By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

The government’s wage bill for the 2017-2018 fiscal year was over-budgeted by $53m because of non-existent persons on its payroll, the deputy prime minister revealed yesterday.

KP Turnquest, unveiling the 2019-2020 budget in the House of Assembly, disclosed that the government suffers from “a historical pattern” of over-budgeting due to the failure to remove civil servants who either leave the public service or retire from its payroll.

Pointing out that this reduced funding for other public spending priorities, such as the security forces, health, education and social services, Mr Turnquest slammed a “very shallow and superficial budgeting process” that had frequently seen multiple government agencies spend just 60 percent to 70 percent of their annual budget allocations.

Pledging that the Minnis administration will seek to “surgically trim spending and linked inefficiencies, he said the government had for too long relied on an unscientific budgeting process where ministries, departments and agencies simply based next year’s expenditure on their current budget and added “a few dollars” for new project proposals.

Focusing on the Government’s wage bill, Mr Turnquest said the over-budgeting problems had been exposed by an internal government review “ministry-by-ministry, line item by line item”, that compared actual spending to budgeted allocations.

He added that civil service wages and benefits had “tapered” by $28.9m, or 4.8 percent, to $576.9m for the first 10 months of the 2018-2019 fiscal year as a result of “more precise budgeting, as opposed to a decrease in the total headcount”.

“To elaborate, in fiscal year 2017-2018, $790.4m was budgeted for employee compensation, though only $737.5m was spent, representing 93.3 percent of the budgeted amount. At the 10-month mark last year, only 76.6 percent of the budgeted amount had been spent.,” Mr Turnquest said.

“Thus, in an effort to apply more prudent and accurate budgeting, in fiscal year 2018-2019 expenditure in this area was constrained to meet its historical trends, as it usually comes in lower than budgeted.”

Referring to the review he flagged earlier, the deputy prime minister added: “We found an historical pattern of over-budgeting. In the category of personal emoluments, for example, we found that the budget included allocations for salaries that were no longer being paid.

“How is this possible? You have situations where the employment register is outdated and does not reflect some of the employees who retire, leave the public service and move into pensioner status. Although these individuals are not being paid, their salaries are still being budgeted for.”

With civil service wages, salaries and benefits typically accounting for 30 percent of government spending, Mr Turnquest said over-budgeting in this area drained much-needed and scarce resources from other priority expenditure areas.

He added that the consequences of the Government’s review will be “a reduction in the budgeted amount for salaries”, along with cuts in various expenditure items in every single ministry. “This budget cut does not mean a cut in the actual headcount, or in actual programmes. It simply means we are budgeting properly to account for the actual commitments of the Government,” he added.

While proper budgeting and spending cuts will likely thrill fiscal hawks who have long called for a reduction in the size of government, arguing that its bloated size imposes too heavy a burden on taxpayers, the 2019-2020 Budget data still shows a rise in the public sector’s payroll over the next three fiscal years.

Total wages and salaries due to the public service in 2018-2919 were budgeted at $696.568m, a figure that does not include benefits. This compares to a $638.535m wage bill for the prior fiscal period, and some $456.794m of the current year’s allocation - equivalent to 65.6 percent of the total - had been spent during the first nine months.

The Minnis administration is now projecting that its wage bill will decline slightly to $671.507m for the upcoming 2019-2020 fiscal year that begins on July 1, before rising to $688.657m in 2020-2021 and $720.24m in 2021-2022.

Turning to the Government’s wider budgeting process, Mr Turnquest said yesterday: “Time after time, in area after area, we have found cases where agencies did not spend all of their allocations. In fact, when the assessments were conducted, on average, most agencies spent roughly 60 to 70 percent of their budgets.

“As a result of our in-depth review, we identified opportunities to surgically trim the budget, decrease fiscal inefficiencies and reverse the historical pattern of improper planning resulting in over budgeting with little outcomes. This, Mr Speaker, is responsible, effective fiscal management.

“In the past, the budget exercise often involved agencies looking at their previous budget and adding on a few dollars for their new proposals. This legacy approach turned into a very shallow and superficial process of budgeting. We have turned that practice on its head and approached the budget process in a surgical manner. Our work is far from over as we work to continue to improve our budgeting process, but you will see the results of our efforts, so far, reflected in various line item reductions in the new budget.”

Pledging to deliver value for money for Bahamian taxpayers, Mr Turnquest added: “It is important to remember that when we allocate money in the budget and Parliament approves that spending, we are not talking about an abstract exercise.

“Those numbers represent obligations we are imposing on hard-earned taxpayers’ money. Taxpayers have sent us here to spend their money wisely and not waste it.”