BY MALIA ZIMMERMAN – Is Hawaii “in the money”? The Hawaii Council on Revenues, the 7-member politically appointed body officially charged with forecasting the state’s economic future, today increased the state’s revenue growth projection for the fiscal year ending June 30 from 11.5 percent to 12 percent.
After a two hour meeting, the Council increased its forecast by 0.5 percent for this fiscal year with one dissenting vote.
The Council’s chair, Richard F. Kahle, Jr., spoke to the press after the meeting, ending his comments by saying “we’re in the money.”
Carl Bonham, who besides being a Council member is the executive director of the University of Hawaii Economic Research Organization, said “the economy is definitely turning around” and news has been better than expected” in large part because of the visitor industry which is seeing record visitor and spending numbers.
But Marilyn Niwao, a CPA on the Council, opposed the plan to increase the forecast, saying she believes the Council should decrease 11.5 percent prediction. Niwao said she knows of several businesses that are still struggling and while the tourism industry may be booming, many other businesses outside this industry continue to be challenged.
The Council also increased its forecasts for FY 2013 through FY 2018. For the coming fiscal year, the council predicts a 7.5 percent growth, which is one percent higher than they previously set.
Other forecast numbers include a 4 percent growth rate for 2014, a 6.2 percent growth rate for 2015, a 4 percent growth rate for 2016, and a 5 percent increase for both 2017 and 2018.
Lowell Kalapa, president of the Tax Foundation of Hawaii, attended the meeting. He said the 0.5 percent increase won’t mean much in terms of government spending – probably around $40 million – but the legislature was watching closely to ensure the growth rate did not go any lower. The council already lowered its forecast from 14.5 percent to 11.5 percent earlier this year.
Kalapa also maintains the forecast for future years is probably too optimistic. He and Niwao point out the council is not taking into consideration the cost of fuel, which is on the rise, and its impact on airline tickets and tourism.
Rep. Marcus Oshiro, House Finance chair, said today the council’s increased forecast is good news because it potentially gives the legislature more money to address the state’s critical needs, especially for human services and child related programs.
“This is good news for us because it gives us a little bit more to address some of the needs right now. Especially with the governor, I think they’ve done a great job, especially last year, making adjustments in our budget. This gives them some reprieve, maybe they can go back and pick some critical services that might need to be restored or beefed up. So this is good,” Oshiro said.
He also said the additional money could be used for the governor’s watershed initiatives or the administration’s technology upgrade efforts.
House Minority Leader said while this is good news, the legislature must not get “over confident.”
“Today’s Council on Revenues projections that suggest an over $60 million increase in state funds over the next two years are positive, but we must not get overconfident. With increasing gas prices, conflict in the Middle East and a contentious election looming, our economy is still far from stable. We must practice caution given our state’s fragile economy. Yesterday, the majority in the State House was far from cautious. Over the course of our nine hour floor session, the majority made a variety of high-risk financial decisions, including creating a state-owned bank and erasing the regulatory framework that keeps our environment, which is our best product, pristine.”
The Council members, who include Richard F. Kahle, Jr. (Chair), Jack P. Suyderhoud (Vice-Chair), Avery K. Aoki, Carl S. Bonham, Christopher Grandy, Ronald K. Migita and Marilyn M. Niwao, meet quarterly to reassess their predictions. Their terms vary from two to four years.
Three of the members are appointed by the Governor, two are appointed by the President of the Senate and two by the Speaker of the House of Representatives.
According to the Council’s web site, the Council does not have to comply with the law on open meetings for public agencies when confidential tax information is discussed, but their estimates are public and are submitted to the Governor and Legislature.
The Council will meet on May 29 to consider whether it should revise its future forecasts.