Hawaii state budget (2008-2009)

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State Information


Hawaii faced a $2 billion budget gap. Gov. Linda Lingle said she wanted to avoid tax increases. Instead, the governor called for cutting state worker benefits to plug the gap in the state budget.[1] Some lawmakers had proposed increasing the state's tourist tax to increase revenue; however, Gov. Lingle promised to veto any legislation that increased transient accommodation or personal income taxes.[2] The governor emphasized that the budget would have to be balanced through cutbacks instead, some of which included possibly reducing state employee wages and benefits by $278 million.[3][4]

Impact of budget woes

See also: State budget crisis, 2009-2010
  • Hawaii's unemployment was the highest that it had been in 30 years.[5] In February 2009 the rate was reported at 6.5 percent. The number of job seekers more than doubled from 2008 and the number of available jobs shrank by 3.4 percent. Job losses, in February, were experienced in construction, -900 jobs; leisure and hospitality, -600 jobs; financial services, -300 jobs; and trade, transportation and utilities, -100 jobs.[6]
  • In light of a declining revenues and a national recession, Hawaii officials announced that the state would have to drop its universal child health care program. As of November 1, 2008 there were approximately 2,000 children enrolled. The program provided coverage from 18 months to 18 years old and was estimated to have cost $25.50 per child per month.[7]
  • In April 2009 officials announced that due to declining revenue approximately 21 layoffs of political appointees would be necessary; however, the number was far less than the 374 state government jobs previously anticipated.[1]
  • Tax increases under consideration in order to reduce the state's budget deficit included: residents earning more than $150,000 would pay higher state income taxes; cigarette smokers would pay 40 cents more per pack.[1]
  • Due to declining revenue state lawmakers were pushing for a large increase in the tax visitors pay on hotel rooms and wanted to divert tourist revenue from the counties to the state. Additionally, the proposal would permit counties to charge a new 1 percent retail sales tax in return. The accommodations tax was estimated to increase from 7.25 percent to as high as 12.25 percent.[2]

Budget background

See also: Hawaii state budget

Hawaii operates on a biennium, covering two fiscal years at a time. A fiscal year begins on July 1 and ends on June 30 of the following year; however, the biennium begins July 1 of odd-numbered years. According to the state Constitution, the governor is required to submit to the legislature a budget that includes proposed expenditures and anticipated revenue for the upcoming biennium.[8] Both the Senate and the House of Representatives are required to make any necessary changes or adjustments to the budget until the bill is passed in both houses. Then the document is passed to the governor before it is enacted into law. The governor is required to submit a balanced budget that does not include a carryover deficit.[9]

Budget figures

The following table provides a history of Hawaii's expenditures and gross domestic product (GDP).

Fiscal year Expenditures (billions) GDP (billions)
2000 $8.2[10] $40.2[10]
2001 $8.8[10] $41.8[10]
2002 $9.4[10] $43.5[10]
2003 $9.6[10] $46.4[10]
2004 $9.9[10] $50.4[10]
2005 $10.5[10] $54.9[10]
2006 $11.0[10] $58.7[10]
2007 $11.5[10] $61.5[10]
2008 $12.1[10] $64.5[10]
2009 $12.7*[10] $67.7*[10]
  • NOTE: The figures for FY 2009 had not been finalized at the time this data was compiled.

Ideas about why the crisis occurred

  • Tourism was a large portion of the state's tax revenue. However, a report from the state business and tourism department revealed that visitor arrivals for February 2009 declined 12.7 percent compared to the same month in 2008 and visitor spending fell 15.9 percent, or by $161 million, to $852.5 million. February 2009 marked one of the worst months for tourism in 18 years.[11]
  • In April 2009 officials reported that state revenues were off 6.3 percent through the first nine months of fiscal year 2009, a sharper decline than the anticipated 5 percent.[12]

Proposed actions

Governor Linda Lingle

In the governor's latest spending proposal, Lingle suggests putting $90 million in stimulus dollars slated for education towards the state's FY 2009 budget shortfall. An additional $22 million in stimulus funds would be used towards the budget gap for FY 2010. According to Gov. Lingle the state Department of Education had continuously experienced budget increases and insisted that her plan would make the agency "whole" by restoring money that otherwise would have to be cut because of the budget shortfall.[13] For state workers, Lingle estimated that her budget plan would trim labor costs by $278 million for the next two fiscal years.[14] Some lawmakers had suggested increasing tourist taxes; however, the governor stated that she would veto any such increases should they cross her desk. “The transient accommodations tax, the general excise tax or the income tax -- all three would hurt our recovery,” Lingle said. “They would drive unemployment up, and they would put a bigger burden on families and businesses."[3]

Republicans

Despite a looming budget deficit and the state's need for new revenue sources considering the decline of the tourism industry, Republican lawmakers said that they were against tax increases. State House Minority Leader Lynn Finnegan and Rep. Kymberly Pine said that the Republican plan was focused on initiatives that protected businesses, created jobs, and eliminated or lowered taxes. "We agree with the governor that we should not be raising taxes and we should be trying to not lay off employees," Finnegan said. "We need to make sure people stay employed and we don't have more taxes that make it hard for them to stay afloat."[12]

