Published On: Sat, Jun 18th, 2022

Kingdom decides Friday about retraction of salary-cut for civil servants

PHILIPSBURG — The Kingdom Council of Ministers decides next Friday, June 24, whether St. Maarten gets permission to terminate the 12.5 percent pay-cut for civil servants. For a positive outcome, the government has to abide by eight conditions.

So far, Prime Minister Silveria Jacobs has only spoken publicly about three of the eight conditions and MP Sarah Wescot-Williams (United Democrats) is the only one who has described them in a press release. According to that release, St, Maarten has to finance the effects of lifting the pay-cut from its own budget. The 25 percent cut for ministers and parliamentarians has to stay in place and furthermore the government has to adopt the law that regulates the top income for employees at government-owned entities.

It did not take long for the other five conditions to become public. Curacao’s Prime Minister Gilmar Pisas mentioned them all during a press conference.

Therefore we know now that the kingdom demands that the focus for retracting the 12.5 percent cut must be on lower income earners. If it is possible to finance the consequences of the retraction from the country’s budget, St. Maarten will no longer be allowed to invoke article 25 of the kingdom law financial supervision. In other words: future budgets must be balanced again.

After the retraction, salaries for civil servants are not allowed to be higher than those of ministers and parliamentarians. This refers to salaries after the 25-percent cut has been applied.

The fourth condition is that retraction can only take place after a decision by the Kingdom Council of Ministers and after that council has been informed by financial supervisor Cft that St. Maarten has met all conditions.

That leaves one more condition, and it is a tricky one. State Secretary Alexandra van Huffelen (Kingdom Relations) demands that St. Maarten quickly executes measure B.5 from the country package. That measure aims to lower the country’s total wage bill to the Caribbean average of 10 percent of gross domestic product (GDP).

The question is now whether that wage bill is above or below that target. According to the Cft St. Maarten’s wage bill is 210.2 million guilders, ($117.4 million) while GDP is around $1.2 billion. That would put the ceiling for the wage bill at 214.8 million guilders or $120 million.

But there is some uncertainty about what must be considered St. Maarten’s total wage bill, because the total provided by the Cft does not include salaries paid to teachers at subsidized school. Those payments are hidden in the subsidies these schools receive.

According to the 2022 budget, the government pays 65.4 million guilders in subsidies to nine educational institutions. How much of that amount goes to salaries? That is unclear.

Maybe a comparison with the expenditures at the Ministry of Education provides a guideline. The budget lists 26.7 million guilders in salaries for this ministry, and 95.6 million for material costs. Salaries therefore represent 21.8 percent of the total.

If this percentage is applied to the subsidies, the wage bill increases by 14.3 million guilders to 224.5 million.

In this scenario the government will have to find savings for an amount of 9.8 million guilders. However, if the salary-component in the subsidies is higher, say, 40 to 60 percent, than the total wage bill increases to anywhere between 236.4 and 249.4 million guilders ($132 to 139.3 million). That would then require cost cutting measures to the tune of between 21.6 and 34.6 million guilders ($12 to 19.3 million).

The Kingdom Council of Ministers may provide some more clarity about the exact numbers next Friday. Whether St. Maarten will be able (and is willing) to meet all these conditions by Friday is another matter altogether.