A ‘Capitol Convo’ about Hawaii’s high cost of living

from Grassroot Institute of Hawaii, February 8, 2023

Two representatives from the Grassroot Institute of Hawaii appeared on an explicitly partisan radio interview program in late January to talk about Hawaii’s high cost of living.

Host Lauren Matsumoto, a Republican and state House Minority Leader in the 2023 Legislature, said the thrice-weekly show, “Capitol Convo” on station AM 690/FM 94.3 The Answer, is “an opportunity for conservative representatives to really invite the public into the legislative sessions.” 

Before talking about the topic of the show, guest Ted Kefalas, Grassroot Institute director of strategic campaigns, emphasized that the Grasssoot Institute is nonpartisan.

“We’re not interested in partisan distinctions, left or right,” he said. “We want to work together with everyone and anyone to bring about positive change in Hawaii” — which from the Institute’s point of view means increasing individual liberty, economic freedom and accountable government.

Moving on from there, Kefalas and Institute policy researcher Jonathan Helton shared with Matsumoto the Institute’s views on factors that contribute to the state’s high cost of living, such as its high cost of housing, high taxes, boondoggle projects, shortage of medical professionals and more.

Near the end of the 50-minute conversation, Matsumoto asked Kefalas and Helton to talk a little about “the difference between the progressive and conservative approaches to the cost of living.”

Kefalas said the “progressive” approach is typically to introduce government programs that “mess with wages or the free market in general, but we have to be cautious about any kind of ripple effects.”

For example, he said, “raising the minimum wage may seem like it’s a great idea, and for a lot of politicians, you know, they think it is because it imposes pretty much zero costs on the political body, when in reality, it’s putting those costs to the private sector and private employers.”

TRANSCRIPT

1-27-23 Ted Kefalas and Jonathan Helton with host Hawaii Rep. Lauren Matsumoto on “Capitol Convo,” AM 690/FM94.3 The Answer

Hawaii Rep. Lauren Matsumoto: Aloha, and good evening. Welcome to “Capitol Convo,” where we have conversations about the 2023 legislative session with conservative state House representatives. 

Hi, I’m Rep. Lauren Matsumoto, and I serve in the Hawaii state House as the House Minority Leader, and I have the privilege to represent the areas of Mililani and Mililani Mauka. “Capitol Convo” is an opportunity for conservative representatives to really invite the public into the legislative sessions.

So, what we do on the show is we share information about what’s going on at the Capitol, and how to get involved in the legislative process, address important community issues, and, of course, answer your questions. So, please feel free to call in anytime over the next hour. 

“Capitol Convo” airs live every Monday, Wednesday and Friday, from 5:00 to 6:00 p.m. on AM 690 and 94.3 FM, The Answer. 

So, today, on “Capitol Convo,” we will be discussing one of the most important issues, I feel, in Hawaii, which is the high cost of living, and really wanted to focus on this, this year, because it’s something that we hear, day in and day out, about what’s really wrong with what’s going on in Hawaii.

And so, our House Republican Caucus package has several bills addressing this issue. But here with us today to dive into this topic, we have Grassroot Institute of Hawaii, which is a nonprofit policy research organization that seeks to educate people about the values of individual liberty, economic freedom and, really, accountable government. 

So, first, we have Ted [Kefalas], who is the director of strategic campaigns at Grassroot. Hey, Ted.

Ted Kefalas: Hey. Great to be here. Thanks for having us.

Matsumoto: Of course. And along with Ted, we have Jonathan [Helton], who is the policy researcher at Grassroot. Hey, Jonathan.

Jonathan Helton: Hey. Thank you for having me on.

Matsumoto: Great to have you. Glad to have you on for “Capitol Convo.” So, Ted, if you can start us off, and just tell us a little bit about the Grassroot Institute of Hawaii and the work that you do.

Kefalas: Sure. So, we’re a public policy research organization. And you kind of touched on it earlier, but at the Institute, we really attempt to educate people about the values of individual liberty and economic freedom in an effort to lower the cost of living in Hawaii. In order to do that, one of the things that we promote at the Grassroot Institute is practical change. And we do that in the spirit of “E hana kākou,” which means let’s work together. And literally, we want to work together with everyone and anyone to bring about positive change in Hawaii.

So, at the Grassroot Institute, we really want to remain independent. We’re not interested in partisan distinctions, left or right. We’re more interested in people coming together.

And, you know, we really want to keep that independence by design. So we don’t take funding from the government. We don’t take funding from any political parties or any businesses that we comment on. And we really feel like we need that independence for the people of Hawaii.

Matsumoto: Yeah, and that’s so important, right? To really bring in that nonpartisan values of just really what are the issues, and how are we going to address them? And what draws you to this type of work? I think it’s so interesting.

Kefalas: So, one of the reasons why we’re “Grassroot” and not “Grassroots” Institute is because we want to focus on the individual. And so for us at Grassroot Institute, I think everybody on staff really has that feeling that, you know, we want to do this work for each and every resident of Hawaii. 

A lot of what happens in government — and you can probably attest to this — but it happens behind closed doors or it hides behind a lot of legal mumbo-jumbo. And so we want to cut through a lot of that and just make it as accessible as possible for people to understand the process and how things work, so that they can get involved, because if we can get people involved in understanding what’s happening, we can make a lot of change.

