Miller blames CS not schools

| 18/03/2010

Cayman Islands News, Grand Cayman headline news, James Miller III(CNS): Despite the fact that government has placed the blame for the current fiscal problems at what it has described as the previous administration’s excessive borrowing for capital projects, the authors of the Miller report have said the problem of Cayman’s debts and liabilities is public service personnel. In the recently published report by James Miller, David Shaw and Kenneth Jefferson, the authors find that the government’s public sector liabilities and spending on civil servants is the cause of its fiscal woes and the reason why government has had to borrow so much and not the schools or the government accommodation building. The report states that without the excessive civil service costs government would have easily afforded the schools.

The Miller report found after analysing compliance with the Principles of Responsible Financial Management and the Debt-to-GDP ratio — comparisons normally used to assess the sustainability of debt for governments — that Cayman‘s debt position would have been satisfactory, if somewhat stretched towards the maximum that is prudent, except for the excessive unfunded liabilities as a result of public sector benefits. “The situation we have found, in relation to contingent liabilities … is sufficiently serious as to require urgent consideration of further steps,” the report reveals.

The former Reagan aide and lead writer on the report said that when priorities changed in the boom years, the Cayman Islands leadership was not alone in pursuing expansionist policies – most countries around the world did likewise, and many broke sound financial rules and spent on capital projects.

But Miller also revealed that, while many people in Cayman had commented that the reason for the borrowing was because of the capital being spent on two new schools and the new government office building, this was not the problems. The reason why the CIG was forced to borrow was really to pay for personnel costs, Miller asserts. “Without the recent increase in personnel costs over and above growth in GDP, both new schools could most likely have been fully funded from normal revenues,” he stated, contradicting the message which has been delivered from government since it was elected to office in May 2009. He said it was the excess personnel costs that drove government to the financial markets to borrow US$312 million.

Miller criticize the increases given to civil servants andsaid personnel costs were not only considerable but difficult for a junior- or middle-grade civil servant to comprehend when seeking a pay increase, but the CIG could not afford to sustain the pay and generous benefits. “Government employees have received additions in pay and benefits not shared by the economy as a whole and definitely not affordable,” the report stated.

In addition, the report reveals that the payroll costs do not fully reflect total personnel costs as a result of the unfunded pension and healthcare liabilities. The size of government’s liability in terms of the pension and in particular the health care benefits for the future were revealed in the offering documents circulated when government floated its bond issue. The total liability of the Cayman Islands healthcare programme alone is nearly twice the government’s current public debt.

“These are considerable in size and, although they are not all payable in one year, the annual cost is rising, as more and more civil servants retire and/or utilize health benefits. The build-up in personnel costs on the current model of salaries and benefits will be considerable, with cash increases projected for every year,” the Miller report warned. “We believe this build-up is an excessive burden for the Caymans and is unaffordable.”

He added that the excess personnel cost of the civil service has caused a higher level of borrowing than is reasonable. “That debt burden will have to be repaid by the next generation of Caymanians,” Miller wrote.

He also observed that with better planning and restraint with respect to personnel costs, the two new schools could have been funded from the government‘s own resources, without recourse to borrowing.

The 135 page report is tough reading for the local civil service, which Miller says is crippling government. Despite not having to assess and collect direct taxes, provide extensive welfare systems or national defence, the level of government employment in Cayman is on a par with or exceeds that of many major nations, the report reveals. Miller also reveals that public sector personnel cost without consideration of future liabilities are almost 12% of GDP.

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  1. noname says:

    While I do not entirely agree with everything that the current Government is doing or has proposed to do, I also believe that it is completely insane to suggest that the past Government (who is mainly responsible for the mess we now find ourselves in) could offer any form of assistance in helping us to recover. If the previous Government were so knowledgeable when it comes to finances, why then did they allow us to get to the point that we are now in? I think that we need a fresh approach and a new attitude. We know how we got here, now we need to figure out how we are going to move forward. The future of my children and their children rely on the decisions that we make today. As long as Mr. Bush is the Premier of this Country, as a Caymanian, he has my support and I pray that God instill in him the wisdom that he needs to lead us. 

