The State Council on Revenues, a body appointed by government officials that determines the state’s economic forecast, decided after a brief meeting Thursday that they won’t revise their most recent forecast for minus 1.6 percent growth this year.
If the council had downgraded their forecast, lawmakers could have been compelled to either call a special legislative session or they could have been called into special session by Gov. Neil Abercrombie, to adjust the state’s $21 billion biennium budget so it is balanced.
Lawmakers already increased taxes more than $600 million this year to balance the state’s $232 million shortfall for fiscal year 2011 that ends June 30 and $1.3 billion shortfall for fiscal years 2012 and 2013.
Several key measures were not funded including $2 million for security for the Asia Pacific Economic Conference this November, $4 million for the University of Hawaii medical school, and $2.67 million in legal claims against the state.
Legislative leaders told Hawaii Reporter that they were willing to come back into special session to address these funding measures. But privately, they indicated they did not want a special session because they did not want to deal with finding the money by either further increasing taxes, legalizing gambling or readjusting their budget.
While the economy continues to struggle this year, the majority of council members believe that the economy will rebound next year with an 11 percent increase. They said the large jump is partially caused by a delay in tax refunds implemented in 2010 by Gov. Lingle’s administration. The real economic growth is likely to be more like 5 percent to 6 percent, council members said.
Paul Brewbaker, an economist who is the Council on Revenues Chair, told reporters after the meeting: “It changes the optics, but it doesn’t change the underlying trend, which is gradual, not particularly impressive economic recovery transitioning to what we believe is sustainable economic expansion.”
Brewbaker told Hawaii Reporter that several events can impact Hawaii’s economy temporarily, but he said that the Council’s role is to see through all the “noise.” He pointed to the earthquake and tsunami that hit Japan, resulting in a 24 percent drop in Japanese tourism to Hawaii over the last three months, and the revolutions throughout the Middle East that caused a spike in oil prices, leading to higher airline ticket prices, which ultimately impacts Hawaii tourism.
The only legislator who was present, Sen. Sam Slom, R-Hawaii Kai, said “I continue to believe our budget is not balanced and we have not emerged from the recession. There may be recovery for selected industries such as the visitor industry, but for the majority of businesses and families, it is still a difficult time. And the key indicator, private jobs, does not show up in the data. As the council itself said, the models are based on mathematics and subject to interpretation. My interpretation is that as long as the state continues its tax and spending policies, it will have a continuing adverse impact on recovery and any meaningful expansion. It also is interesting to note that the chairman even hinted that Hawaii may go into another recession in 2014.”
Some who attended the standing room only meeting at Hemmeter Center, located across from the state capitol, were skeptical of the Council’s actions. They believe legislative leaders who appointed the members did not want a special session and pressured their appointees to hold the line on the forecast. That leaves Gov. Neil Abercrombie scrambling to find funds to cover what the legislature did not. Lawmakers were angered when the new governor did not turn in a budget plan on time this session.
Governor Neil Abercrombie has no plans to call for a special session, he said yesterday. “My Administration remains committed to working with the budget that we have. That has not changed. In recent weeks, we have formed new partnerships that invest in Hawai’i in the spirit of lokahi. These partnerships include a $10 million grant from the Harold K.L. Castle Foundation for education initiatives and Conservation International’s $2 million commitment towards the state’s fisheries enforcement. We are moving the economy in a positive direction and getting things done to fix government. Our New Day plan is on track.”