Matsumoto: I mean, involvement, I think, is one of the most important parts. I can’t even tell you how many times at the Capitol when there’s a bill, and there’ll be nobody testifying on it. 

Really having people get involved, have their voices be heard, and know what’s happening is so important. So, thank you for all the work that you do. 

Jonathan, can you share with us all, what role do you play at Grassroot Institute, and why have you chosen this line of work?

Helton: Yes. If you think of Ted as working with some of the legislators, working with people who agree with us on various issues, Ted’s working on the ground. I’m working behind the scenes. 

My role as a policy researcher means I dig into anything from housing to maritime law to taxes, and they treat me almost like a gofer sleuth. If we need to find a fact on an issue, I try to go look it up where I talk to someone who knows more about it than I do.

Matsumoto: And thank you so much for joining us today. I know the two of you are going to bring so much to the conversation. And so I’m just going to dive right into it, because, I mean, that’s why we’re here. So, Ted, can you share about some of the causes of the high cost of living here in Hawaii?

Kefalas: Yes, sure. I think there’s a lot of causes to this problem, and they’ve just kind of compounded on top of each other, and that’s what’s made this problem so bad, right? And why we have one of the highest costs of living in the country. 

When you look specifically at things like housing, there was an HHFDC [Hawaii Housing Finance & Development Corp.] study back in, I believe, 2019, and it said that we need at least 50,000 homes in the next five years, projecting out to 2025. And we’re nowhere near that population or that number when we look at it. We’re already at 2023.

I believe Gov. [David] Ige’s administration, during their time, built, I think it was something like 13,000 homes. And so we really need to increase that supply if we’re going to bring the price of housing down. 

The other thing is high taxation. According to WalletHub and a lot of other publications, Hawaii has the second-highest tax burden in the country, and that includes all of our property taxes, income taxes and general excise taxes, which I’m sure we’re going to get into a lot today.

And then, you know, another thing that we work at at the Grassroot Institute is the Jones Act, which increases the costs of everyday goods here in Hawaii, because a lot of the things that we have on our shelves come from the mainland. 

And if you don’t know about what the Jones Act is, essentially it’s a 100+-year-old federal law that says goods shipped from one U.S. port to another U.S. port must be on ships that are U.S. built, U.S. crewed, flagged and U.S. owned. 

And that doesn’t sound like a problem, but it really becomes one when you realize that U.S. ships are about four to five times the price of a foreign ship. And so at the Grassroot Institute, we’ve calculated this outdated law costs the average local resident about $1,800 a year.

Matsumoto: Wow. I think those things are so important, and we look at it, Honolulu’s cost of living is 93% higher than the national average. 

Kefalas: Right.

Matsumoto: That’s just insane when you look at it. And people try to put it as, “It’s just the price of paradise. This is what it just costs to live in Hawaii.” And I think we’re seeing very clearly that that’s not necessarily the case or that’s not the whole story.

Kefalas: There’s things we can do, right? That we can try to address these issues, but we have to at first identify what the problem is. And, you know, so we can’t just put our head in the sand and continue with, you know, business as usual. 

We have to analyze what’s happening and see what we can do to lower the cost of housing, lower the cost of groceries, of everyday medicine, when you go to the grocery store or at the convenience stores. So, you know, it’s really important that our Legislature at least this year takes up some of these issues and works to address them.

Matsumoto: Yes. And it’s, I’ve been in the Legislature, this is my 11th year now. And I’ve been working on this from the very start, right? Because identifying that this is one of our No. 1 problems and we always say, taxes are not the fun bill to put in, or it’s not the sexy bill that everybody wants to put in, but it’s so important because it affects so many of the things that we do. 

So I wanted to jump in. I was there at the State of the State address and Gov. [Josh] Green talked a lot about tax reform in his address, and [I] wanted to kind of pick your brain. What did you think about his plan? What were your thoughts on his plan?

Kefalas: Well, we’re really glad the governor’s taking this issue seriously. I mean, as we’ve mentioned, Hawaii’s cost of living is probably the No. 1 problem in the state. And so it’s actually led to a lot of people leaving, going to the mainland or elsewhere, to try to find a cheaper place to live. 

But I do like the governor’s plan to index the tax brackets to inflation and increase the standard deduction and the personal exemption. This would kind of provide relief across the board and make sure that people aren’t punished simply because of high inflation and would push them up to a higher tax bracket. 

I also think that the teacher tax credit is great. We need to do more to support our teachers. They give so much to our keiki and we need to try to do as much as we can to increase the money in their pockets.

Matsumoto: Absolutely. My dad is a teacher at Nanakuli High School for 30 years, and I can personally attest to how much of our personal money would go to paying for things in his classroom. We used to save bottles and cans and all of that money would go to help his classroom. So I agree. That’s an absolute wonderful thing that he introduced.

Kefalas: Yeah, and even the food, rent, child care tax credits, I think those are great for low- and middle-class families. 

But I do want to touch on, the problem with tax credits is that sometimes people don’t remember to file them [or] they file them incorrectly, and so they don’t always get the relief that they need. 

A lot of times it would’ve just been simpler to just cut the income tax rate for food or anything else for that matter, just to make it more across the board, make it easier for people to actually realize this relief.

Matsumoto: Yep. I mean, that’s exactly one of the things that our caucus has introduced. I mean, you know, Ted, we’ve introduced the exemption on food and medical services for decades, right? And it’s not a revolutionary idea. The majority of the states in the mainland do it. It’s one of those “Why aren’t we doing it now here?”

