BY LAURA BROWN–Congress this week passed HR.1586, the Education Jobs & Medicaid Assistance Act, shifting billions of tax dollars from clean energy loan guarantees, food stamps for poor families and foreign tax credits to public education to prevent layoffs in the education system.

While Hawaii Congresswoman Mazie Hirono, D-HI, supported the reallocation, no Hawaii teachers have lost their jobs or are scheduled to lose their jobs under the 2009-11 biennium budget.

Hawaii Board of Education Chair Janis Akuna confirms that only some clerical positions in the state Department of Education have been eliminated.

However, the Hawaii Department of Education is slated to receive $36 million – enough to pay for 700 Hawaii teachers’ salaries or pension costs, according to the House Committee on Education & Labor Committee.

Hawaii’s public school system employs 11,396 teachers for approximately 179,000 students. The number of teachers employed is based on strict enrollment ratio formulas determined through collective bargaining, not by federal decree.

Meanwhile, the U.S. Census Bureau shows that the number of Hawaii teachers employed grew by 3.8 percent, while public school enrollment declined by more than 2 percent since the 2002-03 school year.

Nationally, state and local public sector jobs have remained steady, declining by less than 2 percent, with private sector jobs falling by over 7 percent since the beginning of the recession, according to the Bureau of Labor Statistics.

The Heritage Foundation reports that the National Education Association and the American Federation of Teachers are pushing for the emergency spending, because if their teacher members are laid off, their revenue declines, possibly as much as $24 million in dues.

Critics: Congress Pits Teachers against Poor Families

The additional funds provided to Hawaii for education may be used to offset a $57 million raid of Hawaii’s Hurricane Relief Fund approved by the Legislature and governor earlier this year.

But the financial shift will impact other government services to Hawaii’s most needy, says Gov. Linda Lingle. “What’s even more troubling is in order to pay for this latest $26 billion bailout of states, the Democrat-controlled Congress cut almost $12 billion from the Supplemental Nutrition Assistance Program (formerly known as food stamps), at a time when a record number of Americans – including almost 141,300 Hawai‘i residents – depend on this assistance to subsidize their food purchases.”

The governor included $320 million in Federal Medicaid Assistance Program (FMAP) stimulus funds to balance Hawaii’s budget during the 2009-11 fiscal years. And $15 million per year in stimulus funds is included in Hawaii’s Department of Health and Human Services’ 6-year budget through 2014 that officials say will now have to be reviewed.

DHS estimates that Hawaii may receive an additional $30 to 40 million for Medicaid through the second quarter of 2011 under the new bill, but the department spokeswoman Toni Schwartz says that is a “drop in the bucket” for a program that is “bleeding red ink.”

“The department pays out $90 million each month just to health plan providers. This year we had to defer May and June Medicaid payments to the new fiscal year beginning in July.”

DHS Director Lillian Koller testified before the Senate Ways & Means and House Finance Committees during the 2010 legislative session that the only solution to the shortfalls in the State’s Medicaid program is to reduce benefits. The Legislature did not act on Koller’s reform plans.

Stimulus funds that increased federal matching funds from 55 percent to 67.35 percent in 2009 and 2010 meant that food stamp payments for a family of 3 received about $100 more per month.

The new federal legislation means that the increase may not be entirely eliminated, because the federal government figures in a cost of living increase each year.

DHS will change their supplemental nutrition program formula from 185 percent of poverty level to 200 percent, beginning Oct. 1, 2010, which will bring in an additional $65 million in federal aid into Hawaii’s program.

Transportation Funding Reduced

Hawaii’s roadways and University will suffer with this funding shift, the governor says.  “… Congress rescinded $2.2 billion in unobligated highway funds, including an estimated $10 million that would have been used for Hawai‘i highway projects,” says Lingle.

The bill, originally an FAA Authorization Bill, as passed by the House, contained a provision that would have established a program to use colleges that serve Black, Hispanic, Alaska Native and Native Hawaiian students in research on subjects relevant to the FAA.

Instead, Sen. Harry Reid (D-NV) stripped the language in the bill and inserted Senate Amendment 4575 containing $26.1 billion in other spending.

Companies Doing Business Overseas Hit with Higher Taxes

The bill eliminates many foreign tax credits to offset spending for education jobs.

The Joint Committee on Taxation worksheet shows an estimated revenue increase of $10 billion over 10 years by canceling specific foreign tax credits.

According to the Washington DC-based Americans for Tax Reform, these tax increases are tax hikes on U.S. employers doing business overseas. And by raising these taxes, more companies will likely be shipped overseas. They say foreign tax credits laws helped alleviate double-taxation on companies.

The foreign tax credit provisions passed in the new bill have been unsuccessful in many other stalled protectionist bills including, the American Workers, State, and Business Relief Act of 2010 (HR 4213) and the Investing in American Jobs and Closing Tax Loopholes Act of 2010 (HR 5893).

Clean Energy Risk Guarantee Fund Reduced

The bill, as passed by the Senate and signed into law by the President, also cuts $1.5 billion from the U.S. Department of Energy’s Loan Guarantee Program. The U.S. Solar Energy Industries Association protested the cuts.

The “Cash for Clunkers” used automobile program in 2009 also diverted $2 billion from the loan guarantee fund.

The governor signed an agreement with the U.S. Department of Energy that promises to move the State toward 70 percent renewable energy by 2030.

Hawaii Department of Business and Economic Development’s plans include a loan risk fund to provide incentives to renewable energy providers, while reducing risks to lenders.

Ted Peck, Hawaii State Administrator for the Clean Energy Initiative, said that although the Kahuku wind farm project on Oahu just received the first wind $117 million loan guarantee from the Department of Energy this week. “It remains to be seen what kind of effect this new legislation will have on future projects.”

Bill is Costly, Despite Claims that it is ‘Revenue Neutral’

Stimulus funds are not subject to federal PAYGO – where new proposals must be “budget neutral” or offset with savings from existing funds – so Congress will reduce stimulus funds for food stamps, transportation and the renewable energy risk mitigation fund to offset the bill’s costs.

U.S. Rep. Charles Djou, R-HI, says that while the bill will provide some funding to states for Medicaid, the real problem is that Medicaid is an unfunded federal mandate. “This means that the federal government tells states what to do but doesn’t give states the money to do it. Unfunded mandates are a problem for Hawaii and every other state in the Union.”

Rep. Tom McClintock (R-California) says that the $26.1 billion bailout costs about $330 per average family. “We’re told, don’t worry, it’s paid for.”

But McClintock says that $10 billion is from increasing taxes on business with foreign subsidiaries. And $12 billion will come from food stamp cuts beginning in 2014, but that “savings” will be spent by Congress now.

“This federal bailout, like those that preceded it, is intended to be a one-time shot in the arm that must be paid for in the future. It merely defers the day of reckoning that will require a reprioritization of state services and a reduction of spending. Once the money is spent, states still need to figure out how to balance their budgets without federal stimulus funds,” says Lingle.

Laura Brown is a reporter and researcher for Hawaii Reporter. Reach her at Laurabrown@hawaii.rr.com

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