Hon Kenneth Jefferson Financial Secretary

By Tad Stoner
tad@caymannetnews.com

During Wednesday’s Legislative Assembly (LA) session, the Financial Secretary, Hon Kenneth Jefferson, justified a series of controversial budget figures, rejecting Opposition charges that Government had misled the public.

Saying that “the state of public finances is severely challenged, and will continue to be,” Mr Jefferson told the LA that the projected $74 million budget deficit accurately reflected predictions made on 31 March, 30 April and, finally, 28 May.

A deficit figure of only $29 million proclaimed by the previous People’s Progressive Movement (PPM) administration was the result of a scramble to boost revenues and slash expenses in the face of Mr Jefferson’s 9 February forecast of a smaller $68 million deficit that “elected ministers decided… could not be taken to the Legislative Assembly at that magnitude of an imbalance”, the Financial Secretary said.

A rapid rethink of the budget and projected $68 million shortfall in a series of meetings lowered the projected deficit to $29 million, and included savings of $4 million each by the Ministry of Health and the Portfolio of Finance and Economics; and another $1 million each by the Ministry of Communications, the Ministry of Tourism and the Ministry of Education.

New revenues were to be generated by the $5 million renewal of the Villas of the Galleon lease on Seven Mile Beach; a $4.5 million Hurricane Paloma insurance payout; a $2.3 million increase in company fees; a $2.2 million deficit reduction by statutory authorities and government-owned companies; and another $1 million in garbage collection fees.

“Actual revenue performance indicates that this increase to revenue figures will not materialise,” the Financial Secretary said. “Ministers of the former Government cannot distance themselves from this process and should not be surprised at the poor revenue performance forecast for 2008/9.”

“We feel at this point in time,” he said later, referring to the proposed deficit-reduction efforts, “that they were unrealistic”.

On 11 June, the United Democratic Party (UDP), through the Portfolio of Finance and Economics, released a budget statement describing a record-breaking $74 million deficit, a $590 million public-sector debt and only $17 million in cash reserves.

Leader of the Opposition PPM, Hon Kurt Tibbetts, countered in a 29 June assembly session that Mr Jefferson had advised in a 5 May “Cabinet Note” that the $29 million projection was “running true” through the 20 June close of the financial year. Another $126 million had been left in cash reserves, he said, asking what might have caused such a dramatic decline between 5 May and 11 June.

“It is reasonable for us to be slightly shocked,” he told the assembly.

Mr Jefferson rejected the claim that his “Cabinet Note” had reaffirmed the projected $29 million deficit.

“I was not in Cabinet on 5 May,” Mr Jefferson said after Wednesday’s session. “I was off-island in Miami. The Acting Financial Secretary was in Cabinet and there was a Cabinet Note, which gave actual results for revenues and expenditures for the nine months to 31 March.

“Those actual results were that there was an $18.8 million deficit and the note did not contain any forecast projections to the end of June. It went no further than 31 March. The Cabinet Note did not forecast and it was not forward looking.”

He said the Acting Financial Secretary’s “recollection was that she does not recall being asked about the $29 million figure ‘holding true’. I asked her and her answer was ‘no’. She was not asked that question.”

The 31 March figure of nearly $19 million, reported in the 5 May Cabinet Note, already indicated that, with three months still remaining before the 30 June close of the financial year, the $29 million final deficit was “unrealistic”.

“The projected savings and revenues just didn’t happen,” Mr Jefferson said, a fact underscored by 30 April results that indicated the debt had already doubled to $38 million.

“To go from $19 million in March to $38 million in April logically says that in the month of April, you have incurred [another] $19 million deficit, and that’s why to say that would go from $19 million to only $29 million [at 30 June] was unrealistic.

Another 28 May “Cabinet Note”, presented to the UDP Government, elected on 20 May, indicated the $74 million shortfall as of 30 June, Mr Jefferson said.

Asked about presenting the $29 million figure to the LA during a 20 March session, Mr Jefferson declined to point fingers.

“I can’t answer. A civil servant must defend the government of the day. It was Cabinet document that came here and you can’t kick the government you work with,” he said.