    • Anonymous says:

      EXACTLY!  I agree with your comment completely.  Why ask the PPM for advice on finances when it was them that ruined this country?  I don’t agree with everything our Premier does, but putting stumbling blocks on everything he is trying to do is not helpful.  Give him a chance.

      • Anonymous says:

        And these are your comments having read an article which states that the report indicates that it is not "capital" expenditure but "operating" expenditure that has lead to the deficit. In particular the costs to fund the benefits & salaries of 6000+ staff. Wow!

      • Anonymous says:

        I JUST NOT UNDERSTAND THE UDP, members & supporters alike! On one hand they say that the PPM is not offering any solutions, & then on the other hand (people like Anon 09:31) refuse to accept the PPM’s input! VERY STRANGE PEOPLE they are! If the UDP & their supporters can ask "Why ask the PPM for advice on finances when it was them that ruined this country?" then why do they publicly complain that the PPM is offering no solutions? STRANGE!
        However, the fact is that the PPM have offered many solutions, just read the Miller/Shaw report, but the problem is that Mckeeva Bush & the UDP refuse to listen to the PPM, or work with them to find solutions!
        Furthermore, it is the UDP that has destroyed this country, just check out the destruction, XXXX between 2001 & 2005. Then go back to the years between 1992 & 2000 & check out all the destruction, XXXXXX by Bush & his N.T. colleagues. No one politician has caused as much damage & destruction as Bushy, without a doubt.
        Finally, I would suggest that the UDP try hard & get their public statements alike (even if it is all broken up behind the scenes), because all the different views by the UDP make them seem divided & STUPID! Get your act together children! 

      • Anonymous says:

        Give him a chance to do what? Look at the status grants situation and ask yourself the question, would you trust this person with your children’s future?

         

    • Anonymous says:

      Therein lies our problem. We elect people and then pray to God to instill in them wisdom, integrity, compassion, etc.

      Wouldn’t it be better to elect people that had these qualities to begin with?

  2. Don't worry I wont stay says:

    There is not a single department that is so busy right now that they could not reduce the labour costs by 10% through lay offs.

    But, who do you lay off? The last person to join the department? The weakest link? The serial underachiever? In the private sector yes. But in our case it would put 500 poorly skilled individuals into the already crowded job market for an extended period of time and potentially stress the already overloaded social systems.

    How about taking the other road. Choose the best, the brightest, the fittest, the ones with the highest potential cost of pension benefits in each area, and lay them off with one years notice. The faster they find alternate work, the more of the one year notice they could keep. 

    The private sector would snap up the quality people to reduce the costs relative to work permits, the individuals would benefit from the pay out, and the voices that scream out about losing their security would keep the jobs, have the chance to grow into a better position. 

    Yes there is a cost associated with the buy out, but it is a one time charge. 

    Just a thought.

    • Just thinkin.... says:

      Okay so………..If the brightest and fittest are gone, who will do the CS work? I suppose everyone who is not working now will have no choice but to pull up their socks and dig in. Perhaps this is a good idea after all! When you have a job and there is nothing to do, you become complacent and begin to feel useless, lazy and entitled to a paycheck just because you are there. With a new and valid workload, you gain self-worth by your accomplishments and go home to your family feeling good about yourself. That in turn reflects on your children and society as a whole. Sounds like a win win situation to me…. at least in theory.

  3. Old MacDonald had a farm says:

    I assume like many others I am shocked by the revelations coming out in the Miller Report.  Not the report itself, for most knew already that the economy was in bad shape.  What is shocking is the information, which many suspected, but did not have the relevant figures to back up, is how extravagant the re-numerations and benefits have been for the Civil Service.  And how these caused the government’s finances to be in such critical condition.  It then begs who proposed and implemented such things as massive hiring, over the norm wages, free pension, medical, and dental?  For all public servants, their spouses and children?  And who could not see where this would lead? 

    The answer to the first part…who proposed these things… must be the Civil Service themselves.  Through their "Association", disguised as a union.  The answer to the second part…who implemented it….is the government, perhaps under duress from the same powerful union… disguised as an association.  But it was not too much duress, because ultimately, being top civil servants themselves, they would receive the same benefits, and slightly more.

