How Bad Is It?
Nine local leaders provide a roadmap for difficult economic times ahead
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Q: How do you expect your particular industry to be affected?
A. Douglas Chang, chair, Hawaii Tourism Authority Board of Directors
Hotel occupancies will drop, as will spending for food, shopping and entertainment. The availability and price of an airline ticket to Hawaii has risen dramatically in the past few weeks. As a destination totally dependent on access by air, this will have a major impact on Hawaii as a choice to spend travel dollars. As we have seen in the past, if our hotels and airlines slow, it has a ripple effect on the rest of the economy.
A Kelvin H. Taketa, president and chief executive officer, Hawaii Community Foundation
With decreased financial support from contributions, and government grants and contracts, we might expect that some organizations would dissolve and others would merge. A larger number of organizations might operate at a flat or smaller size for a while, perhaps cutting staff. And for surviving or growing organizations, the world may also look different because whole sections of essential community services may be lost, depending on shifts in funding.
A. Maurice Kaya, energy consultant, former state chief technology officer and energy administrator
Hawaii, like many other islands and isolated locations, suffers from a magnification of effects simply because we have become so dependent on petroleum, and practically our entire energy infrastructure has been built to take advantage of the attributes of this energy resource over time. We cannot expect to find immediate future relief from high oil prices. Supply constraints, competition for oil from China, India and other emerging economies, and uncertainties over supply from unstable foreign governments hostile to the interests of the U.S. are all at work to keep oil prices at unprecedented high levels well into the future.
The energy industry in Hawaii must adapt, and the urgency to do so has become much more compelling today, especially for the electric industry.
A. Donald G. Horner, president and chief executive officer, First Hawaiian Bank
As chair of the Hawaii Bankers Association, I am pleased to say our local banking industry overall is stable and well positioned to weather the economic downturn. For the most part, Hawaii banks steered clear of the subprime bubble, unlike many Mainland banks.
A. David McClain, president, University of Hawaii
Typically, demand for educational services is somewhat countercyclical – that is, it increases when the economy slows. At the same time, we don’t expect that the governor and the Legislature will have the tax-revenue resources to sustain our funding at recent levels, and there will be pressure on federal expenditures, as well from a slowing economy. So we expect we’ll be asked to serve an increasing number of students with more limited resources.
A. Sen. Colleen Hanabusa, president, Hawaii State Senate
From the perspective of state government, these economic changes have both short-term and long-term effects. In the short term, decreases in tax revenues that result from slowing growth will make it imperative that we show fiscal restraint, and set clear priorities for government spending. We will see a growing need to balance spending on the safety nets that serve those in need, with investments in efforts to stabilize the economy. At the same time, we need to continue funding education, healthcare, and other programs that provide our residents with a good quality of life and confidence in our continued success.
For the long term, the economy forces us to maintain the patience and discipline necessary to develop solutions for the years to come.
A. William Kaneko, president and chief executive officer, Hawaii Institute for Public Affairs
The nonprofit sector is highly reliant on the overall health and status of the economy, particularly because many nonprofits receive financial support from corporate and foundation grants. If the economy slows, then corporate support will slow as well. Also, this year, the state Legislature appropriated virtually no funds for grants-in-aid, which hundreds of nonprofits rely on for operating costs. The nonprofit sector will need to brace itself for potentially challenging economic circumstances.
A. Constance H. Lau, president and chief executive officer, Hawaiian Electric Industries Inc.
Hawaiian Electric Industries operates two businesses, Hawaiian Electric Co. and American Savings Bank. For the electric utility industry in Hawaii, we expect sales to remain flat for the near term. While Hawaii’s economic expansion boosted demand for electricity, businesses and consumers have been aggressively pursuing conservation and energy efficiency projects to offset higher fuel prices. In addition, we’re seeing inflationary pressures resulting in higher prices for materials and services. Plus, despite flat sales and higher costs, our utilities still need to make necessary capital investments in infrastructure.
For local banks, the biggest impact of a slowing economy is on credit quality. Credit issues are significantly impacting many Mainland banks. Fortunately, none of the local banks has reported a significant deterioration in credit quality, in part due to the stable home values on Oahu. The slowing economy may also impact the demand for loans, both consumer and business. What has helped has been the Fed easing and the steepening of the yield curve, which has helped improve bank margins. In addition, customers tend to keep higher deposit account balances in a slowing economy, which is positive for bank funding costs.
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