In contrast to the past two years of the pandemic, government is planning a return to operating surpluses in its 2022/23 budget.
However, because public entities, like the Cayman Islands Airports Authority, Cayman Turtle Centre, Cayman Airways and the Health Services Authority, overall are predicted to continue to lose money, the entire public sector is expected to remain in deficit next year (-$15.76 million) and return to only a marginal surplus ($8.67 million) the year after.
Based on core government operating revenues of $940.9 million in 2022 and $978.1 million in 2023, government plans to spend $921.48 million next year and $950.37 million the following year.
Revenue sources
Although the budget does not include any new fees or higher taxes, government’s financial plan will increase debt. This higher borrowing, of up to $349.1 million over the two years, is intended to pay for more than $300 million in capital projects, which are predominantly investments in infrastructure.
At the same time, government’s operating income, mainly from licence fees and duties, in both years should exceed the operating expenditures in terms of government worker salaries, third-party services, and the operation of statutory authorities and government companies.
The principal sources of government revenue, shown in the chart, are not much different compared to previous years.
By far, the largest and growing item is the licence fees for the registration and maintenance of companies, funds, partnerships, trusts, banks and insurers in the Cayman Islands. Given that company and partnership registrations are set for a record year in 2021, the more than 117,500 companies, 34,100 partnerships and close to 27,000 funds are bringing in almost $250 million this year.
Private fund fees alone, a new revenue source introduced last year, are going to raise more than $52 million this year, an amount that is expected to rise to $58.46 million in 2022. The new fee, combined with larger-than-expected financial services revenues, was the main reason why the absence of tourism revenue this year did not result in a larger fiscal deficit.
In the 2022 budget, all financial services fees combined are expected to amount to $365 million.
Import duties for food, merchandise, gasoline, tobacco, alcohol and building materials are forecast to flush $217.1 million into government coffers.
Work permit, permanent residence, Caymanian status and other immigration-related fees are set to raise $98 million next year.
The extremely high activity in the property market is also expected to continue and raise $68.5 million in stamp duties on land transfers.
Direct revenues from tourism, such as room taxes, hotel licence fees and cruise passenger departure taxes, on the other hand, are not anticipated to contribute more than $25.1 million in 2022.
Spending projects
The main spending areas in government’s operating budget also remain largely unchanged but, like on the income side, the largest item, personnel costs, is growing.
Just less than half of the spending budget, $437.2 million, is earmarked for government worker salaries and benefits.
More than $161 million is being spent on the operation of government authorities and companies through payments for outputs from public entities.
Supplies and consumables will cost the government approximately $149.3 million, with $42.5 million budgeted for third-party services.
Transfer payments, largely for social assistance programmes, make up $61.5 million.
Outside of its day-to-day operations, government intends to spend $170.1 million in 2022 and $133.4 million in 2023 on capital projects.
In his budget address, Premier Wayne Panton mentioned the following new infrastructure investments, among other budget highlights.
Education
In the education budget, the expansion of the free school meal programme from primary to secondary schools is eventually going to cost the government $16 million a year.
New halls at Theoline L. McCoy and Joanna Clarke primary schools and the expansion of the Lighthouse School as well as a new building for the Layman E. Scott High School on Cayman Brac are some of the projects funded with $16.8 million in 2022 and $16.9 million in 2023.
Construction at John Gray High School is budgeted to cost $23.9 million next year and $11.2 million the year after.
ReGen/landfill
The budget includes $21.7 million in 2022 and $2.3 million in 2023 for the ongoing remediation work at the George Town landfill and for the ReGen project that will build a waste-to-energy facility to manage most of Cayman’s waste.
Beach renourishment
Government has plans to address the erosion of parts of Seven Mile Beach with a beach-renourishment programme, provided that scientific studies confirm the viability of such a project. In 2022, $1 million has been allocated for beach renourishment, followed by
$20 million in 2023.
In addition, amenities at public beaches, such as restrooms, will be enhanced. General beach access is set to be improved through the acquisition of land.
Government also seeks funding to buy further land for agricultural purposes.
General Aviation Terminal
There are plans to establish a public-private partnership to construct a new terminal to handle private and chartered aircraft. The intention is to improve the traveller experience. The Cayman Islands Airports Authority is working on a business case.
Northward Prison
The government aims to provide a modern and secure correctional facility, Panton said, because Northward Prison was “not fit for purpose”.
There is already an outline business case for the project and construction is expected to begin next year. The budget has allocated $6.9 million and $7 million, respectively, for the next two years.
Affordable housing
Government targets the provision of 100 affordable homes per year through government guaranteed-assisted mortgages and the National Housing Development Trust. For 2022, $8.26 million has been allocated for the construction of affordable homes by the trust and a further $5.44 has been budgeted for 2023.
Subsea cable
The budget includes funding for the implementation of a new subsea communications cable “to ensure Cayman remains connected to the world”, Panton said.
CINICO, Development Bank
Government plans to expand the operations and scope of the Cayman Islands National Insurance Company to increase product offerings. It will also re-examine how the Cayman Islands Development Bank can support Caymanians. The Development Bank is set to receive equity injections of $4.5 million in each of the next two years.
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