Council on Revenues: Hawaii’s Economic Growth Expected to Slow

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HONOLULU, HAWAII – Hawaii’s Council on Revenues today revised downward its economic outlook by 1.6 percent. The latest downturn results in a $1.3 billion shortfall during the next two fiscal years starting July 1, 2011 and running through June 30, 2010.

However, the biggest problem, Hawaii lawmakers say, is that there is still a shortfall of $200 million for the remaining three months of this fiscal year, which ends June 30, 2011.


In December 2010, the Council, which is charged with determining the economic forecast for the state, predicted 2 percent growth, but that changed in March when the Council estimated just a 0.5 percent growth.

Their March meeting was held four hours before the earthquake hit Japan and 11 hours before a tsunami swept over Japan and through the Pacific, killing thousands of people and causing billions of dollars in damage in Japan. The Hawaiian islands also suffered an estimated $30 million damage, mostly on Oahu, Hawaii island and Maui.

With the tsunami already impacting Japanese travel to Hawaii, and the Middle East crisis sending Hawaii’s gasoline prices skyrocketing to more than $4 a gallon, Gov. Neil Abercrombie asked the Council to hold an emergency meeting to revise the forecast.

The downward revision was expected and has been discussed at length by Hawaii legislators in recent hearings.

On Monday, the Senate Ways and Means committee learned that the Abercrombie administration asked Department heads to make 10 percent cuts to their budgets for this fiscal year ending in June 2011 and raid the state’s Rainy Day and Hurricane Relief Funds, as well as other special funds.

Abercrombie confirmed that request Tuesday in a statement sent to the media: “Our administration has put forward a plan that will get us out of the immediate fiscal shortfall while moving Hawaii toward a New Day. We understand the challenges facing the state and we are being conservative as we work with the State Legislature to pass a budget that will get the job done. To meet the immediate shortfall over the next three months, we will enforce a 10 percent spending reduction for all departments. We will also use the Rainy Day, Hurricane Relief and special funds.”

Kalbert Young, Abercrombie’s budget director, came under fire yesterday when Senators on the Ways and Means committee questioned him about the administration’s plans to boost state revenues in the short-term while growing the economy over the next several years.

Senators asked how the governor plans to improve the state’s economy without raising taxes and what his plans were to create the “New Day” he promoted during the 2010 gubernatorial campaign. Young acknowledged that the Administration, which took office in December 2010, had no immediate plans for revenue generation other than to raise taxes and create a new pension tax.

Young said yesterday, and the governor maintained today, that the administration’s future plans, mostly hinging on $1.3 billion in state construction and $5.5 billion in city rail construction, won’t change: “For future years, the plan we put forward in February still stands. Our plan will add $1.3 billion to Hawaii’s economy–creating jobs and building critical infrastructure like schools, clean energy projects, and public facilities. Our plan restores critical government functions to help local businesses and invest in education. The plan balances the budget by making changes to the tax code, labor savings, and spending cuts. The people will not tolerate the status quo. They want jobs, better schools, energy and food produced here.”