Kefalas: Right.

Matsumoto: It just seems like the common sense approach. Again, you don’t have to file for anything. You just go about your day-to-day life and you’re getting that relief without having to do anything else extra.

Kefalas: Exactly. So it just makes it easier. You know, there was also a little bit of concern with Hawaii’s earned income tax credit. It’s tied to the federal EITC program  and it gives relief to lower-income individuals. And that, really, the program is meant to do a lot of good, and I think it has done a lot of good. 

But, you know, when you look at it, there was a report by the U.S. Treasury Department and it said about 28% of those payments, those EITC payments, were improper. Meaning that 28% of that money is going to people that it shouldn’t be. 

And so I don’t want to necessarily call it fraud, but we want these tax breaks and these tax credits to go to the people that it actually means to go to. And so that would be my one concern with the governor’s tax plan.

Matsumoto: Yeah, and another thing that our caucus has introduced is to eliminate the income tax. Kind of a bold move, but a real conversation starter.

Kefalas: Well, and you wouldn’t be the first.

Matsumoto: Yes. No, there’s nine other states that do it, right? We’re not the only ones. And so when we looked at that, that is, it’s a huge asset for those who need it the most. And so we were looking to eliminate income tax across the board, except for the highest bracket. 

But for the average household in Hawaii, they make about $83,000 per year. That means $15,000 back in their pockets every year. I mean, that’s life-changing. 

Kefalas: Yeah.

Matsumoto: That would pay for my preschool that I paid for one child. That’s huge. It could be a start of a down payment for people.

Kefalas: It’s a difference-maker for individuals. It’s a difference-maker for families. I mean, that’s something that we really would love for the Legislature to take up this year and at least address, whether it’s income tax, whether it’s general exercise tax. There’s a lot — when we talk about taxation, there’s a lot that needs to be undone. 

I mean, you know. we didn’t just get here overnight. This was years in the making. And so, you know, we need to start chipping away at some of these high taxes.

Matsumoto: Absolutely. And again, if you’re just joining us, we’re talking about the high cost of living in Hawaii with Ted and Jonathan from Grassroot Institute. You’re on “Capitol Convo.” If you have any questions you’d like to ask us, give us a call at 833-296-8255. That’s 833-296-Talk. We’d love to hear from you. 

But Jonathan, I want to bring you back into the conversation here as we’re talking. You know, Gov. Green has proposed cutting through some of the red tape that holds back development. And we all know those issues with that. What specifically can be done —  that the state can do — to support that, since counties are largely in charge of most of that permitting and planning?

Helton: Yes. When it comes to housing, there’s a laundry list of things that the state and the counties can do to make it easier for homebuilders to build homes. So you can start at the state level. Look at the state Land Use Commission. 

The state Land Use Commission makes it a lot more time-consuming and costly to build a new housing project on any of the islands. And its structure and its mandates, oftentimes, they duplicate what the counties already have in place. 

So the counties might have concerns about environmental issues, or if the Land Use Commission has them too, if a project can come through one of those two, why does it need to go to the other one?

So reforming the agency helps the LUC focus on state land-use issues, right? Give counties more power to rezone lands from maybe from agriculture to urban, to a lot more housing. You know, that would be a good first step. 

But land-use reform, that’s not the only thing you can look at. 

Look at the county level. The counties could, for example, allow more duplexes or triplexes or fourplexes, more multi-family housing. And California has done this to help address their housing shortage. And these are just two things that would really help local homeowners, you know, make a profit. They could add on to their home and maybe rent that out.

Matsumoto: Definitely. I know we’ve been looking at the ADU thing for a while. Ted, if you want to add …

Kefalas: Yeah, absolutely. And just to add on to what Jonathan was mentioning, I think one of the things we talk about, too, with duplexes, triplexes, fourplexes, there were actually a couple of bills put in this year to do exactly that at the state level and kind of try to work with the counties to increase the duplexes, triplexes and fourplexes here in the state. Because it’s really crucial that we increase those units. 

And so,you know,  it’s something that was similar to SB9 in California, which was their YIMBY [Yes In My Backyard] bill. There’s a lot of other kinds of similar states, similar political makeup, that have taken on this kind of project when it comes to housing. You know, it’s something that’s a great free-market approach, that it’s something that we really support.

Matsumoto: Definitely. I think it’s so important for everybody to understand those issues. And when you talked about the supply at the beginning, I mean, I think, we’re seeing that pretty clear right now. 

I’m going to take us back real quick, because we talked about the general exercise tax exemption for food and medical services. And it was something that Gov. Green campaigned on. I was really excited when I saw that — again, because it’s something we talked about so much. 

But we saw on the news, Speaker [Scott] Saiki and Senate President [Ron] Kouchi, they don’t seem to be in favor of it so much. And I’d love to hear your thoughts on the ability to have it be passed.

Kefalas: Well, we have long been advocating — just like you have, Rep. Matsumoto —  for a GET exemption for our groceries, over-the-counter medication and medical services as well.

And so, while a lot of times, you know, people will say, “Oh, well, people on food stamps don’t have to pay the general excise tax,” we can’t forget about, you know, our middle class and the people that are still struggling to make ends meet, people that are working two, three jobs just in order to pay rent or pay their mortgage. And, then, that’s not even talking about inflation nowadays. 

