LIHU‘E — Sen. Ron Kouchi says he is looking for guidance during the next two weeks in making difficult decisions on how to balance the current and future state budgets, citing the impact of the Japanese tsunami and the economic downturn.
The surgery on the budget that has been going on over the past three years is over, said Kouchi, the sole senator representing Kaua‘i and Ni‘ihau in the Legislature. It is time for amputations.
“I’ve been receiving a lot of emails saying how dare you consider raising our taxes when you haven’t cut the size of government,” Kouchi said at a Lihu‘e Business Association meeting Thursday. “I don’t think there is a good awareness about just how much cutting has occurred.”
He said it is time to have a “real frank discussion about what services you would like the State of Hawai‘i to continue to provide and what would you be willing to pay for those services to continue to be offered.”
Since the tsunami, the Council on Revenues dropped the projected growth rate for the state from 3 percent to 0.5 percent for the current fiscal year, leaving the state $100 million short of meetings its obligations through June 30.
“What that means is we need to find money within the existing budget that was approved. You can’t raise taxes or do fee increases anymore, so you have to look within the budget for internal savings,” Kouchi said, adding that government services comprise a significant portion of the budget.
The Council on Revenues has yet to reveal the full fiscal impact of the tsunami, but he said he is not optimistic and it is better to overestimate than underestimate in terms of the budget.
The state is facing a shortfall of $1.3 billion for the next two fiscal years. Kouchi noted that Gov. Neil Abercrombie is receiving a lot of pushback on his proposals.
The state has “already delivered a contraction of services,” he said, including funding for libraries, assistance for needy families and human service programs, to name a few. He added that staffing levels at some agencies like the Department of Business and Economic Development have also declined.
Keeping kids home from school is not one of the budgetary fixes proposed, Kouchi said, but they are looking at increasing class size to more than 30 students.
When asked whether the state plans to take away the transient accommodations taxes from counties, he said the governor is currently not acting on anything because he has submitted his recommendation based on a 2 percent growth rate.
“The bills that both the House and Senate have looked at have capped the room tax money for the counties,” he said. “The current models continue with the room tax money still at the current level … and we’re hopeful that we’re going to be able to keep it at that level.”
Going forward, Kouchi said the state is facing two great unknowns.
First, “we have no involvement on a day-to-day basis on collective bargaining aspects, and what the governor negotiates with the unions we can either accept or reject, but clearly the contract negotiations look to be a critical piece of what our total operational cost is right now and in the future.”
Payroll makes up 60 percent of the general fund for the state. One of the governor’s first acts in office was to raise the state split in the healthcare plan from 50-50 to 60-40, which is estimated to add another $108 million to the budget over the next two years, according to civilbeat.com. Nationally, the average state-benefit amount paid to government employees is 34.5 percent.
Second, the “Council of Revenues is being asked to come back next week to try and affix or forecast what the net effect of the tsunami is on our economy.”
Kouchi may be reached by calling 586-6030 or by emailing senkouchi@capitol.hawaii.gov.
