Friday, April 12, 2024
Hawai'i Free Press

Current Articles | Archives

Thursday, August 8, 2013
Report: Hawaii third highest in per capita interest costs
By Malia Zimmerman @ 8:13 PM :: 5424 Views :: Hawaii State Government, Hawaii Statistics, Taxes

Report: Hawaii third highest in per capita interest costs

by Malia Zimmerman,, August 8, 2013 

HONOLULU - Last year, Hawaii spent more than $175 per person — $244 million in all — just to fund its interest payments, the third highest rate per person in the country.

Truth in Accounting, a Chicago-based financial watchdog group, found that among the 50 states, only Connecticut and Massachusetts paid more per person to manage their debt than Hawaii.

“From 2005 to 2012, interest expense for the state government in Hawaii rose from $170 million to $244 million,” said Jeff Wysong, a research analyst for Truth in Accounting. “The $244 million represents almost 4 percent of Hawaii’s total revenues.”

“Rising interest expense amidst falling interest rates is not a good sign for state government financial health. If interest rates rise, they might place a great strain on state’s budget,” Wysong added.

Wysong said interest expense has risen significantly among state governments since 2007, despite a substantial fall in market interest rates.

Photo by Mel Ah Ching Productions Photo by Mel Ah Ching Productions

RISING COSTS: Gov. Neil Abercrombie with Finance Director Kalbert Young, who agrees Hawaii’s “raw interest expense” has increased over time.

State records show Hawaii’s state government had $4.2 billion of outstanding general obligation bonds in fiscal year 2005, according to Kalbert Young, director of the state’s Department of Public Finance. At the conclusion of fiscal year 2012, Hawaii had $5.4 billion in outstanding general obligation bonds.

Young disagrees this is an “excessive” rate of growth for debt compared to other states, and said Hawaii has sold a good portion of its bonds realizing a premium.

“When interest rates are low, as they have been over the last 4 to 5 years, good-credit bonds with 4 percent to 5 percent coupons typically sell for a premium, meaning that bond holders will buy the bonds by paying more upfront than the face value of the bond,” Young said. “In Hawaii’s case, when bonds sell at a premium, the premium is used to pay future debt service, meaning that the general fund (the Legislature a la tax-payers) do not have to pay more towards appropriating for debt service.”

This nuance is not visible to Truth In Accounting analysts by looking exclusively at appropriated debt service in the annual budget, Young said.

“The last GO bond transaction in November 2012 netted more than $65 million in premiums.  The 2011 GO transaction netted more than $105 million in premiums. All of the premium was received as ‘unanticipated revenue’ and subsequently appropriated by the Legislature towards future debt service,” Young said.

There are other factors to consider, he said. The state capital finances a greater portion of facilities such as schools and prisons, and the state has been on an aggressive capital investment campaign for the last few years. During the economic recession in Hawaii between 2005 and 2010, the state restructured existing debt by postponing principal repayments.

 KOBAYASHI: Debt service in Honolulu could rise with elevated rail project.

“This definitely did not help the interest expense duration levels, but was probably necessary considering the fiscal revenue declines the state was experiencing,” Young said. “This was a textbook strategy of a good number of municipals and states back then.”

Since Young became the finance director for Hawaii in 2010, he directed the addition of about $1.2 billion of new-issued general obligation debt while the state has retired between $400 to $600 million in outstanding debt.

The state will spend $24 billion over the next biennium budget for its operating funds.

In the City & County of Honolulu, where the majority of Hawaii’s 1.2 million residents live, the city spends 19 percent of its $2 billion operational budget on debt service.

Honolulu City Council Budget Chair Ann Kobayashi said if the city builds its proposed $5.2 billion elevated steel rail project, that number could rise as high as 24 percent compared to 13 percent in good years.

Hawaii already has the highest overall cost of living and cost of doing business designation in the country. The state is among the overall highest taxed in the nation. Conservatives note funding the local government falls on 78 percent of the working population not employed by government in Hawaii.



TEXT "follow HawaiiFreePress" to 40404

Register to Vote


808 Silent Majority

Aloha Pregnancy Care Center


Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii


Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together



Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Moms for Liberty

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport


OHA Lies

Opt Out Today

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii


Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii