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Does The Constitutional Spending Limit Need Fixing

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By Lowell L. Kalapa

(Released on 5/25/08)

Established by the 1978 constitutional convention in response to what was happening on the mainland at that time, the ceiling on general fund expenditures was viewed as a far more reasonable approach to controlling the growth in the size of state government than the revenue slashing approach of Proposition 13.

Instead of limiting the growth in the amount of revenues that could be raised or realized by state government, Hawaii’s approach to controlling the growth in the size of state government was to limit its growth rate to the rate of growth in the state’s economy. The logic behind this approach was that if the economy did well, then it would need the underlying infrastructure that government provides to support that economy.

Although the state spending limit was intended to curb the growth in the size of state government, it is by no means an absolute limitation. The current spending limit allows the administration and lawmakers to exceed it provided certain requirements are followed. Thus, unlike the Proposition 13 approach, the limit does not preclude flexibility in responding to unforeseen situations which may require that the ceiling be exceeded.

In order to exceed the ceiling, either the administration, in submitting its budget proposal, or the legislature, in approving the state’s spending plan, must declare both the dollar amount and the percentage by which those expenditures will exceed the ceiling. That seems reasonable enough and convention delegates believed that the revelation that the state spending limit was being exceeded would attract public attention, if not public ire.

Unfortunately, lawmakers have not applied the methodology that most would think is the logical application of this provision, which would entail aggregating all expenditures and comparing this with the spending ceiling in order to determine the total number of dollars by which the ceiling was being exceeded and to determine the percentage representing the excess relative to the ceiling. But that has not been the practice.

Instead, the excess is determined by taking each measure and calculating how much the dollars being appropriated in that particular bill will exceed the state spending limit and the percentage by which only those dollars, in that particular bill, will exceed the limit. Since the state general fund budget is billions of dollars, an appropriation of a couple of million dollars in a particular bill represents perhaps one one-thousandth of a percent in excess of the general fund spending ceiling. Thus, instead of declaring the aggregated excess of all measures, the piecemeal declaration is more likely to generate a ho-hum reaction.

On the other hand, if lawmakers were required to tally all of the measures collectively that contribute to exceeding the constitutional general fund spending ceiling, taxpayers just may pay a little more attention. Would the fact that spending increased 10% more than the growth in the state economy make taxpayers sit up and take notice? Would the fact that perhaps lawmakers spent $100 million more than the ceiling would have allowed while turning down tax relief that would have amounted to less that $50 million make taxpayers ask why they were left on the cutting room floor when it came to tax relief?

Although delegates and observers of the 1978 constitutional convention had the best intention to give taxpayers a useful tool to gauge how fast government was growing relative to the economy’s ability to support that growth in government, the implementation of this disclosure appears to have circumvented the intent of the constitutional provision. Not that what they have done is illegal, it is just that the strategy obscures the picture the general fund spending was supposed to provide taxpayers.

Until this shortcoming is corrected to require that the total amount of general fund expenditures or dollars that exceed the general expenditure ceiling be stated as the declaration that the ceiling is being exceeded and the percentage that represents of the excess over the ceiling, the general fund spending ceiling will have little meaning to taxpayers.

What is more troubling is that if this is allowed to continue, taxpayers will soon find themselves with a state government that is well beyond the economy’s means to support, creating a demand for additional tax resources and will eventually impose a major drag on the state’s economy.

Lowell L. Kalapa is the president of the Tax Foundation of Hawaii. Mr. Kalapa’s commentary is printed each week in the Maui NewsWest Hawaii TodayGarden Isle News, and the HawaiiReporter.com.

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