The grave state of Cayman’s finances played prominently in a Legislative Assembly debate over a temporary spending plan aimed at getting the country through the next four months.
The CI $573.6 million spending and borrowing proposal is only required to take the country from 1 July until the newly-elected United Democratic Party government can craft a full year budget.
That budget proposal is expected sometime in September.
Debate on the interim spending will continue this morning in the Legislative Assembly.
However, it is the current fiscal year’s troubles that have caused most of the uproar. The budget year for 2008/09 is due to end Tuesday.
Depending on whose estimates are believed, the Cayman Islands government will end the year with somewhere between a $29 million and a $74 million operating deficit, which means basically that the government didn’t take in as much as it spent between 1 July, 2008 and 30 June, 2009.
The ruling United Democratic Party blasted the former government for understating the true gravity of the country’s financial situation, and leaving it with massive debts upon vacating office.
‘They have recklessly run this country into a deficit and now are acting surprised,’ Education Minister Rolston Anglin said Friday. ‘They continue to make the claims that they couldn’t see it coming. They refused to listen.’
The now-opposition People’s Progressive Movement party, whose members made up the former government’s Cabinet, said the UDP was manipulating budget figures to make them look bad, and in so doing, making the country’s finances and stability appear shaky.
Opposition Leader and former Leader of Government Business Kurt Tibbetts said Friday that Financial Secretary Ken Jefferson should explain why his office went from projecting a $29 million deficit in early May to a $74 million deficit by mid-June.
‘We are now being told there is a $19 million increase in operating expenses (between late March and mid-June),’ Mr. Tibbetts said. ‘Where is the sudden $19 million increase…? It has to reflect the new government’s policies.’
In previous interviews with the Caymanian Compass, Mr. Jefferson has said government expenses increased by $17 million between March and June, while revenues fell by $17 million in that same period.
He didn’t specify what the increase in expenditures represented, and did not say whether the spending had occurred before or after 20 May, when the new government was voted into office.
‘There’s something radically wrong with our system if what has been said (by Mr. Jefferson) is in fact the truth,’ Opposition MLA Alden McLaughlin said, adding that, if government couldn’t properly project its revenues and expenses, ‘this country is going to Hades in a hand basket.’
Mr. Anglin said the previous government was warned many times in the past several years about record levels of spending and public debt, as well as the increasing size of the civil service.
‘The previous administration cannot run from its record,’ Mr. Anglin said. ‘It was good politics at the time to say we (the UDP) didn’t care about the civil service. Now we have the country saying ‘my gosh, what are you, the UDP, going to do about this?’ ‘
Mr. Anglin did not discuss any specific budget figures in his debate, nor did he state any particular plans for reducing the size of the Cayman Islands government.
‘How do we tighten the belt? I’m not going to predict it today,’ he said. ‘But it cannot simply be about sending messages that say ‘cut your budget six per cent.’ That salami approach…what it does, it hurts good performers.’
Mr. Anglin is scheduled to continue his debate on the matter this morning.
Interim budget: $573.6M
Despite the budget troubles, the Cayman Islands government actually increased earlier proposals for funding needed to get through the next four months by nearly $30 million.
In Legislative Assembly Friday afternoon, Mr. Jefferson said a total of $573 million in cash and borrowing approvals would take Cayman through the next few months until an actual budget is proposed.
On 19 June, Mr. Jefferson advised LA members that not more than $544 million would be needed to get the country through the first four months of the new fiscal year that begins on 1 July.
The budget plan is coming in late this year because Cayman’s elections were held on 20 May, about five weeks before the end the fiscal year. Normally, the government would have a budget in place sometime in June.
Mr. Jefferson cautioned that government departments should not take the four-month approvals for operating expenses – totaling some CI $178 million – as a license to spend freely.
‘Government agencies need to be cognizant of the fact that their budgets may be decreased from what they had last year,’ Mr. Jefferson said Friday.
Opposition Leader Kurt Tibbetts noted that $178 million in operating expenses was a sizeable spending plan for four months’ time.
‘The fact of the matter is, when we look at all of the items that compromise these appropriations…and by saying three times that amount (would equal the entire year) then it certainly is business as usual,’ Mr. Tibbetts said. ‘If the economic situation was…so terrible, it begs the question, why is it business as usual?’
The majority of the $573 million sought by the government breaks down as follows:
*$297 million in borrowing approvals, including a $154 million refinancing deal to pay off debt from the current budget year. Another $128 million was requested in borrowing approval for the budget year that begins 1 July.
*About $65 million in equity investments, most of that money, $44 million, will go toward the construction of two new high schools on Grand Cayman.
*Government operating expenses of some $178 million.
*Spending on executive assets of some $26 million, including the new government office building, road upgrades and community centres.
*Just under $6.5 million to pay off interest of government debt.
If government does not agree to the continuing appropriation it would run out of money by 30 June.