Hawaii state budget (2010-2011)

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Find the state’s FY2011 Comprehensive Annual Financial Report (CAFR) compiled by the state government online.[1]

In May 2011, Moody's Investors Service cut the state's bond rating from Aa1 to Aa2, citing "strained financial operations following the recession-driven fall-off over the last several years" as the reason. At the time the projections for FY 2011 revenue was 1.6 percent lower than FY2010. Downgrades typically lead to slightly higher borrowing costs states.[2]

Then-governor Linda Lingle signed the $11.9 billion FY2011 budget into law on June 28, 2010.[3] Gov. Lingle proposed in December 2008 a biennium operating budget for fiscal years 2010 and 2011 totaling $22.42 billion, $11.1 billion in FY 10 and $11.3 billion in FY 11.[4] After contentious negotiation in the Hawaii State Legislature, the balanced FY2011 budget included $1.1 billion in cuts by the governor to generate the money needed to address the $1.2 billion shortfall.

Hawaii received approximately $130 million from the federal government under HR 1596, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010.[5][6]

Going into the fiscal year Hawaii had a total state debt of $26,111,383,024 when calculated by adding the total of outstanding debt, pension and OPEB UAAL’s, unemployment trust funds and the 2010 budget gap as of July 2010.[7]

2011 State spending & deficit in billions[8]
Total spending Pension Healthcare Education Welfare Protection Transport Debt
$12.5 $0.8 $2.5 $4 $1.4 $0.7 $1.1 $9
2011 Local spending & deficit in billions[8]
Total spending Pension Healthcare Education Welfare Protection Transport Debt
$3.4 $0 $0 $0 $0.2 $0.7 $0.5 $6.7

FY 2011 State Budget

Hawaii faced a budget deficit of approximately $200 million for the fiscal year and about $1.3 billion over the two-year budget cycle. On March 29, 2011, the state Council on Revenues projected a 1.6% decline in revenues, down from the 0.5% growth it had previously predicted weeks earlier. The council observed an unusual drop in February tax collections.[9]

At the start of the 2011 legislative session, Hawaii faced a projected $1.2 billion budget deficit through June 2011, but eliminated that shortfall through a budget that included tax increases, cuts, and savings from the previous year's layoffs of more than 800 state employees.[3][10] The budget appropriated more than $10.2 billion for executive branch operations and almost $1.7 billion for executive branch capital improvement projects.[3]

The state legislature passed HB2200, the state's $11.9 billion budget, on April 27, 2010, and sent it to Gov Lingle.[3][11][12] The House passed the budget unanimously and there was only one no vote in the Senate.[13][14]

Federal funds

Congress approved state aid for education and Medicaid in August 2010 and Lillian Koller, director of the state Department of Human Services, said that the state was likely to get between $30 million and $40 million in Medicaid funding. The state was also anticipating $39 million for education.[15]

"This federal bailout, like those that preceded it, was intended to be a one-time shot in the arm that must be paid for in the future," Gov. Lingle said in a statement. "It merely defers the day of reckoning that would require a reprioritization of state services and a reduction of spending."[15]


Cost Cutting

  • The final budget cut 800 state jobs.[11]
  • State lawmakers cut an additional $7.3 million from the operating budget of the University of Hawaii.[16]

Sources of Additional Funds

  • To reach a balanced budget, the state canceled tax credits given to high-technology investors under Act 221, which was aimed at saving the state approximately $13 million.[12][11]
  • The House and Senate also passed HB 2542 which provided for siphoning of $46 million from special funds to the general fun to help balance the state budget.[12][17]
  • The legislature passed HB 1907, which capped itemized deductions claimed on state income tax returns until Jan. 1, 2016, for higher income brackets, which was intended to save the state $93 million.[12][11][18]
  • The state budget also repealed deductions for political contributions.[12]
  • The legislature raised the cigarette tax by $0.20 cents per pack.[11]
  • Car rental fees increased from $1 per day to $4.50 a day[10]
  • $1-a-barrel increase for imported oil was expected to bring in another $13.2 million.[19]

Gov. Lingle vetoed a bill that would have increased the barrel tax on petroleum products from 5 cents to $1.05, which would generate $22 million a year that lawmakers wanted to help with the deficit.[12]

How the budget was balanced

The state faced a $1.2 billion two-year shortfall. The House Budget Committee released this list of the budget cuts. Furloughs of state employees lessened the shortfall by $366.7 million and were reflected in the general fund cuts.

