homepage logo

Sen. Baker: State budget a challenge for lawmakers

By Staff | Mar 24, 2011

HONOLULU — Aloha kakou. Just when we thought the economic news couldn’t get any worse, the cost of a barrel of oil skyrockets, sending gasoline prices over $4 on Maui.

The State Council on Revenues lowers its projections, increasing our budget shortfall. And a tsunami generated by Japan’s worst earthquake on record causes millions in damages to local boat harbors and devastates a reliable hospitality partner.

It’s a challenging time, but if our communities (and nations) can continue to support each other, we’ll all get through this.

Dealing with the budget shortfall

When the Council of Revenues lowered its budget estimate recently, it resulted in the state’s budget shortfall increasing from approximately $790 million to almost a billion dollars. Fortunately, Gov. Neil Abercrombie based his amended budget on actual collections beginning November 2010 rather than the Council on Revenues’ projections from January 2011. Otherwise, the shortfall would have been greater.

It’s important to keep in mind that lower projections are not always an indication that our economy is stalling. In this case, previous accounting maneuvers by Governor Linda Lingle’s administration contributed to a “paper” shortfall.

Due to the potential economic fallout of the Japanese disaster, the budgetary woes for Hawaii could deepen. The governor has asked the Council on Revenues to provide another assessment as the Senate begins its budget deliberations.

Developing a reasonable, balanced budget

The House recently sent over its version of the state budget. It is now up to our Senate Ways and Means Committee to develop its proposal. There have been many suggestions for filling the shortfall — negotiate labor savings, increase revenue (taxes and fees), borrow from special funds and cut spending. However, I suspect it will take a combination of all of these strategies to develop a budget that not only stays within projected revenues but also balances several key needs: create jobs through economic stimulus, repair our health and social service safety net, and fund critical services, including lower and higher education

I personally disagree with the piecemeal approach offered by the House. Those bills target certain groups and businesses to shoulder the burden of bridging the budget deficit. They include increasing vehicle weight and registration fees, increasing liquor taxes, taxing pensions, eliminating certain deductions and eliminating some industry-specific tax exemptions. The net effect would increase our cost of basic goods, food and other necessities.

If it comes down to temporarily increasing taxes to get out of this budget hole, I believe we ought to look for the broadest-based tax instrument we have — one that can be partially (about 40 percent) exported to our visitors and offset with income tax credits and adjustments. I know there are people who consider ANY tax increase a four-letter word. It wouldn’t be my first choice either, but with the millions of cuts already taken, there may be no other viable alternative.

Doing the least harm, the most good

We must seriously explore all budget options and adopt a strategy that does the least harm to our economic recovery and the most good for our long-term economic health.

Funding public works projects is an important way that government can assist economic development. The governor has been looking for previously authorized capital improvement projects as a way to put our residents back to work. There are several that have been released on Maui, including several highway and school projects.

I’m hoping that the Senate draft of the budget will include needed education facilities for the Fifth Senate District. The good news is that the Kihei High School project is still moving forward and won’t need additional funding at this time.

The Senate is now looking at the bills passed over by the House. Some of them are companions to bills already moved forward, but others offer new approaches. I’m working with my House colleagues to keep alive a bill that would allow the Department of Commerce and Consumer Protection to negotiate with PEG access community TV stations like Akaku rather than put those services out to public procurement.

We also sent over a very innovative bill to establish a new business model called a “sustainable business corporation.” The B-Corp bill will allow businesses to include community benefits or contributions to sustainable communities as part of their core mission — not just turning a profit. It creates a triple bottom line that could hopefully inspire and motivate a new type of entrepreneur or investor!

As always, I enjoy hearing from you on any or all of these matters. Please e-mail me at senbaker@capitol.hawaii.gov or call my office toll-free at 984-2400, extension 66070#. To check on the status of a bill, go to www.capitol.hawaii.gov. A hui hou.