Legislature must rein in state budget

Grassroot testimony outlines the problem and suggests some reforms

News Release from Grassroot Institute

HONOLULU, May 10, 2020 >> If Hawaii legislators hope to rescue our state from the deep economic damaged caused by the statewide coronavirus lockdown implemented March 16, they must pare state spending and expand economic freedom.

That is the message of testimony submitted by the Grassroot Institute of Hawaii to the state Senate Ways and Means Committee, which meets tomorrow, Monday, May 11, at 10:30 a.m., to consider the proposed Supplemental Appropriations Act of 2020, aka SB2200, HD1.

Joe Kent, institute executive vice president, says in the testimony that the institute "recognizes the need to shrink the state budget, as tax revenues have fallen sharply. … State planners will need to focus on cuts, just as businesses and workers struggling in the private sector already have had to do."

Kent points out: "Hawaii’s fiscal 2021 general fund budget is $8.72 billion. In fiscal 2015, the budget totaled $6.98 billion, adjusted for inflation, which means today’s taxpayers are paying an extra $1.74 billion annually to provide public services for fewer people. This suggests that there is plenty of room to reduce spending, since even the fiscal 2015 budget could’ve been trimmed, as we noted at the time."

He continues: 

"Had Hawaii’s state government been cutting in previous years and saving for a rainy day, which we have recommended many times, the savings would have enabled the state to better cope with the current coronavirus crisis. Instead, the state whittled away a $1 billion surplus on growing department budgets, payroll increases and other nonemergency items.

Kent noted that, "Spending advocates are arguing to borrow up to a maximum of $4 billion dollars from the federal government and repay it over two years by implementing temporary additional future taxes on Hawaii residents."

But this, Kent says, "would only swell Hawaii’s already dangerous total of $88 billion in unfunded liabilities over the next 30 years — as well as put billions of dollars of additional weight on the backs of struggling Hawaii taxpayers, discourage entrepreneurs from doing business here, and possibly prompt more residents to flee for the mainland because of the state’s ever-increasing high cost of living."

Kent notes that there is a legislative plan in the works that would "scrounge up about $1 billion from special funds, vacant positions, the state’s rainy day fund and by borrowing to fill the budget shortfall. However, this strategy relies on the rosy assumption that the economy will bounce back quickly, and that Hawaii’s government can continue its bloated operations during a recession."

Instead, "Hawaii’s tourism economy is likely to recover slowly, which is why lawmakers should pare spending, such as by reducing department budgets and payrolls and contracting more with the private sector to deliver public services.

"Reducing spending could also create wiggle room for lawmakers to reduce taxation, which could provide relief for Hawaii’s struggling taxpayers and breathe new life into the economy."

Kent concludes: 

"It’s time for Hawaii’s government to face the hard fact that cutting government spending is the only way to put money back into the economy without saddling taxpayers with extra burdens.

"Shrinking Hawaii’s government spending by 20% would still allow for satisfactory public services for residents — especially if private contracting of public services were encouraged — while keeping enough money in taxpayer pockets to sustain economic growth now and in the future."

Link: TESTIMONY ON SB2200, HD1