The Cayman Islands government will submit a one-time, 18-month spending plan to the U.K.’s Foreign and Commonwealth Office within the next week for pre-approval, likely to be the last time Cayman will have to do so, according to Finance Minister Marco Archer.
Although it appears Cayman will be back within all six measures of responsible financial management set out in local law, the final proof of that will not be known until the current government budget year ends on June 30, Mr. Archer said. Cayman has to submit its next budget to the U.K. prior to that date, the finance minister said.
“With the upcoming budget, we would still have to seek approval because this goes to the Legislative Assembly before the end of the [fiscal] year,” Mr. Archer said. “I always need to stress, this achievement doesn’t mean we have to stop complying with the requirements of the Public Management and Finance Law.”
The upcoming 18-month budget is a transition, according to the finance minister, as Cayman switches its government budgets to a two-year cycle. The next budget will run between July 1, 2016 and Dec. 31, 2017. After that, the local government will issue two-year budgets starting Jan. 1 of one year and ending Dec. 31 of the next.
Mr. Archer said the 18-month budget will not have as large an operating surplus as recent government budgets have shown, mostly due to timing.
The 18-month period between this July and December 2017 will only contain one “high earning” revenue period between January and April. Typically, the Cayman Islands government takes in most of its annual revenue during the first few months of the calendar year, when tourism revenues are at their peak and when most financial services-related company fees are due.
By contrast, the next budget will contain two “low revenue” periods – during the tourism off-season normally between August and November – when government revenues tend to shrink.
“Except for the operational surplus, the performance [for the 18-month budget] is as good or better than in previous years,” Mr. Archer said.
The 18-month plan does not include any proposals to borrow money or to add new government fees. The finance minister said a recent increase in airport security tax was a requirement of the Civil Aviation Authority in line with international standards, adding that the money earned would be “ring fenced” for security purposes and not added to the government’s general fund budget.
Mr. Archer acknowledged there could be some difficulty for lawmakers comparing this year’s 12-month budget to the upcoming 18-month spending plan. To ease that comparison process, Mr. Archer said the current budget numbers would be estimated on an 18-month spending timeline, including budget planners’ best guess at what another six months of spending might have looked like.
“It’s basically what the expected expenditure [over 18 months] would have been,” Mr. Archer said.
Both Opposition Leader McKeeva Bush and independent North Side MLA Ezzard Miller have strongly objected to the change to multiyear budgeting, stating it does not allow for proper scrutiny of government accounts until it is “too late.”
Mr. Miller has said that the proposed 18-month “interim budget,” between July 1, 2016 and Dec. 31, 2017, would allow the current government to effectively “skip” finance committee and strategic policy reporting requirements during its last 12 months in office prior to the May 2017 general election. There have been rumors of an earlier election being called, but Premier Alden McLaughlin has brushed aside questions on the topic in recent months.
“[The budget process] provides some opportunities for government to spend money in that period leading to the election that is not going to be scrutinized until long after the next election takes place,” Mr. Miller said.
Mr. Archer denied that would be the case under the Progressives-led government. He explained that while the budget plan would be extended, first for 18 months and then to two years, annual audits and reviews of government spending would still take place as prescribed by the law.
Opposition Leader Bush pointed out that those audits have often lagged years behind the actual expenditure and that legislature members are not allowed to question those reports at the time they are made public, due to Legislative Assembly rules.
“That is a long period of time when there is no scrutiny,” Mr. Bush said.