HONOLULU, HAWAII – Late Thursday afternoon, Hawaii’s House and Senate money committees passed a budget that grows the size of government, restores many cuts lawmakers made earlier this session to Gov. Neil Abercrombie’s budget proposal and includes funding for new state positions.

How the state will pay for the almost $22 billion biennium budget – through a new pension tax, alcohol tax hike, removal of business tax exemptions, and special fund raids on the city’s rail surcharge, hotel room tax and other special funds – won’t be decided until Friday evening.

The state is facing a $1.3 billion shortfall over the next two years and an immediate shortfall of $232 million.

The Hurricane Relief Fund, which Hawaii homeowners were mandated to pay into in case local insurers pull out of the market as they did in 1992 when Hurricane Iniki hit Hawaii, was raided to pay for public education at a cost of $120 million.

The vote was unanimous with Rep. Gil Riviere, R-North Shore, voting yes with reservations and Reps. Gene Ward and Barbara Marumoto excused.

Senate Ways and Means Chairman David Ige, who called the budget restorations “investments on behalf of the people of Hawaii,” outlined the budget highlights:

  • “This budget does fund Dept. of Education to insure that there will be no furloughs in the next biennium provided the governor is smart about his negotiations.
  • “We did make significant investments in the Department of Human Services to shore up the safety net that included appropriating $13.2 million to provide services for those immigrants from the Compact of Free Association.
  • “We provided more than $50 million for temporary assistance for needy families.
  • “This budget appropriates $4 million for the pre school open doors program. We’ve provided more than $3 million in general funds to be matched by $27 million in federal funds to upgrade the new Medicaid eligibility fund to prepare for the affordable care act. “
  • “Made an investment of $3 million for homeless services and programs.
  • “For the Department of Health, $2 million for early intervention services.
  • “For Department of Defense nearly $4 million for veterans services, including maintenance of veterans cemeteries.
  • “On behalf of the University of Hawaii, we restored that $6.9 million that the ARRA funds represented for the University of Hawaii Hilo and the Community Colleges. For Department of Land and Natural Resources critical positions and the funding needed for the state Historic Preservation Office so we can regain national certification.
  • “We’ve also provided $475,000 to address tsunami-related damages. For the Dept. of Accounting and General Services, assuming that Sen. Fukunaga and her house counterpart conclude negotiations on the CIO bill, funding for the Chief Information Officer…
  • “Taxation, nearly $9 million to assist our tax collections and $180,000 for the multi state tax commission which will allow us to participate in multi-state audits to get more state revenues.
  • “Department of Business, Economic Development and Tourism (is allocated) $300,000 for office of international affairs to restore the Taiwan office and approved funding to support coming APEC conference.
  • “We created the Office of Aerospace to pursue aerospace ventures.”

House Finance Chairman Marcus Oshiro said some of their decisions are “controversial”, but “well intended.”

“We have a budget. It’s not the budget that we would prefer. But it’s a budget that attempts to preserve the most basic of services, core government services in these trying times. It is a budget that lays a foundation I believe for long-term success in energy policy,” Oshiro said.

The legislature made over $200 million in reductions, including 5 per cent in labor savings. Oshiro said. He added, “We will be giving the governor the flexibility to allocate the reductions throughout the departments as necessary to implement any collective bargaining agreements once finalized.”

Also included in budget an estimated $200 million in cuts throughout the state departments.

“We have struggled against the Council on Revenue’s revised projections. Most of us here believe the current projections will go further down from 1.6 per cent current year to something maybe even three percentage points down. Our goal is to give the governor the tools he needs and his cabinet needs to retool and reprioritize government,” Oshiro said.

Republicans, who number eight of 51 in the House and one of 25 in the Senate, opposed the Democrats’ tax and spending plan.

Sen. Sam Slom, R-Hawaii Kai, who offered his own budget proposal in the Senate, said substantial cuts need to be made to government so that the legislature reforms government spending and does not face these challenges again in 2013. He opposes all special fund raids and tax hikes.

He said other states have come to grips with the new reality of over spending and declining revenues, but not Hawaii.

“We seem to believe we can spend and tax our way out of our poor economy and hostile business climate,” Slom said.

The Lingle Administration had to deal with two years of unprecedented budget deficits, $2.1 billion and $1.2 billion, he said. “Money was withheld; programs defunded, furloughs (instead of massive layoffs) emerged. The process was painful, but it worked. No major change in government direction took place, however, as this was a short term fix.”

He is critical of the Abercrombie Administration, which he said “entered in December 2010 and immediately announced reinstatement of programs, personnel and funding. … and submitted a budget to the legislature 1½ months late, that put back all personnel, added nearly $900 million in new spending and unilaterally ‘gave away the store’ to the public unions.”

Slom said: “The projected $1.3 billion budget deficit is real; the projected decline in revenues by the state council on Revenues is real. The proposed solutions by the governor and the majority in the Legislature are not real solutions. The Legislature wrestled with the budget proposal amid continuous begging and screaming from a multitude of social and business entities used to getting state subsidies. The result has been cutting around the edges of the budget, but no substantive cuts.”

Advocating cuts as many families and private sector businesses have made, Slom said “We have to curtail state department growth, eliminate waste and duplication—and there is plenty already uncovered—and learn to live within our means and the means of those that pay for all of us.”

The House GOP offered a plan that included some borrowing and some raids from special funds, cuts in government, no tax increases, and removal of some tax exemptions for businesses. They detailed their plan here.

To boost revenue, they suggested selling under performing or vacant state buildings and property. For example, Aloha Tower Marketplace and Puahala Homes, low-income housing on School and Lanikila Streets, may be better operated privately.  The Campbell Industrial cattle feed lot has been vacant for 20 years, and the former Department of Commerce and Consumer Affairs building on Richards and King Streets has been vacant for a number of years.

Rep. Barbara Marumoto, R-Kahala, said the Democrats had introduced a number tax hike proposals this session, including $600 million in House Bill 799 $600 million alone, were “unbelievable.”

Republicans in the House and Senate also fought against pension tax raids and a General Excise Tax increase.

Democrats did not consider their Republican counterparts’ proposals.

 

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