Balancing the state budget. Executive budget bill HB 200 is currently in the spotlight since it outlines a balanced spending plan for the next two years. Due to legislative deadlines, prior House and Senate drafts did not reflect the latest Council on Revenues forecast after the devastating tsunami hit. The negative financial impact has increased the state deficit from $790M to $1.3B and requires cuts to be made in the current fiscal year ending June 30. (Note: The Hawai‘i state government cannot run a deficit, so the legislature must enact a balanced budget. It is then up to the governor to adjust spending if revenues fall short of projections.)
With many departments and programs already running on empty because of previous personnel cuts, retirement vacancies and increased demand for services, many question the wisdom of even larger cuts to balance the budget. Of course, no one wants to pay additional taxes either.
It is clear to me that there needs to be some revenue enhancements and cuts to bridge the gap. The question is how much and where. With only a few months remaining in the current fiscal year, it is likely that funds will be borrowed from the Hurricane Relief Fund (but set on a plan to pay back), as well as from the so-called “rainy day fund” created for such a fiscal shortfall. Also, Gov. Neil Abercrombie has imposed a 10 percent spending reduction for all departments for the remainder of the year.
The Legislature, like the executive and judicial branches, continues to tighten its belt. Moving to conference, HB 575 will also continue pay cuts for legislators, judges and members of the executive branch not covered by collective bargaining. Budget conferees have limited difficult choices. Sen. Kalani English and Rep. Kyle Yamashita are the Maui members of the budget conference committee.
Bright spots in Senate version of HB 200. On a positive note, the Senate’s budget bill includes funding for:
• Two portable classrooms for Kīhei Elementary school, which came from my district CIP request;
• Improvements for Kahului Airport, such as modernizing the loading bridges, improving the passenger information system, terminal re-roofing and the access road;
• Implementation of an electronic health record system for HHSC hospitals, including Maui Memorial Medical Center
Additionally, the governor has announced the release of funds for a number of hurricane retrofits for Maui schools, including new cafeteria screens for Kīhei Elementary.
Senate says no to taxing pensions. The Senate amended HB 1092, deleting the proposed new tax on pensions before sending the measure back to the House. My colleagues and I felt that imposing this tax on public and private sector retirees after their retirement budgets and plans had been set would pose an undue hardship. Hopefully the House’s pension proposal will not find its way back into conference deliberations.
What about economic development? It is critical to move our economy forward and create jobs. One such measure going to conference is SB 318 that proposes incentives for film and digital media companies to build infrastructure, create new businesses, train and employ a Hawai‘i workforce and grow this industry here in the islands.
Because of the importance of creating and retaining good-paying private sector jobs, we should not let any tax measure harm our fragile recovery. That is why I oppose HB 793, which would re-impose the 4 percent GET on a variety of businesses such as subcontractors, aircraft maintenance and leasing and the transportation of goods between the islands, among others. HB 793 re-imposes a tax on a tax, causing the end product to cost more.
Since most of the GET gets passed on to consumers, it will mean construction of housing, roadways, schools, remodeling will cost us more. It will hurt our attempts to get workers back to work, as well as risk the high-paying jobs in Hawai‘i that originated as a result of de-pyramiding the GET. It’s not about fairness, as some claim. It is about preventing the increase in our cost of living and protecting job creation/retention in the private sector.
There are many, many important decisions your Legislators will make in the days ahead. Please go to www.capitol.hawaii.gov for information on the bills going to conference.
I welcome your comments and look forward to providing a final wrap-up of the 2011 session in early May.