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Difference between revisions of "Hawaii state budget and finances"

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Revision as of 16:27, 18 January 2014

Hawaii state budget

Flag of Hawaii.png
Budget calendar:  Biennial
Fiscal year:  2013-2015
Financial figures
GF expenses:  $23.7 billion
Other state budgets
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Hawaii operates on a biennial budget cycle. Its fiscal year begins July 1.

According to the Hawaii Department of Budget and Finance, the operating budget for FB2013-2015 includes $11.7 billion for FY2014 and $12 billion for FY2015.[1]

On June 23, 2011, Gov. Neil Abercrombie signed Hawaii's $21.9 billion biennial state budget passed by the state legislature.[2] In April 2012, the legislature passed a supplemental budget for FY2013.[3]

Hawaii has a total state debt of approximately $39,954,412, when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the FY2013 budget gap.[4] The state debt increased over the prior year's total of $36,310,406,000.[5]

Hawaii's total state debt per capita is $29,061.77, the highest per capita state debt of all 50 states.[6]

See also: The Hawaii State Budget on State Budget Solutions

Federal Aid to State Budget

The chart below represents how much of the state’s budget comes from the federal government.[7] The number is the corresponding ranking in relation to the rest of the nation (if #1, the state receives the highest percentage of federal funding in the nation):

State 2008 2009 2010 2011 2012
Hawaii 22.49% (#44) 24.28% (#47) 26.92% (#48) 28.6% (#44) 28.6% (#44)
  • Figures were calculated by dividing each state’s intergovernmental revenue into its general revenue.[8][9]

FY 2014-15 State Budget

Gov. Neil Abercrombie submitted his biennial state budget for FY2014-15 on Dec. 18, 2012. His plan requested a total of $12.4 billion, $6.1 billion for FY2014 and $6.3 billion for FY2015. The administration also requested $1.7 billion for capital improvement projects for fiscal year 2014 and $906 million for FY 2015.[10]

Budget highlights include:[11]

  • $59 million per year for information technology initiatives and improvements;
  • $7.1 million in 2014 and $22.2 million in 2015 for digital curriculum for Common Core State Standards;
  • $9.6 million in 2014 and $35.3 million in 2015 for the Executive Office of Early Learning and early childhood education and health initiatives;
  • $5.6 million in 2014 and $5.9 million in 2015 for the Executive Office on Aging, Aging and Disability Resource Centers, and kupuna care programs;
  • $118.1 million in 2014 and $172.8 million in 2015 for health premium payments and other post-employment benefit pre-funding.

FY 2012-13 State Budget

Budget Director Kalbert Young said that the state estimates a $19 million shortfall by end of FY2013.[12]

The FY2012-13 state budget as originally enacted can be found online, as well as the subsequent supplemental FY2013 budget.[13][14].

Supplemental FY2013 State Budget

The legislature passed a supplemental budget for FY2013 on April 28, 2012. Negotiators approved $428 million in new bond-financed state construction, including $250 million for repair and maintenance projects. The $428 million was more the House and Gov. Neil Abercrombie had wanted but less than the Senate had proposed. The additional money takes the general obligation bond portion of the budget to $825 million in FY2013.[15]

In Dec. 2011, Gov. Abercrombie released his $188 million supplemental budget request for FY 2013 to state lawmakers. The governor's proposed supplemental budget can be found online.[16]. The governor's proposal does not include new taxes, but the governor said he would be open to tax increases by the legislature.[17]

The Senate Ways and Means Committee unanimously passed the supplemental budget on April 2, 2012. It funds the governor's proposals in his own supplemental budget proposal.[18] The Senate passed the supplemental budget bill, House Bill 2012, on April 10, 2012.[19][20]

The Senate wanted to invest $500 million in capital improvement projects at state facilities to stimulate the economy, which was $200 million more than what the governor included in his proposed budget. The House, however, did not want to increase the state's debt. The issue went unresolved on April 27, 2012, the last day of the session for committee hearings.[21]

Biennial State Budget

In a speech to legislators about the state's fiscal health, Gov. Abercrombie said that Hawaii faces an “undeniable storm” of fiscal challenges that could upend the state’s economic foundation. One of the challenges he listed was the state's unfunded liabilities, including an $8 billion unfunded liability in the public-worker retirement fund and a $14 billion liability in the public-worker health care fund. In the same speech, the governor said that his administration had finished cutting $50 million in discretionary cuts for FY2012 and FY2013 through financial management, such as restructuring debt service, thus sparing some agencies harsh cuts.[22]

Gov. Abercrombie signed the $21.9 billion biennial state budget on June 23, 2011. Based on the budget drafted by the state legislature, the governor has to reduce state spending by $50 million in each of the next two years. In a June 16 memo, the governor instructed state department directors to identify low-priority programs for possible elimination and take other cost-cutting measures.[2]

