Personnel costs ‘blew budget’

Civil service staffing costs add $8.6 million to budget

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Delays on producing the Cayman Islands government budget over the past few weeks can be attributed to figuring out how to fill about 190 current and new jobs, Premier Alden McLaughlin said Friday. Mr. McLaughlin said the government’s spending plan for the 2014/15 fiscal year has been sent to the United Kingdom for approval, which he expected to receive this week. The Legislative Assembly plans to start meeting on Monday, May 26 if that approval is granted.  

“The budget we’ve submitted to the U.K. has conformed to all of the parameters they’ve required,” the premier said. “Our challenge has been getting it to conform.”  

Cayman’s leader said in late April that the central government service had 174 “vacant” posts, meaning jobs that exist but for financial reasons could not be filled. In addition to those positions, the civil service has made requests for an additional 17 new jobs, he said. Among the vacant positions were 70 posts in police, fire, customs and immigration, Mr. McLaughlin said. 

“We’re already seeing the impact,” he said at the time. “Customs officers available at the two ports [are] down from 30 to 19, so when [the press] asks why there hasn’t been better enforcement [at the ports of entry], these are some of the reasons.”  

Previous medium-term plans agreed with Britain included constraining personnel costs to $241 million for the 2014/15 year.  

“We had to bring the budget in, in terms that complied with that and the great challenge was with the proposal to fill 174 vacant posts and create 17 more,” he said. “It just blew the budget by $8.6 million. 

“We had to get those things back in line, not just to get the number right but to understand … we have to have some degree of flexibility over the course of the year.”  

Mr. McLaughlin said the “troubling” recurring issue with the budget is the overall operating expenditure of government, the key component of which is the cost of the public service. He made reference to this issue Friday in connection with a proposed 3.2 percent cost of living increase for civil servants that has been bandied about as a possibility in upcoming government spending plans.  

“Until we actually right-size the public service … we’re going to continue to face these sorts of challenges,” he said. “It’s not just the salaries component, it’s the health care and long-term pension commitment. If numbers in the civil service are continuing to grow, the ability of government to continue to give raises to those in the civil service … get compromised more and more. Increasingly, benefits will be eroded. 

“I am determined that’s not going to happen under my watch.”  

To assist in “right sizing” the civil service, government has hired “big four” accounting firm Ernst & Young to help carry out a wholesale review to identify what services local government provides, what areas it can outsource or sell off to the private sector, what government departments can be combined, and what entities no longer have a relevant purpose.  

Both Mr. McLaughlin and Deputy Governor Franz Manderson agreed Friday that the review would lead to government reducing the number of its operating departments and employees, but both said that the end result would hopefully be a more efficient and effective government service.  

Ernst & Young’s Regional Managing Partner Dan Scott said the local private sector often likes to “Monday morning quarterback,” but in this case, his firm has a real chance to advise government on the way forward.  

“It’s critically important that we get it right within the civil service,” Mr. Scott said. “I’ve taken a personal interest in it and will be very involved in the process.”  

Mr. Scott said other Ernst & Young partners from the U.K., Australia and New Zealand have been brought in to assist in the review, which Mr. Manderson hoped to have completed by the end of next month. Those individuals include Larni de Courtenay of Ernst & Young’s Australia offices and John Nash in the U.K., who has previously worked with Cayman Islands Governor Helen Kilpatrick.  

Nothing is off the table for consideration, Ms. De Courtenay said Friday. She said similar government right-sizing efforts in Australia included a number of options, such as public offerings for government assets, outsourcing of things like road maintenance, shared services within government entities, and merging of government departments.  

Mr. McLaughlin indicated that implementation of Ernst & Young’s recommendations was likely to be done in stages.  

“There are what I believe will be easy wins,” he said. “There will be some services that will obviously … be passed over to the private sector or outsourced. That’s how we will start.”  

Other options, for example, selling a government statutory authority that provides essentially services such as water, wastewater or garbage pick-up, will require legislative and regulatory reform and will necessarily take longer.  

“When we do things it has to work … we won’t want to do something just for the sake of doing it,” Mr. Manderson said.  

“Many of the key decisions to be taken need the benefit of professional advice,” Mr. McLaughlin said.  

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Ernst & Young Regional Managing Partner Dan Scott, left, and Premier Alden McLaughlin discuss plans to ‘right size’ the civil service Friday. – Photo: Brent Fuller
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