Pay cuts on table

Pensions saved

Mr. Anglin

Mr. Anglin

Government leaders confirmed late last week that civil service pension payments would not be suspended in the current budget year as had earlier been proposed.

However, a new plan for a modest salary reduction surfaced Friday. The two per cent pay cut is expected to be included in the budget government will bring to the Legislative Assembly as early as next week.

Meanwhile, Leader of Government Business McKeeva Bush was travelling to the United Kingdom to negotiate with Foreign and Commonwealth Office officials on plans to allow the Cayman Islands to borrow $372 million to get through this fiscal year.

Cayman’s finances are in dire straits by all accounts. The government ended its budget year on 30 June with an $81 million operating deficit. That deficit in the current year is expected to exceed $130 million if no new revenue sources are found and costs remain unchanged.

The pension suspension proposed by government ministers in July was anticipated to save more than $40 million. However, Education Minister Rolston Anglin said Friday that the suspension, or ‘holiday’ as government leaders had called it, was dead.

‘We have seen that’s a proposal we’re not going to follow through with,’ Mr. Anglin said.

However, there may still be some adjustments made to certain aspects of the government’s pension payment scheme.

The Caymanian Compass has learned that one plan being considered is to delay past service pension liability payments in the 2009/10 budget year. Those are payments made to support the retirement benefits of civil servants under the country’s defined benefit pension plan.

The government paid some $14 million into that pot during the 2008/09 budget year.

However, those payments cannot be simply taken away. Government would have to make up the money owed in subsequent budget years.

‘But there’s no legally required amount we have to pay in any one year,’ Mr. Anglin said.

The pay reduction plan, brief details of which were circulated to civil servants Friday via e-mail, would require all government workers making more than $3,000 per month to take a two percent pay cut starting in October and ending on 30 June, 2010. Teachers with the Education Department will not receive a pay cut, no matter what their salary is.

In return, those workers would get four days of added vacation time. Contrary to what government had reported on Friday, workers would be paid for those extra four days off.

During calendar year 2008, the government spent just a shade more than $245 million on personnel costs. Two per cent of that total amount would equal just under $5 million in savings.

However, since not every civil servant would be receiving a pay cut under the plan, it’s not clear how much government would actually save.

Civil servants were given a cost of living pay increase of 3.2 per cent at the start of the last fiscal year.

Mr. Bush has previously suggested an increase in a number of indirect taxes collected by the Cayman Islands government as a way to help make up the budget gap.

Those ideas include a rise in customs tariffs, stamp duties on property transfers and various business registration and operating fees.

However, UK leaders have suggested that a more sustainable long-term revenue stream, such as an income or property tax, should be considered to help get Cayman out of its budgetary morass.

Mr. Bush said the ruling United Democratic Party would not support such a plan.

The government has previously indicated it needs $30 million to meet its obligations for workers’ salaries, pensions, health care and other operating costs this month. Government pension, health care and certain construction project costs were not paid in August, according to Mr. Bush.

Aside from borrowing to get that cash, Cayman’s legislators have the option to raid the country’s reserves. Those are estimated at some $74 million. But most of those reserves are invested or restricted and a vote of the entire Legislative Assembly would be needed to access them.

Fear has been rife within the civil service that workers might not get their paycheques this month. Another meeting of the Civil Service Association is being scheduled to address budget issues, possibly to occur this week.

At the last such meeting in August, Financial Secretary Kenneth Jefferson said no basic wage cuts would be considered for civil servants as part of the government’s cost savings plan.