Revenue's flat but we're borrowing more: who's running this shop?

In this economic climate, Government’s actual spending has fallen. It has fallen by $183 million. From $1,167 million [net] actually spent in 2008 to $984 million planned [net] spending in FY 2011/12.

Government’s revenue was a low $917 million in 2009. In 2010, Government revenue will likely come in around $965 million. For 2011/12, Government has said it is hoping to take in about $940 million in tax revenue.

So in a real-world national situation of non-rising revenue and falling expenditure, Government has agreed a pay raise of 1.25 per cent to the Civil Service, and 1.65 per cent to Government’s BIU workers.

After the BPSU gets its 1.25 per cent, and the BIU gets it 1.65 per cent, will the Fire Services Association, the Police Association, the Prison Officers Association, the Bermuda Union of Teachers, and the Association of School Principals, all turn altruistic and forego any pay raise at all? Or will they also queue up for a matching pay raise? Human nature and commonsense says that they will queue.

Result? All 6,000 plus Government workers will be getting pay raises. However, this pay raise cannot be funded by robbing Peter to pay Paul. Instead, in Bermuda’s economic climate — and remember that Bermuda’s unique problem is largely self-inflicted — it can only be done by raping Peter and bludgeoning Paul so as to pay Lucifer. Because we are now beginning to pay Lucifer.

National debt

Reported in Government’s own Revenue and Expenditure book, Government’s own figures tell the full story*.

Government tells us that it hopes to take in $940 million in tax and other revenue in 2011/12. Out of the $940 million that comes in — all of it in hard-to-earn foreign exchange — Government tells us that it will first use $70,000,000 to pay just the interest on National Debt.

Then a kick-in-the-butt additional payment of $25,750,000 will be piggy-banked in the Sinking Fund to pay down the humongous $1,080,829,000 in Cash Debt that is owed. So $95,750,000 goes straight back out as Debt Service Costs.

Government is telling us that it will take $95,750,000 and use that to deal with the self-inflicted debt burden that it largely built up between 2004 and 2008.

Very, very, simply, this is what happens. Revenue of $940,000,000 comes in. Government then clips off that $95,750,000 to pay interest and pay into the Sinking Fund. That leaves $844,250,000 of revenue left over for spending on pay and pay raises, goods, utilities, services, parliamentary and ministerial pay, and so on.

Daily interest

But $844,250,000 is insufficient to run this Government. So Government has to borrow $139,550,000 to meet the planned net expenditure of $983,800,000 in 2011/12. Proof? Didn’t the Minister of Finance announce on Friday, June 24 that she has arranged to borrow another $200,000,000?

When fully taken up — and it will be fully taken up before Santa Claus comes again — this will add $9,920,000 a year to interest costs alone. This will push Government’s DAILY interest cost to $219,000 a day.

What? Still borrowing? If, at this point, I seem to have lost you, please do not think that you — or I — have gone crazy, are too stupid to understand, or that you just haven’t read this properly. You have read it properly. I am not wrong. You are not stupid. The numbers do work just as I describe them. It is crazy.

Sunshine League

Government made those national financial decisions and other people are implementing and executing them. That is why the Sunshine League Children’s Home had its already inadequate $200,000 annual grant slashed to $100,000.

That is why, with the children’s grant slashed, ‘race consultants’ are kept on Government’s temporary payroll at over $100,000 a year.

That is why 1.65 per cent and 1.25 per cent pay raises are actually given out.

That is why there will be more pay increases awarded to the five other unions queuing up for matching pay raises.

That is why, sucked down by declining Government spending, Bermuda’s national economy will continue trending down.

If this makes sense to you, that’s great. However, if it does, it’s likely that you and I live in completely different worlds. Mine is a world where two plus two always equals four and where the rules of arithmetic do not bend to politics or angry rhetoric.

Back to my opening question. Who is running this crazy shop?

*Approved Estimates of Revenue and Expenditure... 2011/12. Pages C-34 and C-40.