Uncharted Waters

Major issues facing the State Legislature in the upcoming session:

January, 2002

As you are reading this, Gov. Benjamin Cayetano and the state’s legislators are being faced with what could possibly be their biggest balancing act since taking office. The immediate outlook for Hawaii is grim, with unemployment levels at nosebleed highs and visitor arrivals at nadir lows. Last November, the Council on Revenues forecasted a negative .07 percent growth in state tax collections for fiscal year 2002, which translates into a $150 million loss in state revenues. A special session was held in October to combat the immediate effects of Sept. 11, including the newly unemployed and their loss of health insurance coverage. However, both state legislators and the governor were publicly criticized for being overly cautious following the outcome of that session. So now, heading into regular session, the question is on the table: What are the options? Hawaii is bleeding badly. We are a small, isolated and un-diversified state, and the time has come for our state government to confront its true vulnerabilities.

ISSUE:

State spending vs. consumer spending. Does the state artificially inject money into the local economy, sinking the general budget further into debt, or does it create tax credits and assume consumers will, in turn, fuel the economy?

“It’s a fine line you walk, and there’s many schools of thought. If we give tax credits then perhaps we can walk away and the money will come eventually and you can maintain your programs and stabilize the economy. The other side of that is ‘Why give the store away?’ It’s competition and the marketplace will handle that, but you need to stabilize your programs so no one is cut.”

— Senate President Robert Bunda


ISSUE:

$150 million hit to the state budget. Budget cuts, transfers from cash reserves, payroll reductions … these things all become fair game this session. Where will the state cut spending? Are there any sacred cows?

“Government spending will be a big part of the discussion (this) spring. How do you offset that revenue loss to your expenditure side? We have to maintain government services. I think there will be no sacred cows. The one that gets hit the hardest this time may be the D.O.E., while before they’ve always been the sacred cow.”

— House Speaker Calvin Say

How do you prioritize? Is there a plan? No, we don’t have one. Are there sacred cows? Yes there are. In other words, do you touch teachers and the educational system? How do you even begin to plan who is going to be around and who’s not?”

— Senate President Robert Bunda


ISSUE:

Capital Improvement Projects. The governor asked for $1 billion during special session to keep the construction industry alive and stimulate the economy. He rode off with $100 million for school repairs plus $150 million for construction of a University of Hawaii Medical School, in addition to the $500 million already in the pipeline from previous sessions. Will he get more money this session, and how do adversaries of his plan justify the tradeoff between spending the money — thereby lowering the state’s bond rating — with the potential loss of jobs for thousands of workers?

“The governor was looking for a big response and I think that was the right thing to do. I think the problem with big construction spending is not only what it does to our debt limit, but that it’s not packaged with the reform of the procurement process that would make sure the construction money is spread as widely as possible.”

- House Minority Leader Galen Fox


Additional considerations:


 

  • Hurricane Relief Fund

    Tapping the $213 million Hawaii Hurricane Relief Fund. Originally established as a hurricane insurance policy, some argue the money should be returned to those who paid into the fund. Others feel the money should be transferred into the state’s rainy day fund and used to float more bonds.

  • Tax relief

    Eliminating — not deferring — burdensome taxes for a period of time. Hawaii is one of very few states that taxes food sales. We are one of two states that tax on medical services. Some have mentioned temporarily eliminating renters’ tax and even state excise taxes.

  • Gambling and privatization

    Both have been the subjects of very heated, touchy discussions in sessions past. While they may not come to pass, these issues may resurface from the backburner as the state debates alternative measures to counteract the significant loss in revenues.

    More so than ever, state government will be under the finest of microscopes this session. Getting this dichotomous Legislature to agree on anything this session may prove a daunting task. The issues at hand are more urgent than ever and yet solutions have probably never been more elusive. At the very least, the decisions made, or bills backed, by splintered political factions this session will most certainly define each candidate’s political stature and weigh heavily on public opinion in the upcoming election.

 

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