Legislators prepare for 2009 term, 'scary time'

All options on the table with shortfall in funding

The Maui News
January 18, 2009

By ILIMA LOOMIS, Staff Writer

Still reeling from the last round of state budget cuts? Brace yourself for more.

Plans to cut spending, increase fees, chase down unpaid taxes and maybe even dig through sofas for loose change are already high on to-do lists of lawmakers gathering for the start of the legislative session.

With the Council on Revenues now projecting a $1.8 billion shortfall through 2011, the biggest issue on lawmakers' minds is expected to be the budget crunch.

"It's a scary time for all of us," said Sen. J. Kalani English, D-Upcountry, East Maui, Molokai, Lanai. "There's no doubt at all there's going to be huge cuts, and in many instances, it's going to be whole programs."

The cutbacks could also mean layoffs for state workers, he warned.

"It's really a last resort," he said. "The shortfall is so huge that the likelihood of layoffs is very real. Nobody wants to talk about it, but it's part of the equation."

Earlier this month the Council on Revenues told officials to expect a 3 percent decline in revenues for the fiscal year ending June 30, down from its earlier forecast of a half-percent decline. The change means Gov. Linda Lingle must cut an additional $125 million this year.

Legislators also expect a $350 million shortfall for the 2010 fiscal year. And House Finance Committee Chairman Rep. Marcus Oshiro, D-Wahiawa, said he is preparing for even worse news when the Council on Revenues meets again in March with the Legislature at midsession.

The Legislature opens the 2009 session Wednesday. It runs through May 7.

"There's no escaping that reality," Oshiro said. "This is probably the most severe and deep recession that Hawaii has faced, probably since statehood."

Maui Memorial Medical Center could be one area where Maui feels the pinch. Lingle has already told legislators she won't seek supplemental appropriations for the hospital if it needs more funding this year, Oshiro said.

Sen. Roz Baker, D-South Maui and West Maui, said she would introduce legislation to allow Maui Memorial to partner with other hospital systems and "provide some infusions of cash."

Rep. Joe Souki said Maui legislators will fight for Maui Memorial.

"The big thing for Maui is how we're going to get the hospital to stay afloat, because that's the only hospital we have," he said. "As a delegation, we should at a minimum work hard to see they get the money they need to survive."

On the revenue side, Oshiro said, lawmakers would look at "all viable options, including uncollected taxes, fines and fees, as well as other revenue opportunities, such as additional fees, and some tax changes also."

The Legislature will likely look at other revenue sources before tax increases, Baker said.

She was especially loath to expand the state's 4 percent general excise tax, which could impact both consumers and struggling businesses.

"I'm hoping we'll look at other avenues before that gets on the table, but that's not to say someone may not introduce it and we'll have a discussion about it," she said.

Other options could include drawing on some of the $74 million Emergency Budget Reserve Fund, taking interest from the Hurricane Relief Fund, and analyzing other special funds for ways they could help support programs now paid for by the General Fund.

Hawaii could also join other states to ask Congress for legislation requiring online businesses to collect and remit sales taxes to the states where their merchandise was sold.

"It would be like plugging a leak in the bucket," she said.

Baker will offer a bill extending the surcharge on auto rentals, which is due to expire this year. The money is used for transportation programs.

She will also propose tax hikes on alcohol and smokeless tobacco, specifying that the revenues will fund health programs.

"That's the only way I can think of to get resources," she said.

The state's shrinking coffers have led some legislators to take another look at legalizing gambling. Senate Ways and Means Committee Chairwoman Donna Mercado Kim, D-Halawa, has said she would look at gaming as a potential source of revenue, and Lingle said she wouldn't rule out the idea.

Souki, a longtime supporter of gaming, noted that gambling could be a tourist attraction as well as a revenue source.

"There's Hawaii's proximity to Asia - and Asians love to gamble," he said.

But other Maui lawmakers were skeptical.

"I'm not a fan of gaming," Baker said, noting that it could take five years or more to get casinos or lotteries on line and producing revenue. "I don't really think that's a viable option."

English took a stronger stance.

"I've always been opposed, categorically, to legalizing gaming in Hawaii," he said.

Hawaii and Utah are the only states without gambling.

English said he'd look for ways to access matching federal funds for local projects, such as prioritizing bridge and highways upgrades, which are expected to get a substantial amount of money in President-elect Barack Obama's economic stimulus plan.

"We're trying to leverage everything we can," he said.

While lawmakers look at cuts throughout the state system, some are also considering skipping scheduled pay raises for state officials.

A pay raise of $12,808 per year for representatives and senators went into effect Jan. 1, but Oshiro said he would likely support skipping raises scheduled to go into effect in July. The scheduled raises would include 5 percent for the governor, lieutenant governor and Cabinet members, and 10 percent for judges, as well as a 3.5 percent raise for the executive, judicial and legislative branches scheduled for July 2010.

"I think we will probably look at deferring July's increase, at least a year if not two years," he said.

Oshiro said it is not possible to defer legislators' January raise retroactively.

As legislators take a hard look at programs they can cut, English worried that remote parts of the state, such as his district of Upcountry, East Maui, Molokai and Lanai, could suffer the most.

"Usually the slightest change has the most impact in those areas," he said. "In these rural areas, it's going to be devastating."

But there could be some good things to come out of the hard times, he added.

"Yes, it's gloom and doom on the budget," he said. "But it gives us an opportunity to do structural things that need change. There could be a lot of policy changes that come out of this session that don't cost any money."

Ilima Loomis can be reached at iloomis@mauinews.com.

Original article URL: http://www.mauinews.com/page/content.detail/id/513798.html

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