Fixing a projected $29 million budget deficit will only be the People’s Progressive Movement government’s job if they are elected to a second term in office.
Otherwise, it’s the next administration’s problem.
Financial Secretary Kenneth Jefferson announced last week that sharp drops in government revenues had led to estimates of a $29 million operating deficit…down from a $15 million projected operating surplus earlier in the year.
What that means is the money core government takes in isn’t enough to cover all its expenses from operations.
To fix it, government would either have to find new ways to generate revenue, cut its expenses…likely meaning jobs or services, or borrow to make up the gap.
Mr. Jefferson said, due to the 20 May election, the new government won’t start its budgeting process until August. They will operate through July, August, September and October on a continuing appropriation, which means government would fund itself at current levels during that period.
After that, it’s up to elected leaders to determine the best way to balance the budget, preferably with an operating surplus.
‘We can’t have an operating deficit forever, we’d run out of money,’ Mr. Jefferson said.
According to the financial secretary’s projections, Cayman will be left with enough cash on 1 July to support a further three months (91 days) of operation. Mr. Jefferson also said borrowing and debt servicing limits were within what is required by law.
However, the projected deficit does not comply with public financing requirements.
That fact was seized upon by Opposition Leader McKeeva Bush during the final hours of Legislative Assembly’s debate Monday, prior to the dissolution of the house.
‘I believe that the country is moving along a path where we can say it is dangerous,’ Mr. Bush said. ‘We have more and more expenditure while there is an imbalance in our revenue.’
Mr. Bush pointed out the government’s term had been marked with a failure to produce timely financial statements for years in some cases. He also accused Mr. Jefferson of overestimating revenue projections in order to make the numbers work in the budget.
The final product, he said, was a rushed finance committee hearing in the Legislative Assembly building that started at 5.30pm Friday and ended at 12.50am Saturday.
‘We couldn’t even study the matters that were put before us,’ Mr. Bush said.
Mr. Jefferson defended the budget projections made by his office in April 2008 and said government had no way of knowing the full impact of the world economic crisis that would begin toward the end of that year.
Leader of Government Business Kurt Tibbetts said steps were taken earlier in the budget year to cut expenses, including the delay of several planned construction projects and a six per cent across-the-board budget cut for the civil service that trimmed about $15 million from government spending.
However, those cuts were quickly eaten up by additional spending, and a further revenue shortfall of some $22 million.
‘If it were left just to the shortfall in revenue and the savings which were realised…we would still have had a surplus,’ Mr. Tibbetts said. ‘But there have been extra pressures put on the Department of Children and Family Services [and] an increase in overseas medical costs. We also had the devastation of Hurricane Paloma in Cayman Brac.’
‘As if that were not enough, we had and still have the on-going police investigations which are racking up a nice chunk of money.’
He questioned whether the opposition United Democratic Party would have decided against that spending if they were the ruling party in government.
‘It would have meant that, given all that has faced us, it would have meant cutting the services of the people of the country are not only used to, but that they deserve.’