Budget cuts deeper than expected

A six per cent across-the-board budget cut which was announced earlier this year to offset declining government revenues is cutting deeper than many in the Cayman Islands civil service expected.

According to records obtained by the Caymanian Compass, budget cuts for various central government departments will have to account for as much as eight, 10, even 13 per cent of agencies’ annual spending plans.

‘We are aware of the discomfort, but we have to stick with our guns,’ Financial Secretary Kenneth Jefferson told the Compass last week. ‘No one wants to enforce expenditure cuts; it’s only because we have to.’

The reason for the discrepancy between the six per cent reductions which were announced for the current financial year and the actual amounts operating budgets must be cut is somewhat complicated.

According to a finance department memo sent last month, government sought a $30 million reduction for the budget year which started 30 June, 2008 and which will end 1 July, 2009. The six per cent reduction was based on total estimated central government expenditures of $500 million for the year.

However, according to the memo, there are other items included in the $500 million total expenses which basically cannot be counted when chief officers look at reducing their budgets.

One of those items is known as the ‘deficit in public authorities.’ This is the amount which comes from central government’s budget to help cover the operating losses of government-owned companies and statutory authorities. Mr. Jefferson said there has been a net operating loss among all of those entities for the last several years which government has been forced to cover.

Another item is payments to non-governmental suppliers, agencies which receive some government funding for services provided but whose budgets do not fall under the direct control of department heads.

Basically, these items and others are off the table when budget cuts are considered, meaning that some central government departments would actually have to cut more than six per cent to make up the $30 million.

For instance, the auditor general’s office, which has a total budget of $2.8 million for the 2008/09 financial year, will have to cut its operating budget some $271,000. That’s roughly a 9.7 per cent cut.

Complaints Commissioner John Epp said the reduction to his office’s budget actually turned out to be around 12 per cent.

Both Mr. Epp and Auditor General Dan Duguay said the cuts, coming as they do in the middle of the budget year, could impact their ability to hire experts to help investigate certain cases.

Mr. Epp said he met with officials last week about the budget cuts and was assured by Minister Alden McLaughlin that additional funds needed for the proper operation of his office would be made available.

Chief officers have been asked not to cut staff. However, government has deferred hiring for most new positions which were anticipated to swell the ranks of the civil service from roughly 3,800 to more than 4,000 employees this year.

The government budget reductions are only in effect for the current 2008/09 budget year. This winter, lawmakers will start planning for the coming fiscal year which starts 1 July.

Cayman Islands Civil Service Association President James Watler said his group’s members have expressed concerns about losing their jobs if cutbacks continue next year. Mr. Watler said there will be an effect on the civil service even if no one is laid off.

‘Vacant posts are put on hold until the economic situation makes a turnaround,’ Mr. Watler said. ‘In this, one can see the implications that the delivery of efficient and effective services may be at risk.’

But he admits there’s little government can do amid a projected revenue loss of $15 million for the current year.

‘As president of CICSA, what do you do? You simply encourage each civil servant to continue to give her/his best, go the extra mile.’

Chief Secretary George McCarthy said in October that the there was no reason to view the six percent reduction as a ‘precursor to job cuts.’

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