No quick end to budget crisis

Acting Gov: ‘These are challenging times’

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Cayman’s top two civil service
officials signalled at the end of last week that a pay cut for government
workers in July may just be the tip of the iceberg when it comes to balancing
the Islands’ struggling budget.

“I would suggest that we should all
be most grateful that the reduction is not larger,” Acting Cayman Islands
Governor Donovan Ebanks wrote in a memo to all civil servants on Friday
afternoon. “We must all appreciate that some sacrifices will be necessary. ‘For
how long?’ is the logical question, of course. Unfortunately, there is no reliable
answer to this.”

Acting Deputy Governor Franz
Manderson had warned earlier in the day in a separate memo that government’s
budget-cutting exercise would not end on 1 July, when the new fiscal year
begins.

“Further reductions in operating
expenses will be expected over the next three years,” the circular from
Mr. Manderson read. “It follows that sustainable means of reducing costs
must continuously be pursued.”

The goal for Cayman is to balance
its budget and achieve an operating surplus by the end of that three year period.

Complicating matters further, the
Cayman Islands government has been forced to put off its formal budget proposal
for the coming year – initially scheduled for 30 April – partly due to elections
in the United Kingdom.
Thursday’s balloting there has delayed on-going negotiations with the UK Foreign
and Commonwealth Office about how much money Cayman can borrow in the coming
year.

Moreover, it seemed likely that current
foreign office minister Chris Bryant would not be returning to that position
following the elections in which his Labour Party lost its majority. Mr. Bryant
has been leading most of the foreign office’s budget negotiations with Cayman
over the past several months. 

“These decisions will enable the
budget to now be tentatively finalised,” Mr. Ebanks said, referring to the
civil service budget cuts. “Hopefully, post-election events in the United Kingdom
will soon be settled.

“The government must still await
the earliest opportunity for the substantial borrowings…to be considered and
hopefully approved by the UK.”

Pay cuts

Employees in the Cayman
Islands civil service were informed Thursday that their salaries
would be cut by slightly more than three per cent starting 1 July.

The 3.2 per cent cut is basically a
“rollback” or removal of the cost of living pay increase given to government
workers in 2008.

The move came as no surprise
following earlier statements from Mr. Ebanks that some pay reductions might be
needed in the upcoming budget, as Cayman struggles to balance its spending
plan.

Forecasts from December projected
that the government would end its current budget year on 30 June with a $56
million operating deficit.

Members of the Cayman Islands Civil
Service Association had previously agreed to a modest pay cut, at least as a
temporary reduction, to help government meet its budget targets.

However, some members indicated
Thursday that they had not been told about the latest round of budget cuts. The
association had also stated its hope that those pay reductions would be made up
at a later date.  

According to Mr. Manderson’s administrative
circular – sent to all government chief officers and department directors
Friday morning – the pay reduction was one of several budget-cutting items set
for the next fiscal year.

Other cuts include a 10 per cent
reduction in premiums charged by CINICO (Cayman Islands National Insurance Company)
to all central government departments.

Currently, civil servants pay
nothing out of their own pockets for monthly health care premiums. 

Funding to fill new or vacant jobs
will be limited to positions agreed to during a meeting of Cabinet members and
chief officers on 3 May. Government has been operating under a “soft”
hiring freeze since late 2008.

Some civil service departments were
also asked to cut up to 75 per cent of their recruitment budgets, acting pay
allowances, duty allowances, and motorcar allowances. 

Overtime budgets were slashed by 50
per cent for the upcoming fiscal year. 

Eliminated from the spending plan
were all payments for accrued leave and compensatory time not taken during the
year. Also cut out entirely were allowances for entertainment and
laundry. 

“Some of these decisions will
require amendments to existing legislation,” read Mr. Manderson’s circular.
“Those decisions, when implemented, should accomplish the 2010/11 targets
for personnel costs for the core government to which the Cabinet have now
agreed.”

Friday’s circular said nothing
about reductions in other areas of government spending, including capital (construction)
expenditure and non-personnel related costs.

Statutory authorities and
government-owned companies were also told that Cabinet’s budget cutting
measures should be implemented, where they are applicable to those entities.

Donovan Ebanks

Mr. Ebanks
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