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Evading the Real Problem of Excess Spending

posted in: Weekly Commentary 0
By Lowell L. Kalapa

Once again lawmakers have failed to curb their obsession for spending above their means and failed to bring state spending into alignment with available resources.
This problem has been compounded in recent years with legislators’ believing that they can fix the economy by promulgating a spate of tax credits that have literally drained the resources of the state treasury. As a result, the state general fund tax collection structure has failed to match the recovery of the state’s economy. Lawmakers, as well as the wizards of the state’s Council on Revenues, remain puzzled that while the economic indicators tell of economic recovery, the state’s tax system appears to be struggling to keep above water.
Seemingly, lawmakers appeared to realize that all of their generosity in doling out various tax breaks and tax incentives has something to do with the sub par performance of the state’s tax system as there were few, if any, new tax incentives approved during this past session. And those which were approved probably should be vetoed solely on the fact that they lack merit.
However, it appeared in the waning days of the 2004 legislative session that lawmakers seemed to back away from approving massive tax credits as they did but a few years ago. On the other hand, lawmakers did not appear to shy away from their penchant for spending. And when there weren’t enough general fund dollars to pay for various state programs or projects or for public employee pay raises, lawmakers resorted to their other tried and true habit of raiding special funds to shore up the general fund budget.
The problem with raiding those special funds is that the fees or taxes were originally imposed to fund a specific program or project. The beneficiaries of the services for which the fees or user charges were imposed expected that the money they forked over was supposed to pay for the service they expected. However, by taking those earmarked special funds to pay for programs and services that should have been paid with general funds, those specific beneficiaries either do not get the services they need or end up paying more than is needed to fund that specific service.
Such is the case of the continual raid of the state highway fund over the past eight years. Highway users who pay the 16 cents per gallon fuel tax on their purchases of gasoline or diesel fuels for use on the state highways or the $20 annual vehicle registration fee or the weight taxes have had to fund programs such as education, prisons, welfare assistance, state parks and so on.
Meanwhile state highways have been allowed to deteriorate while other state highway projects cannot get off the ground because these funds have been diverted from highway projects to projects that have absolutely no relationship to the roads used by highway users. To the extent that many road projects could have received matching federal funds, Hawaii has missed out on opportunities to bring additional construction and maintenance dollars into the state.
Over the past eight years the state highway fund has been raided to the tune of more than $143 million and with the legislation approved by this year’s session of the legislature, another $11.5 million will be taken from the state highway fund. If lawmakers thought that the $154 million was in excess of what was needed to run the state highway program, then they should have returned those dollars to the highway user by reducing the state tax on gasoline and diesel fuels, and the vehicle weight tax or the state registration fee.
Instead lawmakers will raise the annual vehicle registration fee another $5 later this year unless the measure is vetoed by the governor. And will that additional $5 go to pay for those potholes in the state highway system? No, that money will be earmarked for emergency medical ambulance services regardless of the fact that it is not only highway users who need those services but hikers, sky divers, swimmers, etc.
Finally, lawmakers decried the high cost of gasoline and enacted a cap on the price of gasoline – albeit delayed implementation. Never mind the fact that the cost of that gallon of gasoline could be lowered by 16 cents immediately if the state fuel tax was suspended. After all, why should highway users be asked to pay that 16 cents when highway revenues are not used to pay for highway maintenance.
Again, the problem is that lawmakers cannot curb their spending. The result is that taxpayers are being taken for a “ride” in being asked to pay for something that they are not getting, in this case better roads.

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