Hill finds some gems amid Legislature’s overspending

by Grassroot Institute of Hawaii, June 5, 2023

Talking about Hawaii’s high cost of living was how Malia Hill, policy director of the Grassroot Institute of Hawaii, and radio host Rick Hamada eased into a conversation earlier this month about the Hawaii Legislature’s “distressing” 2023 legislative session.

Appearing June 1 on the Rick Hamada Program on News Radio 830 KHVH, Hill said it was frustrating how little the Legislature did to change the conditions that have been prompting thousands of Hawaii residents to leave for the mainland. especially in light of the state’s wildly irresponsible spending spree that exceeded the state’s legal spending limit by 16%. 

“There is a connection between the fact that you have this growing budget and all the spending and the fact that people are leaving, because that money that’s being spent by the Legislature, by the governor, it has to come from somewhere. And it comes from the … taxpayers, and people leave.”

She expressed hope that Gov. Josh Green will use his line-item veto power to trim the budget before signing off on it. She also highlighted two bills that would improve Hawaii’s economy and a couple of others that would make things worse.

Hill said the bills she like to see the governor sign are SB674 and SB1437. The first would allow Hawaii to enter the Interstate Medical Licensure Compact. She said if the governor signs it, it will become much easier to attract doctors to Hawaii from the mainland and help alleviate the state’s doctor shortage.

The second — which the governor actually did sign on the same day as Hill’s interview with Hamada — will allow certain Hawaii businesses, such as partnerships and S corporations, to deduct their Hawaii income taxes from their federal income taxes, saving them millions of dollars a year and making it “slightly easier for Hawaii businesses to survive” — at no cost to the state.

Hill said among bills that Green should veto are HB525 and SB945, which stand to severely cripple Hawaii’s cryptocurrency sector.

“We hear so much about the need to diversify our economy,” she said. But then “you get a new industry like cryptocurrency, and the state’s response is 80 pages of regulation.”

TRANSCRIPT

6-1-23 Malia Hill interviewed by Rick Hawaii on News Radio 830 KHVH 

Rick Hamada: I’m delighted that Malia Blom Hill, policy director, Grassroot Institute of Hawaii, joining us from Washington, D.C. And Malia, I wish you aloha and a good morning to you.

Malia Blom Hill: Oh, thank you. Aloha to you.

Hamada: Malia, I know this is the first time we’ve gotten together and I love the fact that Grassroot Institute of Hawaii [is] part of the morning show, but would you mind sharing a bit about yourself, and then we’ll jump into some details?

Hill: OK. Well, I feel like since I am coming from Washington, D.C., today, I need to just defend myself and say I’m a local girl at heart. My family is all from Kauai. But I’m one of those people where you just kind of had to go to the mainland ‘cause Hawaii is just so expensive.

Hamada: Wow.

Hill: But happily, I work with Grassroot Institute of Hawaii to advance policies that I hope one day will make it affordable for me to come home.

Hamada: Well, we’re prayerful that it does. Ironically, today I’ve spent a lot of time about the exiting out of Hawaii, and that we have, for instance, we have negative growth in age groups here in our state: 18-plus negative — can you say negative in growth at the same time? — but, you know, down 1.5%. And under 5 years of age, down 11.5% in the U.S. Census data. So your lamentation about affordable and living in Hawaii, I get it and I live it too.

Hill: Yeah. It’s very distressing. You know, everyone always asks you, “Why’d you leave Hawaii?” and you have to say, “No one wants to leave. It’s just, you know, it’s just the economic reality.”

Hamada: And it’s the decision made by thousands, because that’s the rate we’re losing of people leaving our state. And I understand it. But I also understand that it’s a condition that has been caused, that hopefully and prayerfully will be able to be rectified. 

And we’re to talk a little bit about our state and the governor, because we are going to get into hundreds of millions of dollars that, with a population base of about 1.4, 1.5 million people, Malia, my goodness, the sheer utter amount of money that flows through this state and this city and county.