    The answer to the last part….who could not see where this would lead….is the rest of us.

    Both the government, and the civil service, of which the government is a part, have not seemed to comprehend, or even care less…that it was not their money… they were going through… SO RAPIDLY.  And without a care in the world, except how much they could pocket before time ran out.

    Now that the cow has run dry.  We are about to witness the fight of the century!

    As each sector points the finger at the other, we’re hearing from the civil service "the government spent too muchof your money on schools and whatnot".  That turned out to be b.s.

    And, from the government "it’s the civil service, it’s just too big and that’s where your money went."

    And who was in control of the civil service??   Don’t b.s. us!!!  You do!!!!

    It’s funny.  As each one looks to bottom of the well, and sees that it’s empty. Panic has struck the ranks  It’s palpable!   Then of course as we have heard recently there will be bickering and blaming. And smoke and mirrors.

    UDP/PPM/Civil Service

    All we know is……the cow can’t give any more milk, and the well is dry.

    It was our well dammit.  We filled it.  for years!

    And all we can say is:  Scream and yell all you want. Point fingers. Whatever you do… don’t try and con us into believing…. the cause isn’t obvious.  You’re self-serving interest and GREED.  

    And it was your well too.

    Tough to swallow ain’t it?

  4. Anonymous says:

    It was the PPM who increased the civil service so much during their term to gain support and it was them also who gave out pay increases last year.  Now the CS is the main target of the private sector.  I hope the CS does not forget all this when it comes time to vote in a few years.  I don’t ever want to see any of those PPM bunch anywhere in power ever!

    • Anonymous says:

      The civil service increased in number for a variety of reasons. For example, the Public Finance and Management Law, the Freedom of Information Law and our ever-increasing demand for services from govt. The civil service was expanding when the UDP were previously in govt. To suggest that the civil service was expanded to seek political support is obviously silly. However, following your reasoning, if the UDP decimates the civil service then then it is obviously the UDP who would suffer when the time comes to vote in a few years.       

      • Anonymous says:

        Re civil service increase – you are so right the Public Finance Management Law is a major cause.  The head of the civil service brought this in, best thing since sliced bread civil servants were expected to believe. Didnt fool all the civil servants though, many of them asked for it to be reconsidered. Now nobody will admit accountability for it.TC75J

        • Anonymous says:

          Fri 11:40:

          Can you provide empirical proof of your statement? And I don’t mean generalised stuff like "all those CFOs etc" or Ezzard’s claptrap about the PMFL creating 700 new posts. Go ahead, list them and make sure you demonstrate how they are caused by the PMFL and not by the "wants" of chief officers using the PMFl as an excuse.

          Then read what the Miller report says about the PMFL and our finacial management system and government’s refusal to hold our astronomically paid civil servants accountable for doing nothing to ensure the law is complied with. Disgraceful.

    • Anonymous says:

      Hang on a minute….. Our FS co-authored this report? Surely he has/had a conflict of interest? He’s preparing the annual budgets and now he’s saying that it’s the civil service to blame? Isn’t he a civil servant? So, hypothetically, he’s partly to blame!!

  5. OnePeople-OneGovernment! says:

    WELL, ya mean we had to pay some foreigner to come here and tell everyone what most of us already knew???!!

    What the actual, realistic, financial reports were evidencing??!!

    What the Financial Secretary was trying to cover-up and confuse??!!

    Well, well, well, are we ALL going to believe and accept the FACTS now?????

    Oh what a shame, the UDP ‘blame’ song has lost its tune…..aaaawh, what a shame.

    OH and before I forget……the additional costs of our country having to pay for both McKeeva and Juliana to live in "mansions on the hill" (no no, not at Capital Hill), body guards, cooks, govt vehicles, etc., etc., etc.,…..and UDP have the gald to ramp-n-rave about EXPEDITURE!!! Aaaaah man, stop blowing smoke up my a$$!!!

