State's $1.4B deficit is equal to its overspending since 2012

Respecting the state’s legal spending cap might have saved the state from having to consider furloughs for its employees

News Release from Grassroot Institute, December 16, 2020

HONOLULU, Dec. 16, 2020 >> The state spent $1.4 billion over its constitutional spending cap during the past decade, which might have been enough to deal with the state’s current $1.4 billion shortfall for each of the next four fiscal years,[1] according to research from the Grassroot Institute of Hawaii.

In response to this dire fiscal situation, Gov. David Ige is seeking to implement
two-day-a-month furloughs for state employees, with the goal of saving $300 million a year over the next four years.[2] State employee unions are pushing back, calling the cuts “devastating.”[3]

Keli‘i Akina, president and CEO of the Grassroot Institute of Hawaii, said he sympathizes with state employees who stand to suffer. However, the alternative is not much better.

“It doesn’t help state workers to have a government that falls apart,” he said. “If lawmakers had not routinely ignored the state’s constitutional spending limitation, Hawaii’s budget situation would not be so dire.”

Lawmakers have exceeded the state’s spending cap by a total of $1.4 billion since fiscal 2012. Not counting the 1,554 employees added through special funds spending, this added a net 2,224 employees to the state's payrolls.[4]

Source: “Hawaii historic general fund executive spending cap information, in millions,” Grassroot Institute of Hawaii, Nov. 11, 2020. Note: Fiscal 2020 and 2021 were on track to exceed the debt limit, but then the COVID-19 lockdown reduced tax revenues, prompting the state to reduce expenditures.

Hawaii’s constitutional spending cap was intended to limit general fund expenditures to the estimated rate of growth of the state’s economy, as measured by the average growth in personal income. 

That limit can be bypassed only by a two-thirds vote in both chambers of the Legislature. But all budget bills in the past decade have been approved unanimously, with only former state Sen. Sam Slom voting no.

“Hawaii’s spending cap needs teeth,” Akina said. “That could be achieved by putting proposed spending cap breaches to a vote of the people. But even without that backstop, current events should make it clear to lawmakers that they need to vote against continual government growth whenever they have the opportunity.”

By way of background, Hawaii’s state tax revenues boomed after the Great Recession of 2007-2008, peaking in 2019 at 29.4% higher than in 2006, adjusted for inflation.[5] But much of that windfall went toward expanding government programs and payrolls, rather than savings.

Said Akina: “Lawmakers set the ‘boom’ as the budget baseline, and busted the spending cap regularly in the process. If they had saved the money instead, we very well might have been able to pay for today’s current rainy day.”

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Footnotes:
[1]  “VIDEO: Gov. David Ige to furlough many state workers for 2 days a month starting in January,” Honolulu
Star-Advertiser, Dec. 9, 2020.
[2] "State of Hawaii $147,555,000 General Obligation Bonds of 2020, Series GA," Hawaii Department of Budget and Finance, Oct. 21, 2020, p. B-16, "... estimated labor cost savings from an approximately 9.23% furlough from fiscal years 2021 through 2024."
[3]  “Public workers unions calls Ige’s furlough plan ‘devastating’” Hawaii News Now, Dec. 9, 2020.
[4] “Hawaii historic general fund executive spending cap information, in millions,” Grassroot Institute of Hawaii,
Nov. 11, 2020. See also, “Summary comparison of FY 2021 supplemental budget,” Hawaii Department of Budget and Finance, obtained through an information request by the Grassroot Institute of Hawaii, email dated June 19, 2020, and add row 301 E + 302 E which equals 36,447.11 positions in fiscal 2021. See also, “Legislative budget system budget worksheet,” Hawaii State Legislature, 2012, p. 472, which shows 34,222.68 positions. 36,447.11 - 34,222.68 = 2,224.43.
[5] “COVID-19 Abruptly Ends Decade of State Tax Revenue Growth,” PewTrusts.org, Q4, 2019.

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The Grassroot Institute of Hawaii is an independent 501(c)(3) nonprofit research and educational institution devoted to promoting individual liberty, economic freedom and accountable government. Its goal is to improve the quality of life in Hawaii through a lower cost of living, expanded opportunities and greater prosperity for all.