Major storms hit Hawaii after lawmakers raid hurricane fund

Iselle hits Hawaii followed by Hurricane Julio

by Malia Zimmerman, Watchdog.org August 8, 2014 

HONOLULU — As Hawaii feels the brunt of two hurricanes this week, residents believe any substantial damage could be alleviated by the state’s $126 million hurricane relief fund.

But that well has nearly run dry after the state Legislature snatched the funds to balance the budget in 2011.

The fund was established in 1993, shortly after Hurricane Iniki slammed into the islands of Oahu and Kauai on Sept. 11, 1992. That Category 4 hurricane, the most powerful storm to ever hit Hawaii, killed six people and caused $1.8 billion in damage. More than 1,400 homes on Kauai were destroyed and another 5,000 homes severely damaged in the 145-mph winds.

After the storm, several insurance companies either went out of business or refused to insure the Hawaiian market, and as a result, hurricane coverage availability and affordability became major issues for homeowners.

In response, the state established the hurricane relief fund, requiring homeowners to contribute.

As the hurricane insurance market improved in the following years, the fund discontinued issuing hurricane policies, but there was still a substantial fund balance remaining.

Some homeowners wanted their money returned. Senate Minority Leader Sam Slom, R-Hawaii Kai, introduced legislation to facility refunds, but that bill was defeated. The fund proved too tempting for the Legislature and governor, and they raided the fund in 2011 to balance the state budget.

Some $55.5 million was repaid as of August 2013. State Finance Director  Kalbert Young said another $55.5 million will be refunded this month.

“I warned against any special fund being established because the funds would be in danger of being raided by the Legislature or the executive branch, as was the case in 2011,” Slom said. “We cannot guarantee funds that are supposed to be earmarked will ever be used for that purpose.”

So if not for homeowners to access, what’s the purpose of the fund?

There is now adequate insurance coverage available in the marketplace for homeowners to get  private hurricane so the fund isn’t “active” for coverage, Young said. The fund will remain dormant until sufficient private hurricane insurance policies aren’t available, he added.

The fund is considered state reserve and use of the funds is limited, extensively controlled, and future use would require legislative authority, Young said.

However, if a catastrophe occurs and funds are needed to repair infrastructure, the governor and Legislature could use the money for that purpose.

“Clearly, one source could be the Hawaii Hurricane Relief Fund, but others could include cash appropriation, debt authority or special funds,” Young said.

Slom said he wants to prevent the fund from being grabbed by lawmakers again.

“Raiding it to balance the budget for excessive spending is outrageous,” he said.

Hurricane Iselle first hit the Big Island of Hawaii on Thursday evening as a weak hurricane, and then transitioned into a tropical storm as it doused the island chain Friday with heavy rains. Hurricane Julio is expected to hit the islands later this weekend.