So, you know, as for medication, I think prescription medication was already exempt. And so the governor is really talking about over-the-counter medication, which, you know, is Tylenol, Advil, things you can get at Long’s. So, we feel really that the big deal in exempting the GET is exempting medical services. 

Matsumoto: Yes.

Kefalas: And so that’s something that right now the state is short. I believe they came out at 750+ doctors. And because of our cost of living, it’s so expensive also to run a practice here in Hawaii. So, a GET cut on medical services would help us to keep some of those healthcare professionals practicing here, and, not to mention, it would reduce a lot of the healthcare costs for individuals. 

I also just wanted to touch on, you know, Hawaii is one of the only states — is actually, I think, the only state — which taxes Medicare, Medicaid and TRICARE medical services. 

And so, Hawaii Department of Taxation says that, “Oh, no healthcare providers can pass on the GET to those patients,” but the federal government has actually come out and warned providers that if they pass that along, they’ll be referred to the Office of the Inspector General for investigation of Medicare fraud.

And so, you know, this is a really important issue. It’s something that the State Senate previously brought up back in 2020. They passed, I believe it’s SB2542 in 2020, to exempt medical services from doctors and APRNs from the general excise tax. 

But then obviously, COVID hit and priorities shifted. So that got put on the back burner and we’re glad at least it has been brought back to the forefront, but we would really like to see the Legislature take the lead and push this thing past the finish line this year.

Matsumoto: Absolutely. I believe we have a caller now from Ewa. We have Brett from Ewa who has a question about taxes. Brett, are you here?

Brett: I am here. Can you hear me?

Matsumoto: Hi, Brett. How are you?

Brett: Aloha, Representative. And then you obviously know, so for a disclaimer, I am the Honolulu County chairman for the Republican Party.

Matsumoto: I recognize your voice, Brett.

Brett: So, I agree with all the tax stuff, but I think the other part of it — and this is probably the hardest part of it — is we got to cut our spending also.

Kefalas: Absolutely.

Brett: We can do the taxes, but I think that’s part of the fear from the Democrats is they’re not going to have any money to spend on their pet projects and all their social projects that they want to do. So, yeah, I totally agree with the tax reduction. 

And, you know, I was a little concerned on the governor’s address when he signed the homeless proclamation because that removes a lot. He can remove a lot of laws that are in place to protect various things to get his project through. And I’m just concerned that that’s going to turn into a spending spree and suck the $32 billion or whatever we got in our excess funds that we have in the state.

So they’re doing a lot of other things, and I know there’s a lot of bills and there’s even some from the other side of the aisle on the same issues. So I hope something gets through on the GET tax reduction, but I totally agree. 

I would say get rid of the income tax, GET and gas tax and just go to a straight flat consumption tax. And that way, people have the power in their own hands that when they’re buying things and they know that they’re going to be taxed on it, rather than the side taxes that you never really know about. 

Matsumoto: Yes, and I think that’s why …

Brett: So that’s all I had to say …

Matsumoto: Thank you so much.

Brett: I’ll take the rest of it off here. Great job. I look forward to listening to you every Monday, Wednesday and Friday. Aloha.

Matsumoto: Thank you so much, Brett. And I think that’s why our caucus is so focused on eliminating the income tax and the GET on food and medical services, because it’s not piecemeal, because it does apply to everybody across the board, and that’s looking at the most relief for the most amount of people. So thank you, Brett, for calling in and giving your comments. 

OK, so I’m going to switch us a little bit. And, Jonathan, another area of our cost of living is, in Hawaii, we have some of the highest energy costs in the country. I know when I go to conferences across the country and they’re talking about, “Oh, it’s gone up here. It’s 9 cents per kilowatt-hour,” I’m going, “Oh my goodness, you have it so great.” 

But really wanting to ask you, is there anything the Legislature can do to really address those high energy costs?

Helton: Yes. I think that the desire from the Legislature right now, they want a balance of things. They want energy to be both renewable, affordable and reliable. The challenge is, it’s really hard to get all of those three things at once. 

So right now, there’s some very well-meaning efforts to make Hawaii energy self-sufficient, to improve the environment. But what we’re seeing is some of the drawbacks to that current energy portfolio not being very affordable. 

You know, HECO’s [Hawaiian Electric Co.’s] rates, they announced in August, they were going up 7%, and that’s because we were closing the last coal-fired power plant, and we didn’t have, you know, a lot of affordable energy online to replace that.

So all of this is that balance between renewable, affordable and reliable, so that’s good. We should be looking at renewable energy. But the question is, at what cost? 

And that’s a question that I think the Legislature really needs to look at. They need to ask questions like “Is it realistic to achieve 100% renewable energy over the next 15 to 20 years?” 

Ask the question: “How much it is going to cost the economy? 

How much land are we willing to dedicate?” 

Solar farms might have a lot of benefits [but] they do take up a lot of land.

And Hawaii isn’t California. We don’t have unlimited amounts of land. So questions like that really need to be asked. 

But as far as policy specifics, there’s some very free-market reforms that the Legislature could look at. 

What about incentivizing green tech start-ups to start or move to Hawaii? A lot of states are experimenting with things called regulatory sandboxes, which is just a fancy term for a short-term waiver of certain laws and regulations.

