proposes to get the majority of its $17 million in savings before the end of
the budget year in June by eliminating pension payments for civil servants, elected
lawmakers and workers in statutory authorities and government-owned companies.
The revelation is contained in an
internal memo sent out last week detailing how government intends to reduce a
projected $61.7 operating deficit to $44.4 million by 30 June.
According to the memo from
Financial Secretary Kenneth Jefferson, if the proposed cuts take effect this
month, some $5.2 million will be saved in salaries; another $8.6 million will
come from a pension suspension; and the rest, about $3.2 million, will come
from requiring civil servants to pay half of their monthly health insurance
Those figures indicate that nearly
51 per cent of the proposed savings from March through June would come from
pension payments that the government wouldn’t make.
In a full year, the salary
reduction would save the government $15.6 million; the proposed pension suspension
would save a projected $25.8 million and the 50 per cent payment on health insurance
premiums would make up $9.6 million.
There is one problem with the
pension suspension plan. The proposed suspension is illegal under current Cayman Islands’ law.
According to the Public Service
Management Law, government must pay 12 per cent on top of a civil servant’s
monthly salary toward a retirement fund. The pension payment measure is also
contained in the contracts of government workers who are expatriates or who are
over 60. There are more than 1,300 of those individuals working in central
“Certain legislation will require
amending in order for this particular measure to be achieved,” the financial
secretary’s memo read.
The government had earlier
considered the idea of temporarily suspending its employee pensions, but later
withdrew the measure because civil servants roundly rejected the idea as it was
Lawmakers recently passed
amendments that allow a voluntary pension suspension for private sector workers
to take effect in a few weeks.
Earlier the Cayman Islands Civil
Service Association had outright rejected a salary reduction, but indicated it
would be amenable to a pay deferral. Any pay deferred would have to be made up
at a later date, association President James Watler said.
“This way, when other measures are enacted
successfully yielding the desired savings, the deferred amounts can be paid to
employees,” a draft report issued by the association in August read.
Pay reductions and health insurance premium payments
may also run afoul of current civil servant contracts for foreign workers and
Caymanian civil servants who have remained in government jobs past the standard
retirement age of 60.
If government contracts are
cancelled prior to their expiry, most contain provisions for a severance of up
to three months to be paid to those workers.
The civil service association’s management
council is expected to respond to government’s budget cutting proposals by