Larry Burchall: “When The Money Runs Out”
[Opinion column written by Larry Burchall] Nine days before Christmas 2013, Minister for Finance Bob Richards completed borrowing $800 million. Most people probably thought that was a lot of money. However, that $800 million will be gone before Christmas 2017.
In fact, less than six months after 16th December 2013, by 11th June 2014, more than half of that $800 million had already gone.
$333 million covered the deficit for FY 2013/14. $45 million paid off a Senior Note due 21st May 2014. $75 million paid off another Senior Note due 10th June 2014. That’s [$333m + $45m + $75m] $453 million gone by 11th June 2014! And Bob only got the last of the $800 million nine days before Christmas 2013.
Then, there’s this year’s planned $267 million ‘deficit’ – planned overspend is the honest name for it. Add $453 already gone to $267 ‘planned to go’ this year = $720. So that’s $720 million that will have been expended by 31st March 2015.
So by March 2015, there will only be $80 million left over from Santa’s Christmas 2013 bundle of $800 million.
But don’t jump in the lifeboat just yet. There is some fluff money that will keep things afloat for two years beyond March 2015. Here’s the fluff.
On 22nd December 2012, when Minister Bob took over from the Seventh Minister for Finance, he found $97,141,966 in the national piggy bank more formally described as the “Government Borrowing Sinking Fund” [Sinking Fund = SF]. But the Seventh Minister also left a total Debt of $1,505,000,000. Like a seven year-olds piggy bank saving, that piggy bank money helped – but not much.
UBP legislation from 1993 requires that, every year, Bob must put 2.5% of the total of what the Government owes into the SF (piggy bank). Including last FY (2013/14) and this FY (2014/15), and the next two FY’s (2015/16 and 2016/17) Bob will put about $219 million into that piggy bank.
That $219 million gets added to the $80 million leftover from the $800 million in bonds. So between now and March 31st 2017, Bob will be able to count on having access to $219m (SF contributions) + $80m (leftover from the $800m) + $97m (balance found in SF in 2012) = $396 million fluff money.
But we’re not OK!
According to his February 2014 Budget Statement, in 2015/16 Bob will overspend by $181.8m. So in 2015/16, the $396 million fluff money gets reduced by $181.8m. That leaves about $214 million fluff money in the fluff fund.
In 2016/17, Bob’s spending plan has him overspending again, but this time only by $120.6m. That means that on March 31st 2017, with only $214m in the fluff fund, and a $121m planned overspend, Government will end up with about $93 million fluff money to carry into 2017/18.
In 2017/18, Minister Bob or a new, ninth, Minister for Finance can only overspend by this $93 million. So in 2018/19, it’s either a balanced budget with no overspend at all – or, in order to get through 2018/19, go borrowing again as early as December 2017.
Shadow Finance Minister David Burt has a different plan.
However, the two plans – OBA and PLP – are so alike that under PLP Shadow Minister David’s plan, the money will still run out in the same FY as in OBA Finance Minister Bob’s plan. Both ‘run out of money dates’ occur in 2017/18.
[By the way, none of this includes the $27 million - or more - annual cost from the KEMH/Public Private Partnership that will soon – next year? - start showing up. Once this KEMH/PPP annual cost kicks in, the money will run out even faster.]
That leads to two questions. Who will pick up the begging bowl and go borrowing again? Or, who will cut spending even more so as to make Government’s national revenue match Government’s national spending – a.k.a balancing the budget?
There’s only one solution to this now ten-year long Government financial shell game. Increase Government tax revenue by growing GDP. And do it fast.
What happens when the money runs out? Next week….
[Note: All base figures and dates are from Government’s audited accounts or from Government Budget Statements.]
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- Burchall: “Over The Hurdle, Into The Wall” | Bernews.com | August 19, 2014
Dont worry – the PLP have a plan to get us out of the hole that they dug for us. We will just wait for that to happen in 2017!
In the meantime we will pass legislation for trash removal and tinted windows for cars – that will get the economy going big time!
Bermuda is ***** – pure and simple. Start packign your bags for Turks and Caicos folks as once the stupid people introduce income tax for the richer Bermudians its all over – mass exodus – movement of Jah people!
Don’t forget…make sure to alienate enough PRC holders and hopefully drive them away, that will improve things.
Then concentrate on a 100 year old land issues.
All part of the PLP masetr plan.