And this waiver allows businesses that start up in that state to really get going without all of the administrative and taxation burdens that they’d otherwise face. So that can really allow innovation to flourish. 

So if Hawaii were, for example, to start a regulatory sandbox for green technology, you might see people moving to Hawaii, looking to innovate, looking to experiment with new types of energy. And that could be a boon for Hawaii and the rest of the United States.

Matsumoto: Absolutely. And when you’re talking about tech, and really incentivizing them to come to Hawaii, well, it’s not directly related to cost of living. It just makes me think about how we need to diversify our economy, right? And how important that is. 

And really, with being the epicenter in the Pacific of Hawaii, and in the Pacific Ocean, and being right between Asia and the United States, I feel like we are at that unique advantage to really have a strong tech sector here in Hawaii. But some of our business laws and some of our regulatory laws just make it so prohibitive.

Kefalas: Oh, absolutely. I mean, and you even see it in California, where a lot of these tech companies are actually leaving and moving to places like Texas, Nevada, other areas of the country that have more business-friendly environments. 

And so, you know, you kind of touched on it, but we have an opportunity to be a kind of gateway between Asia and the U.S., North America. And so to be able to capitalize on that, we need to look at some of these regulatory barriers, some of the taxation, some of these things that are keeping these businesses from coming and relocating to Hawaii and providing good, high-paying jobs for our local residents.

Matsumoto: Yeah, and not just with that is, we’ve been really focused in the Legislature on strengthening the STEM [Science, Technology, Engineering and Math] pipeline, the K-12 STEM pipeline, even at the university level, but then not providing the opportunity for those jobs after the students are done. 

And I think that’s even similar with the film industry, right? I mean, I am a graduate of University of Hawaii’s Academy for Creative Media, and while we have film companies and programs that come in, I mean, we could be doing so much more, right? By providing and simulating the economy, having a state-of-the-art film studio, but also incentivizing people to come, because now there’s studios popping up across the nation. And with technology, they don’t have to be on location anymore, right? 

So it’s something that’s, I think, important to look at, is really diversifying that economy. Agriculture too. My family has Peterson Egg Farm in Wahiawa. We’re 113 years old this year.

Kefalas: Oh, wow.

Matsumoto: And we could be doing so much more with agriculture, and ag and tech especially. Putting those together, and going, we can have a smaller footprint for what we grow and we can also be doing a lot more ag tourism. I think we have some unique advantages here in Hawaii.

Kefalas: Yeah, absolutely. And especially, looking at the ag side of things, you know there is a great chance for us to do and grow that agricultural area. 

But you know one of the problems is — and last year, Rep. Matsumoto, I’m sure you remember — but the minimum wage increase. And so, you know, now all of a sudden, you’re having to pay, you know, farm workers and field hands a much higher wage and so a lot of farm owners can’t afford it, quite frankly. 

And so, they’ve just decided to leave their lands fallow and, you know, it’s really created a ripple on the agricultural community. 

And so, you know, I noticed that even when I go to the mainland and at any time to visit, I was recently in D.C. and went to the grocery store and they were selling pineapples for 99 cents there.

Matsumoto: Oh, my goodness.

Kefalas: And I went to Foodland when I got back and the pineapples were, I think, $3.99. And I just thought, you know, “That’s so wrong.” But again, it’s a lot of the regulatory barriers that are pushing these prices up artificially.

Matsumoto: Yes. I remember speaking on the floor on that minimum-wage issue. And I choked up thinking about it, because I remember I was choked up on the floor because I told the story about my family farm, and how much it was going to impact us. 

And just it’s, I think, people are like, “All these employers, they can handle it. They’re living it so easy.” And our small businesses in Hawaii are really struggling, especially during the pandemic, because what I said on the floor is, “We made these businesses open and then close, and then open and then close.”

And then we turn around and say, “Everybody’s struggling. So you’re going to be the only solution with an $18 minimum wage,” rather than saying, “Hey, let’s look at a multi-prong approach. Let’s look at lowering the income tax. Let’s look at eliminating GET on food and medical services.” Not just putting it on our small businesses, because, again, after that happens, we’ve been struggling to figure out how are we going to keep going. 

Now we haven’t hit $18 yet, but we’re not sure how that’s going to look and how it’s going to play out.

And we struggle to find people who even want to work on a farm, much less when you’re having the $18 minimum wage, who’s going to work on the farm when you can work somewhere like McDonald’s or Walmart in AC [air conditioning] instead of putting on your boots and being in manure, right? 

So we talked about food sustainability so much in Hawaii, but not realizing how so many of the bills that we pass in the Legislature have that trickle-down effect, especially on our farmers. 

Kefalas: Right. 

Matsumoto: And they’re the ones who can’t take the time to come in to testify because they’re working so hard.

Kefalas: Right. And I do want to say, I mean, while minimum wages, they do technically increase wages, that’s really for the people that remain in the labor force. And that’s something that we really have to underscore there. 

There’s a lot of people that, yeah, they’ll remain employed and wlll see higher wages, but then there’s a lot of people, which the literature, you know, indicates that these people will either lose their jobs, lose their benefits or have their hours cut.

And so, you know, you also, given the high inflation nowadays, and businesses are looking to push some of those costs off to consumers with this new minimum wage, you know you’re feeling a lot of the prices when you go to the everyday stores. 

So the wage increase is really going to be negligible when these workers go to the stores, these new highly paid employees are going to the stores.

