SAGE report: A public sector out of control?

The SAGE Commission’s report pulls no punches. It was unveiled to the House of Assembly on Friday and through the media, Bermudians were soon reading about what a mountain we have to climb to get national finances back on track. 

The report links weak leadership at the top of the civil service to the island’s $1.8 billion debt. Bloated departments and staff benefits, a lumbering and inefficient bureaucracy, a shocking lack of accountability — the report makes grim reading for anyone who pays taxes.

The report sparked a finger-pointing frenzy on social media but, as some observers have pointed out, it seems that some negative cultures are so deeply ingrained in the civil service that they transcend party politics. 

Sweeping solutions will be hard to implement but the first step, it seems, has been achieved — identifying the problem. Here, in a nutshell, are the report’s key findings and recommendations.

A ‘rudderless and unaccountable’ Civil Service

Findings: A lack of effective, accountable leadership in Bermuda’s Civil and Public Service  

Recommendations: Reconstitute the Public Service Commission as an independent body with oversight for appointments and dismissals, performance appraisals, and succession planning of the Civil and Public Service.

Establish two separate, but equally senior roles; Secretary to the Cabinet and Head of the Civil Service – to lead Government employees. Both positions would work under the policy direction of the Premier but each position should have a direct reporting line to the PSC

A ‘bloated’ Government

Findings: The Government, including the Legislature, is too big for the size of the country it serves. There is consequently unfocused, duplicated and diluted decision-making

Recommendations: Reduce the House of Assembly from 36 to 30 seats. Reduce the number of Government Ministries from 12 to eight and the number of departments from 72 to 52

Privatization

Findings: ‘Ample evidence’ that some areas of Government are undertaking functions that are inefficiently delivered; in other areas, Government should not be undertaking the function in the first place.

Recommendations: Establish an independent Privatization and Outsourcing Authority to review all Government activities

Consider privatizing: Airport Operations; Civil Aviation, Highways Management; Maritime Administration; Public Lands and Building; Waste Management; 

Consider outsourcing: Conservation Services; Corrections, GEHI and Health Insurance Department, Human Resources, Marine and Ports, Parks, Public Lands and Buildings, Public Transportation, TCD, Youth, Sport and Recreation and Vehicle and Equipment Operations

Pensions

Findings: Pension schemes for Government employees and Parliamentarians are close to $1 billion underfunded. Government cannot make that amount up in the foreseeable future.

Recommendations: Adjustments that will keep schemes operating while maintaining a good level of benefit for current and future retirees

Gov’t employee’s retirement windfall

Findings: Government’s current Pre-Retirement leave policy that allows Government employees to claim full retirement benefits upon retirement represents unnecessary expense.

Recommendations: Renegotiate the Collective Bargaining Agreements governing the payment of this benefit so that it is frozen at a Specific Date, which the Commission says could save more than $10m

Gov’t Employee Health Insurance

Findings: As of March 31, 2012, the actuarially determined Accrued Benefit Obligation for this benefit was $249.9 million and is 100% unfunded. This liability continues to increase and by March 31, 2013, amounted to $269.4 million. It is estimated to reach $288.8 million by March 31, 2014

Recommendations: Establish a fixed amount to be paid annually on behalf of current retirees equal to the amount currently paid by Government for this benefit for the retiree, their spouse and any dependents. Change the existing rules so that only the present spouses and dependents of current retirees are to benefit if the retiree dies. If a spouse subsequently remarries on the death of a retiree, then the spouse and any new dependents will no longer be eligible for any health benefits

Union negotiations

Findings: Government has negotiated some union contracts that grant benefits, such as sick leave and the provision of overtime pay, that are exorbitant and significantly higher than the norm in the private sector 

Recommendations: Government union negotiations with the BPSU should be conducted by an independent body, not members of that union 

‘Abuse’ of Sick leave

Findings: The average sick leave amongst Government employees is eight days, which is about three times the average sick days for Government workers in the Isle of Man and Gibraltar

Recommendations: Departments with chronic sick leave problems need to be investigated thoroughly and those abusing the system must be managed appropriately

Bermuda Hospitals Board

Findings: Duplication of some services provided by the Mid-Atlantic Wellness Institute and King Edward VII Memorial
Hospital

Recommendations: BHB should ‘urgently’ review the costs and savings to be gained from the erection of a new building on the KEMH site adjacent to the new Acute Care Wing that is currently being built

GP Cars

Findings: GP-plated vehicles have ‘often’ been observed in the parking lots of supermarkets, health clubs and golf courses suggesting the Government cars are not used strictly for Government business

Recommendations: The Head of the Civil Service should review the use of Government cars and to whom such vehicles are assigned with a view to reducing their number. This review should include the use of Government cars by senior officers in the Police, Prisons, Fire, Regiment and Customs Services

Cabinet Office

Findings: An uncoordinated, ineffective and inefficient infrastructure within Government

Recommendations: Reduce the size of the Cabinet to a maximum of 8 Ministers including the Premier.

Resurrect a fully staffed and functioning Central Policy Unit. Close the Washington DC representative office, eliminate all assistant Cabinet Secretary positions and abolish Registrar General and Sustainable Development Departments

Post Office

Findings: The Post Office currently has over 100 too many staff and its current business model is no longer sustainable. Losses of around $134 million are predicted for the next decade

Recommendations: Close all post offices apart from one in Hamilton, one in the east and one in the west. Sell the old buildings and use funds to pay off national debt. Stop delivering mail to houses and businesses and use cluster boxes instead

Prisons

Findings: ‘Serious operational weaknesses’ and a need to streamline work processes and improve performance as well as a poor relationship with the Prison Officers’ Association. The average cost per inmate per year is approximately $80,000; the average daily inmate population is 283  

Recommendations: The Privatization and Outsourcing Authority should be tasked with identifying outsourcing opportunities to reduce operating expense. Employ non violent prisoners to reduce expense and provide them with earning and learning opportunities. Use of electronic tags as opposed to confinement and greater use of video link between court and Westgate

Ferries

Findings:  Major maintenance issues with ferries, in particular with fast ferries, as well as problems with fare collection resulting in lost revenue

Recommendations: The maintenance of the ferry service, tendering operations for cruise ships, and government-operated ship slips and cradles be outsourced

Buses

Findings: Bermuda’s bus fleet is an expensive one: buses are custom-built for the Island and the cost of replacement parts is high.  Operating costs for Bermuda’s buses are excessive

Recommendations: Dept of Public Transportation should purchase “off the shelf”, rather than customized, vehicles for its fleet. Maintenance of the fleet should be outsourced and certain routes, or portions of those routes, should be reviewed for outsourcing

TCD

Findings: TCD’s contribution to the Consolidated Fund has been positive for the last three years with a projected increase of 13% over last year’s contribution of $20,621,000

Recommendations: Eliminate testing of vehicles by TCD and outsource it to licensed garages, which would charge their customers for the testing and pay Government a fee to be licensed to do so.