Do We Really Want to Starve the Golden Goose?

by Tom Yamachika, President, Tax Foundation of Hawaii

Our legislative session for this year is now over. Among other things the legislature passed this year was the state budget. With the exception of a few line-item vetoes, the Governor signed the bill and now we have a budget.

Our state's fiscal year started on July 1st. With that new budget in place, can agencies like our Department of Taxation start implementing the plans that are in their approved budget? The answer is no. Despite having a budget in place, the Governor's office has ordered spending restrictions. The restrictions are across-the-board, meaning that every agency must take its general fund budget and cut it again by a certain percentage. For the fiscal year that just began, that percentage is 10%, double the amount restricted last fiscal year.

Kalbert Young, director of the state Department of Budget and Finance, said this restriction was ordered because state revenues are predicted to be flat to nearly a half percent lower than for the fiscal year that just ended. "While the ten percent is admittedly larger, it's still only preliminary and it's really until certain financial and fiscal metrics are more thoroughly evaluated for the state," he told Hawaii News Now.

The restrictions mean departments will not be able to spend money buying new vehicles and other equipment, hire new personnel or expand new programs or start new ones, at least for the next few months.

But what about fixing things that could use some repair?

Witness our Department of Taxation. In its annual reports, it said that when taxpayers called, their employees were able to answer the phone only some of the time. This percentage has varied over the years: 90% in the fiscal year ended June 30, 2007, 81% in 2008, 80% in 2009, 61% in 2010, 40% in 2011, 57% in 2012, and 59% in 2013.

Folks, if our tax agency can only pick up the phone half the time, and they are making the news for duplicate bills and other issues, a 10% indiscriminate budget cut is not going to help fix them. We need to realize that we depend on tax revenue, and that we depend on this department to bring it in. Are we going to starve the golden goose to make it lay more eggs?

We already know that the Department of Education has asked for reconsideration from the cut since it comes at the beginning of the school year when public schools have their largest start-up costs. If our government leaders are inclined to grant requests like this one, shouldn't reconsideration be given to our tax agency which brings in the funds so desperately needed?

Sure, every department and every office will argue that their programs and services are essential, and they all will have good arguments. Thus, one may think that to be fair, every agency must feel the ax equally. But in practice that isn't how it works. The Department of Transportation and the Department of Commerce and Consumer Affairs are funded by federal money and special funds, which means they are exempt from the restrictions. So: two agencies bring in their own money and are exempt, while DOTAX brings in their own AND everyone else's money, and has to feel the pain.

Come on, folks. Let’s go back to the original problem, which is state revenues. The restrictions were ordered because we aren’t sure how much money is going to come in. If we are going to starve the agency whose primary job is to bring in that money and cripple its operations, we will increase the chances that the money will not, in fact, come in. Put another way, if we need the golden goose to pull us out of our financial doldrums, we better make sure the goose is healthy.

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