LA to begin meeting Monday
United Kingdom budget watchdogs approved the Cayman Islands 2014/15 spending plan Wednesday, just five days before the Legislative Assembly was due to meet to review the upcoming budget.
Finance Minister Marco Archer confirmed the budget would be presented to the Legislative Assembly on Monday, as scheduled. Mr. Archer said Thursday that “no new revenue measures” would be proposed in the 2014/15 plan.
The spending plan arrives about three-and-a-half weeks later than government’s first anticipated date of May 2. The timeline gives legislators 25 working days through June 30 – the end of the current fiscal year – to approve the document in order to maintain spending authority as of July 1.
Premier Alden McLaughlin said last week that all budget numbers – save one – came in within parameters set by the U.K. Revenues for the current 2013/14 fiscal year were above projections, government expenses for the year were below projections. The Progressives-led government anticipates a larger operating surplus by June 30 than the $100.3 million Mr. Archer originally forecast.
The premier didn’t specify how much larger the surplus might be, but Opposition Leader McKeeva Bush said earlier this week that he had been informed of a $104 million surplus.
In addition, government has paid down debt and will meet the legally required debt service ratios – government can spend no more than 10 percent of the its revenues to pay off debt each year, Mr. McLaughlin said. He also noted that the budget would have more than 90 days of cash available by June 30.
The major difficulty revolved around personnel costs: salaries, pension and healthcare payments required to fill 174 vacant jobs and create 17 new positions.
Premier McLaughlin said last week that getting the numbers right requires a balancing act, leaving government budget managers enough flexibility to reduce costs later in the year if revenues do not come in as expected.
“The troubling issue continues to be the overall operating expenditures,” Mr. McLaughlin said.
To that end, the government has commissioned the services of the Ernst & Young accounting firm to look at areas where government services could be outsourced to the private sector. In addition, Ernst & Young budget-crunchers will look at opportunities to combine or eliminate outdated government agencies.
Premier McLaughlin has worried that continuing to reduce central government numbers and supply budgets without regard to effect on services, as government has done over the past three or four years, is unsustainable. Both the premier and Finance Minister Archer have acknowledged that some privatization options would have to be considered in upcoming budget deliberations.
“There will be no sacred cows,” Mr. McLaughlin said earlier this year, though in a recent meeting of the Legislative Assembly, the premier appeared to place Cayman Airways off the table for privatization discussions.
The review by Ernst & Young will not be completed in time to assist the government’s 2014/15 budget.
One proposal that was rejected for the upcoming budget is the restoration of a 3.2 percent pay increase for civil servants. Deputy Governor Franz Manderson had suggested that the pay raise – taken away due to budget austerity measures in 2012 – be given back in the 2014/15 year, but Premier McLaughlin said government can’t afford it.
The government will also have to sort out refinancing of its lingering “bullet loan” debts – debts that have to be paid all at once and start coming due in the 2014/15 budget year.
According to previously released government records reviewed by the Cayman Compass, there are five bullet loans taken out on behalf of the Cayman Islands Development Bank that have due dates listed as: April 2015 ($20 million), June 2015 (two payments totaling $11.8 million), July 2015 ($5 million), and January 2016 ($5 million). That equates to $41.8 million due between the last quarter of the 2014/15 budget year and the first half of the 2015/16 budget year.