Category Money Saved
General Fund cuts $794.4 million
Tax Refund Delay $275 million
Credit adjustments, loopholes, penalties $185 million
Non-general fund changes $77.8 million
Cash CIP lapses $62.5 million
Tax revenue increases $58.5 million
Fee revenue increase $9.5 million

The budget included a bond measure providing for the issuance of about $326 million in state general obligation bonds to finance state capital improvement projects.[3]

Prior Fiscal Year Budgets

2009
The Hawaii State Legislature passed during its 2009 Session a biennium operating budget for fiscal years 2010 and 2011 totaling $24.8 billion, $13.37 billion for FY 10 and $11.4 billion for FY 11.[20] Gov. Lingle objected to raising taxes to close the revenue gap and used her veto powers on $566 million of increased taxes , which the Legislature quickly overrode.[21]

The annual financial report for 2009 was reported 14 months late.[22]

2010
Hawaii’s FY 2010 budget was in deficit before the fiscal year began on July 1, 2009. From March 2008 through August 27, 2009, the Council on Revenues, which forecasts the State’s tax revenues, projected that Hawaii would have nearly $3 billion less revenue than anticipated through June 30, 2011. Gov. Lingle stated in late September 2009, “Through various prudent spending restrictions, the Administration had reduced spending by $2 billion. However, we still face a $496 million shortfall in the next nine months and an additional $529 million from July 1, 2010 to June 30, 2011. That’s a total of $1.024 billion less money we would have in the next 21 months. Because of the huge revenue losses between fiscal years 2009 and 2011, it would take until fiscal year 2012 for our revenues to return to pre-recession levels.”[23]

Governor Lingle announced August 4, 2009 that the State would immediately begin delivering written layoff notices to the approximately 1,100 state employees who were previously notified their positions could be eliminated. In addition, the Governor announced the furlough of approximately 900 "exempt excluded" nonunion state employees for three days per month effective September 1, 2009, employees not covered by a court order barring the Governor from unilaterally implementing furloughs for union employees.[24]

A standoff between Governor Lingle and the public employees unions ensued. The largest public employee union in Hawaii, the Hawaii Government Employees Association, with about 30,000 members would vote in October 2009 on whether to accept a new contract with 42 furlough days over the next two years, which amounts to approximately an 8% cut.[25]

Budget background

See also:Hawaii state budget

Hawaii has an annual Legislative session and sets a biennial budget in odd years. In practice the budget was submitted each year. State agencies submit their budget to the Governor in September each year. The Governor submits the budget in December, 30 days before the Legislature convenes on the 3rd Wednesday in January, which meets for 60 working days. The state’s fiscal year runs from July 1 to June 30.[26]

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[27] $40.2[27]
2001 $8.8[27] $41.8[27]
2002 $9.4[27] $43.5[27]
2003 $9.6[27] $46.4[27]
2004 $9.9[27] $50.4[27]
2005 $10.5[27] $54.9[27]
2006 $11.0[27] $58.7[27]
2007 $11.5[27] $61.5[27]
2008 $12.1[27] $64.5[27]
2009 $12.7*[27] $67.7*[27]
  • NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year.

See Hawaii state budget (2008-2009) for more information.

Accounting principles

See also:Hawaii government accounting principles

The Hawaii State Auditor was Marion M. Higa. In May 2008, the Legislature reappointed Ms. Higa to her third 8 year term to start on July 1, 2008. The State Constitution in Article VII, Section 10, establishes the Office of the Auditor. The Constitution specifies that the Auditor be appointed for an eight-year term by a majority vote of each house in joint session. The Auditor may be removed only for cause by a two-thirds vote of the members in joint session. It was the constitutional duty of the Auditor to conduct post-audits of the transactions, accounts, programs and performance of all departments, offices, and agencies of the State and its political subdivisions. Audit reports were published online.[28][29]

The Institute for Truth in Accounting (IFTA) rates Hawaii “Tardy” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA did not consider Hawaii’s CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis did not include significant liabilities for the pension plans and for other post employment benefits, such as health care.[30] Hawaii's CAFRs were published online by the Hawaii Department of Accounting and General Services.[31][32]

Credit Rating Fitch Moody's S&P
Hawaii[33] AA Aa2 AA

Economic Stimulus Project

Hawaii would receive approximately $130 million from the federal government under H.R. 1586, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010.[34]

Hawaii already received $2 billion from the $787 billion dollar American Recovery and Reinvestment Act, or the "economic stimulus."[35]
For more information on how the federal stimulus funds were being used in the state of Hawaii, visit the state recovery website.

