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Monday, January 25, 2010
State of the State: Proposals to cut unemployment taxes, create jobs
By News Release @ 2:44 PM :: 6803 Views :: Energy, Environment


Governor Linda Lingle announced a proposal in her State of the State Address to moderate increases in the unemployment insurance tax while returning solvency to the Unemployment Insurance Trust Fund. 

Under the Lingle-Aiona Administration’s proposal, employers will pay only 60 percent of anticipated tax hikes, saving businesses $497 million over the next four years.

The Administration believes strongly that anything beyond this 60 percent threshold will cause large job losses.

The Governor urges the Legislature to enact this bill prior to mid-March when the Labor Department will need to send out the unemployment insurance bills to businesses statewide.


PURPOSE:        To amend the law providing for Unemployment Insurance (UI) taxes by: (1) setting the taxable wage base at 70 percent of the average annual wage for 2010 and 80 percent for 2011, and every year thereafter; (2) setting the adequate reserve ratio at 1.0 times the highest ten-year benefit cost rate; (3) setting the UI tax contribution rate schedule at the schedule determined under chapter 383, Hawai‘i Revised Statutes (HRS) or at schedule “E” for 2010 and 2011, whichever is lower; and (4) setting the UI tax contribution rate schedule at the schedule determined under chapter 383, HRS, or at schedule “F” for 2012 and 2013, whichever is lower.

JUSTIFICATION:        If left unamended, current Hawai‘i law would raise average Unemployment Insurance taxes over 1,000 percent in 2010.  While Hawai‘i’s economy is starting to show signs of recovery, many employers are still struggling to stay in business.  If assessed the high UI taxes under current law, many of these businesses will have no choice but to layoff workers or close down their businesses, placing further strain on the Unemployment Insurance Trust Fund.  This bill seeks to moderate the increase in UI taxes to ensure Hawai‘i’s economic recovery is not impeded by assessing businesses high taxes at a time when they can least afford it.

Impact on the public:  The Department of Labor and Industrial Relations projects that this bill could save Hawai‘i businesses $497 million in UI taxes over the next four years (2010 through 2013).  Additionally, this bill requires enactment by March 12, 2010, in order to be in effect prior to first quarter UI tax payments from employers.

Impact on the department and other agencies:  None.

GENERAL FUND:        None.

OTHER FUNDS:        Unemployment Insurance Trust Fund.

EFFECTIVE DATE:        Upon approval.

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Governor Linda Lingle announced in her State of the State Address a proposal to empower property owners across the state to help create a green jobs sector through the establishment of a new program called Hawai‘i Clean Energy Investment Bonds.

Similar programs, which already exist in 15 states, assist residential and commercial property owners with the upfront costs of installing clean energy systems or energy efficiency upgrades by allowing them to borrow the money from the state and then repay the loans over a period of years via an annual assessment on their real property tax bill.

This program spurs both immediate job creation and economic activity, and moves Hawai‘i closer to the goal of 70 percent clean energy by 2030.

The HCEI Bonds program to encourage a green jobs sector is just one of the economic recovery proposals the Lingle-Aiona Administration will be implementing in the months ahead.




To establish a Hawai‘i Clean Energy Investment Bond Program for renewable energy system and energy efficiency improvements on residential and commercial properties.


The initial capital investment required by property owners to install renewable energy systems and energy efficiency improvements on residential and commercial properties is a significant barrier to reaching the State’s clean energy targets.  As such, employing innovative financing to remove known barriers and stimulate enterprise in the clean energy sector is beneficial to the public.

A Hawai‘i Clean Energy Investment bond, also known as a “HCEI” bond, is a bond where the proceeds are lent to commercial and residential property owners to finance small renewable energy systems and efficiency improvements; and owners then repay their loans over a prescribed time period via an annual assessment on their property tax bill.  The liability to repay the bond is attached to the property, rather than to the individual, as an assessment on real property.  HCEI bonds can be issued by states or local governments, and the proceeds can be typically used to retrofit both commercial and residential properties.

Fifteen other states have already established clean energy bond financing or loan programs and two other states have pending legislation.

Assisting renewable energy projects and investments in Hawai‘i can provide jobs, as well as long-term energy, environmental, and economic benefits.  Moreover, this measure is compatible with the goals and objectives of the Hawai‘i Clean Energy Initiative and is for the benefit of the public.  This measure will increase energy security, provide economic diversification, provide increased career opportunities for Hawaii residents, and attract funding and investment into the State.