Dont’t worry the UBP/OBA will save us. December 2012 election the year they came and lied. This is the last time I will trust the OBA. Bring back Mr. Craig Cannonier the OBA found nothing wrong. Then again that was part of the plan. Craig front for us in 2012, later we remove you 2014.
What an a@# !!!!!
…or start implementing cost saving measures. There’s never ‘only one solution’
If the private sector will not hire, nurture and retain educated Black people they will end-up in the public sector. Quo Fata Ferunt!
Hire – yes. Baby, and guarantee employment – no. That’s public sector where someone else pays your bills.
There first needs to be Black people who are WILLING to work in the private sector and who are also educated; unfortunately they go hand in hand. You will not see uneducated people (regardless of race) working and succeeding in the private sector because they are simply not smart enough. This happens every day all over the world, nothing new.
Quo Fata Ferunt!
Nurture ????
Hard work once employed in order to prove your worth applies to all employees. If you are not moving forward you are falling behind.
There won’t be a public sector.
They are not hiring fool!
What has been set up to hear Bermudians with job ideas?
.
What are the police doing to fight corruption?
These two things are holding bermuda back. I will quote from the Royal gazette, bottom of the front page Tuesday august 12 2014 bermuda fails to make top 10 list A survey by London based Bradley Hackford based on QUALITY OF LIFE, LEGAL AND PHYSICAL SECURITY AND QUALITY OF ECONOMIC INVESTMENT.
The article didn’t say where we were on the list, probably TOO embarrassing.
What job ideas do you have?
We done to ourselves! – now were going to pay for it! – the Money is running out!
Only thing Mr. Larry Burchall has one is highlighted the dawn of DOOMS DAY’ for Bermuda – if the OBA’s
plans fail. – if you read between the lines.
It’s all de plp’s fault!
(yes,yes,I know,someone had to say it)
As depressing , no – frightening , as they are I always enjoy Larry’s pieces.
The problem is a full 50% (maybe more) of the population simply do not get it . Either through lack of education , denial or party loyalty .
Like Bill Stephens said , Bermuda is *****d ! And all thanks to the ‘you know who’ who a large percentage of the population can’t seem to wait to have returned to government . Truly scarey .
Larry .. ”There’s only one solution to this now ten-year long Government financial shell game. Increase Government tax revenue by growing GDP. And do it fast.”
When the ‘you know who’ stop with the political BS games that they’re playing and start to act responsibly alongside the government only then will we see a slim possibility of this happening .
Until then , make contingency plans for what little money you may have left .
Things do not look rosy for the future at all .
I’d put the percentage of people who simply don’t get it (or simply aren’t interested in getting it) way higher than 50%.
Bermuda’s economics are really very simple, but the average person simply cannot see the connection between his job, at say, operating a trash truck, and how his paycheck is indirectly linked to exempt companies and tourism.
Fixing the problem is probably impossible, and what will likely happen is a series of insignificant cost-cuttings and further borrowing. This really is just a form of kicking the can down the road. When I say the real fix is impossible, I mean impossible to do without massive social unrest, and that unrest would just exacerbate the already bad situation, driving out what remains of Bermuda’s economic engines (i.e. exempt companies and tourism).
why do governments have to “borrow” money?
Because they don’t have enough money to meet the cost of running the Government. It’s that simple.
Well a complex question!
1. Bermuda does not really have its own independent currency. The Bermuda $ is tied to the US dollar and so for sound economic reasons we cannot just print more the way the the US can. Everything we buy must be paid for in US dollars, our debt is in US dollars. Bermuda dollars cannot be used off the island, they have no value anywhere else.
2. Even if you could just “print money” it would devalue the currency (dilution essentially) so everything you import would become more expensive. Bermuda imports EVERYTHING! This would be highly inflationary and in the end you don’t gain anything because we do not export anything. All our international trade is in other currency.
seems the OBA is outspending the PLP…
The budger deficit was $330m when the PLP left Gov. So in fact the OBA have reduced spending. Please however do continue to spread untruths because that is always such a big help when we’re all supposed to be finding a way out of this gaping hole together. SMH
Yes your right have to fund the PLP debt and pay for the continueing cost of running Government.
LOL
You mean the GIGANTIC oversized Government the PLP created
Dearest Rhonda…..before the general election you were of the opinion that the debt simply does not matter. Therefore stop running ya mouth and book a trip to the moon where your company will at least be appreciated.
Not surprisingly that’s the way you (want to) incorrectly interpret it.
Read ,again , what Larry wrote above .
The flip side is when the OBA finally does what it’s going to have to do, which is going to be the polar opposite of spending, you’re going to be having a hissy fit .
no it doesn’t….not a math major I guess?
Are you really that unintelligent Rhonda? Seriously.
@ jt,
Yes, yes i believe she is. Degree n all. lol
Unfortunately, yes she is.
whilst you sling mud my way…the OBA is turning a small hill into a mountain…but than again it doesn’t take much to say it’s all the PLP’s fault..and have parrots to regurgitate, the same…. so carry on..
Who would you say got us in this situation, Rhonda?
Small hill? This is how you see this country’s debt issues? A small hill being turned into a mountain? And yet PRC issues and Tuckers Town are a massive mountains that must be climbed immediately?
Small bill? You just answered my question.
Execellent article Larry ,as usual.
The Goverment will have to “CUT” the spending to what we have comming in.
The PLP/BIU have left the Younger Generation a “HUGE DEBT” with increadable interest every month.
More borrowing will mean “HIGHER” interest rates as we have already been down graded twice.
We cannot afford a $750Million pay roll for the Civil Service.
If we dont cut the Civil Service by 50% (half) our currency will be cut by 50% or (half)
Otherwise simular to GRENADA in the Carabbean,even the lender of last resort will refuse to lend anymore money.
GREECE had to borrow money even though completely broke @24.9%
A currency devaluaation might be the only solution if the civil service cannot be cut and we can end up like Jamaica at $108 to the BD$1.00.
because they continued to borrow heavely in the 1970′s.
And now they are unable to get out of DEBT.
We were one of the richest countries in the world and now we are headed to be one of the poor ones if we continue to “BORROW”.
We cannot continue to “LIVE ON OTHER PEOPLES MONEY”
The day of reconning soon come.
Ian…Cunta…Famous…Betty…Alvin…???
Before I plan on voting for the Progressive Labour Party in the next General Elections I would first want to know all I can about the P.L.P. candidates. I’d like to know,(if possible)how much are they worth outside of the Island and in the event Bermuda ends up like many other places, are they going to hang around and suffer like the rest or are they going to be the “big dogs in the yard” while everyone else fights over the “kibbles and bits”?
I’d like to know why the majority of white Bermudians have more money then black Bermudians Raymond Ray?
@ Black work permit holder: When people like you who’ve chosen to hide their true identity behind a “nom de plume” say who they are then I’ll be more than glade to further our “conversation”. Until then, do not(and this goes out to all others that do hide behind made up names)expect me to reply.
Raymond why wouldn’t you want to know that same information about all our politicians.
it’s Simple – White People got a better running start and established themselves well while the Black Man was working
for him for free.- than after 350 years of extreme cruelty and Slavery they made sure that Blacks would never have the
money base that they have using every method possible.
If you get the job done effectively , and get it done efficiently is what matters.
If you want a career, then you need to show growth in knowledge, willing and your ability to add value.
We have been here longer.
only by 3 years – Free labour made you ! 375 Years of it!
One reason is the whole idea that they are “Workers for Life” and so proud of that that they will never change or aspire to anything but. If that is your stated goal in life you will never be able to earn as much as those who own businesses or have good paying jobs.
That is why you need to say “Majority”, because there are indeed a number of black men and women who decide they do not want to be a “Worker for Life” and work hard, take risks and enjoy the rewards.
Speaking personally, I see my purpose in life as getting my kids as well educated as they can possibly be….at any cost, so they do not have to be “Workers for Life”.
There is nothing wrong with being a worker, but you will never get rich that way.
If the OBA fails to recover the Economy it’s not going to make a difference who you vote for.
We all will be Fishing and mending the Banana Trees.
Smart money is leaving/left Bermuda.
The future is not good.The OBA are not doing what is necessary to turn us around.The unions and the PLP are running the country by intimidation.The govt is not making the hard,needed decisions.Wimps are in control and we will be a developing country soon. You like that new description for “third world”?
Bermudians will not be able to travel.buying foreign currency will be too expensive.Houses will be worthless,crime will soar,there will be no international business or tourism.There will be a political elite dictating to us left.
That is what Bermuda will be like if the OBA do not get the job done!