    OH and one more thing…….I crossed the DEPUTY GOVERNOR, Donavan Ebanks (NOT the

    premier) walking by my house last night WITHOUT body guards. Needless to say, he’s still staying in his "ordinary house" in an "ordinary community" and with his "ordinary neighbors" and NOT seeking to cause this country any further expense. I wonder why???….geee could if be that he hasn’t pranked-call his own home and then made a report to say that he & his family was threatened???? Don’t you find it straaaaaaaannnnnnnngggggeeeee that the Police can quickly locate the mental ward person who called in the bomb threat to FCIBC but can’t find the person who called McKeeva’s house????

    But Miller also revealed that, while many people in Cayman had commented that the reason for the borrowing was because of the capital being spent on two new schools and the new government office building, this was not the problems.

    The reason why the CIG was forced to borrow was really to pay for personnel costs, Miller asserts. "Without the recent increase in personnel costs over and above growth in GDPcontradicting the message which has been delivered from government since it was elected to office in May 2009., both new schools could most likely have been fully funded from normal revenues," he stated,

    Geeeeeee……….I’m confused ans scratching my head………

  6. Questions to CNS says:

    I am convinced that CNS has taken the side of the PPM. Over the last few months I have carefully examined some of the articles on this forum and have found that overwhelmingly they favor the PPM. While I believe we live in a democratic society which allows freedom of the press; I find it quiet unfair that a news outlet would take sides in discussions that are so politically charged;  In no way does the Miller report exonerates the reckless spending of the PPM, on the contrary this is cited in the report as a major reason the governments finances are in the red. Sorry CNS i just couldn’t help it. I await your comeback

    • Anonymous says:

      Read the report for yourself!!!!!!

    • Anonymous says:

      DUH!!!! Well what do you expect? Do you know of any story or news item over the past few months that favor the UDP? If CNS was to report stories that favor the UDP they would have to shut down because they would have no stories to report! Get it?

    • Anonymous says:

      Funny, I have long since been convinced by reading its articles and editorials that the Compass are strongly biassed towards the UDP. There editorials like "what were they thinking?!" (referring to the PPM Govt). Perhaps you could save your sanctimony for them.  CNS gets the balance about right.

    • Joe Average says:

      I disagree.   I believe the people at CNS are too intelligent to support either party.  Stop for a second.  Look at them!!  Listen to them!!!  I await your response.

  7. Anonymous says:

     Big surprise. The spoiled CS of the Cayman Islands are the reason for the financial deficits. I don’t think some people got the gist of this article. THE SCHOOLS ARE NOT THE REASON FOR THE DEFICIT. Its the ridiculous fluffing of CS benefits that are unrealistic under current the current financial climate. But like all good advice the government gets I’m sure this will be promptly ignored and filed away in a desk drawer. 

  8. slowpoke says:

    “many broke sound financial rules”… If only I could remember who else did that and if maybe it contributed to this financial mess. Oh Yes, they go by names like Lehman, AIG, CITI… and then they required massive bailouts. Keep chanting “free market, less regualtion” it has worked so well for us.

    I just have to wonder what this report would have looked like if we had hired Paul Krugman instead.

  9. anonymous says:

    this still does not excuse the fact that these schools are extravagant.  prospect primary was built for around $12 million and it serves its community perfectly fine both as a school, and as a hurricane shelter.   the PPM spent millions of dollars on "consultants" to be sold the "lamborghini" of schools, when all it really needed was a reliable Honda.  ultimately, extravagant schools do not make smarter students; anyone who thinks different…the rest of the money could have been put to much better use.

    • Anonymous says:

      Prospect does NOT serve it’s community just fine…it is already OVERCROWDED!!!!

    • Anonymous says:

      I suggest that you go to investigate the Prospect school. It was full to capacity within months of opening. It was built without any thought for expansion. It now has several "temporary" classrooms to accomodate the children. Some of the resource rooms have also apparently had to be converted to clasrooms. Great forward thinking.

      The Frank Sound H.S. is to serve as the main shelter for the two Eastern districts. How large do you think that has to be? How much equipment do you think will be required?

      Both of these schools are to be used for community events & adult learning. If we don’t have good facilities to educate the current & future generations where are we going as a country?

