Published On: Mon, Apr 23rd, 2018

No new initiatives in draft budget

Government Money Bag

PHILIPSBURG – The accumulated deficits on the national budget increase to a total of 486.2 million guilders in 2020. The government projects that 2021 will be the first year when the budget shows a slim surplus again of 4.1 million guilders. This appears from the revised draft 2018 budget. Parliament will discuss the budget in a meeting on Thursday.

The draft budget does not contain any new initiatives, nor does it specify new cost-cutting and revenue-generating measures.

The government projects expenses for 2018 at 500,545,550 guilders; revenue falls short with 303,436,964 guilders. The investment budget for this year is 28.8 million guilders.

The government has dropped the previously budgeted compensation for deficits the country incurred since 10-10-10. The compensation of 20 million for 2017 has been removed from the budget for that year and the 24 million deficit compensation that was foreseen for 2018 has also been dropped.

“Budgeting these deficits is unrealistic and it will only be feasible once the economy recovers. We expect that to be in 2020,” the government writes in the budget.

The budget does not contain any draconic measures to cut expenditures. “A substantial decrease in expenditures is only possible through rigorous measures within the government organization,” the budget states.

There is not much the government can do about cutting its current financial obligations: “The budget is based on multi-annual contracts, for instance for personnel, rent, energy, communication, garbage collection and school bus transport.”

Trimming the government organization will take a lot of time due to the share of labor contracts in the expenditures. “That can only be realized after a long period of friction.”

Initially, it looked like 2017 would close with a deficit of 153 million guilders. Based on the fourth quarter report however, that number has been brought down to 72 million.

The budget lists a number of financial risks. One of them concerns healthcare. Because premiums do not cover the costs, the situation has become untenable, the budget states. It is urgent to take measures and not wait for the National Health Insurance. The government has instructed Soab – the government accountant bureau – to analyze the OZR and PP-systems.

Other financial risks are loss-making entities like the post office and government-owned companies like the harbor.

According to a report from the Central Bank, St. Maarten’s economy will shrink by 9.1 percent this year. The dramatic drop in government revenue that results from this economic downturn becomes apparent from the following projections.

Receipts of wage taxes will drop in 2018 (compared to 2016) from 140.4 to 107 million; turnover tax falls from 132.6 tot 96.5 million; profit tax from 42.3 to 13.8 million; fuel excise drops from 9.9 to 9.1 million, transfer tax from 12.7 to 3.9 million; timeshare fees from 3.7 to 1.2 million and accommodation tax from 10 to 2.9 million.

The government expects stay-over tourism to drop to 20 to 30 percent of its normal levels.

Per July 2017, the government’s payment arrears stood at 106.9 million guilders. Almost half of it, 50.8 million is owed to Social and Health Insurance SZV, while general pension fund APS is waiting for the payment of 39.2 million. Other creditors have 16.9 million outstanding.

Liquidity remains a big headache in the meantime. The Netherlands extended 50 million guilders in liquidity support for 2017, but the government will need this support in 2018 as well. Each quarter the government collects around 90 million in revenue, but it has to deal with 130 million guilders in expenses. Based on these numbers, the government would have run out of money in March without external support.