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Even the Hurricane Fund Raid is a Tax Increase

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By Lowell L. Kalapa

Although the Senate has now taken the position that it is not willing to raid the Hurricane Relief Fund to help balance the state budget, the idea is still one of the options which the House is willing to go to the mat within its efforts to balance the state budget.
While the proponents of raiding the fund argue that it is necessary to raid the fund because the state is now in a financial disaster and a disaster is the purpose for which the fund was established, taxpayers should view the raid as nothing more than a tax increase on the people of Hawaii.
What, you say? How can it be a tax increase? Well, when one thinks about how public programs are paid for, there can only be three resources for the payment of public programs. The most familiar is, of course, the taxes we all pay. The second is user fees and charges that many of the state and county agencies have resorted to in recent years to generate additional income to fund their various programs. And finally, there is that not so free “free” money that we get in the form of grants from the federal government.
Some may argue that the money paid into the Hurricane Relief Fund is a fee. And that is the point. Appropriate user fees and charges have a direct link to the services for which the fee or charge is being paid. Thus, the amount paid into the Hurricane Relief Fund was not expected to pay for education or prisons or social services. People paid into the fund with the expectation that they could rely on it to provide compensation for damages should another hurricane disaster strike Hawaii.
Now while the Republicans also agree that the money in the Hurricane Relief Fund should not be used to balance the state budget, they argue that it should be returned to the people who paid into the fund, like homeowners. Well, yes true, but not true. What many people do not realize is that the money in the Hurricane Relief Fund came not only from homeowners but from everyone in the state even though they did not own a house or have a mortgage.
Many taxpayers do not realize that because lawmakers needed to capitalize the Hurricane Relief Fund with the greatest speed, one of the primary sources of funding was a surcharge of 3.75% on all lines of property and casualty (except auto) insurance including workers’ compensation and liability insurance. Thus, everyone who purchased a property and casualty insurance policy immediately following the adoption of the Hurricane Relief Fund paid this surcharge up to a half billion dollars. This money went to purchase reinsurance to back up the Hurricane Relief Fund coverage.
And although lawmakers and administration officials argue that the money in the fund is state money, it should be noted that the only contribution of state money was to come from the issuance of state bonds. Well, it was not necessary to issue those bonds as the surcharge and the hurricane insurance premiums were more than enough to capitalize the fund.
Thus, the return of the money to homeowners as the Republicans suggest is not feasible nor is it fair as all insurance customers helped to capitalize the fund. Since the money paid into the fund came from businesses buying workers’ compensation insurance and liability insurance for their place of business, shouldn’t those premium payers also get something back?
Given that impracticality, then there are only two alternatives left on the table. Either use the money to balance the budget or leave the money intact to be available should Hawaii experience another hurricane disaster. If lawmakers use the hurricane relief money to balance the budget so that they don’t have to cut expenditures, what will they do next year when that money runs out and the economy does not turn around? Indeed administration officials and lawmakers argue that without the money many essential services like education and social services will have to be cut.
But taxpayers can see through this pathetic parade of the poor and tired yearning to be free, good public relations, make the public feel sad while no one is questioning the burgeoning bureaucracy within state government. No one seems to ask why do department heads need “spokes people” to speak on their behalf. Why has the state not computerized a lot of the records they keep rather than continuing to add clerical personnel who seem to enjoy moving paper from one desk to another? Has anyone asked why not cut instead of raid?

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