      • Anonymous says:

        Prospect does not have ‘several’ temporary classrooms.  It has one, due to the influx and overcrowding.  I suspect the problem shall solve itself come September when those that are not living in the catchment area are removed.

         

         

    • OnePeople-OneGovernment! says:

      For once, I wish to God that we could accept that someone was giving us the very best, considering us first in our own country!!  Why can’t you be thankful that someone gave us such consideration after all these years???  Let me, what did any of the past govts do for education, for us, for our children and for our future generations to come????

      Let me!!!!!!!

  10. anonymous says:

    leadership is lacking all around, whether it’s the UDP or the PPM.  they are both complicit to the present disaster.  the sooner people realize that, the better off the cayman islands will be; in other words, vote for neither come election time…

     

  11. anonymous says:

    WOW!  I am so glad that the report has clarified that issue to the people of the Cayman Islands.  Perhaps now the Government of the day can get on with the business of efficiently running the Government matters correctly and stop this blame game, about PPM this and PPM that.  MacKeeva you need to grab the olive leaf that the PPM has offered you and bridge the great divide and ask them to assist you with the finances of these Islands.  Kurt and Alden has been telling you for the last 10 months that the buildings were not the reason for the Financial situation, but you were just so bent on playing politics and showing your hatred for your fellow Caymanians. I dunno why you are so hateful and angry, but Christians do not act that way. They try to make peace and live in harmony, but you are always blaming others and cannot see your own faults.  Get on now with the business of running Government and there is no need for you to sell the people’s assets. Just stop spending, unnecessary.

    • Heavy Cake says:

      Prospect Primary was also cramped by the end of the first year.

      • Anonymous says:

        So true Heavy Cake. It was designed by the then hated "curriculum coordinators" who had nothing to do (and no expertise), didn’t know s–t from shinola about anything but tried to boss the schools into doing things their 30 years out of date ways and when that and snitching about supposed offences by teachers didn’t get them anywhere they were given this school to design to keep them out of trouble. One of the many travesties foisted on education by failed educators put in the Education dept to keep them out of the classroom.

  12. Anonymous says:

    Good reporting, lame analysis. 

    The government’s position is that, whether or not the schools represented good value for money, or were needed or not, the country was in no financial position to invest the kind of money required.

    If I earn ten grand a month and spend fifteen a month for a period of three years, and want to buy a brand new escalade, you can’t say I can’t afford it looking at my revenue, only my godforsaken balance sheet that says I am 180 grand in debt as a result of unnecessarily profligate spending! 

    The miller report is saying "don’t blame the lack of revenue", blame the spending. 

    That obviously isn’t the same as saying building new schools and numerous other buildings was a wise decision in the circumstances and that the UDP is wrong to say so, which you imply at the start of this piece:

    "Despite the fact that government has placed the blame for the current fiscal problems at what it has described as the previous administration’s excessive borrowing for capital projects…"

    If the country ever runs out of cash it would be incontrovertible that BOTH the bloated civil service AND the excessive capital expenditure would be to blame (because if either had been more modest we wouldn’t have run out of cash!).  There’s no point in debating which is more to blame, the figures speak for themselves.

     

    • Anonymous says:

      Some direct quotes from the Miller report –

      "The tendancy toward under-forecasting expenditure exacerbates the borrowing problem caused by overcommittments on capital projects. This dual pressure on borrowing has occurred in Cayman"

      "From FY 04 -09 Core Govt debt increased rapidly from $160.8 million to $421.3 million (161%) and Total Govt debt increased from $246.3 million to $565.2 million. We have no hesitation in saying that such a rate of increase in Govt debt cannot be sustained in the future."

      "Figure 2-11 shows cash flow after capital expenditure has been negative almost all the last 20 years, with sizeable deficits in the last 3 years particularly 08/09."

