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Heaven Help Hawaii in 1999

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By Lowell L. Kalapa

     One would think that now that the legislature has gone home for the year, taxpayers are safe, at least for the time being. Oh silly fools we are!!

With tax cuts tucked neatly under their belts and a budget that appears to have been pared down so that it meets the constitutional requirement that the state spending plan is balanced, elected officials will soon be on the campaign trail seeking voters’ support. What voters will not realize is that what lawmakers did not do this session will come back to haunt them in 1999, after the November elections.

 

 

 
What voters will not realize is that what lawmakers did not do this session will come back to haunt them in 1999…
       While taxpayers may feel good that personal income taxes will be reduced by more than $150 million next year, beginning 1999, the spending plan adopted by the legislature probably will not be able to accommodate the reduction in revenues. In other words, lawmakers probably did not cut enough in the state budget so the state can do without the loss in revenues as a result of the tax cut.

While lawmakers will probably point to the fact that they cut more than 500 positions, those who carefully read the fine print find that most of those positions were vacant anyway. In fact, less than 100 positions that were cut were occupied by actual living, breathing persons and then only about a fourth of those were full-time employees. So much for the cutting the size of government!

Then there is the issue of the collective bargaining increases that were “left on the table” this year. Even though the negotiated pay raises were ready for approval, lawmakers chose not to bring the issue up. It is estimated that those pay raises will cost the state about $62 million. One can only guess why the issue was deferred. Was it because lawmakers are hoping that the economy will turn around in the near future and there will be the necessary funds by the time the 1999 session rolls around? Is it with the intent that they could avoid voting down the pay raises that might otherwise anger the public employees’ unions?

In any case, the collective bargaining pay raises remain an unfunded liability for the 1999 session to address. However, should those pay raises be approved, the cost will be one more demand on taxpayers. Add that to some of the other issues that have been ignored such as the funding of the employees’ retirement system and the looming debt service that will come due on the “billion dollar” CIP package that was intended to “jump start” the construction industry, and taxpayers have every reason to be concerned.

All of these issues have basically been deferred beyond that next benchmark in any politician’s life – reelection in November. It is becoming increasingly apparent that those issues will bring a lot of pressure to bear on the 1999 session such that an increase in the general excise tax might be the only solution to bailing the state of what could be bankruptcy. In fact, many observers are already talking about an increase in taxes as being inevitable since the current crop of elected officials don’t appear to be able to truly cut the size of government.

Given that possibility, taxpayers, public employees, and businesses should be concerned about who is going to deal with the looming financial crisis. If those who are already in the driver’s seat could not deal with the problem as it was at the beginning of the 1998 session, how will they deal with what will be an even larger problem in 1999?

It is not that elected officials were not offered alternatives despite the charge by some Task Force members that no one came forward with alternative plans to revitalize the economy. Even the working groups which were convened by the Task Force came up with alternatives from which lawmakers could have selected, yet because putting together a proposal that could have made a difference meant cutting state spending even more, lawmakers shied away from dealing with the difficult.

Everything may seem OK for the time being, but waiting in the wings are the ingredients for fiscal doom that may result in a hike in taxes in 1999. Heaven help the taxpayer in 1999!

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