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Sunday, January 1, 2017
Ige’s Billion Dollar Psych-Out
By Tom Yamachika @ 4:01 AM :: 4683 Views :: Hawaii State Government, Taxes

Psych!

By Tom Yamachika, President, Tax Foundation Hawaii

In almost every year that the Peanuts comic strip by Charles Schulz has run, Lucy offers to hold a football for Charlie Brown, Charlie Brown comes running up to kick it, and then Lucy yanks the football away at the very last second. Psych! Charlie Brown flies into the air and crashes to the ground.

Here in Hawaii, our Department of Budget and Finance reported that it closed out this past fiscal year (ending June 30, 2016) with a general fund balance over $1 billion. Our public worker unions saw this as a “surplus” and began salivating. In their mind the question was not whether there would be public worker pay raises, but how much.

In recent months, however, as we hear from the Star-Advertiser, the Ige Administration has been meeting with the unions. One of the first points made in those meetings was that the general fund balance wasn’t there any more. The state spent $1.3 billion in July! What happened to the football? Psych!

We all need to remember that the $1 billion number that Budget and Finance announced wasn’t “surplus” in the sense of “extra cash that we can play with.” It is like what a person has in the bank at a given point in time. If that account balance is high on a given day, it doesn’t mean that you’re rich, because you might have to pay out most or all of that money the very next day. Simply put, that $1 billion balance doesn’t show what we owe, so it doesn’t demonstrate the ability to spend on other things.

To underscore the point, the Governor’s executive budget for the upcoming biennium doesn’t factor in any raises for public workers. None. As Civil Beat reported, the Governor said that his administration is working “to get a fair settlement with all of the unions.” Perhaps that’s a way of saying the administration didn’t want to show its hand by sticking something in the budget while the negotiations were ongoing.

To be sure, our state government has plenty of needs. We expect the Department of Transportation to be back at the Legislature working on elected officials for more money to expand highway capacity and fix roads and bridges, even while its Harbors Division moves to significantly increase wharfage and other user fees for goods coming into Hawaii by boat. We expect the Department of Education to plead that the evil contractors caused the $100 million for 1,000 cool classrooms initiative to fail miserably, and that only more money, and lots of it, is urgently needed. And the list goes on and on, like it does every year.

And then, of course, the City & County of Honolulu will be coming in to ask for another modest (?) extension on the rail surcharge, while pressuring our lawmakers to fast-track the legislation by blaming it on the Feds needing a revised financial plan by April 20. Hawaii News Now has reported that at least one key senator is on board with the plan, and is thinking of approving an indefinite (namely, “forever”) extension of the tax in exchange for pinching not just the current 10%, but a full 1/3 of surcharge revenues.

Our government, therefore, has plenty of needs. The $1 billion “surplus,” “psych,” or whatever it is, won’t be there to satisfy those needs. Our lawmakers, therefore, will be under some pressure to find ways to put the needs and the funding in balance. If we aren’t careful, we might find them trying to force our beleaguered taxpayers to make up the difference once again. Hold on to your wallet, because this coming session looks like it may be a rough ride!

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