(Released on 10/21/07)
In the past months of contentious rancor over the operation of the Superferry, some observers have attempted to characterize the debate as one of the city fellas in Honolulu versus the country fellas of the Neighbor Islands.
Some readers have even called to argue that “those Neighbor Islanders enjoy the taxes paid by Honolulu residents” or vice versa. Although those arguments may appear to have some credence as the bulk of the resident population is located on Oahu, each side of the controversy has contributions to offer. As a former chairman of the House Finance Committee in the state house used to chide witnesses before his committee, “we must remember that although there are four counties with unique characteristics, if not lifestyles, we move into the future as one state.” Those words of wisdom should remind us that while each county has its treasures, it is important for us to remember that each county is dependent on the others for their health and welfare.
Indeed readers should remember that Honolulu was not the economic powerhouse of yesteryear. In fact, in the days of the plantation era when Hawaii’s economy was largely agricultural, the economic wealth of the state was to be found on the Neighbor Islands. Even into the year immediately following statehood in 1959, sugar production income generated on each of the Neighbor Islands far exceeded what was produced on Oahu. The same can be said of pineapple canning where production on Maui and Kauai far exceeded what was produced in Honolulu. And the tax revenue generated on the Neighbor Islands again exceeded what was realized from economic activity in Honolulu.
Certainly with the coming of the jet age and the growth of tourism, the shift in economic might moved to Honolulu. To accommodate the spurt of economic growth in the service economy and in retailing, the state restructured how services were delivered, moving the two major functions of government away from the counties to the state. The various departments of public instruction were consolidated into today’s department of education and the county hospitals became functions of the state. This allowed the revenue base of the state to be shared more equally amongst the counties in order to properly fund these functions of government.
As a result, Hawaii did not experience the disparity of funding education as many mainland states encountered during the 1960’s and 1970’s. While many states have moved to state subsidized education systems, Hawaii was at the front of the line when it moved all the responsibilities for education to the state level. Although some would argue that having a huge educational bureaucracy might not have been in the best interests of the quality of education, at least there are none of the disparities between wealthy and poor communities.
The same can be said about the health and welfare systems in Hawaii, both of which are state programs as opposed to what is found on the mainland where the county or local governments are responsible for these public programs. It is this funding structure that makes Hawaii unique among the 50 states. The funding mechanism reflects the division of responsibilities between the state and local government in Hawaii with the state garnering about 80% of the public revenues and the counties about 20%.
It is also possible that this funding structure gives rise to the entitlement mentality of Hawaii’s residents and especially policy makers who figure that as long as there is money to be had and money to be raised each and every constituent demand must be satisfied. The result is that Hawaii has maintained the “honor” of having one of the heaviest per capita tax burdens in the nation.
Unfortunately, having an endless array of public services costs the taxpayers dollars out of their wallets and adds to the cost of living and doing business in Hawaii. So while many taxpayers complain about the high cost of living and the numerous taxes on everything we do or consume, taxpayers are also a part of the problem as they demand that state and local governments do more for them. Only when taxpayers realize that there is a direct connection between how much they pay in taxes and how much they expect government in Hawaii to do for them will they understand that taxpayers are their worst own enemy.