Scrutinize the Big Agencies!

by Tom Yamachika, President, Tax Foundation Hawaii

There has been a lot of flip-flopping and waffling going on in government. President Trump groused about, panned, and then finally signed a second stimulus package on Sunday, Dec. 27. Then Gov. Ige, who previously decided to furlough public employees, put the furloughs on hold on Dec. 23 (after Congress passed the stimulus package but before President Trump signed it) knowing full well that there was nothing in the package with any designated funding for state and local governments. The furloughs won’t start until some unspecified time in the future. Or maybe the idea of furloughs will be scrapped.

In the meantime, there is a very real concern about balancing the state budget. There is a projected shortfall of $1.4 billion over each of the next four years. The furloughs, representing roughly 10% of state payroll costs, were to save $300 million, or $0.3 billion, a year.

There is still a lot of real estate between $0.3 billion and $1.4 billion a year, and we are already giving up on the $0.3? “I know how hard state employees have been working during this difficult period and I realize how much distress this will cause our employees and their families,” Gov. Ige said when the furloughs were announced in early December. But Governor, haven’t you seen the pandemonium at your Department of Labor? Those of us in the private sector have been suffering. Layoffs are at unprecedented levels. Businesses have been shuttering. At least when you are furloughed and suffer a day off without pay you will have a job tomorrow. Not so if you have been laid off.

On top of the layoffs, the Governor has asked individual departments and agencies to take budget cuts between 10% and 20%. The big departments with broader public appeal, like the Departments of Education, Health, and Human Services, take the least pain. The small departments that aren’t politically sexy, like the Department of Taxation, take the bigger hits.

I suggest that this is exactly the opposite of what we need.

If, for example, you put one big agency, such as the Department of Education with 25,000 employees, and a small agency, such as the Department of Taxation with 300 employees, side by side, you will probably find that there is more questionable spending in the bigger agency. It’s easier to bury things in a bigger haystack.

We are not at all suggesting that teacher salaries be cut indiscriminately. Far from it. But a nonprofit like the Education Institute of Hawaii had to spend years and a lawsuit to get the DOE to release basic financial data for public-focused analysis (which analysis will probably have limited value because the data released is now several years old). And the State Auditor recently tried to get DOE to give them answers about basic COVID-19 procedures and protocols, and loudly complained about the stonewalling it got. With this evidence of lack of transparency, it is easy to think that there is unsavory financial information that has been and is still being hidden from legislators, the public, or both.

And then, for the Department of Taxation, do the politicians appreciate that it brings in the lion’s share of the money that nearly all agencies need to survive? Our tax laws are not simple. People need the Department’s help to understand and comply with them. And there are bad actors who wouldn’t mind skipping their tax payments if they think they can get away with it; for example, we just wrote about some landlords who were recently smoked out. A 20% cut from that department means that there will be more confused taxpayers who won’t get help and more tax scofflaws who won’t get caught. What good are budget cuts if the revenue doesn’t come in?

Let’s put some work into finding those nonessential expenses, and maybe we can come up with a better solution.