Hill: I know. It is stunning. And, you know, there is a connection between the fact that you know, you have this growing budget and all the spending and the fact that people are leaving because that money that’s being spent by the Legislature, by the governor, it has to come from somewhere. And it comes from the people who, you know, taxpayers, and people leave. And so that money has to come from whatever taxpayers are left and more of them leave and the budget keeps going up. It’s just a vicious circle.

Hamada: We’re talking with Malia and with Grassroot Institute of Hawaii, based out of Washington, D.C. If we could, Malia, let’s just jump right on in. 

There is a bill … there’s a $200 million — this one just is, yeech, shaking my head constantly —  $200 million slush fund, basically, that is before the governor. Your thoughts on this and the disposition of the bill now?

Hill: I mean, this one was just … I mean, you always are frustrated. I don’t know if there’s ever been a legislative session where I wasn’t a little frustrated at the end. But to have such a huge budget increase and then, on top of that, throw in this $200 million gift, you know, to the governor. 

And the governor has said, you know, “I’ll be very transparent about how I spend it.” 

I mean, good? I guess that’s better than not being transparent about how you spend it, I suppose, but should that even be an option? 

You know, should we be grateful that you’re at least gonna be transparent about what you do with your slush fund? 

We think the most responsible thing to do, especially given the way that spending has just gone through the roof this year, would just be to line-item veto that slush fund. 

But [sighs] you know, will the governor do so? It doesn’t look like he intends to.

Hamada: And remind us, Malia, how did this even come about? Now we’ve had conversations about … But it was the frenetic end of this legislative session, and the deadline was looming, and there was all kinds of horse-trading and last minute and not even read and all this. Is this a result of that or is it perhaps something else?

Hill: I mean, it definitely seems like it’s this little escape clause. Like, “Hey, we really didn’t catch everything. So here’s $200 million just in case, or maybe even a little bit of a dodge for some of those things that you didn’t get specific appropriations ‘cause they were just so contentious,” like HTA [Hawaii Tourism Authority]. 

And so we have this incredibly chaotic end of the session. Like you point out, the feeling that people aren’t even really fully aware of what’s in every single bill that’s getting jammed through, and then all of a sudden, you know, this $200 million, and at the time it was passed, they tell us, “This isn’t that unusual. We’ve done it in the past, we just didn’t do it for Gov. [David] Ige.” 

And we kind of, “OK, that sort of makes sense,” but you know, looking at it, I’m not even really sure how often they’ve done it in the past. We have our researchers looking at that with this claim like, “Oh, no, no, no. We often give the governors a blank check.” 

And no, we’re still trying to find a lot of examples of this, you know, “Hey, here’s a bunch of money to just do what you want with it.”

So I do think it’s, like you say, I think it’s just one of those, “Oh, hold on a second here. Last-minute rushed decisions.”

Hamada: Yeah. I think there was another indicator, and Malia Blom Hill with this, another indicator was that — for the first time I can recall — that five Democrats, they voted against the final budget bill. And I’ve never seen that before in my days here. And I think that’s really an exclamation point on how just messy this entire thing is. 

What is the status of our state’s budget? And I know there are some specific bills, but where are we financially in the state? 

I mean, we went over our spending ceiling that purportedly we have, but it just seems like it’s just a reckless scenario, Malia.

Hill: Yeah, it is stunning. You know, there were eight house members that voted no, and six voted yes with reservations, for whatever that’s worth.

Hamada: Yeah.

Hill: And I mean, I think that’s symbolic in its own way, that we almost never get anyone voting against anything.

Hamada: Yeah.

Hill: We both say that this is stunning. But you also have to kind of put a big question mark over the fact that no one ever votes against anything. 

But it’s worthy of note because we have about $11.29 billion in spending for that general fund budget. That’s a 23% increase. And so that is busting the cap by about $1.6 billion. And we do have a cap. And it’s even a constitutional cap.

Hamada: Yeah. 

Hill: So that sounds very serious and yet, you know, people are always a little surprised, “What, we have a spending cap?” Well, that’s because to exceed the spending cap — and we are exceeding it by, I want to say, 16% — you just have to have a two-thirds vote from the Legislature to agree to exceed the cap. 

