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Taking Fiscal Responsibility Seriously

posted in: Weekly Commentary | 0
By Lowell L. Kalapa

In a few short weeks our neighbors in California will decide whether or not to recall their governor who many blame for the financial crisis that threatens to destroy the Golden State.
Left with a substantial surplus and a booming dot com economy, both the governor and the state legislature in California set off on a spending spree adding new programs and projects nearly four years ago just before the collapse of the market and the dot com bubble. As a result, more employees were added to the payroll, services were expanded and commitments were made for a variety of projects.
A drop in the market, the tragedy of 9/11, and an unforeseen crisis in the energy supplies of the state turned the picture upside down. The state committed to some expensive options to acquire energy and the downturn in the national economy and the demand for new hardware and software took the bloom off the high technology rose of Silicon Valley and with it the fortunes of the state treasury.
What happened in California is eerily reminiscent of what happened here in Hawaii during the late 1980’s and early 1990’s. A blip in the economic landscape produced a cornucopia of revenues for the state. Lawmakers and administration officials were in hog-heaven. There was no public outcry over lavish spending of hard-earned tax dollars as each constituent group pandered for a favorite program or project.
But when the economy hit a bump in the road, elected officials didn’t know how to rein in their free spending. Each program had garnered its own constituency of support and it became difficult, if not impossible, to reduce or eliminate spending on those programs, many of which in leaner times would never have been funded. Ah, but now all of those programs became critical functions, sacrosanct of the budget cutting sword. Here in Hawaii lawmakers even resorted to funding some of those programs out of one-time tobacco settlement money from the rainy day fund.
However, it seems that lawmakers still do not grasp the gravity of the situation, that the state truly does not have money. For example, on one hand, lawmakers were enthusiastic to overturn a number of vetoed appropriations because they deemed the programs underwritten by those appropriations to be of a high priority. The question that taxpayers should ask is that if those programs are so critical to the health and welfare of our community, why didn’t lawmakers make cuts to what they might have thought to be programs or services that are not of a high priority. No, instead they chose to fund these “high priority” items out of one-time only funds.
And what do lawmakers think will happen next year if the economy doesn’t turn around? Will they go to the rainy day well again? It is as if lawmakers are crossing their fingers and squeezing their eyes really tight hoping that the economy will rebound next year.
Well they have been doing that for the last 12 years and relief seems to be nowhere in sight. Although lawmakers have told us that they are trying to “fix” the economy and therefore improve the revenue outlook, much of what they have done is merely quick and sexy fix solutions like tax credits and other tax incentives. And in the interest of improving the business climate, in most cases, lawmakers have adopted laws that have made it more difficult to do business in this state.
At the same time lawmakers have managed to adopt even more regulations with which businesses must comply and established new programs all of which cost money to operate. And while reductions in spending have been mandated over the past few years, it was not less than what had been spent, but less in what was proposed to be spent. In some cases, the reductions in spending increases caused the elimination of positions or programs, but the savings went to feed the remaining programs.
And despite the fact that lawmakers have been told that their ingenious idea to provide generous tax credits for everything from high technology to construction is sapping the state treasury, they refuse to curtail these tax expenditures. So lawmakers are not only spending what little tax dollars are being raised by the tax system, but they are also spending it out the back door with the use of tax incentives that appear to be nothing more than subsidies for certain taxpayers.
Are our elected officials being fiscal responsible? You be the judge and then let your lawmaker know what you think.

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