The FY2012-13 budget increased spending to pay higher Medicaid costs[2], but the state planned to cut Medicaid coverage to 10 days a year in April, the fewest of any state, pending federal approval.[23]

The budget also increased spending to cover increasing public worker health care and debt service costs. A summary of the operating and capital budgets can be found online [24]

The budget authorized $11 billion in spending for FY201, with $5.4 billion in the general fund and $10.9 billion for FY2013, with $5.5 billion in the general fund, overall an increase of approximately 7 percent from FY2011.[2]

The spending plan assumed approximately $180 million in labor savings from contract talks between the administration and public-sector labor unions — or about a 5 percent pay cut. In addition to $600 million in spending reductions, the budget relied on about $600 million in separate tax increases, with the an excise tax on contractors, businesses that sublease, airlines and others, predicted to generate around $400 million.[2]

Abercrombie also signed into law a capital improvements project budget that includes $1.8 billion for fiscal year 2012 and $1 billion for fiscal year 2013.[2]

Education spending

For FY2012, Hawaii devoted 25.0% of its total spending to K-12 education, up from 22.3% in FY2010.[25]

Fiscal Year Total Spending[26] Education Spending[27] Percent Education Spending
2009 $14.3 billion $3.4 billion 24.3%
2010 $14.3 billion $3.2 billion 22.3%
2011 $13.8 billion $3.2 billion 23.1%
2012 $13.6 billion $3.4 billion 25.0%

Governor's Proposed Budget

Overall, Gov. Abercrombie proposed a $10.8 billion budget for FY2012, which was a 6.1% increase over the FY2011 budget, and an $11 billion budget for FY2013, up 8.2% from FY2011.[28] The general fund portion of the proposed budget is $5.5 billion in FY2012—a 12.6% increase, and $5.7 billion in FY2013—a 16.4% increase.[28]

The governor promised not to raise the general excise tax.[28] The Senate, however, introduced a measure to increase the general excise tax 1% and it would eliminate several business exemptions as a way to help eliminate the budget deficit over the next two years.[29]

Legislative Budget

State legislators agreed on a final version of the state's $11 billion FY2012-13 budget, which relied on pending tax increases generating $500 million over the next two years to fund the spending plan to balance the state's $1.3 billion projected shortfall. Although legislative leaders said that the budget has $600 million less than that proposed by the governor, overall, the new budget increased state spending from FY2012. That is due to multiple factors, including rising Medicaid enrollment, the end of federal stimulus funds, and increasing public worker health expenses.[30]

The House and Senate voted to pass tax increases on businesses, vehicles and large incomes, raising more than $600 million over the next two years to help address a projected $1.3 billion deficit during that time. They also cut $600 million from Gov. Abercrombie's requested spending, drained the state's savings accounts and reduced government health costs to pay for the state's $11 billion annual budget. [31]

The Legislature avoided approving broad, unpopular proposals to tax pension income or raise the general excise tax, which is paid on most transactions statewide. Instead, the biggest tax hike hit construction subcontractors, subleasors and Hawaiian Airlines. Those businesses will lose their exemption to the state's general excise tax, which is 4.5 percent on Oahu and 4 percent on neighbor islands, generating about $200 million a year for the government. [32]

On March 9, 2011, the state House Finance Committee approved House Bill 200, its $10.98 billion draft of the state budget for FY2012, which is less than the version than Gov. Neil Abercrombie proposed but still a 7.1% more than the FY2011 budget.[33] It also provides for $10.9 billion in spending in FY2013, an increase of 7%. The general-fund portion of the budget, over which lawmakers and the governor have the most control, is $5.4 billion in fiscal year 2012, a 10.2% increase, and $5.6 billion in FY2013, a 14.7% increase. The end of public workers furloughs after FY2011 account for some of the higher costs, which may be less if Gov. Abercrombie and public-sector labor unions agree to labor savings in contract talks.[34]

For the next two fiscal years, legislators have approved $11 billion and $10.9 billion spending plans — an $800 million increase over this fiscal year — to cover higher Medicaid, public-worker health care and debt service costs and to make up for the end of federal stimulus money.

