The statutory authorities and government-owned companies operating in the Cayman Islands public service are expected to earn more than $12.8 million by the end of the next budget year.
That is after the entities are projected to spend more than $98.6 million they are allocated as part of “output purchasing” arrangements – referred to as “subsidies” by government economists – with the central government.
The Cayman Islands effectively keeps track of two separate overall budgets, one for the largest part of government, which is generally referred to as “central government,” and another budget that includes the operations of the 26 statutory authorities and government-owned companies.
The overall operating revenue projected for the 2015/16 budget year is approximately $888.4 million (with $661.2 million in projected revenues for central government), and the overall expenditure for the public sector is $735.4 million (with central government expenses coming in at around $552.8 million).
The statutory authorities and government-owned companies operate independently from central government, typically with boards of managers who are appointed by politicians. Most of the entities make their own money, which goes to fund operating costs.
However, additional cash is brought in from central government coffers, usually revenue from taxes, to help pay for the operations of the authorities and companies. These payments – output purchases – are considered purchases of services by the central government from the outside authorities.
Government budget planners do not consider the $98.6 million listed in the 2015/16 spending plan a subsidy, but the amount historically has been listed as such in annual economic reports from the government’s Economics and Statistics Office.
If the public entities report any additional losses beyond what they are initially allocated, those are recorded as operating deficits. In past years, the statutory authorities and government companies have posted overall losses.
However, in the current 2014/15 fiscal year, they were expected to earn back more than $13 million, and in the upcoming 2015/16 year, overall operations are expected to result in an additional $12.8 million to government’s bottom line.
“We are no longer seeing collective net deficits,” Finance Minister Marco Archer said last week. “But somewhere along the way, a few [authorities and companies] have gone off the rails.”
Some government entities are still expected to have an annual loss in the 2015/16 year, according to budget records. Those include the Cayman Turtle Farm, the Cayman Islands National Insurance Company and the National Housing and Development Trust.
Others, which are expecting to break even or turn a small profit, will require additional cash injections from central government to settle debts or “capitalize” operations. Those include Cayman Airways, the Cayman Islands Development Bank, the Health Services Authority and the National Housing and Development Trust.
Minister Archer wants to reduce the amount allocated for “output purchases” to the outside public entities as a general strategy. Budget figures reveal that in 2013/14, government spent about $102.2 million, compared to $94.1 million in 2014/15.
The figure increased in the upcoming budget, which begins in July, to $98.6 million, largely due to an additional $3.8 million the government provided to the Cayman Islands Monetary Authority because fee collections were lower than anticipated.