Honolulu Weekly

Balancing act / It’s not pretty. It never is. But balancing the state budget this year has been an uglier process than some of even the most seasoned Hawaii politicians can remember. With just six weeks left in the legislative session and little common ground between Gov. Linda Lingle and many state lawmakers, it’s unclear how anything is going to get settled.

The debate over the state spending plan, and what to do about a looming $90 million deficit for this fiscal year—along with another $170 million shortfall expected over the next two years—becomes more complex as it intensifies. What started when the legislative session began in January as a serious fiscal problem has only worsened, with ever-lower growth projections issued by the state Council on Revenues. As with most financial news these days, the council’s latest figures have also been the most pessimistic. The latest projections, released two weeks ago, increase the decline in tax revenue growth compared to last year from 3 percent to 5 percent. The council also slashed rebounding growth estimates for 2010 from 1 percent to .5 percent.

These trends are “consistent with the extraordinary intensity of a contemporaneous deterioration in financial and real economic activity,” the council wrote of its latest projections in a letter to Lingle two weeks ago.

While the governor has repeatedly promised to veto any proposal to raise taxes, a series of tax hikes are among the many measures legislators have suggested to help narrow the growing spending gap. Republicans backing the governor argue that tax hikes—especially those against high-income residents, many of whom are small-business owners—would only further destabilize an already-weak economy, but Democratic lawmakers have openly criticized Lingle for long keeping tax hikes and government staff reductions off the table. The House version of the budget calls for 374 state employees to lose their jobs.

“This budget addresses the critical revenue shortfall by making difficult but necessary cuts to programs and personnel,” said Rep. Marcus Oshiro, chair of the House Finance Committee, in an e-mail. “The solution must be both systemic and sustainable …Given the recent Council projections, it is imperative to consider every available option.”

Meanwhile, state residents are bracing for tax hikes and ready to fight back against them. One national activist group, Tea Party and Revolution, is promoting “tea party” rallies at state capitols across the country—including Honolulu on April 15—in an effort to “express our dissatisfaction with government tax increases,” according to a statement on the group’s website. “It’s time to stand up and voice our disgust at government taking our hard earned money.”

To the state’s credit, there are plenty of proposals floating around that would affect state workers only. One plan calls for the discontinuation of life insurance for state employees, which would translate to an estimated $8.4 million in savings. Another idea is to increase premiums for state employee health plans to the tune of $48 million annually, while some representatives have suggested that lawmakers should donate one day’s pay per month toward minimizing the spending gap and preserving state jobs.

“We’re talking about more than 300 people who we’re possibly laying off,” said Rep. Lynn Finnegan. “And the other answer would be to cut even more jobs than that because of the Council on Revenues’ adjustment. Our idea is, the more that we can share in the painful results of the economy, the better, and the last thing we need is for state workers to lose their jobs. So we’re looking at the union negotiating with the governor so that we can have the attitude of everyone giving a day’s pay a month to save money, and also because we would like to save some of our coworkers’ positions.”

The one thing that everyone seems to agree on is that there isn’t a single solution to the state’s financial problems. Rather, solving the budget crisis will require bi-partisan cooperation in making some difficult decisions and passing a series of measures that might help offset the cuts that are made.

“With the magnitude of the deficit that we’re facing, I don’t think we can accomplish that strictly through cuts, so we’re having to look at revenue enhancement measures,” said Sen. Russell Kokubun. “I think this is the more feasible way for us to address the deficit.”