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Imbalance In Next Governor’s Agenda

posted in: Weekly Commentary 0
By Lowell L. Kalapa
(Released on 11/21/10)

As Hawaii prepares to usher in a new state administration, one has to look back on those promises made in the heat of the campaign and during the numerous debates voters had to endure and wonder if they can be delivered.

One campaign promise that taxpayers will certainly hold the next governor to is the promise that the general excise tax will not be increased. While that may be a welcome ring to the taxpayer’s ear, one has to wonder about some of the promises in light of the no general excise tax increase. But taxpayers should also remember that part of the campaign promise was that “the people of Hawaii will not tolerate any tax increase until there are serious discussions on whether we are using our existing revenues in a way that matches our values and priorities.” Does that sound like leaving the door open to possibly saying that if the “values” of the people of Hawaii are not being met utilizing the existing revenue resources, that the administration will consider raising taxes?

While promising not to raise the general excise tax, does that mean the next administration will consider raising “other” taxes? That just may be a possibility given that another campaign promise is to “not pursue furloughs or pay cuts for state workers after the current labor contracts expire.” If the revenue picture does not improve dramatically, where will the next administration get the money to erase furlough Fridays and avoid cutting wages and salaries of public employees? Of course, that doesn’t even take into account the promise to establish a brand-new department of early childhood education and a Hawaii energy authority.

Unless there is a magic pot of gold at the end of the state’s fiscal rainbow, it will be difficult to deliver on these latter promises, all of which involve additional spending if current programs and services are not to be cut or reduced. Ah, but the new administration has promised that this would not involve more state spending but would re-prioritize existing spending. While that is highly commendable, will the next administration be able to sort out all the state spending that is tied up in special funds and wrest the control of those programs away from the beneficiaries of those earmarked funds? As we have seen, once those monies are set aside for a specific program or activity, its constituents vehemently defend their “right” to keep those funds. “Re-prioritizing” the state’s resources may be more of a challenge than it sounds.

While taking on the fiscal challenges of the state budget will not be easy, the next administration should take a conservative approach to state spending as the pace of the economic recovery has yet to be determined with any great certainty. Should some unexpected event occur that would throw a monkey wrench into the works of economic recovery, the state may be faced with even more difficult decisions than lawmakers were faced within the past two years. Knowing that Hawaii is already overburdened with taxes and regulations, the state’s new leaders should address those challenges first as it is obvious that those issues stand in the way of economic prosperity. And if economic prosperity cannot be realized, then all of the state spending in the world will not get Hawaii out of the economic doldrums.

If any new spending is to be undertaken, it should be implementing the recommendations of the state auditor to modernize the entire state’s information technology system. Investment in this upgrade and modernization of the state’s computer systems so that everyone is operating on the same page, with the same software that allows departments to “talk” to each other could realize millions in savings. And even though some employees in the department of taxation have derided the new computer program that was aimed at collecting delinquent taxes, because it “cost” the state $25 million, it is estimated that by the time the contract comes to an end next year, the state will realize well over $110 million in delinquent tax collections. That is $110 million that the state had not been able to collect until the software was developed.

Yes, there are a lot of things that can be done to make state government more efficient, but it will be a challenge to bring change about and a challenge to the existing bureaucracy. The question is, will the new administration have the courage to buck the status quo or will it cave to the “system?”

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

 

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