Impact on the public:  Provides an additional financing option to residential and commercial property owners to install renewable energy systems and energy efficiency improvements on their property. 

Impact on the department and other agencies:  The Department of Business, Economic Development and Tourism will be responsible for implementing and administering the HCEI Bond Program.  The Department of Budget and Finance will be responsible for issuing general obligation bonds. 

GENERAL FUND:        None.

OTHER FUNDS:        Authorizes the issuance of $50,000,000 in general obligation bonds.

EFFECTIVE DATE:        Upon approval.

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Governor Linda Lingle announced in her State of the State Address a package of legislative proposals and administrative programs aimed at creating jobs, getting residents back to work and enhancing job training opportunities.

The Lingle-Aiona Administration’s initiatives include an income tax credit proposal that grants credits equal to the wages withheld by the employer for each new, full-time permanent position filled by a resident who is currently receiving unemployment benefits.

In addition, because the construction and visitor industries have been hit especially hard during the downturn, and have the capacity to significantly stimulate the economy, the Governor is proposing a 10 percent construction and renovation tax credit for hotels and resorts.

The Administration will also actively work on two jobs programs that do not require legislative approval.  One program expands SEE Hawai‘i Work that currently reimburses an employee’s wages and benefits for up to one year for companies that hire people off of the welfare rolls.  Another program will allow workers on unemployment to volunteer their time at a business or non-profit organization while still drawing unemployment benefits.

Additional information on the job creation tax credit proposals and jobs programs follows:

Income Tax Credit for Job Creation


PURPOSE:        To encourage business firms to hire new employees by authorizing an income tax credit equal to the wages withheld by the employer, including one allowance, for each new full-time permanent position created and filled by a State resident currently receiving unemployment insurance benefits or eligible to receive such benefits. 

JUSTIFICATION:        Hawai‘i has suffered as a result of the national and global economic downturn.  Much of the impact has occurred in the loss of employment for people in the State.  Hawai‘i’s unemployment rate climbed from 3 percent in January 2008 to an average of 7 percent today.  Maui’s most recent unemployment level was 9 percent and Moloka‘i is experiencing a 13.5 percent unemployment level.  These unemployment levels are unacceptable and hurt families and their ability to support themselves.  Additionally, this situation places a drain on the State’s other resources including unemployment insurance benefits and social services.

To encourage businesses to create new full-time positions in this economic climate, the costs of new job creation must be addressed.   This bill would allow companies to receive an income tax credit in the amount equal to the wages withheld by the employer, including one allowance, for each new full-time permanent position created and filled by a State resident receiving unemployment benefits.  By allowing a credit equal to the wages withheld by the employer, this method will help offset the costs to the State in most cases.

The program would cover a three-year period of 2010 through 2012, when Hawai‘i is projected to be in a slow economic recovery.  To continue to draw credits, businesses would need to remain operational for two years after their final tax credits are received, thus ensuring that the credits go to those firms that make a lasting commitment to improving the economy. 

Impact on the public:  Similar programs have been operational in ten other states and have shown success in creating jobs that businesses might not otherwise decide to fill.  The program will give those currently drawing unemployment the opportunity to be considered for new jobs.  The program allows businesses of any size and industry sector to participate as long as they meet the basic program requirements. 

Impact on the department and other agencies:  The Department of Taxation will be responsible for administering the tax incentive provided in this measure.

GENERAL FUND:        Not applicable

OTHER FUNDS:        Unemployment Trust fund should show smaller draw downs and more deposits as positions are created and filled.

EFFECTIVE DATE:        Upon approval with credits applicable for calendar year 2010 through December 31, 2012, when the bill is repealed, provided that valid credits applied for subsequent to the repeal date can be claimed until exhausted. 

Construction and Renovation Tax Credit


PURPOSE:        To provide a 10 percent tax credit on costs incurred for the construction or renovation of hotels or resort properties from January 1, 2010 to December 31, 2012.

JUSTIFICATION:        As a result of the current economic downturn, a number of Hawai‘i real estate projects have been delayed or canceled in the past two years.  In a study released on January 4, 2010, the General Contractors Association reported that between November 2008 and November 2009, Hawai‘i’s construction industry lost 5,800 jobs, or 15 percent of construction jobs statewide.  Compared to the state’s 7 percent overall unemployment rate during the same period, construction job loss is double that of overall job loss.

