LINGLE-AIONA ADMINISTRATION ADVOCATES FOR FISCAL STABILIZATION FUND TO PROTECT TAXPAYERS DURING FUTURE FISCAL EMERGENCIES

HONOLULU – Governor Linda Lingle’s senior policy advisor testified before a joint Senate committee today on the importance of establishing a State Fiscal Stabilization Fund that would ensure funds are available for future fiscal emergencies by building a reserve in periods of economic growth to offset any budget shortfall during future economic downturns. 

While the Lingle-Aiona Administration remains focused on stimulating the economy and creating jobs for Hawai‘i’s residents to overcome the current economic downturn, Governor Lingle is also taking steps to minimize the impact of future fiscal emergencies. 

Under a proposal (SB2693) by Governor Lingle, voters would have the opportunity to decide on a constitutional amendment to establish a Fiscal Stabilization Fund that would require 5 percent of the year-end general fund balances to be transferred into the Fund whenever state general fund revenues for two consecutive fiscal years exceed 5 percent. 

These funds would be in addition to the current revenues from the Tobacco Settlement that are now deposited into the Emergency Budget and Reserve Fund (also known as the Rainy Day Fund). 

Transfers into the Fiscal Stabilization Fund would be suspended when the total equals 10 percent of the general fund revenues for the preceding fiscal year. 

Any use of the funds would require an emergency declaration by the governor and a two-thirds approval from both houses of the Legislature.

Based on the State’s current six-year financial plan, $1.62 million of the $32.4 million year-end balance for fiscal year 2011-2012 would be transferred into the Fiscal Stabilization Fund.  Over a four-year period for fiscal years 2011-2015, an estimated $33.8 million will be deposited into the Fund. 

A second bill (SB2692) would rename the Emergency Budget and Reserve Fund to the State Fiscal Stabilization Fund, and require that interest earned from money in the State Fiscal Stabilization Fund remain in the fund.

“The purpose of these two proposals is not to change the concept or use of the State’s Rainy Day Fund, but to ensure a steady source of revenue is available to build the fund balance for future emergencies,” said Linda Smith, senior policy advisor, in written testimony.  “We believe a constitutional amendment is the only way to safeguard against expending year-end general fund balances that in good years need to be saved rather than spent on new programs and services.”

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