Tax Foundation’s Lowell Kalapa: Use of the Rainy Day Fund to Stop Public School Furloughs, Not Fiscally Sound

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    Hawaii Reporter’s Laura Brown wrote to Lowell Kalapa, president of the Tax Foundation of Hawaii, to ask him about the Governor’s new plan to eliminate most of the public school teacher furlough days by tapping into the state’s emergency Rainy Day Fund at a cost of $50 million to taxpayers.’

    ”HAWAII REPORTER: Is this a good idea to use the rainy day fund? Might there be any negative consequences?”


    ”LOWELL KALAPA:” It is a politically good idea from the standpoint it takes the heat off
    the governor and legislature coming from parents and educators.

    It is not a good idea from a financial standpoint because it is a one-time solution
    and as we have subsequently seen, others would also like to be bailed-out
    like the health and human services providers.

    Given that the public has
    learned that there are non-instructional days for which teachers are
    paid, the immediate solution is to not pay teachers for those days and
    pay teachers for those furlough days so they are back in the classroom.

    The other point that many in the private sector are pointing out is that
    teachers, as well as other public employees who are being furloughed, are
    not taking a pay cut.

    Yes, they will be taking home less money, but they
    are still getting paid at the same rate per day as they were before
    “Furlough Fridays.” It would be a pay cut if they were still required to
    work the same 40-hour week but take home less pay. That is a reduction in
    the per hour pay rate.

    Finally, as we learned today, the outlook is not going to improve until
    well into 2011, nearly two years from now. What will Hawaii do in the
    meantime as revenues continue to decline? With a nearly 13% decline in
    TAT receipts for the first four months and a 9.6% decline in personal
    income taxes, the legislature’s game plan to balance the budget certainly
    is not working.

    Similarly, general excise tax revenues are down by nearly
    13% so even an increase in the GET rate is not going to generate the
    money to address what is now forecast to be a $1.4 billion shortfall for
    the fiscal biennium. And what if some natural disaster befalls the state
    in the next two years? Where will Hawaii be able to turn to address that

    At this point both the administration and the legislature must make
    serious cuts in the state’s program of services, eliminating all that is
    not essential to the health and welfare of the community. It means
    instilling in the public workforce that a job in government is not an
    entitlement and that practices must change to achieve efficiency and
    greater productivity.

    ”HAWAII REPORTER: How much is currently in the fund?”

    ”LOWELL KALAPA:” At the beginning of the 2009 session, the balance stood at $79 million.

    During the session the legislature appropriated $22.1 million leaving
    about $57 million. We do not know for sure if the funds were actually

    ”HAWAII REPORTER: Would it be better to identify waste within the DOE budget first?”

    ”LOWELL KALAPA:” Identifying waste should not be limited only to the DOE but must be
    practiced in all departments and programs.

    The legislature made
    horizontal cuts during the past session, but this time around they must
    make vertical cuts which may mean the complete elimination of a number of
    programs. In education, one has to question the necessity of providing
    after-school care when there are so many private providers of such care.

    And, yes, that may mean some families will not able to afford such care
    but there are many families who roll up to the school campus to pick up
    their child after an A+ session in Benz’s and Beamers. Those families who
    cannot afford such care can be subsidized. But as it is now, all those
    who participate in the A+ program take it for granted. So why should all
    taxpayers be asked to underwrite after school care when instructional
    days go wanting?

    ”HAWAII REPORTER: Do you believe the $50M figure is accurate? (If the DOE costs $5M/day
    to operate, that works out to about $29/day per student. ( Meaning the
    cost of educating each student would be about $5,900.yr. and the cost of
    educating 170,000 students about $877M. But the DOE’s allocation is 3X
    that @ $2.5B. So wouldn’t the actual cost to run the DOE be about $15M
    per day?)”

    That daily figure is probably only for instructional costs and not
    overhead including administrators which are included in the total budget
    cost for the DOE.

    Whether or not the $50 million is accurate, depends on
    what costs are being covered, teacher salaries, or does it also include
    the cost of administrative personnel both at the school level and at the
    DOE headquarters.