Governor's budget exceeds spending cap — again

The Grassroot Institute of Hawaii urges the Legislature to rein in spending and taxes

News Release from the Grassroot Institute of Hawaii

HONOLULU, Jan. 9, 2020 >> Gov. David Ige this week released his updated budget for fiscal 2021 and it shows extra spending that exceeds the state spending ceiling by $40 million in fiscal 2021, and $28 million in fiscal 2020.[1]

The state’s spending cap was incorporated into the state Constitution in 1978.[2]  It has been routinely ignored, including when it was previously overspent by $180 million in fiscal 2020, $395 million in fiscal 2017 and $214 million in fiscal 2016.[3]

The governor’s updated budget for 2021 shows the excess spending would be covered by money taken from the state’s dwindling surplus, which currently stands at $587 million, down from $752 million in fiscal 2020. The surplus is on track to be drained to only $63 million by fiscal 2023.

Keli‘i Akina, president and CEO of the Grassroot Institute of Hawaii, called the governor’s budget irresponsible.

“Bursting through the state spending limit is bad budgeting,” Akina said. “This puts Hawaii taxpayers at risk and raids the state’s surplus at a time when we should be saving for a rainy day.”

Hawaii’s constitutionally mandated general fund spending cap is tied to the average growth in personal income growth over the previous three fiscal years.[4] This would put the cap at $8.503 billion for fiscal 2021, yet overall Ige is proposing to spend $8.542 billion.

The rolling ceiling is also updated every calendar for the previous fiscal year. The newly updated cap for fiscal 2020 is $8.167 billion, but the governor is proposing to spend an additional $92 million in fiscal 2020, which would increase the total to $8.195 billion. 

The $92 million in additional spending in fiscal 2020 could be inserted this year through different appropriation bills that are submitted by the executive agencies, or Ige could pass it through his amended supplemental budget proposal.

According to the governor’s plan, the spending cap breach is due to additional education funding, taxpayer contributions for Hawaii’s unfunded liability for public pension and health benefits, and additional collective bargaining funding appropriations for HGEA Bargaining Units 2 (Blue Collar Supervisors); 3 (White Collar Non-Supervisors); 8 (University of Hawai‘i Allied, Professional & Technical employees); 9 (Nurses); and 13 (Professional & Scientific employees).

The state Constitution allows the Legislature to override the spending limitation with a two-thirds vote in both houses, which it usually does, essentially making the law a paper tiger.

Akina of the Grassroot Institute cautioned against bypassing this spending limit.

“The spending cap is in place,” he said, “to force the state to balance its competing demands without resorting to raiding the surplus or increasing spending beyond what taxpayers can afford. Lawmakers should hold the line on the state’s spending cap.”

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[1] “Testimony by Craig K. Hirai, Director, Department of Budget and Finance, to the Senate Committee on Ways and Means and the House Committee on Finance,” State of Hawaii, Jan. 7, 2020, pp. 11, 12, and Appendix 2, www.capitol.hawaii.gov/session2020/testimony.

[2] “General Fund Expenditure Ceiling,” Hawaii State Constitution, Article VII, Section 9, https://lrb.hawaii.gov/constitution#articlevii.

[3] “Hawaii historic spending cap information,” Grassroot Institute of Hawaii, Jan. 8, 2020, https://www.grassrootinstitute.org/wp-content/uploads/2020/01/State-Spending-Cap-citations-2.pdf.

[4]  “Expenditure Control,” in “About State Budgeting,” Hawaii Department of Budget and Finance, accessed Jan. 8, 2020, https://budget.hawaii.gov/budget/about-budget.