Highlights of the 2012-2013 budget include:[35]

  • Expected to raise about $200 million per year, the legislature removed exemptions to the state's general excise tax currently granted to businesses including subcontractors, subleasors and Hawaiian Airlines.
  • A $55 increase to register a car after July 1, 2011
  • Cap the counties’ share of the Transient Accommodations Tax to $85 million which is expected to increase tax revenue $32 million in fiscal year 2012 and $38 million in 2013.
  • Raising the daily rental surcharge from $3 to $7.50 for cars rented from locations other than the airport (cars rented at the airport already have a $7.50 daily surcharge) and diverting $4.50 of the daily surcharge to the state general fund will bring in over $60 million in new taxes.
  • Eliminating the state income tax deduction and limiting the amount of itemized deductions that can be claimed by high income earners, the state expects to generate nearly $52 million in new tax revenue per year. A high income earner is defined as individuals with an adjusted gross income over $100,000, a head of household with an AGI over $150,000, and joint filers with an AGI more than $200,000.

The Senate draft includes $11 billion in spending in fiscal 2012, and $10.9 billion the following year.[36][37]

Ways and Means Chairman David Ige outlined the primary differences between the two chambers' versions were[37]:

  • The Senate rejected every request to restore funding to make up for furloughs.
  • The Senate identified $30 million worth of state government vacancies (out of $80 million total).
  • The Senate rejected Abercrombie's promise to cover a larger share of public workers' health premiums, which would have cost $54 million in both 2012 and 2013. The draft instead reflects a 50-50 split.
  • The Senate reviewed the governor's requests for "add ons" ($50 million in each year), and only funded about two-thirds of the request in the first year, and one-third in the second year.

Union Contracts

Labor costs account for about 70 percent of Hawaii’s state government spending. The Hawaii Government Employees Association, the state’s largest government employee union, tentatively accepted a salary reduction of 5% and reductions of retirement perks. The agreement is an improvement over the prior two years, when state employees took a 10% salary reduction and two monthly furlough days. Unlike in other states, there are no efforts to curb the collective bargaining rights of unions in Hawaii.[38]

Budget transparency

See also: Evaluation of Hawaii state website

Budget review period

See also: Constitutional provisions regarding reading of bills

Article 3, Section 15 of the Constitution of the State of Hawaii requires a 48-hour review period before any bill, including a budget bill, can be voted on for final passage.[39]

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 Grants Contracts Line Item Expenditures Dept/Agency Budgets Public Employee Salary
State Procurement Office
600px-Red x.png
600px-Red x.png
600px-Red x.png
600px-Red x.png
  • Contracts are searchable.[40]

Multi-Measure Budget Transparency Profile

The Institute of Government and Public Affairs at the University of Illinois has created a multi-measure transparency profile for Hawaii, which measures state transparency as of September 2011 using indicators from a range of organizations.[41] These indicators measure both website transparency and other recognized facets of governmental transparency. In addition, IGPA presents four unique indicators of non-transparency based on the observation that transfers or reassignments between general and special funds can obscure the true fiscal condition of a state.

In addition to the individual state profile, IGPA offers a 50-state comparison and profiles for other states.[42][43]

Budget background

Hawaii has an annual Legislative session and sets a biennial budget in odd years. In practice the budget is 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.[44]

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 [45] $40.2 [45]
2001 $8.8 [45] $41.8 [45]
2002 $9.4 [45] $43.5 [45]
2003 $9.6 [45] $46.4 [45]
2004 $9.9 [45] $50.4 [45]
2005 $10.5 [45] $54.9 [45]
2006 $11.0 [45] $58.7 [45]
2007 $11.5 [45] $61.5 [45]
2008 $12.1 [45] $64.5 [45]
2009 $12.7* [45] $67.7* [45]

Accounting principles

See also: Hawaii government accounting principles

The Hawaii State Auditor is Marion M. Higa.[46] 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 is 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. The audit reports are published online.[47]

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.[48] IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA does 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 does not include significant liabilities for the pension plans and for other post employment benefits, such as health care.[49] Hawaii's CAFRs are published online by the Hawaii Department of Accounting and General Services. Russ K. Saito is the Hawaii State Comptroller.[50]

Credit Rating Fitch Moody's S&P
Hawaii[51] AA Aa2 AA


Hawaii has received $1.3 billion in federal stimulus funding between February 2009 and June 2013.[52]

Public Employees

See also: Hawaii public employee salaries and Hawaii public pensions

Labor costs account for about 70 percent of Hawaii’s state government spending. The Hawaii Government Employees Association, the state’s largest government employee union, tentatively accepted a salary reduction of 5% and reductions of retirement perks. In the prior two years, state employees took a 10% salary reduction and two monthly furlough days. Unlike in other states, there are no efforts to curb the collective bargaining rights of unions in Hawaii.[53]

According to 2011 Census data, the state of Hawaii and local governments in the state employed a total of 89,409 people.[54] Of those employees, 68,698 were full-time employees receiving a net pay of $290,137,922 per month and 20,711 were part-time employees paid $16,896,002 per month.[54] More than 56% of those employees, or 50,938 employees, were in education or higher education.[54]

