Island Council reluctantly approves skeletal budget 2020-2023

The Island Council on Wednesday, November 13 adopted the 2020-2023 budget of the Public Entity Saba, but not without the members sharing their great concerns about the lack of structural funding from the Dutch Government and after hearing the urgent message of Finance Commissioner Bruce Zagers.

Zagers explained in his presentation at the start of the meeting, which was a continuation of the adjourned meeting of last week Thursday when the Island Council staged a walk-out in protest of the lack of structural funding, that the multi-annual draft budget was barely balanced.

Calling it a “skeletal budget,” the Commissioner noted that the 2020 budget stood at US $12,379,257, a mere US $218,000 higher than the 2019 budget, whereas the responsibilities of the Public Entity Saba, the overall general operating costs and the cost of maintenance have increased. “The draft budget as is can only meet the legal financial obligations of the day-to-day running of government. It barely allows for government to function.”

Zagers said that the Saba Government always made it a priority to continue improving financial management, but given the current circumstances it was imminent that government would no longer be able to honor its legal responsibilities and that deficits could be expected. “Ultimately, government’s financial health will not only be tested but will be at great risk of regress.” The free allowance (‘vrije uitkering’) from the Dutch Government of US $9,770,710, which basically has remained the same since 2012, is simply too low and the part of the budget that depends on incidental funding is too big.

Sound the alarm

“The overall discussion today should not be as much about what is in the budget, but what is not in the budget. Year after year, we continue to sound the alarm about the government finances and year after year, we have budget meetings to basically approve a document which can barely be balanced or meet our financial obligations,” said Zagers.

To illustrate how little flexibility this budget has, Zagers mentioned the diminished amount on the budget item unforeseen. This budget item which is used as a buffer is only US $22,542 for 2020. In the budget for 2019 the amount for this item was US $111,101. Some of the measures taken to balance the budget included the removal of all vacancies as well as the loan payments. This means that the Public Entity will need to pay the loans from its liquidity which will result in a reduced liquidity position and increases risks as a government.

“I can assure you that neither the Caribbean Netherlands Government Service RCN nor the other Dutch Caribbean departments that are financed by the ministries have such tight budgets. If something doesn’t change with the free allowance or any other means of structural funding, this will probably be the last balanced budget that the Public Entity Saba will be able to present without having to take serious cost cutting measures,” said the Commissioner.

Bare minimum

The free allowance discussion between the Saba and the Dutch Government has been ongoing for several years. “The current free allowance is based on the bare minimum to execute the island tasks and does not properly reflect what it takes financially for government to properly execute its mandated responsibilities. The government organization and the services offered have grown and for the most part improved, yet it is expected that it is to be maintained with the same amount of money. We have often heard our State Secretary, who is now Minister of Home Affairs and Kingdom Relations, use the words ‘more for more.’ However, it seems that it is expected that the Public Entity is expected to do more with the same amount of money,” said Zagers.

“The Executive Council continues to lobby on a political and ministerial level in the Netherlands for a higher free allowance and the including of incidental funds used for structural tasks in the free allowance. This is of utmost importance because we now face the risk of jeopardizing our standard of financial management when government can no longer financially meet its legal obligations. The risk is also high that structural tasks such as the activities in the social domain, recycling and agriculture may need to be downsized or halted if our funding isn’t increased or if the incidental funds are stopped,” said the Commissioner.

Strong message

The Commissioner said that after last week’s protest by the Island Council, he sent a strong message to The Hague that the finances for the budget need to be urgently improved. He said the walk-out also sent a message that the “perception of creating two different classes of governments and civil servants, with RCN being over-financed and the Saba Government basically struggling to meet its legal obligations,” was undesirable. “No one wants to create a system which will be an equal to what we saw during the days of the Netherlands Antilles. This government appreciates all the progress made in many policy areas, but sound local government finances cannot continued to be ignored.”

The financial law regulating the Caribbean Netherlands FINBES states that when a Public Entity cannot balance a budget it will be done by the Ministry via the Committee for Financial Supervision (CFT). “This could result in drastic cuts in either subsidies or personnel. No one wants to see this possibility materialize. That is why we must remain steadfast in our approach to the ministries that the current level of funding for our budget is no longer adequate nor is it realistic,” said Zagers.

The Commissioner advised the Island Council to approve the budget because having no budget could severely hamper government operations. “Not approving the budget today will not bring the financial support we desire and deserve. Putting operations and our civil servants at risk should never be an option if we can avoid doing so. We need to continue building our case and lobbying for the funding necessary to pay civil servants livable wages, for funding for local policy, and for structural funding so that Saba’s ability to adhere to strong financial management is not put at risk.”

Bold move

Member of the Island Council Esmeralda Johnson remarked that she was unable to attend last week’s walk-out because she was off-island with her grandfather for medical reasons, but she did commend her colleagues for taking this “bold move.”

“We want to make sure that we are in strong financial shape, that we are fiscally solid, that we have a reserve and that we reduce the burden on our hardworking taxpayers. Strategic public investments must go hand-in-hand with strategic funding mechanisms and supporting governance systems. We need more flexibility and more trust with the funding that is provided. How can we improve with the same budget that we have had for several years? I hope that we can resolve these issues and continue to produce a balanced budget that provides the needed investments to deliver the services that our government and our people deserve. No more paying lip service. We need support,” said Johnson.

Councilman Hemmie van Xanten said he had “mixed feelings” about the budget, but acknowledged that not approving it would slow down the government operations. He called on the Executive Council to have a “serious dialogue” with The Hague “in order to bring our financial situation where it is supposed to be and to guarantee this for the years to come.”

Heavy heart

Councilman Vito Charles said that he “reluctantly” approved the budget “with a heavy heart.” He said that historically, Saba always made do with what it had at its disposal. “But sometimes it is not enough. We need to be rewarded for doing good.” He was critical of having to approve a skeletal budget, but not doing so and thereby hampering the government operations, people’s salaries and the subsidies was not an option either.

“We have all repeatedly heard the statement of the now minister ‘more for more,’ yet the reality is that we have to do more with the same,” said Councilman Carl Buncamper. He said that there was not much room in the policy area and that as such there was no need to challenge the numbers in the budget.

“It is clear that if we continue on the same financial path, achieving financial sustainability will continue to further slip away. This Council is aware of the consequences of not having an approved budget by the lawfully stated deadline of November 15. It is for that reason only that we adopt this budget,” said Buncamper.

GIS Saba