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Revenue Shortfall Creates Feeding Frenzy

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By Lowell L. Kalapa

Remember the last time you watched someone feed the fish at someone’s backyard fishpond or the koi pond at some popular restaurant in your neighborhood? What excitement it was to watch the fish thrash about trying to get what limited fish pellets were being cast about the water!

Well, that is what it is like down at the state capitol building this past week as lawmakers held marathon hearings on all sorts of finance related measures. However, the most interesting sessions were those where various agencies or nonprofit groups circled the wagons to protect their funding.

For example, one measure proposed earmarking 50% of the conveyance tax collections for the homeless programs run by the state’s housing agency. However, the bill left in question how much the natural area reserve program and the affordable rental housing program would get as it deleted the amounts earmarked for those programs and left the amounts blank.

Of course, supporters for both favored programs begged committee members to restore the funding for each while tip-toeing gingerly on the issue of the homeless. Of course, no one mentioned the fact that if that happened, there probably wouldn’t be any money from the conveyance tax that to go into the general fund. Those supporters of the earmarked monies seemed to completely ignore the fact that the general fund pays for such “important” programs as education, welfare, and health.

Nor, by golly, would they talk about how channeling conveyance tax moneys into their favorite programs “stole” from starving families or kids in the classroom with no textbooks. All that was important to these witnesses was that they be allowed to keep their earmarked funds and “too bad” for everyone else. Indeed, that is the problem that has been created with earmarked funds. Those who were persistent and vocal enough a few years ago were able to convince lawmakers that this was the “right thing to do.” After all how can one oppose preserving hiking trails or building affordable rental housing? So lawmakers acceded and earmarked, in this case, the conveyance tax for these choice programs. In fact, they had to raise the tax rate to give these constituents what they wanted.

But now as other worthy programs come to their attention, lawmakers are hard-pressed to find the resources to pay for those programs. And little do they want to incur the wrath of those who benefit from these earmarked funds. Thus lawmakers are squeezed between the proverbial rock and hard place to find the money that they would like to spend on such worthy programs for the homeless.

A few days later, another bill relating to the bureau of conveyances was heard before the very same committee. This time the department of land and natural resources was pleading with the committee to allow it to keep all the fees it collects in excess of $15 for the purpose of modernizing its recording system. The department also wants the power to establish its own fees for the bureau of conveyances and set the rates for those fees.

What was sad was that lawmakers failed to make the connection between the fact that the conveyance tax collections are being siphoned off for the natural area reserve program and the affordable housing program while the very office and system that collects those funds is deteriorating because they can’t get money appropriated for that modernization program. This is truly the penny-wise, pound-foolish approach to running state government.

Lawmakers could go ahead and put the bureau of conveyances on a self-sufficiency path by allowing the department of land and natural resources to raise fees and allow the bureau to keep those funds, but what will it accomplish? The increase of fees will just turn the heat up higher in Hawaii’s tax hell, for the fee is nothing more than a substitute for a tax. Officials are just looking for another way to raise more money instead of working with what they already extract from the taxpayer.

Rather than raising fees or raising the conveyance tax rate, lawmakers might want to look at returning all of the conveyance tax revenues to the general fund by repealing the earmarking of the tax. With the money back in the general fund, lawmakers can then set priorities for that money. If the bureau is in need of modernization so it can perform its functions more efficiently, then lawmakers should appropriate enough to accomplish that task.

Sure the constituents of the natural area reserve program and the affordable rental housing fund will scream, but what makes those programs more important than improving the system that collects the money they now enjoy?

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