Insurance fund: A good national financial plan.... that was not carried out

WEDNESDAY, OCT. 24: A perfect and pure example of questionable management is in the story of the Unemployment Insurance Fund.

“The Unemployment Insurance Fund (the Insurance Fund) was established March 18, 2002.  The Legislature authorized $1 million to be set aside within the Fund to set up the Insurance Fund.  … The Minister of Finance will pay amounts… to the Insurance Fund.  Monies paid into the Insurance Fund will be invested….and the interest earned on such investments will be paid into the Insurance Fund.” [Govt of Bda Financial Statements of the Consolidated Fund, 31 Mar 2009, page 13/14.]

“At the time, it was anticipated that an unemployment insurance scheme would be established to make periodic payments to unemployed persons.” [Govt of Bda Financial Statements of the Consolidated Fund, 31 Mar 2011, page 15.]

“As of March 31, 2010, no amounts have been paid into the Insurance Fund.” [Govt of Bda Financial Statements of the Consolidated Fund, 31 Mar 2010, page 14.]

In plain language, this was a good national financial management plan that was not carried out.

During the boom years from 2003 to 2008, unemployment hovered around 2.5%; government revenue was rising; GDP was rocketing up; employment rose from 37,768 up to 40,213; there should have been years and years of government surpluses; and there was no need, no need at all, to pay out any unemployment benefits in this booming growing market.

Between 2003 and 2008 — the boom years — money was supposed to be set aside every year. It was to be invested in the Insurance Fund. But that never ever happened. For eight consecutive years (April 2003 to March 2010) the Minister for Finance did NOT put any money into the Unemployment Insurance Fund. Through eight consecutive boom years — no investment was made. Zilch! Zero!

Then, in 2009, unemployment slammed into Bermuda and Bermudians at 4 percent. In 2010, unemployment hit 6 percent. Now, in 2012, unemployment is reported at 8 per cent with 3,026 Bermudians unemployed. [Labour Force Survey October 2012 for Unemployment figures.]

Now the screw! With National Debt shooting through the $1 billion level, with annual Debt Service Costs heading for $115 million, with the Finance Ministry and Seventh Minister madly scrambling for cash, “in July 2011”, the Seventh Minister for Finance, arranged “to provide for payments out of the Fund to be made … for the purpose of assisting unemployed persons.”

In July 2011, this badly managed Unemployment Insurance Fund, having never been invested in, was still sitting there with the same $1 million that Finance Minister the Honourable Eugene Cox had put in as ‘seed money’, nine years before, on March 18, 2002.

Nine years later — with zilch being added — and in sheer desperation [‘cash-peration?’], the Seventh Minister for Finance grabbed the original seed money.

Now, in 2012 with 3,026 Bermudians out of work; now, when the need exists; now, we find that even the $1,000,000 seed money has been taken.

This is a perfect example of the quality of financial management by Bermuda’s current top team of top financial managers.

Even the seed money has gone! And Debt Sevice Costs and unemployment are still rising.