Jah boy, Bermuda is like that because of the PLP/BIU. But now you want the OBA to fix it….do you people have any idea how stupid you sound when you say these things?
Sounds like Movement of Jah People scared you – did he !
I heard those same comments before and from many people in Bermuda — the situation just gives many people
that sinking feeling. – and yes how long do we have before we meet our doom. – many believe that neither the OBA or
the PLP can save us. – in the year 2020 the population of Bermuda is going to be 45,000 because 35% of it’s
population left. — soon come !
Are you forgetting about the party that was in power BEFORE the PLP….lots of mismanagement went on during their tenure as well….let’s not forget…
There part of the problem to because the old UBP base joined the thus the OBA has elected to pursue there agenda
other than on the real ECONOMIC SITUATION.
Not true
Forget what Larry has to say . I want to hear this message from Bob . We pay Bob not Larry . If Bob after nearly two years , if that genius is still looking under the hood and can’t find anything then someone needs to slam the fri@@in thing down , put the car in gear and roar into the future with or without him .
MORE MONEY ! IS ANOTHER NAME FOR SACRIFICE.
Some don’t know on which side the butter in on.
Buying on and living credit is the ultimate down fall
Buy what you need not what you want.
” A fool and his money are soon parted. “
Mr. Larry Burchall has made his comments about the money we borrowed running out and it has bought
quite a bit to light — now lets see what the Premier Dunkley and Bob Richards has to say on this delicate issue.
The opposition should lay very low and let them [ OBA ] explain were the next batch of money is coming from
before the blame game and other political stupidity starts.
While the two political parties fight about other things they forgot about the Money we use every day which will run out.
The Big Question is – How much was wasted and how well it was well managed.
We all know who got us in this mess in the first place – but the people who claim that there going to take us out of this mess has not
done so. – so far! – I dont think the PLP have a clue either.
Mr. Burchall is insightful as usual however there are sources of revenues that can retire the outstanding debt.
The issue is more than financial its more about the “will”of the government apparatus who advise and direct the policy of Bermuda.
An example of this was the previous Premier and her Minister of Finance and later Cabinet Secretary who together appeared to collude in the mismanagement and unbearable debt increase to the country.
The social and political cost to reduce our dependence on borrowing money we do not have to finance unproductive activity is not acceptable to the voter unless they are prepared to face and be told the truth.
In the past we were able to “live on other peoples money” and we can continue to do that (taxing non Bermudians) but not by driving them away with the PLP anti foreign anti race rhetoric.
The outsiders and organizations who can keep paying the bills will not continue to pay the bills if the behavior of the politicians, union and the civil service keep spending and enriching themselves leaving the less advantage Bermudians behind.
The opposition seems to think by destroying the past leader of the OBA will allow them to destroy the whole party. It is a mistake not to recognize the deeper diversity of the OBA which reflects a new Bermuda reality which as a policy the PLP started in 1998.
The future of Bermuda is bright if the government empowers young Bermudians to create new business and services promoting freedom to get wealth without interference from state.
Amazing that an Island of only 63,000 people can incur so much spending and debt!! The mind “boggles”!!
At this rate BDA will be “bankrupt” in about 5/6 yrs time – then what???
It could be sooner than that – If the OBA doesn’t pull a trick out of it’s claimed magic hat real soon were
going to be doomed – we will be right on par or lower than the Caribbean in terms of financial wealth.
We will also become the laughing stock of the Modern World and or Dollar will be worth twenty five cents
to the US Dollar.
If the OBA fails to lift the economic situation and were fully Bankrupt the PLP be the ruling Party to mend
the Banana Trees.
Have some one read the SAGE REPORT to you.
Larry Burchall’s analysis is spot on. When will some of the people writing here realize that IT NO LONGER MATTERS whose “fault” it is or was that Bermuda has financial problems. It makes no difference whose fault it was that the Titanic hit the iceberg. What matters is everyone working hard together to fix the problem. Regardless of politics, the OBA has a leadership that have run organisations in the private sector and they can gather support from Bermuda’s exempt companies. Which is the only option we have to address our debt. The PLP mostly do not have that experience and mostly do not have that support. We all need to stop focussing on matters that are not urgent, at present (Status debate, land grabs, other non important legislation) and right our economic ship. When we are stable we can address the other issues. A drowning man needs to be rescued before there can be a discussion on his passport and his home. PLEASE can we pull together and focus on the one thing that will make matters better for all.