Acting Governor Franz Manderson signed off on the Cayman Islands government budget Friday just hours before the territory’s spending authority from a two-month temporary budget was to run out.
Friday officially brought an end to what had been a heated and sometimes confusing debate over the controversial spending plan.
Cayman Islands lawmakers voted to approve the $567 million in expenses and $650 million in revenues for the government’s 2012/13 budget Wednesday, nearly two months after the start of the fiscal year on 1 July.
The budget depends on a 20 per cent, one-year growth in revenues to make ends meet. The proposal also requires $81 million in overdraft facilities, also known as transitional borrowing, to cover expenses during the lower-earning months of the fiscal year.
Those are the numbers, so what does it all mean for Cayman?
For businesses and people
Cayman’s business community, along with citizens and residents, will see a number of new fees assessed during the 2012/13 year.
“The [revenue] amount represents a growth of 20 per cent when compared to the $544.1 million in revenue forecast for the 2011/12 year,” budget documents state. “The forecast is based on enhancement to current revenue streams and new revenue measures totalling approximately $90 million.”
The increase does not include the proposed “Community Enhancement Fee” – often referred to as the payroll tax for expatriates or the “expat tax”.
Instead of that levy, government added revenue measures that include increased bank and trust licence fees, increased work permit fees for permits costing more than $1,000 per year, an increase in the tourist accommodation tax from 10 per cent to 13 per cent, an increase in the departure tax of $10 per person and the across-the-board increase on stamp duty charged to land transfers. Most property purchasers will now pay a 7.5 per cent duty rate. Some exceptions are made for first-time Caymanian home buyers on properties below a certain value.
Other fees include master fund registration fees, a new licensing system for fund and corporate directors, traffic “regulatory fees”, additional fees on exempted limited partnerships and a luxury tax on non-commercial boats.
A number of other fees and licensing charges will be assessed to the local financial services industry.
For the civil service
Cost-reduction measures totalling about $10 million in net savings will be enacted within the civil service as the new budget takes effect.
All civil servants will receive a 3.2 per cent cut in pay. However, some civil servants – those age 60 and older who continue working with government – will be given a much larger pay cut under budget reduction proposals that require them to regress to “point one” in the salary scale of their respective pay grade. That pay cut will only apply to government workers with at least 10 years of pensionable service who will receive a pension upon reaching age 60, but who continue to work for government on a contract basis.
Government staff is to be reduced by a “headcount” of some 360 civil servants during a period of five years, on top of the 162 civil service positions that had not been filled between January 2009 and June 2012.
Deputy Governor Manderson noted in a message to civil servants Friday that the 360 jobs figure might not be as bad as it sounds. He said 145 positions already left unfilled in the 2012/13 budget will count toward the overall figure.
“The reduction necessary to achieve the further cut of 215 posts will be strategically managed over the next five years and guided by the established priorities of the government of the day,” Mr. Manderson stated. “Further reduction will be accomplished through a continuation of the moratorium on hiring, a voluntary separation scheme and rationalisation and transformation review.”
There will be a “pay freeze” for all members of the civil service within the remaining ten months of the 2012/13 fiscal year, except in instances where a worker has received a promotion or has taken on extra duties to make up for the loss of a co-worker or unfilled staff position.
For the UK and Cayman
An agreement with the United Kingdom has granted Cayman’s Mother Country never before seen levels of influence over the locally-governed budget.
A UK-appointed economic adviser will be reviewing Cayman’s economic progress every quarter and a “Budget Delivery Board”, run by Mr. Manderson, will be involved in planning medium to long-term financial goals for the territory.
Cayman has also agreed to pass the agreement known as the Framework for Fiscal Responsibility, signed with UK Overseas Territories Minister Henry Bellingham last year, into law by this month. Right now, the agreement sets certain general spending, procurement and management guidelines on the territory, but has taken the form of a signed agreement only – not law.
The Cayman Islands government has also agreed not to bring any supplementary budgets during the next three years, unless additional funds are required for disaster recovery efforts in the wake of an event such as a hurricane or earthquake.