PHILIPSBURG — The government aims to let pension reform for civil servants go into effect per May 1 of this year. With the carnival season almost upon us, parliament will have to move swiftly to get this done.
Once the reforms are put in place, the premium the government pays to general pension fund APS will go down from 25 to 18 percent, resulting in 7.5 million guilders ($4.2 million) in savings this year.
In its comment on the draft budget, financial supervisor Cft expressed its disappointment with the fact that the pension reform did not go into effect per January 1 of this year as originally planned. In that scenario the savings for 2019 would have been 11.3 million guilders ($6.3 million).
“The pension legislation has been presented to parliament in 2018 but a decision has not been taken yet,” the Cft states in a letter to Finance Minister Perry Geerlings. “The Cft finds it disappointing that this part of the instruction from the Kingdom Council of Ministers from 2015 (with a deadline at the end of 2016) still has not been executed in spite of the financial necessity and the several promises that were made. The Cft will take this continued delay and its financial consequences into consideration in future advices, among others in the context of liquidity support.”
The retirement age for civil servants will go from 62 to 65. Per January 1, 2020, the government also wants to increase the retirement age for old age provisions (AOV) to 65.
Another measure mentioned in the draft budget is the universal healthcare package; this also has a projected implementation date of January 1, 2020.
From the draft budget it appears that settling the government healthcare regulation (OZR – Overheidsziektekostenregeling) will require around 25 million guilders ($14 million). General Pension fund APS submitted a claim for an additional 20 million guilders ($11.2 million).
The government payment arrears that were well on the way of being settled before Hurricane Irma changed everything in September 2017 have ballooned to 150 million guilders ($83.8 million). The numbers mentioned in the draft budget do however not add up. It mentions an 85 million guilders ($47.5 million) debt to social and health insurances SZV, 40 million ($22.4 million) to APs and 25 million $14 million) to other creditors.
The budget document states that TelEm is the largest of these other creditors. However, elsewhere in the budget it appears that the government owes TelEm alone already 32 million guilders ($17.9 million). Together with the other creditors – representing an unknown amount – the payment arrears must therefore be well over 160 million guilders ($89.3 million).
Civil servants in scale 6 or higher will be confronted with the collection of their 10 percent contribution to their healthcare expenditures. While this contribution is regulated in the law, the government so far has never collected this money. This year, the government intends to collect a million guilders ($558,659) from these civil servants.
Nothing is budgeted for the establishment of the Integrity Chamber this year but that is not necessary either. The Netherlands pays 2 million guilders ($1.1 million) per year in 2019 and 2020 and half of that amount in 2021.
Another nugget from the draft budget is the intention of Minister of General Affairs Leona Romeo-Marlin to establish a calamity fund of 5 million guilders ($2.8 million). These funds will be earmarked for immediate relief after a calamity like a hurricane.
Financial supervisor Cft notes that St. Maarten’s debt to gross domestic product ratio was 39 percent at the end of 2018 and that it could go further up to 46 or even 56 percent by the end of this year.
That could put the government in a bind where its ability to borrow is concerned. The IMF and the Cft advise a maximum debt to GDP ratio of 40 percent with a margin of 5 percent.
There is however another rule in the consensus kingdom law financial supervision that sees to the country’s borrowing capacity: the interest burden standard. The interest on outstanding loans is not allowed to exceed 5 percent of the countries average revenue over the past three years.
Currently, St. Maarten’s interest burden on its loans is below this ceiling, but now the debt to GDP ratio could get in the way. The government is therefore pleading with the Cft for a “significant extension” of the debt to GDP ratio.
The Cft criticizes St. Maarten for the decision to enter into a $50 million loan with the European Investment Bank on behalf of the Princess Juliana Airport. “Why was this loan not directly extended to the airport but to St. Maarten?” the Cft wonders. “Based on the consensus kingdom law financial supervision this is not allowed. No decision has been taken about this issue in the Kingdom Council of Ministers and the country exposes itself to a creditors-risk.”
In spite of its critical remarks, the Cft is rather positive about the draft budget. “This is a step in the direction of sustainable government finances. The Cft supports the decision to prioritize the overhaul of the tax inspectorate and the improvement of financial management.”
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Collection long lease fees seems problematic
Pension reform possibly into effect per May 1
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Geerlings offers payment plan on unpaid taxes to ease the pressure on businesses
St. Maarten Chamber of Commerce and Industry waives fees up to 2014
Download the complete DRAFT 2019 BUDGET here
