Archer: Don’t spend just because money is there
Cayman Islands government officials are hoping a projected $51 million operating budget surplus for the fiscal year just ended may grow due to last-minute spending restraints.
Shortly after taking office, Finance Minister Marco Archer warned civil service chief officers in a memo not to incur expenses through 30 June “simply because available budgets exist”. “[The] Internal Audit Unit will be carefully scrutinising all transactions during this critical June 2013 period and will highlight any apparent unnecessary expenditure being incurred,” the 7 June memo stated. “Government agencies are asked to continue the good fiscal restraint exercised … by not exhausting budgetary appropriations in June 2013 simply because such appropriations may exist.”
Mr. Archer’s memo represents something of a departure from what has been a long-standing, but unwritten, practice in the civil service. Put simply: Spend the money, or they’ll take it away.
The practice was described in August 2012 during a Generation Now debate by Human Rights Commission Chairman Richard Coles. Mr. Coles, the former attorney general, told the debate audience that upon taking up his attorney general post, he was happy to see the office had spent less than its allotted budget for the year. Mr. Coles then said he was informed by staff this was, in fact, bad news because any amount left over from the current budget would be cut out the next year. Mr. Archer also warned in his 7 June memo that the 2013/14 government budget year, which started on 1 July, would look for “long-term cost savings” and operational efficiencies.
Neither the finance minister nor Financial Secretary Ken Jefferson would speculate about final budget figures for the year ended 30 June. But Mr. Jefferson did admit he would be “disappointed” if the forecasted operating surplus of $51 million was not achieved and surpassed.
The previous United Democratic Party administration had forecast an operating surplus at 30 June, 2013 of $81 million. However, several new fees and taxes proposed by that government were not put into place by the time the January-March collection cycle rolled around.
That delay led to a drop in government earnings of some $30 million over the course of the year.
The $51 million figure, if it is achieved, is only an operating surplus – meaning government revenues outstripped spending for the 2012/13 financial year. Government will have to subtract additional amounts from the operating surplus to pay off principal amounts on its debt, as well as any capital expenses it incurred during the year.
Those expenses would likely leave government with somewhere around $15 million to $20 million in cash left over.
Mr. Archer also previously announced in the Legislative Assembly that a $30 million overdraft facility – short-term borrowing – for the government’s 1 July to 31 October interim budget had been approved. An overdraft of $46 million has been approved for the full budget year through to 30 June, 2014.
“We have a $15 million bank account,” the finance minister said, which, including the overdraft facility made a balance that adds up to $45 million. Coupled with $8.5 million in depreciation allowances for fixed and long-term assets, Mr. Archer said government expected an overall deficit – pegged at $56 million – to be reduced to only $2.5 million at the end of the interim budget period on 31 October.
Prior to the interim budget ending, government will have to adopt a full-year spending plan to run between 1 July, 2013 and 30 June, 2014.
Government expenditures between July and October, he said, traditionally outpace revenues. January through March, Mr. Archer said, “is when government revenues far outstrip expenditures – and the full-year budget shows a significant operating surplus”.
No projections have yet been made relative to government’s financial position at the end of the 2013/14 year.