Matsumoto: Yeah, and the kūpuna who have a fixed cost, right? They are not seeing an increase in wages or …

Kefalas: Or Social Security.

Matsumoto: Yes. And all they’re going to be doing is feeling the increased costs. And so those are the things I think we need to look at the really the macro picture, especially at the Legislature when we’re passing things. 

So, again, if you’re just joining us, this is “Capital Convo,” and we’re talking about [the] high cost of living in Hawaii. 

I have Ted and Jonathan with me from the Grassroot Institute. And if you have any questions, just call in at 833-296-Talk. That’s 833-296-8255. And actually I believe we have a caller, Malia? 

Malia: Hi, Rep. Matsumoto.

Matsumoto: Hi, Malia. How are you?

Malia: I’m doing great. Could be better if the cost of living was a little bit lower.

Matsumoto: I feel you. Feel you, Malia. What question do you have for us today?

Malia: So I’ve been trying to get a home for about three years now. I live in a multi-generational home. And a lot of people, I think, my age are in the same place where they’ve been struggling with the cost of living, trying to get a home of their own, and in this state, it just feels impossible. So I’m wondering what recommendations you have and what things you think can be done to solve this issue.

Matsumoto: Absolutely. And I remember when my husband and I were trying to buy a home, we put offers in for three years, and just we weren’t able to get anything or there was too many things that were outside of our price range. 

And I think when looking at this, when talking with people, when I go door to door talking with constituents, one of the No. 1 issues that people cite is not being able to save up for a down payment, right? 

They go, “We can afford the monthly mortgage because that’s pretty much what you’re paying in rent,” or oftentimes the mortgage ends up being cheaper than what you end up with rent.

And so one of the things that the Republican Caucus put into our bill package is to look at down payment assistance programs. So what that does is it helps you to use pretax dollars. So before the government takes any of your money, you can use that money to save up as a first-time home buyer in order to buy a home. 

And so we’re looking to have that down payment assistance be up to $200,000, because now looking at the average cost of a home price at being at $1.2 or $1.3 million in Hawaii, realizing that that’s what we need. So that’s one way we can do things. And, Ted, do you have any …

Kefalas: And, Malia, I’m right there with you. I’ve been looking to buy a home as well for probably the past year or so and it’s probably going to take me a few more years, to be quite honest. just in terms of saving and it seems like things keep going up and up and up. 

But I think Jonathan really hit on it earlier when we talked about some of our solutions to housing. When we talk about, you know, cutting through some of the regulations and the red tape to then be able to build more housing. Right now it’s a supply issue. And we just don’t have the supply to meet the demand. 

And so if we can address that by building new homes, allowing accessory dwelling units, ADUs, more duplexes, triplexes, fourplexes to just increase the supply that’s out there and available for people like you and me, you know, we really feel like that’s something that’s going to address this housing crisis and help bring down the cost of a home. 

Because when we talk cost of living, most people, their highest expense or their greatest expense is on a home. So, whether that’s rent, whether that’s mortgage. And so if we can look at ways to bring that cost down, you know, we’ll also feel it in other things throughout our lives, just going to the grocery store, going out shopping at Ala Moana, wherever.

Matsumoto: And to add on to that, I think something that we’ve really looked at is really helping people towards home ownership. I think there’s been a lot of talk about rental assistance over the years, but not really that path to home ownership. 

And if we’re looking about lifting everybody up, when you’re able to buy a home, that’s locking you into a set mortgage, right? And there’s not that fear of your rent is going to be raised; you know, for the most part, what your mortgage cost is going to be.

And so really being able to help people because, like you mentioned, our population has dropped for five straight years now, by almost 7,000 people between July 2021 and July 2022. Just one year losing 7,000 people to the mainland. I mean, that’s crazy, right? We always talk about people leaving, but I think when you put that into the context of the numbers of people that are leaving, that’s just crazy.

Kefalas: I think we’re one of the only states — I don’t think we’re the only state — but we’re one of the only states where, for the past five years, like you mentioned, we’ve had a consistent decline in population. 

And so you think about it and you think, “Wouldn’t people want to move to Hawaii or be there?” But it’s the cost of living is so high and it’s such where a lot of people, even if they do move here, they realize they can’t make it after a couple of years, three years, and, you know, they end up having to move back. 

Or we lose so many people after graduation. As you mentioned, we don’t have the industry a lot of times, so they end up moving to California, New York, wherever, in order to find a job.

Matsumoto: Most of my friends never came home, because after they finished college, they went: “1) Can’t afford it, but 2) There’s no job opportunities for me here.”

Kefalas: Right.

Matsumoto: Right. It’s very, very limited. And looking at that diversification is really important. And so, Jonathan, I want to pass it to you now. 

You know, the governor also announced a lot of new funding for healthcare. He plans to create new training positions at the university and fund student loan repayment for behavioral health providers. You know, what’s your take on these actions?

Helton: No. 1, I’ll say I’m glad to see the governor’s putting a concerted effort to attracting more healthcare workers because it’s very clear; as was mentioned, Hawaii has almost 40,000 staff short — over 700 physicians. 

In various human terms, this makes it harder to get healthcare. If someone needs it, they might have to wait weeks or even months just to get an appointment. So in addition to all of the funding and all of the training programs that the governor’s trying to put forth, we need to look at other things too.

