The Cayman Islands Legislative Assembly unanimously passed the government’s 2014/15 spending plan Wednesday, just four working days before the territory would have run out of authority to spend money on July 1.
Legislators passed a budget that included $872.6 million in public sector revenue and $744 million in public sector expenditure.
The budget’s approval came after more than three weeks of lawmakers’ questioning government’s proposed spending, line-by-line during finance committee.
Targeted tax cut measures proposed in the 2014/15 spending plan by Premier Alden McLaughlin’s Progressives-led government include a reduction of import duties on diesel fuel supplied to Caribbean Utilities Company. The duty cut would take the rate from 75 cents per imperial gallon to 50 cents per imperial gallon. That reduction is set to occur in January 2015.
The average customer was expected to see a 4.3 percent reduction on monthly power bills from that rate cut, assuming fuel prices stay at roughly current levels, Finance Minister Archer said. The fuel duty reduction will cost government $8.4 million annually in revenues.
The Progressives-led government also seeks to reduce import duties to “licensed traders” from 22 percent to 20 percent on “most items offered for retail sale,” again with the assumption that prices of consumer goods would be cut. The rate cut is to take effect in July but not all retailers have pledged to cut their prices because of the reduction.
A third proposal includes reduction of small business licensing fees on a sliding scale. Trade and business license fees for small businesses [those with 10 or fewer employees] based in George Town and West Bay would be cut by 25 percent, fees for businesses located in Bodden Town, North Side, East End and Little Cayman will be cut by 50 percent and fees in Cayman Brac would be cut by 75 percent. Those discounts will also take effect in July. In addition to the private sector incentives, government civil servants will be getting a little something extra in their paychecks this month, Premier McLaughlin said. “The government has taken the decision to award its staff a one-off gratuity payment equal to 2.5 percent of annual salary … payable by the end of June,” Mr. McLaughlin said.
The Cayman Islands will have to pay off several of its loans during the upcoming budget year, a move that could cost more than $26 million if the debts are not refinanced.
According to Finance Minister Marco Archer, five loans taken out by the Cayman Islands Development Bank must be paid between 2015 and 2016, with three of them coming due within the 2014/15 fiscal year. The loans, referred to as “bullet” or “balloon payment” loans, must be paid off all at once, according to the conditions of the bond.
Mr. Archer said the three loans have a combined value of $26.4 million, with a $16.6 million loan “maturing” or coming due on April 27, 2015, a $4.8 million loan amount due on June 30, 2015 and a $5 million loan also due on June 30, 2015. The $5 million loan payment will be made through reserve funds held by the development bank, the finance minister said.
The other two loans owed are worth a total of $8.3 million and will be due sometime during the 2015/16 budget year. A total of $34.7 million is owed by government on the five development bank loans.
The current plan is to refinance a large portion of the debt, and government officials also noted that some $22 million in debt still owed by the Cayman Turtle Farm may be included in the refinancing package.
The number of people working for the Cayman Islands public sector is set to increase by more than 100 full-time equivalent employees.
The government’s annual budget statement shows a net increase in “full-time equivalent” positions of 73 jobs in core government ministries and portfolios compared to numbers in the current 2013/14 budget.
Meanwhile, statutory authorities and government-owned companies increase full-time equivalent positions by 53 jobs, according to the upcoming budget plan, when compared to 2013/14. Full-time equivalent positions basically mean the number of hours worked that equate to a full-time work-week. One person working up to 45 hours a week would equal one full-time equivalent, and two part-time workers working a combined 45 hour week would also count as one “full-time equivalent” employee.
Also, just because a position is budgeted doesn’t necessarily mean someone will be hired to fill it if it is currently vacant. Government departments seeking to cut costs later in the budget year may choose not fill a position in order to save money.Central government’s full-time equivalent staff was budgeted at 3,912 workers for the upcoming 2014/15 fiscal year. Statutory authorities and government-owned companies reported overall full-time equivalent staff of 2,402 people planned for the 2014/15 budget year.
Here’s where government spends most of its money in the upcoming 2014/15 budget plan, which runs through July 1, 2014 to June 30, 2015.
Personnel costs: Civil service salaries, health care and pension spending was increased by $7.4 million in the 2014/15 budget to $241.7 million. Supplies and consumables: The “hard costs” of government operations, building leases, equipment costs, consulting contracts and other physical resources will decrease by $3.3 million in the upcoming budget for a total spend of $87.7 million.
Statutory authorities and government-owned companies: The government’s ancillary branches are budgeted to cost $94.1 million in the 2014/15, about $6.6 million less than they did this year. The drop is largely due to new dedicated purpose revenue streams being given to the Cayman Islands Monetary Authority (via the funds directors’ fee) and the National Roads Authority (through a percentage of the petrol tax). The additional funds should lower the overall subsidy from central government. Non-government suppliers: These items ranging from overseas medical care to rental assistance, legal aid services to private schools funding, will cost a total of $22.7 million, a drop of $4 million from the current year’s budget. Transfer payments: Scholarship spending, poor relief payments and seamen’s subsidies will see a modest decrease of $1.6 million to $31.1 million in the 2014/15 fiscal year.
Financing expenses: What government pays on interest for its annual debt will come in at $28.5 million, some $2.1 million less than what it spent in the current year. Capital investments: The amount spent on this area for public projects like the John Gray High School, road improvements, landfill upgrades and public safety equipment stays the same at $47 million.
Other debts: Government plans to spend about $20 million to pay off various debts and operational losses from certain public sector companies, including the Cayman Turtle Farm ($9.5 million), Cayman Airways ($4.85 million), the National Housing Development Trust ($2.4 million) and the Cayman Islands Development Bank ($1.5 million). The amounts do not represent the full operating budgets provided to these entities by the government. For instance, government budgeted $17.8 million to operate Cayman Airways during 2014/15, but that amount is included in the $94 million funding for the government-owned companies above.