Democrats

In an attempt to reduce tax increases and layoffs Democratic lawmakers were pushing legislation that would increase tourist taxes. "It wouldn't impact our residents. It would be those who would come here as visitors," said Senate President Colleen Hanabusa. "The bulk of the population needs as much protection as we can afford." A 1 percent increase in the tourist tax was estimated to generate $30 million in annual government revenues.[2] Gov. Lingle stated that she would veto any tax increases that might cross her desk. "This is way too early to draw these lines in the sand," Rep. Marcus Oshiro said. "I don't think she's dealing with reality. Her budget is based upon the assumption that she can work out something with labor, find additional savings in the budget, not lay off anyone, and not raise any fees or taxes."[15]

Economic stimulus project

Hawaii was expected to receive $2 billion from the $787 billion dollar economic stimulus.[16] All told, the federal stimulus plan would create or save 15,000 jobs in Hawaii, based on White House estimates.[17]

According to preliminary reports, Hawaii was expected to receive:

  • $125.7 million for state and county highway improvement projects[18]
  • $76.5 million for improvements to Kahului Airport and Honolulu International Airport[18]
  • $43.8 million for county bus transit systems improvements[18]

Budget transparency

Legislation

House Bill 122 was enacted on July 11, 2007 by the legislature without the signature of the Governor. This bill mandated creation of a searchable grant and contract website for state expenditures over $25,000.[19] However, the site failed to launch by the established deadline of January 2009.[20] New transparency legislation, Hawaii Senate Bill 659 (2009), was sent to the governor on May 8, 2009.[21]

Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases
State database Searchability Revenue source Expenditures Contracts Employee salary
None n/a n/a n/a n/a n/a

Limitations and suggestions

HB 122 limits disclosure to recipients of $25,000 or more. The federal-level legislation set the same limit, so surely a single state such as Hawaii should have a lower threshold. The legislature should act to reduce or remove this barrier.

Economic stimulus transparency

  • The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[22]
  • It was estimated that Hawaii would receive at least $650 million in federal funding.[23]

Support for creation of a database

The National Taxpayers Union, Citizens Against Government Waste, and the Grassroot Institute of Hawaii supported transparency legislation (House Bill 122 and Senate Bill 1689).[24]

Hawaii Senate Bill 659 was introduced by Senator Les Ihara.[25]

Public employee salary information

See also: Hawaii state government salary

See also

External links

Additional reading

References

  1. 1.0 1.1 1.2 Associated Press, "Hawaii proposed budget calls for minimal layoffs," April 8,2009
  2. 2.0 2.1 2.2 Associated Press, "Hawaii lawmakers consider more tourist taxes," April 15,2009 (dead link)
  3. 3.0 3.1 KHON2, "Governor Would Veto Taxes; Furloughs On The Table Again," April 8,2009 (dead link)
  4. Associated Press, "Lingle pushes budget, opposition to higher taxes," April 12,2009
  5. KHON2, "Unemployment Rate Hits 30-Year High," March 27,2009 (dead link)
  6. Honolulu Star Bulletin, "Unemployment hits 12-year high," March 28,2009
  7. Associated Press, "Hawaii ending universal child health care," October 17,2008
  8. The Hawaii State Constitution, "Budget process," accessed April 15,2009
  9. INPUT, "State Budget Process," accessed April 15,2009
  10. 10.00 10.01 10.02 10.03 10.04 10.05 10.06 10.07 10.08 10.09 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 US Government Spending, "Hawaii State and Local spending," accessed April 15,2009
  11. Chicago Tribune, "Hawaii's business battered," April 13,2009
  12. 12.0 12.1 Honolulu Advertiser, "Hawaii Legislature plans tax hikes to ease budget deficit," April 15,2009
  13. Associated Press, "Hawaii gov plans to use school money for budget," March 26,2009
  14. Honolulu Star Bulletin, "Lingle wants to cut state workers' pay," March 26,2009
  15. Honolulu Advertiser, "Lingle vows veto on taxes," April 9,2009
  16. KITV, "Stimulus Plan's Include $2B For Hawaii," January 28,2009 (dead link)
  17. American Recovery and Reinvestment Act, "Impact," accessed April 15,2009
  18. 18.0 18.1 18.2 State of Hawaii, "Hawai'i' to receive $246 million in federal stimulus funds for highway, airport and bus transit improvements," March 16,2009
  19. govtech.com, "Taxpayer Group Applauds Hawaii's Passage of Spending Transparency Bill," July 16, 2007
  20. Honolulu Advertiser, "Web site to track spending shelved," January 28, 2009
  21. Measure history, Senate Bill 659 (2009)
  22. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  23. Wall Street Journal, "Stimulus Spending by State," April 9,2009
  24. National Taxpayers Union, "Taxpayers Support Creating Grant and Contract Database in Hawaii," April 13, 2007
  25. Measure history, SB 659 (2009)