Over-budgeting or underpayment of public sector wage and pension increases

Introduction

In his presentation to the National Assembly of the 2011 Budget on January 17, Dr Ashni Singh announced that public assistance was then being paid at a rate of $4,900 per month to approximately 9,000 beneficiaries. He went on to announce a 12% increase to $5,500 per month from February 1. And in the same speech, he announced that “in like manner,” old age pensions then being paid at a rate of $6,600 per month to approximately 42,000 pensioners would be increased to a rate of $7,500 per month, a 14% increase. Even allowing for the word “approximately,” the information was specific enough to allow for a reasonable calculation of the total cost – inclusive of the announced increases – of $4,330 million, made up of Public Assistance of $590 million and Old Age Pension of $3,740 million.

But the 2011 Estimates themselves tell a very confusing story which could easily mislead readers. What is clear however is that a one-line item from page 21, Table 9 of the 2011 National Estimates accounts for the entire year‘s pensions cost – without the need for any further increase. Yet, there is a provision for increased pensions of $2,106 billion or 31% of the year’s pensions cost, exclusive of the increase. To emphasise, the increases are already built into the non-statutory pension cost and there ought to be no further provision, unless of course tens of thousands of persons suddenly become eligible for pensions! I would unhesitatingly dismiss any suggestion that the provision relates to persons in receipt of statutory pensions and gratuities since that would amount to an increase of nearly100%!

Moreover, there was no indication in the announcement by GINA that those in receipt of statutory pensions would also receive the 14% increase, usually intended for persons classified as vulnerable. But even if one charitably assumes that they too will share in the 14% previously announced, the increase is still only $325 million, leaving a huge amount to be accounted for.

Padding  
The situation is no different in 2010 or indeed 2009. Unlike wages and salaries, OAP and Social Security are not subject to any negotiations, and any proposed increases should be included in the year’s budget, or explained somewhere in the budget. Indeed any uncertainty would be removed if Dr Singh would comply with the requirement of the Fiscal Management and Accountability Act that the assumptions underlying the budget should be stated. Without subscribing to any conspiratorial fear, for the Minister to do this might expose the budget to some of the padding that takes place, allowing for “authorised” slush funds, many of which are controlled by the Minister of Finance and his President.

This is more than a procedural or presentational point. It is about serious and substantial over-budgeting while somehow the government still manages to utilise the full amounts budgeted. If this is indeed a case of utilising over-budgeted funds, it would compound questions asked about Ms Manickchand’s pensioners‘ register, which has been the subject of adverse comments in a report by opposition parliamentarian Sheila Holder, and me in the letter columns.

According to Mrs Holder that register may contain as many as 17,640 phantom persons, with an annual loss to the state of over $1.3 billion. My estimate was higher because I applied the law strictly which would eliminate those returning Guyanese who have not been here for the minimum period specified by law and those persons who on account of assets and income would not qualify for the receipt of pension.

Wages
Let us now turn to similar provisions for wage increases. It took the Guyana Informa-tion Agency rather than the Accountant General or the Secretary to the Treasury to report the President’s announcement of his pre-elections wage increase for public servants. According to GINA, the “8 percent increase is payable to all public servants and members of the disciplined services, while teachers will get a 3 percent across the board hike with effect from 1st January 2011 on top of the 5 percent increase previously paid by Government with effect from the same date in accordance with the multiyear agreement concluded between Government and the Guyana Teachers Union.”

Here is a summary of the estimates raising similarly disturbing questions as they do in relation to wages and salaries.

WAGES AND SALARIES EXTRACTS 2011

Affordability
What seems clear is that the government can afford to pay much more than the 8% that it has announced. Forget for a moment that as the employer and tax collector the government gets back 33.33% of any wages and salaries it pays to taxable persons. And forget too that the so-called contract employees like Ms Teixeira, Reepu Daman Persaud and Odinga Lumumba have fixed remuneration contracts and would therefore not be entitled to the 8%. The allocation in the Estimates for revision of wages and salaries in the 2011 Budget allows the government to pay a minimum of 13% to all public sector employees, or 17% if the contract employees are excluded. And since the government gets back 33.33% of what it pays out as remuneration, it can afford to pay as much as 20% to 25%, depending on whether it excludes or includes the contract employees.

Readers will recall that the increase announced in 2010 was 5% when the National Assembly had approved increases equivalent to anywhere between 10% and 13%. No one knows how the substantial difference of about $1.2 billion was spent. The only certainty is that it was spent.

Similarly, in 2011, a payment of 8% will leave the government with a hefty surplus or slush fund of about $1.5 billion.

Poor oversight
While the unearthing of some of the missing information requires some kind of detailed investigation, the public sector unions and especially the Public Service Union have been in the business long enough to alert themselves to the fact that the government might be shortchanging them. They ought to be aware that given the attitude of the government to its own employees, public servants deserve strong leadership from their unions.

The teachers too, have perhaps as weak a leadership as ever and one recalls their President Mr Colin Bynoe describing a 5% annual increase over the next five years as a “giant step.” One wonders whether he thinks President Jagdeo has made a giant leap of benevolence or has convinced him of what many felt when he accepted the five year, five per cent annual increase for his members. While he might have been overwhelmed, what is unforgivable is that his union might not have been aware of the budgetary allocation for public sector employees, including teachers.

But let us not blame the unions alone. What about the parliamentarians, including those sitting on the Public Accounts Committee which is chaired by an opposition member? They should be challenging rather than following the tepid report of the Auditor General who seems to see no evil even in the most glaring impropriety. That the Estimates are so unfriendly to readers and incomprehensible to most persons should suggest to them that they should ask probing questions, seek independent advice and ensure that they are capable of doing the job the taxpayers of this country pay them to do.

Hopefully, the next parliament will do a better job.

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