Gov. Josh Green’s proposed state budget calls for no increase to the state’s $1.5 billion rainy day fund, but Green does want to dedicate all of the estimated $66 million in annual interest to help Hawaii address the effects of climate change and prevent future wildfires, according to the state Department of Budget and Finance.
Green previously told the Honolulu Star-Advertiser that the state needs $100 million to $200 million annually to adapt to climate change and better protect the islands from another fire like the fatal one in 2023 that decimated Lahaina, which continues to recover.
But the annual estimated $66 million in interest from the rainy day fund would mean that legislators would not have to pay for the full amount, especially in future years when the economy may be down.
The Star-Advertiser incorrectly reported Tuesday that Green wants to increase the amount of the $1.5 billion rainy day fund.
Currently, the fund stands “at a historic level. It’s at a historic high,” said Sabrina Nasir, deputy director of the Department of Budget of Finance. “Taking the interest is more of a novel idea and would give a dedicated source for climate, a dedicated source of funding.”
Green’s request for $66 million of rainy day fund interest represents the entire amount, Nasir said. But the fund would continue to generate interest, she said.
In a statement to the Star-Advertiser on Tuesday, Green said:
“Climate change is one of the most pressing challenges of our time. It’s not just about environmental protection but also about future generations. Our kids deserve action on this now.
“Having a source of funding to support climate resiliency will allow us to work towards building a more sustainable future.”
The $1.5 billion size of the rainy day fund also keeps the state’s interest rates low when it comes to issuing bonds to pay for major capital improvement projects.
Moody’s lists Hawaii with an Aa2 rating; S&P Global has the state at AA+; and Fitch Ratings ranks Hawaii as AA, which Nasir called all “strong ratings. They all have ‘stable outlooks’ for the state of Hawaii.”
Bond sales of $750 million are expected to close this week, Nasir said.
The exact interest that Hawaii has to pay to issue bonds varies depending on when each of them matures, but the overall rate is roughly 4.91%, she said.
Green’s budget calls for $10.472 billion in state general funds in fiscal year 2026 and $10.543 billion in fiscal year 2027 — totaling a 1.5% increase ($149.9 million) the first year and a 2.1% boost ($200 million) in the second.
It accounts for record tax cuts for residents, who will pay less in taxes — resulting in more take-home pay — in January, Green said.
The amount of taxes will continue to decrease over the following seven years, putting even more money in the hands of isle residents.
Green’s budget also accounts for the state’s $800 million share of a proposed $4.037 billion settlement to resolve over 650 lawsuits in the aftermath of the 2023 Maui wildfires, and likely raises for unionized workers.
The Maui settlement has the support of victims and their families and all of the parties, Green said, except for attorneys representing Maui insurance companies that do not want to waive their right to also sue the defendants, including the state, Hawaiian Electric and Kamehameha Schools.
The standoff has gone to the Hawaii Supreme Court, and Green told reporters Monday that he expects a decision in January.
A ruling for the insurance companies would represent a setback for settlement talks and likely lead to litigation and potential higher costs for the state, the possible bankruptcy of Maui County and the potential financial distress of Hawaiian Electric, Green said.
His budget was based on the Council on Revenues’ September economic forecast.