Budget transparency

See also: Evaluation of Hawaii state website

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 sight for state expenditures over $25,000.[36] However, the site failed to launch by the established deadline of January, 2009, and it had since become apparent that there were no plans to launch a transparency database.[37] New transparency legislation, Hawaii Senate Bill 659 (2009), was enrolled to the Governor on May 8, 2009.[38]

Government tools

The following table was 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 had 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 U.S. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[39] It was estimated that Hawaii would receive at least $650 million in federal funding.[40]

Two of the projects included $295,743 to conduct field mapping of late-glacial volcanic rocks in West Iceland for geochemical analysis. Hawaii's university also received $210,000 to study learning and cognition in honeybees.[41]

  • Hawaii established an economic recovery website.[42]

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).[43]

Hawaii Senate Bill 659 was introduced by Senator Les Ihara.[44]

See also

External links

Additional reading

References

  1. FY2011 CAFR
  2. The Honolulu Star Advertiser "Hawaii's bond rating takes a hit from Moody's" May 18, 2011
  3. 3.0 3.1 3.2 3.3 3.4 Businessweek "Hawaii governor signs state budget for 2010-11" June 29, 2010
  4. "Governor Unveils Two-Year Budget, Six-Year Plan," December 22, 2008
  5. Federal Fund Information for States “ARRA FMAP Extension & Education Jobs Fund Totals” Aug. 11, 2010
  6. H.R. 1586
  7. State Budget Solutions “States Hide Trillions in Debt” July 22, 2010
  8. 8.0 8.1 USA Spending, State Guesstimated* Government Spending
  9. The Honolulu Star Advertiser "State budget deficit to grow to $1.3 billion, panel predicts" March 29, 2011
  10. 10.0 10.1 Business Week "Hawaii Legislature passes $10.1 billion budget, tax hikes" April 28, 2010
  11. 11.0 11.1 11.2 11.3 11.4 The Honolulu Star Bulletin "Job cuts and new taxes balance state's budget" April 28, 2010
  12. 12.0 12.1 12.2 12.3 12.4 12.5 Honolulu Advertiser "Hawaii Senate votes to cut off Act 221 high-tech tax credits" April 28, 2010
  13. Pacific Business News "Hawaii state budget had tax, fee hikes" April 27, 2010
  14. House Bill 2200
  15. 15.0 15.1 Businessweek "Hawaii gov slams Medicaid, school money she sought" Aug. 11, 2010
  16. khon.com "Lawmakers Again Cut University Of Hawaii Budget" April 27, 2010
  17. House Bill 2542
  18. HB1907
  19. "Lingle's cuts kept in budget" May 4, 2010
  20. Hawaii Legislative Reference Bureau, "Supplemental Information Relating to Bill Passed by the Hawaii State Legislature Regular Session of 2009," June 4, 2009
  21. Hawaii Free Press, "Governor to Veto $566 million in new taxes," May 7, 2009
  22. Watchdog, Hawaii due to release report 14 months late, Aug. 23, 2010
  23. Hawaii Reporter, "Dealing with the State's Unprecedented Budget Shortfall," September 28, 2009
  24. Committees on Economic Development and Technology and Economic Revitalization, Business, and Military Affairs, “Informational Briefing,” October 15, 2009
  25. Honolulu Star-Bulletin, "Furlough agreement would not avert layoffs, governor warns," October 16, 2009
  26. National Association of Budget Officers, "Budget Processes in the States," 2008
  27. 27.00 27.01 27.02 27.03 27.04 27.05 27.06 27.07 27.08 27.09 27.10 27.11 27.12 27.13 27.14 27.15 27.16 27.17 27.18 27.19 US Government Spending,"Hawaii State and Local spending," accessed April 15,2009
  28. Hawaii State Auditor Web site, accessed October 16, 2009
  29. audit reports
  30. Institute for Truth in Accounting, “The Truth About Balanced Budgets—A Fifty State Study,” Page 35
  31. Department of Accounting and General Services Web site, accessed October 16, 2009
  32. CAFRs
  33. California State Treasurer, “Comparison of Other States’ General Obligation Bond Ratings”
  34. Federal Fund Information for States “ARRA FMAP Extension & Education Jobs Fund Totals” Aug. 11, 2010
  35. KITV,"Stimulus Plan's Include $2B For Hawaii," January 28,2009
  36. govtech.com, "Taxpayer Group Applauds Hawaii's Passage of Spending Transparency Bill," July 16, 2007
  37. Honolulu Advertiser, "Web site to track spending shelved," January 28, 2009
  38. Measure history, Senate Bill 659 (2009)
  39. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  40. Wall Street Journal, "Stimulus Spending by State," April 9,2009
  41. Watchdog, Icelandic Rock Studies to Learning in Honeybees: Hawaii Stimulus Projects in Question, Aug. 5, 2010
  42. Economic Recovery Hawaii
  43. National Taxpayers Union, "Taxpayers Support Creating Grant and Contract Database in Hawaii," April 13, 2007
  44. Measure history, SB 659 (2009)