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Buying Our Future With Current Savings

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By Lowell L. Kalapa

All right, it seems that no one wants to talk about “cutting the size of government” or “reducing spending,” because such rancor upsets the “unions” and certain “constituents.”

However, even as the administration’s own forecasts predict, if something is not done about controlling the growth in state expenditures, there will be red ink all over state ledgers within a couple of years. So, what can elected officials who have oversight over state spending do if they are unwilling to tackle the size of state government and the breadth of state spending?

An unfortunate practice of state government in recent years is to spend every nickel and dime of anticipated revenues as forecasted by the constitutionally mandated Council on Revenues. This is because the amount of state government today was created at a time when state general fund tax revenues were growing by leaps and bounds. Since that is no longer the case, the growth rate of spending has outpaced the current growth rate of state general fund revenues.

One of the ways elected officials have dealt with this problem is to raid special funds that were initially funded with general fund revenues. However, in recent years those raids have tapped special funds underwritten by dedicated resources such as the state highway fund. Another way that elected officials staved off the inevitable was to authorize departments to impose user fees which are then deposited into special funds so that those operations can be self-financing.

Despite all these schemes, the forecast continues to point toward a potential deficit. Again, what can elected officials do to avoid this calamity? Perhaps a different approach might make the task a bit less daunting. Instead of trying to scramble for the dollars to meet the spending requests that beset the administration and legislature each year, lawmakers and administrative officials should agree on a spending target for each of the next two fiscal years. To insure that the fiscal calamity currently predicted is avoided, that spending target should be set at a percentage of what the Council on Revenues is currently forecasting.

For example, if the Council forecasts $1 million in general fund revenues for the next fiscal year and the legislature decides that the spending target should be 95% of the Council’s forecast, then total general fund expenditures could not exceed $950,000. This amount would then be the maximum that could be spent on all general fund programs in the coming year.

This would force budget makers to work within this target amount. Either they would have to set priorities among programs or they would have to spread this amount over all of the existing programs. In the latter case, this would mean that the state would continue to be all things to all people and still not do any one service very well.

If on the other hand, budget makers take this opportunity of using a targeted amount as the overall guideline to state spending as a means of setting priorities, then those programs which are deemed of highest importance to the health and welfare of the community would be fully funded. So unlike one recent newspaper advertisement which conjures up the possibility that a cut in education would endanger the future leaders of our community, lawmakers would have to decide whether or not education was indeed of the highest priority.

In the latter case, if lawmakers truly believe that education is of the highest priority and deserving of full funding, then they would have to decide which state programs are not of high priority. This process would then hold elected officials accountable for their decisions. If they choose not to fund education or some other program deemed by the taxpaying public to be of critical importance to the health and welfare of the state, then voters could express their disappointment at the polls the next time elections roll around.

By setting a dollar amount as the target within which elected officials must work in budgeting for state programs would help voters discern just which elected officials are willing to make the tough decisions. If elected officials exceed the target, which then means that other revenues – read taxes and fees – must be raised, voters will have a better idea of how those elected officials feel about raising the tax burden in Hawaii and how much political will they may or may not have in containing the growth in the size of government.

While it will be a challenge for elected officials, unless the size of government is contained, Hawaii will be headed for fiscal disaster.

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