       

  13. BORN FREE says:

    Ever heard the saying "he who pays the piper plays the tune"???
    The Miller/Shaw reports sounds too much like what Mckeeva Bush has been saying over the past few months for me to believe that this report did not have Bush’s input. Remember good folks, this report was commissioned by Mckeeva Bush & the UDP! It is my opinion that Bush definitely had a big influence & input into the Miller/Shaw report. There are too many similarities between the report & what Bush has been saying for it to simply be a coincidence. 
    However, the point that the report blames the CS more than the buildings of the new schools for our present financial crisis must have embarrassed the premier somewhat. Afterall, Bush & the UDP have done nothing but blame the PPM & the building of the much needed schools for the state of the economy, while TOTALLY ignoring the fact that the whole world is in a recession & has been for over two years. What a low blow that is for the premier & the UDP! OUCH! That hurt! 

    • Anonymous says:

      Actually, Bush has had this report on his desk for months. AKA yes it sounds like him because he was using it’s ideas before publicly publishing the report to sound like he was the one coming up with everything.

    • Live Free.... says:

      Well said my friend and I guess MacBush did’nt actually saw that coming and it hit him wherever it hurts. I guess he will now stop blaming the opposition and start workimg as a team and sort out the financial situation we have here.

  14. Anonymous says:

    Has the Civil Service been cut yet  ?

  15. Anonymous says:

    This whole Miller Report sounds like a classic example of where we hire some "smart" consultants, pay them a huge amount of money, and tell them "Here is the answer. Now, write me a Report with the proposals". And they do it! Of course, covering their tracks by saying that because of the lack of sufficient time there may be errors in the Report! Balderbash!!!

    • Just thinkin.... says:

      Perhaps the possible errors in the Miller Report might stem from not having accurate and timely financial reports from each department of CS and Government to work with in the first place. One can also guess that the reports they did have were just a tad doctored up to mask expenditures that were not above board. You can only hide so much in the closet before the door bursts open and the truth falls out for all to see. Time to face it and fix it and move on to a much better future for all.

  16. Confucious says:

    So does this mean we can get our schools now? Who will staff them if we are doing away with Civil Servants. Good thing we have so many Caymanian Teachers waiting in the wings who will be able to take on the task at hand with reduced benefits, salary and even less respect than before. Can’t wait for the future. Hmmm.

    • Anonymous says:

      Would you all stop being so sarcastic!! This is serious.  We all need to help do what ever we can to assist our country get back on it’s feet regardless of whether it was PPM or UDP that has us put us in this mess.  I am not a McKeeva supporter and I don’t necessarily like some of his ideas, in fact I think some of them are way off base, but what are we all doing to help? Absolutely nothing, except to continually knock him. We all knew who he was before we put him back in last year. Yet he was voted in.  Let’s all try to put politics aside for awhile and try to give him some good, sound, workable ideas. Come on Caymanians, we had better start making some changes now or it will only get worse.  Are we gonna continue to  sit back and  do nothing ? Just watch the UK come in and do what they want  while we all sit here and argue and critisize.

      Have you all been reading the world news.  Califronia has been issuing IOU’s since mid  2009.  There are states tjhat are clsoing schools, and even police stations because of the economy. Is this what we want? with all the crime and illeiterate children we are currently graduating from school, I hope we dont; have to take those or any other drastic measures.  But that is where we are headed if we all don’t try to come together. Please Cayman, wake up and let’s each do our part to sort our country out.

       

  17. anonymous says:

    Without upsetting my relatives in the CS….it is obvious to the Blind that this is the case.

    It is also clear that the CS is not prepared to make any sacrifice for the benefit of the Cayman Islands….and no one is likely to cut their own salary..I would not, to be perfectly honest.

    We need leadership now to make the tough decisions even if it means they loose the next election. They will go down in history for turning around the Cayman Islands in the Great Recession of 2009/10. Guys think history books.

    Go for it and stop reading our stupid blogs.

    • Anonymous says:

      I must agree Cayman needs leadership willing to make the hard decisions

      "Without upsetting my relatives in the CS….it is obvious to the Blind that this is the case.

      It is also clear that the CS is not prepared to make any sacrifice for the benefit of the Cayman Islands….and no one is likely to cut their own salary..I would not, to be perfectly honest.

      We need leadership now to make the tough decisions even if it means they loose the next election. They will go down in history for turning around the Cayman Islands in the Great Recession of 2009/10. Guys think history books.