The recently published Ernst & Young report contains 55 recommendations on how to reduce the size, and cost, of the Cayman Islands government. While the areas addressed are distinct and diverse, many are linked by this commonality: Government carrying out functions that could be performed more efficiently, more effectively and more fairly by the private sector.
Three such entities – the Port Authority, Airports Authority and Cayman Airways – that had attracted the scrutiny of EY consultants recently became the subject of discussion in the Legislative Assembly following a parliamentary question from North Side MLA Ezzard Miller, who asked for the annual salaries of the heads of those quasi-government agencies.
In response to Mr. Miller’s inquiry, Deputy Premier Moses Kirkconnell revealed that Port Director Paul Hurlston earns between $180,000 and $204,000 per year, Airports CEO Albert Anderson earns between $152,000 and $160,000, and Cayman Airways CEO Fabian Whorms earns between $150,000 and $180,000.
Nice work if you can get it.
While the inexactness of the salary figures is testament to the entities’ lack of transparency, the numbers are precise enough to show that the heads of those organizations – which are plagued variously with financial losses, aging facilities and/or low quality of service – are on par with, or greater than, the salary drawn by Cayman’s elected leader of government, Premier Alden McLaughlin. He earns about $160,000 per year. They are also significantly greater than the salaries paid to central government’s chief officers, who typically earn between $123,000 and $143,000 per year.
Following Friday’s story in the Cayman Compass on the subject, some readers rejoined that leaders of large private sector companies often make more than their counterparts in government. Sometimes they do, but the competitive market sets the salary range, and private sector executives are exposed to real-world risks – such as being summarily terminated or their enterprises going out of business.
Public sector workers, on the other hand, enjoy the security of nearly lifetime employment (regardless of performance), and typically receive far more generous benefits than their private sector counterparts (including their sweetheart-deal health insurance and pension packages).
If there is one ingredient that differentiates the private sector from the public sector, it is the continual presence of the possibility of failure.
The architects of Cayman’s vast assemblage of statutory authorities and government-owned companies may have been operating under the illusion that “decentralization” would compel those government entities to behave more like businesses. But without the risk of failure, and propped up by an unending stream of annual subsidies, the opposite has occurred.
Given a level playing field, if government attempts to compete with the private sector, it will lose every time. Governments are only so-so in providing essential services and terrible at running real businesses.
That’s why Cayman Airways loses money, that’s why Radio Cayman loses money, that’s why the Health Services Authority loses money (big money), that’s why the Turtle Farm … well, don’t get us started.
The Compass advocates for a lean, limited and responsive public sector, characterized by a clear divide that demarcates precisely where government ends, and where the private sector begins.
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When the Compass prints (Going out of business sale needed for government), are the actually saying going out of business for Caymanians. It has already been clearly stated that the sale of any of the authorities would likely not be to a Caymanian, failing the assets necessary for such a large purchase it is expected that a foreign entity would step to the plate.
As is, these authorities are owned by Caymanians, their management by default by our elected officials.
Lets make an association of facilities. The port authority, our country’s Navy, Cayman Airways, our Air force. How efficient do you believe a country’s air-force is, and the Navy very efficient right. Well that depends on the objectives does it not. A country’s security being the top priority I would say.
There are somethings a country do not leave to civilians, and still expect to be nation guided by the majority of its citizens.
The Framework for Fiscal responsibility is an excellent starting point to efficiency and should not be misconstrued as a call for dissolution of government entities. Sustainability is a very broad and complex term. No, Cayman is not a private sector cooperation, Private sector work within its borders, and under the governing structure of it’s people. If the call to arms is to battle inefficiencies, why would we require a changing of the guard, lets get those troops fit to fight and dress right dress..
First, this editorial seems to imply that if EY suggests it, then it is gospel. Let us wait and, if the Compass can’t do it, let the Government do some thoughtful examination of these suggestions and see which will and can fly in the context of what is in the best interest of the population that the agencies serve.
Second, there is an underlying assumption, it seems, that the private sector will be inherently better at providing these services. What the private sector is better at is making profits — even if that means cutting services. These agencies have already cut personnel but are trying to maintain the services that the territory needs. If the private sector takes over these services, I can guarantee you that they will immediately discontinue some services to preserve profits. The Cayman public needs to be aware of this, even as the Compass is unabashedly forging ahead with pushing the changes — yesterday, if possible.
This will be true, for example, of the HSA. True, systems could be improved — let us do that. I was down at the pharmacy this morning and today they implemented a new system, aimed no doubt at ensuring all funds are collected. I hope that once the teething period is passed that it will also result in greater efficiency of delivery — which I have actually, where the pharmacy is concerned, found it to be at a reasonable delivery standard — and definitely professional.
So let us not be too hasty to make changes lest we throw out the baby with the bath water. We must be thoughtful and careful and by no means hasty.
Third, on the matter of salaries of the CEOs of the agencies they mentioned, yes!I think they are high, too high, but do we really think that the private sector CEOs will not be looking to line their pockets? Let us get real here. As to the bottom line determining range of salaries, I don’t believe that either. The bottom line will determine the salaries of the line workers — and private sector bosses will be ruthless at that — but the only thing that will determine CEO salaries will be the CEOs themselves — and if to achieve those high salaries they have to cut, baby cut (services and personnel), they will !!!
Finally, on the sweet-heart deal health insurance and pensions — I don’t know where the evidence is of that. Compared to the private sector, pensions are paltry. And based on the low salaries that civil servants get, they need to have salutary health insurance packages — otherwise, they might just not survive the few years they will have to enjoy their retirements. Many of the civil servants make such low salaries they will hardly be able to afford more weight tied to what they take home to accommodate more deductions.
Let us face it, many of the higher ranking civil servants — and many in the middle and even lower end — could be pulling down salaries that would be much more substantial, if not in some cases astronomical, compared to what they make in government. They do it because they want to serve — a motivation that I suspect may be difficult to conceive of in the private sector. So the few benefits they get are to compensate them for that. And if you think this is exaggerated, let me give you an example of a pension package — in this case a retiring partner in one of the top law firms — 14 million! And I did say million. And that person was a local so I don’t even want to fathom what the big boys take home after years of billing through the ceiling.
Before I end, if I have not already done so, let me pour a little cold water on some wet blankets I believe will be in store for some if not most of EY’s ideas. There will be very few going out of business sales. Keep the heart rates and the blood pressure steady — not so fast. I somehow don’t think this story is going to end in this overheated, ebullient fashion. I believe that better and wiser heads will prevail.
Congratulations to the Compass for clear thinking. The private sector will be motivated to succeed because they won’t get bailouts from the taxpayer and competition will keep them honest. As to the issue of foreign ownership, regardless of who owns any privatized entities, Caymanians will still have the local jobs and they will gain the additional benefit of lower taxes because taxpayer money won’t be used to prop up a failed enterprise. A government should only do those things the private sector can’t, won’t or shouldn’t do.