J.Kalani English

Shortfall means hard choices

Maui senators prepared to cut, but they push for action on CIPs, too

The Maui News
Thursday, September 18, 2008

By EDWIN TANJI, City Editor

'Not all of the legislators are going to agree on what we decide, but we're going to have to make some hard choices and really prioritize where the money is going.'

— Sen. Shan Tsutsui, vice chairman, Ways and Means Committee

With the state budget director forecasting a billion-dollar shortfall in revenues through 2011, the leaders of the Senate Ways and Means Committee said the 2009 Legislature will need to make tough decisions.

"Not all of the legislators are going to agree on what we decide, but we're going to have to make some hard choices and really prioritize where the money is going," said Sen. Shan Tsutsui, vice chairman of Ways and Means.

"Obviously, it's easy to make those decisions when the economy is doing well. We get our top priorities and some of the things that are nice to have as well. But this time we will have to evaluate all of our priorities and decide what we need."

At the same time, he and Ways and Means Chairwoman Roz Baker said the administration should be moving on capital improvements projects that will help to stimulate the state economy.

Both were responding to statements by Gov. Linda Lingle and a monthly report from the state Department of Taxation showing a severe downturn in tax collections in the first two months of the 2009 fiscal year.

Tsutsui, the 4th District Democrat representing Central Maui, said legislators already are considering options for cutting back and said Maui County is in a good position to protect its interests with key members in leadership positions in the Senate and House. That makes the 2008 elections significant in terms of having elected officials who can work together to resolve differences, he said.

The Tax Department reported tax collections of $348.17 million in August and $717.6 million since the start of the 2009 fiscal year on July 1. The two-month total is down 7.9 percent from the same period in 2007.

Tsutsui said legislators met with Budget Director Georgina Kawamura last week to discuss the revenue shortfalls and the administration's proposals for reducing spending. He said the administration is predicting a $1 billion reduction in revenues over the next three years - roughly 6 percent of the state's annual $5.3 billion budget.

The shortfall results from a combination of factors, including downturns in revenues from general excise taxes, corporate and personal income taxes, and hotel room taxes, as well as lower fuel tax revenues for the Highway Fund.

According to the state's preliminary August tax revenues report, general excise tax income is down 12.5 percent from $479.4 million in July-August 2007 to $419.7 million in 2008. The transient accommodation tax is down 16.9 percent from $43.85 million to $36.45 million. Corporate income taxes are down 77.4 percent from $6.4 million to $1.5 million.

There was one bright spot. Personal income tax payments - taxes withheld by employers - were up 1.9 percent from $225 million to $229.4 million. The report issued by Tax Director Kurt Kawafuchi said it is an indication that job retention remains steady if not slightly ahead of the same time in 2007.

But Lingle last week warned public employee unions that the state cannot afford pay increases in current contract talks. The alternative is to lay off workers, she said.

If the 7.9 percent reduction in overall tax revenues persists through the year, it would represent a $367 million loss of income over the fiscal year. Economists previously forecast the state would face a $162 million deficit based on projections of the economic downturn.

Lingle anticipated the downturn, advising her departments on Aug. 26 that tax revenues in fiscal 2008 had grown only 1.2 percent over the previous year, as opposed to the projected 3.3 percent growth on which the current state budget is based.

She ordered a freeze on filling vacant positions, set a 4 percent restriction on all spending, banned new programs and discouraged travel and purchases of new equipment.

Tsutsui said the administration's plan for cutting spending "is a good effort, but they really didn't come close to meeting the budget shortfall."

He said he considers economic development tax credits to be expendable. Aimed at encouraging investment in technology industries at a cost to the tax base, there may have been some benefit to the overall economy, but not to individual residents, he said.

On the spending side, Tsutsui said there will be hard choices on cuts. But he said the state should also be looking at investing in the state economy through capital improvements projects.

"That's one of the things that would make perfect sense. We're just not moving on many projects. For a number of years, there have been projects funded for schools, harbors and including the University of Hawaii," he said. "We should be using the capital improvements funds for those projects because they are things we need to do."

The concern is whether the administration is moving to award projects for both repair and maintenance as well as for expansion of public facilities, he said.

"Talk to anybody in the building and construction trades, and they say they don't see the work moving forward," he said.

While the construction industry previously was booming, it is facing a slowdown now, and an infusion of state projects will help to keep workers employed while providing needed public facilities, he said.

"Some will argue that we don't want to increase the debt of the state. But these are projects not only for now but for the generations to come," he said. "We're not talking about a 20,000-seat War Memorial Stadium, but rather with dealing with real needs, the leaky roof in a classroom and the highway expansion that has been delayed for years. Those are the ones the state should be moving on."

As Ways and Means vice chairman, Tsutsui oversees capital improvements budgeting, with Maui County in a unique position of having all three of its senators on the 12-member committee that authorizes state spending. Maui Sen. J. Kalani English is a Ways and Means member and is also chairman of the Committee on Transportation and International Affairs.

In the House, Rep. Bob Nakasone oversees the House CIP program, while Rep. Joe Souki chairs the House Transportation Committee. While they don't always agree, Tsutsui said, the Maui members in leadership positions underscore the importance of experience in the legislative process.

Baker, whose 5th District includes West Maui and South Maui, agreed with Tsutsui that the state must begin investing more in the economy.

"One of the things that concerns me is that there are things that the governor could be doing that would help keep jobs available. We could really be looking at all of the capital improvements projects that are ready and available to go," Baker said.

"We gave the governor some emergency powers so she can move on those."

There are areas in which Baker said she fears that public needs will not be met. She cited holdups in assistance for the community clinics that provide basic health care services to low-income and uninsured residents.

"How are we going to make sure our safety net for the weakest in the community doesn't end up in tatters?" Baker asked. "There are going to be hard decisions that we will have to make, but before we start cutting staff, can we look at how can we improve the government process?"

While the state could speed its efforts on capital improvements, Baker said it may need to step back on some other areas, such as a move on enforcement of permitting requirements on commercial weddings on public beaches.

"Right now the DLNR (Department of Land and Natural Resources) is cracking down on the wedding industry that's an important segment of our visitor industry," Baker noted. "Every wedding planner we have heard from said they don't mind the permits, but just work with them."

She acknowledged the Legislature had instructed the department it needed to enforce its own rules, "but we said enforce fairly and evenhandedly and work with the industry."

While commercial weddings do intrude on public facilities, she said, "it makes a very small footprint on our resources.

"What we're hearing is the word is out on the Mainland that Maui doesn't want to have your wedding there. That is not helpful," she said. "To me, Maui weddings have always been an important segment of the industry. We can't say we want you to come, but you can't have your wedding on the beach."

Edwin Tanji can be reached at citydesk@mauinews.com.

Original article URL: http://www.mauinews.com/page/content.detail/id/508589.html

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