See also

External links

Additional reading


  1. Department of Budget and Finance, "Budget in Brief," Accessed August 19, 2013
  2. 2.0 2.1 2.2 2.3 2.4 2.5 The Honolulu Star Advertiser "Budget set, now cuts begin" June 24, 2011
  3. The Honolulu Star Advertiser "State legislators end $11.2B budget stalemate" April 28, 2012
  4. State Budget Solutions "State Budget Solutions' third annual State Debt Report shows total state debt over $4 trillion" Aug. 28, 2012
  5. State Budget Solutions “Report reveals aggregate state debt exceeds $4 trillion” Oct. 24, 2011
  6. State Budget Solutions "State debt more than $37,000 per private worker, $13,000 per capita" Oct. 2, 2012
  7. Tax Foundation "Federal Aid to State Budgets," Accessed August 20, 2013
  8. US Census Federal Aid to State and Local Governments
  9. Tax Foundation' "Monday Map: Federal Aid to State Budgets. Accessed October 15, 2013
  10. Businessweek "Hawaii gov submits $12.4 billion budget request" Dec. 18, 2012
  11. "Governor’s Proposed Budget Reverses 5% Pay Cut" Dec. 18, 2012
  12. Hawaii Reporter "Future Budget Woes Worry Hawaii Officials" Jan. 8, 2012
  13. [1]
  14. [2]
  15. The Honolulu Star Advertiser "State legislators end $11.2B budget stalemate" April 28, 2012
  16. 2011 Supplemental Budget
  17. State Budget Solutions "No New Taxes Proposed by Gov. Abercrombie in Budget Proposal, but Governor Could Still Support Legislative Tax Proposals" Dec. 21, 2011
  18. The Honolulu Star Advertiser "Senate Ways and Means OKs state budget bill" April 3, 2012
  19. House Bill 2012
  20. "Senate passes its version of state budget" April 10, 2012
  21. "Lawmakers pushing deadline on budget negotiations" April 27, 2012
  22. The Honolulu Star Advertiser "Governor outlines 'storm' of fiscal challenges" Aug. 17, 2011
  23. "More states limiting Medicaid hospital stays" Oct. 2, 2011
  24. Budget Summaries
  25. State Budget Solutions "Throwing Money At Education Isn't Working" Sept. 12, 2012
  26. "Hawaii Government Spending Chart - Total Spending" Aug. 4, 2012
  27. "Hawaii Government Spending Chart - Education Spending"Aug. 4, 2012
  28. 28.0 28.1 28.2 The Honolulu Star Advertiser "Abercrombie confronts vast deficits" Dec. 21, 2010
  29. "Hawaii weighs big tax hike despite opposition" April 7, 2011
  30. Forbes "Hawaii lawmakers reach deal on state budget" April 29, 2011
  31. [ Business Week, Hawaii lawmakers balance budget with taxes, cuts, May 4, 2011}
  32. [ Business Week, Hawaii lawmakers balance budget with taxes, cuts, May 4, 2011}
  33. House Bill 200
  34. The Honolulu Star Advertiser "House approves $10.9 billion state budget" March 9, 2011
  35. Kilakila, Hawaii legislature passes nearly 600 million in new taxes to help bridge the budget gap, May 4, 2011
  36. draft
  37. 37.0 37.1 Honolulu Civil Beat "Hawaii Lawmakers Will Hammer Out State Budget Over Next Week" April 20, 2011
  38. The Honolulu Star Advertiser "Unions tested even in labor-friendly Hawaii" April 16, 2011
  39. Article 3, Section 15
  40. Contracts Search
  41. Multi-measure transparency profile for Hawaii
  42. 50-state comparison
  43. profiles for other states
  44. National Association of Budget Officers, "Budget Processes in the States," 2008
  45. 45.00 45.01 45.02 45.03 45.04 45.05 45.06 45.07 45.08 45.09 45.10 45.11 45.12 45.13 45.14 45.15 45.16 45.17 45.18 45.19 US Government Spending,"Hawaii State and Local spending," retrieved April 15,2009
  46. The Hawaii State Auditor
  47. Hawaii State Auditor Web site, retrieved October 16, 2009
  48. The Institute for Truth in Accounting
  49. Institute for Truth in Accounting, “The Truth About Balanced Budgets—A Fifty State Study,” Page 35
  50. Department of Accounting and General Services Web site, retrieved October 16, 2009
  51. California State Treasurer, “Comparison of Other States’ General Obligation Bond Ratings”
  52. Recovery, "Stimulus Spending by State"
  53. The Honolulu Star Advertiser "Unions tested even in labor-friendly Hawaii" April 16, 2011
  54. 54.0 54.1 54.2 2011 Hawaii Public Employment U.S. Census Data