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Denial Reflected in Legislative Action

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By Lowell L. Kalapa

A couple of weeks ago, this space reported on how lawmakers were busy hearing all sorts of “tax credit” and “exemption” bills that basically would give away millions and millions of dollars.
Then just last week lawmakers sat down in sack cloth and ashes to beat their breasts and moan that the cupboard was bare and there was no money to be had to fund education, prisons, welfare, and the like. Administrators threatened that schools and libraries would have to close or at least close earlier. While department heads lined up to discuss their woes, thoughts of how to solve the budget crisis danced in the heads of lawmakers.
The options included raiding the $213 million sitting in the hurricane relief fund, money that all homeowners paid for hurricane insurance so the banks would not foreclose on home mortgages. Another proposal on the table is to increase taxes on alcohol and tobacco products by as much as 100%. Then there is the possibility of raiding all the other special funds of the state to come up with the money.
Oh, speaking of money, let’s get some facts straight. Administrators and lawmakers, as well as media people, hype the number $315 million shortfall. Well, yes, it is a shortfall, but it is a shortfall in revenues forecast over the two-year biennium. More specifically, the general fund was forecasted to realize X number of dollars as reported by the Council on Revenues on September 10th of last year. Then when it met again in November, it forecast that revenues over the next two years were going to be X minus $315 million.
In other words, the state is going to get less revenue than had been forecasted. It doesn’t say anything about not being able to cover the bills. In a presentation the budget department did before the two legislative money committees last December, the real story came to light. Administration officials told lawmakers that after assessing what expenditures had been authorized by last year’s legislature and what they figured they would need in emergency appropriations, as well as those needed for the Judiciary and additional debt services, the state general fund would be $154.2 million in the hole.
That is more than half the number that has been touted as the short fall. Okay, so the state will need a cash balance in the general fund so the bond people don’t get upset, so give the state another $50 million for a fund balance and now the number is just over $200 million. That is still a big difference from the $315 million “shortfall” lawmakers and administration officials are bemoaning.
Now that the real number is known, is it possible that lawmakers can deal with paring back $154 million in expenditures or will it be necessary to raise or find that money in new revenues? The public sentiment is clear on raiding the hurricane relief fund. People think that it should stay where it is and be there should Hawaii experience another disastrous hurricane. Others rightfully argue that when that money was paid into the fund, homeowners expected coverage for hurricane damage. They did not expect that money to be spent on education or prisons. To do so, would amount to nothing more than additional taxes.
Still others point out that raiding the hurricane fund amounts to nothing more than a quick, one-time fix. If the economy does not improve and revenues continue to lag next year and the following year, what then will lawmakers do to bail out the budget shortfalls?
So another alternative lawmakers are being asked to consider is raising taxes. What are lawmakers bonkers? Do they really want to raise taxes in an election year? Apparently that is why the administration is pushing an increase in liquor taxes and certain House members are pushing an increase in the tobacco tax on cigarettes. They believe that the public, as a whole, won’t object to increases in “sin” taxes.
What they don’t realize is that hikes in these taxes, which are already amongst the highest in the nation, will affect consumption and encourage purchase of non-taxed products from outside the state or from the military reservations. So rather than getting the windfall they would hope for, collections may actually decrease or grow at a lesser rate than expected.
So what should lawmakers do? They might want to follow the example of other states that are also faced with budget crises, and that is to use this as an opportunity to further streamline state government. It’s that simple.

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