Things that — as the topic of this show, cost of living — things that make it more attractive for healthcare workers to either grow up in Hawaii and stay here or to move from the mainland. 

So the No. 1 thing — which Ted did a great job of mentioning earlier —  the exempt medical services from state GET, that would be amazing. 

But No. 2, why don’t we take a look at the state’s occupational licensing laws? The state’s medical licensing laws make it a lot harder. If someone is a doctor from California, from Nevada, then they’re trying to move to Hawaii. In order to practice in Hawaii, they have to apply for an entirely new license, which means a lot of time and sometimes a lot of money, and it doesn’t incentivize someone to want to make that move. 

So something that a lot of states have been looking at for things [is] called [an] interstate compact, which is essentially an agreement that, “Hey, I will recognize licenses from other states if other states will recognize my licenses.” So people who join this compact, doctors can practice freely within states that are members.

So Hawaii should really take a look at joining these compacts, or these compacts for physicians, for nurses, for mental health professionals. And they make it a lot easier to practice across state lines. And that would be one really great way right there. 

But you mentioned looking at the income tax. Some doctors, they moved to Nevada. We had one doctor speak with us, and he said he moved to Nevada and he saw an almost $50,000 pay raise just from moving from Hawaii to Nevada. And one big reason: Nevada doesn’t have a state income tax. 

So we have to look at these things relating to cost to make physicians want to practice here.

Matsumoto: Absolutely. And you talked about occupational licensing, and that’s something you couldn’t have teed it up for me any better. I mean, that’s something that our Legislature has really been working on in our caucus. 

Our Republican Caucus has introduced a bill this year to look at all the occupational licensing in our state and really look at what those requirements are. 

In order to be a hairstylist, you have to have somewhere between, like, 1,500, 1,800 hours of, quote unquote, “residency” before you’re able to practice, and really looking at, what are the barriers to providing access into the workplace, not just for those doctors or for everybody else, but just even those entry-level jobs like doing hair.

Kefalas: Now, there’s so many professionals, and I think there was a report that was recently released that said, I believe, Hawaii has the highest rate of occupational licensing in the country. So what that means is that we have the most number of licenses required for different occupations. 

And what that is is, it makes it really difficult, like you mentioned, when you want to move from a state, like Arizona and Nevada, wherever, and you want to come to Hawaii, you can’t, because you have to complete even more hours and training, and you’re not getting paid for that time. 

You know, and a lot of times people will often say, “Oh, we don’t want more foreigners or people from the mainland coming to Hawaii.” But these are, a lot of times, people that have left after college and want to move back home and be close to their families, but they can’t.

Matsumoto: Absolutely. I believe we have a caller. Marissa.

Marissa: Hi.

Matsumoto: Hi, Marissa. How are you?

Marissa: Hi, I have a question. So I’m having a baby in a few weeks.

Matsumoto: Oh, congratulations.

Marissa: Thank you. I’ve been looking at preschool and child care options and the ridiculous cost and expense that comes with early childhood education. So I just have a question: If there’s anything or what can be done to address those costs?

Matsumoto: Thank you, Marissa. I’ll just lead with, first of all, I understand your concerns. I am a mother. I have a 3-year-old and a 5-year-old. Both of them are in preschool. And at one point, it was costing us $48,000 a year. I mean, that’s more than my take-home from the Legislature. It’s my entire paycheck. If I wasn’t called to do the job that I’m here now, it makes absolutely no sense financially for me to work. 

And so it’s something that I’ve been working on in the Legislature for years. And so, I remember looking at a PATCH study — it’s a little bit older now, but from 2019 — and the average cost of child care per child is around $14,000, but can be up to $24,000 a year. 

And there’s also a huge supply issue, right? We were on a waiting list for, I can’t even remember how long, before we were able to get our firstborn into a preschool. And so, it’s just like the housing, there’s that supply issue, there’s the cost issue. 

And so, one of the things that we’re really looking on doing is, 1), similar to the doctors, right? Incentivizing more opportunities for preschool teachers through different types of certification, different types of incentives to have them go into the early childhood education field. 

And then also for talking about the supply this year for the Women’s Legislative Caucus, which I happened to be a co-convener for. I’ve been the co-convener for the last nine years. 

And again, here’s a bipartisan caucus and, recognizing this is an issue we need to address, and so we have a bill this year, HB583, for those of you who track bills. And the bill is really focused on the accreditation of child care programs, to ensure that these programs are more accessible, but also that they’re providing top-notch early education for our children because there is a lot of questions on, are we just providing child care or are we providing early education?

But I think being able to look at those costs, because $48,000 a year for two children is, again, insane. And by the end of it, we had about $30 of discretionable spending every month. 

And so, I think, again, something that the Legislature and we are really looking at and something that I have been really focused on, because I felt it personally for the last few years. And it’s one for those families that have children, I mean, it’s essentially a mortgage. Or it’s the same as your rent. And if you have two kids in preschool …

Kefalas: Game over.

Matsumoto: … it’s double the rent. So it’s crazy. So thank you again, Marissa, for that question, because I know it’s a top issue for people here in Hawaii.

Marissa: Thank you. Thank you, Rep. Matsumoto.

