As the clock counts down the time before the adjournment of this year’s legislative session, the options to balance the state general fund budget become fewer and fewer.
It appears that while legislators in the upper house of the Senate may believe that the public is willing to pay more in taxes, especially if it is to be used to fund education. their counterparts in the House are not ready to commit political suicide with the approval of a tax increase.
On the other hand, it appears the administration may be reconsidering its initial hard-line stance on tapping the hurricane relief fund. Certainly, the administration has put together its laundry list of cuts in spending, but lawmakers and administrators of the department of education do not appear to be willing to go along with those reductions in spending.
As a result, as the budget conference committee convenes with just under two weeks in which to accomplish its task, the options available have begun to dwindle. That shortfall between available resources and the demand for state spending was a major impetus behind legislators conceding to the changes made to the infamous Act 221 high technology tax credits. What is ironic is that while lawmakers and administration officials wring their hands and search under every stone for overlooked revenues, they are supporting even bigger give-aways to “stimulate” the economy.
Stimulate the economy while raising taxes has to be an oxymoron. New or increased taxes do not a robust economy make. And that’s the real problem facing lawmakers with the battle of the budget. At a time when the economy is literally crawling out of some of the most devastating events from the war in the Middle East to the SARS epidemic to a national economy that continues to stumble along, taking more money out of the hands of investors and consumers is just the wrong thing to do for the economy.
While some may argue that the money will be ploughed back into the economy when spent by government, that is not quite true as in the case of the long-term care insurance contributions. In order for that money to grow so that it can support future claims, it will have to be invested outside the state as there are few, if any, investments in the state that will pay the kind of returns needed to support the social insurance program.
As for the other moneys that would be raised, one can almost be assured that the use of those funds will not be the most efficient. Somehow when money flows through a huge bureaucracy like state government, you know that you are not going to get the maximum bang out of that buck.
Then there is the other side of the table — the agencies that just refuse to believe there is no money. They put up a stiff upper lip and decry lawmakers every time there is a hint that spending might be cut. Bureaucrats, as well as union officials, argue that if this or that program is not fully funded, there are going to be dire consequences. Where do these people get the idea that the money pit is bottomless? And if their program is not reduced, the money to fund their program will have to come from another program or worse yet, taxes will have to be increased to assure full funding of their program.
The point of the matter is that unless lawmakers, administrators, rank and file, and union leaders work together, the problem will not be solved. Taxes will have to be raised because all parties did not have the will to do what needs to be done, that is to find a more efficient way to operate state government. This means working together and not arguing over spending reductions. It means pointing out which cuts do not make any sense and which cuts will have the lease impact on the crucial health and safety of our community.
The options are dwindling. Taxes can be raised to balance the budget, but what are the economic implications of that action? Conversely, what if precise, well-tailored cuts are made to state government? Will those spending cuts actually jeopardize the health and welfare of the community or will it just be another service that the public could do without? Bureaucrats that just dig their heels in are just that, bureaucrats and not problem solvers. Raising more taxes so these bureaucrats can be sated is throwing good money after bad. Raising taxes is not the answer nor is a one-time bail out like tapping the hurricane fund. It is about time for lawmakers and administration officials to set priorities for the state, for the state cannot be all things to all people especially when there is no money to be had without turning up the tax burden heat.
”’Lowell L. Kalapa is the president of the Tax Foundation of Hawaii, a private, non-profit educational organization. For more information, please call 536-4587 or log on to”’ http://www.tfhawaii.org