Moreover, recent economic forecasts by the First Hawaiian Bank and the University of Hawai‘i Economic Research Organization project that the construction industry will continue to be impacted for some time before a gradual recovery ensues.  Since the construction and visitor industries have been among the hardest hit during this economic downturn, and since larger scale hotel and resort projects have the potential to hire large numbers of construction workers, and since renovation of existing hotels and the build-out of new resorts will re-energize our visitor accommodations, it is essential to incentivize key construction activities in the state.

This bill stimulates construction activity by establishing a 10 percent tax credit, applicable to costs incurred in the construction or renovation of hotel or resort properties for tax years 2010 to 2012.  The non-refundable credit may be used to offset corporate income, general excise or transient accommodation taxes.  The purpose of the hotel and resort construction and renovation tax credit is to provide an immediate boost to the construction industry, while jump starting Hawai‘i’s overall economy.

This tax credit sets a floor of $10,000,000 and a cap of $100,000,000 in the aggregate per project.  Construction or renovation costs include labor, material, and supply costs incurred in Hawai‘i, but do not include design, planning, or permitting costs.  This provision is necessary to ensure the credit is only applicable to actual construction and renovation.

Additionally, the bill places an annual limit on the amount of tax credits the Department of Taxation may award to $50,000,000 per year.

Impact on the public

        This bill helps revitalize the construction industry in the key sector of hotel and resort development and provides long-term enhancements to visitor accommodations in the state.

Impact on the department and other agencies

        The Department of Taxation must administer the tax credit. The Department of Business, Economic Development, and Tourism will work with the Department of Taxation to oversee the program.

GENERAL FUND:        $50,000,000 per year to generate $500,000,000 per year in construction activity resulting in up to $74 million in net addition tax income to the State.

OTHER FUNDS:        None.

EFFECTIVE DATE:        Upon approval and applies to taxable years beginning after December 31, 2009 and ending December 31, 2012.

Volunteer Internship Program

The Department of Labor and Industrial Relations (DLIR) Volunteer Internship Program (DLIR VIP) will allow unemployment insurance claimants to gain workforce training by interning at local businesses for up to 32 hours a week for 8 weeks, while still receiving unemployment benefits.   The program is part of the Lingle-Aiona Administration’s economic recovery initiatives and is geared toward getting Hawai‘i’s unemployed greater job skills and back to work quicker. 

It is anticipated that most, if not all, interns will be current unemployment insurance claimants who have not exhausted their 26 weeks of benefits. However, other unemployed jobseekers or part-time workers seeking full-time work may be eligible, provided they are registered in HireNet Hawai‘i (, the state-sponsored online job board. 

Starting today, the Hawai‘i State Department of Labor and Industrial Relations will begin registering unemployed persons and businesses in the DLIR Volunteer Internship Program.  This program will begin next month and continue through December 2010.  Results of the program will be assessed at that time to determine whether it should be continued.

To sign up and register or for more information including answers to frequently asked questions visit or email

SEE Hawai‘i Work

SEE (Supporting Employment Empowerment) Hawai‘i Work, which was launched in February 2005 by the Department of Human Services, provides work opportunities for individuals on government welfare assistance, while reimbursing employers for up to one year for most of an employee’s wages in exchange for on-the-job training and potential employment.

The Lingle-Aiona Administration will expand this successful, innovative program using federal stimulus funds to cover for six months parents who are collecting unemployment and whose household income does not exceed a certain level. 

These parents can earn up to 300 percent of the federal poverty level and participate in SEE – thus encouraging employers to offer them jobs and eliminate the need to pay these parents unemployment benefits.

The SEE program sends pre-screened SEE applicants to participating employers for interviews and potential hires.  SEE employees can be hired for part-time or full-time positions, ranging between 24 to 40 hours per week.

Employers are reimbursed the current Hawai‘i State Minimum Wage plus $.50 for each additional $1.00 per hour paid over the minimum wage for up to 40 hours per week. Employers are also reimbursed an additional 14 percent of the subsidized wages to cover training and employment-related expenses, such as Unemployment Insurance, Workers Compensation and FICA.

Visit for more information.

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