Matsumoto: You’re welcome. And also, I want to let that if you follow @RepMatsumoto on Instagram and also at “Rep. Lauren Matsumoto” on Facebook, we will be keeping all of you updated on these bills as they’re going through the Legislature because we realize it’s so important for people to know what’s happening, but also would love for you all to testify when these bills are being heard. So we will be keeping you up to date if you follow us on social media.

Marissa: Hey, great, thank you.

Matsumoto: Thank you so much. And, again, if you’re just joining us, we are talking about the high cost of living in Hawaii with Ted and Jonathan from the Grassroot Institute. This is the show “Capital Convo.” 

And so if you have any questions you’d like to ask, give us a call at 833-296-8255. We’ve had a lot of really wonderful questions thus far, and just goes to show you what an important issue this truly is and how many people really care about it. 

So, I’m going to switch us really quick in a different direction because it’s such a big issue: Ted, what about the new Aloha Stadium development? I mean, some lawmakers want to see it have affordable housing nearby, some might think it’s going to be another boondoggle like the [Honolulu] rail. What are your thoughts?

Kefalas: So, I am torn because I played football for a long time, and it’s something that’s near and dear to my heart. But, you know, in my mind, ideally, the state would not be in the stadium-building business. 

But, you know, if our legislators are determined to do it, then the goal needs to be to minimize the burden on the taxpayer. 

And, I think, in conversations with a lot of Republican and Democratic leadership, the one promising thing that I’ve taken away from it is that a lot of them feel the same. And, you know, I’m not sure if it’s because people still have egg on their face from the rail, but it is something that is encouraging.

You know, granted, the record of past government projects in Hawaii isn’t great, so you know, I do have a little bit of hesitancy. And I think we are already seeing a lot of the dysfunction that we’ve come to know with these government projects. 

You know, for people that may not be aware, right before leaving office, Gov. Ige wanted to stop the project and change it all up and start almost from scratch. 

And I know that Speaker Saiki has actually mentioned that DAGS, the Department of Accounting and General Services, has mentioned that the project is already $75 million over budget. And so, you know, when they say 75, you have to question how much that actually is.

Matsumoto: And correct me if I’m wrong. I believe I remember them saying $25 million was just spent in planning, or was that right?

Kefalas: Right.

Matsumoto: Right. But nothing actually been done, nothing digging in the ground being done, just planning — for $25 million. And so, that’s something I think that we all have to look at. 

And, I mean, a recent poll said 46% agree to the stadium and 38% disapprove, and that’s a pretty close number. So, I think, as a Legislature, when we’re looking at those things, I think we are all pretty afraid with what happened to rail. We do not want another rail boondoggle. 

And you know some people are … I also feel the same as you and I’ve played at the University of Hawaii. I was on the water polo team. And so UH sports are near and dear to my heart. I mean, I was there every single game, the year that we went to the Sugar Bowl. So I was able to talk with Colt Brennan and be there at the same time as all of those amazing athletes from UH that we all remember. 

But really, looking at what is that going to cost and what are the overruns going to be? Because if we’re already spending this much and haven’t quite started yet, it’s enough to give you pause.

Kefalas: Right. And you also have to ask what is the best use of that space, and it might be for stadium. But, you know, we talk so much about housing and we talk especially about housing located near transit areas. 

And Aloha Stadium is a perfect example where it’s right off the rail line. And if we really want to build housing, and if we’re really serious about housing, then that needs to be in the conversation.

Matsumoto: Absolutely. And we have just a few minutes left, and I kind of wanted to talk about the difference between that progressive versus conservative approach to cost of living, you know, and wanted to see if you can talk a little bit about that.

Kefalas: Sure, I’d be happy to. So, we kind of touched on it a little bit earlier, but the progressive approach to cost of living is to increase the minimum wage. And, you know, essentially, what that does, we see, is increased inflation, increased costs at the stores, it drives businesses out of business and it just makes it overall difficult for people to operate in the state. 

And so, you know, while raising the minimum wage may seem like it’s a great idea, and for a lot of politicians, you know, they think it is because it imposes pretty much zero costs on the political body, when in reality, it’s putting those costs to the private sector and private employers. 

And so we really just have to be careful. You know, when the government puts in these mechanisms to artificially, you know, mess with wages or the free market in general, we have to be cautious about any kind of ripple effects. 

And I think that it’s something that, hopefully, can be addressed this session, when we talk about taxes and some of the regulatory burdens that, you know, the Legislature has placed over the past decade, two decades plus.

Matsumoto: Absolutely. And, Jonathan, I wanted to see just to have you chime in. Any last thoughts on the overall issue of cost of living in Hawaii?

Helton: I think the last thing I would say is that we’ve talked a lot about the state, and that is fantastic. [But] this is county-level too. So at the Grassroot too, we’ve been focusing a lot on property tax recently. I know Honolulu County rate[s], the assessments are up massively. 

So this is a conversation that you know we hope to have with the counties as well, but at the state [level], I think it boils down to this: [The] progressive approach to cost of living usually involves adding more government spending, adding more government regulation, whereas a more conservative or free market approach usually tries to focus on decreasing the size of government.

Matsumoto: Absolutely.

Helton: I think if you could boil down, that would be it.

Matsumoto: Absolutely. And again, I just wanted to thank everybody for joining us here on “Capitol Convo” tonight. We are here every Monday, Wednesday and Friday from 5 to 6 p.m. on 690 AM and 94.3 FM The Answer. And we really look forward to having more “Capital Convo” with you. Mahalo.