But when you have a merely one-party Legislature and even within that, a lot of the minority members also voted for the budget. So it’s just really not a very high bar. 

You know, you’d have to have a much more divided Legislature for that to be an actual meaningful cap. So it’s not really hard to go past the cap. They do it relatively regularly. 

But as a result, I don’t know if you recall, but just in January or so, we were talking about billions of dollars in surplus, $10 billion surplus, $7 billion surplus. 

And now we’ve gone from that to the possibility that we’ll be running a deficit by 2028. And how … Well, yes, they have downgraded how much revenues they expected, but we would still be in surplus if we were more responsible on our spending. It’s just the spending. We’ve just basically spent our way up to a potential deficit.

Hamada: It’s unreal. It is just absolutely unreal. 

We’re talking with Malia Blom Hill, policy director, Grassroot Institute of Hawaii, based out of Washington, D.C., hopefully, and prayerfully returning back home soon. 

There are two bills of note, Malia, that Grassroot has attention on, that the governor on his desk should pass these two bills. One SB674. Could you walk us through a little bit about medical licensure compact and what the benefits are?

Hill: Yes, this is … we had a bunch of bills in this session that we were just really hoping would kind of help address the doctor shortage. Sadly, one of them, a general excise tax exemption for physicians, or private practice physicians, it did not pass. And I’m still sad about that. 

But the one that did get through was this one, SB674, which allows Hawaii to enter the Interstate Medical Licensure Compact. And effectively, what that is is this sort of group that oversees a set of agreements between states as compact states in order to make it a lot easier for physicians in those states to go practice in another state. 

That’s a really complicated way to basically just say, like, if we join this compact and there’s a doctor who lives in the mainland and he goes, “I want to go to Hawaii and practice there,” it just becomes so much easier because you always have to get a license in the state where you practice.

But this bill, joining this compact, will make it much, much easier, streamline the whole process for doctors to basically get licensed and practice in Hawaii. And that’s one of those things that we need to do in order to address this doctor shortage. 

I believe we’re short by about 776 full-time-equivalent physicians. Mostly primary care physicians, but as anyone, especially on neighbor islands knows, those specialties, you know, that can be so bad that you’ll have to fly to Honolulu to get care. 

And so making it an easy thing, or much easier thing at least, for a doctor to set up a practice in Hawaii, get licensed to practice in Hawaii, that’s a huge deal. And I hope that this is just the first and we see, you know, a nursing compact and some specialist compacts in future sessions.

Hamada: We’re at 9:22 in the morning. I have some time remaining with Malia and prayerfully coming home soon, but thanking her for her time today. 

SB1437, pass-through entity bill. Malia, why is this important?

Hill: Yeah, this is one of those ones that sounds technical, but when you understand, you just go, “Oh, well, that seems like an easy — ” It’s basically an easy way for Hawaii to just lower the tax burden on some businesses. And it costs us nothing. 

So what it does is it lets members of partnerships and S corporations elect to pay their state income tax at this level so they can deduct their state income tax liabilities from their federal income tax liabilities. It’s a workaround for what happened with the federal Tax Cut[s] and Jobs Act. That law put a cap on these deductions. 

So this just kind of works it around, so that, basically, you reduce the tax burden on Hawaii businesses. You do that without costing anything, without decreasing the revenues.

There are lots of other states — 29 other states — that have this. And they estimate that it’s saved business owners about $10 billion a year in federal taxes through these kinds of laws. So this is just a really nice, easy way to do it. Make it slightly easier for Hawaii businesses to survive.

Hamada: We’re talking with Malia Blom Hill, again, Grassroot Institute of Hawaii. Malia, what’s the best way for us to connect with Grassroot Institute?

Hill: Oh, I suggest you visit our website, and in fact, if you are excited about some of these bills we’re talking about, you go to grassrootinstitute.org, get to see our website, or grassrootinstitute.org/action to take action and write to the governor on some of these bills. It’s this whole cool little function where it makes it really easy to write to the governor and even helps you write your letter.

Hamada: It was clear the veto on the $200 million, you know, cash– I want folks to– $200 million. We get caught up, we talk about the federal deficit. “Oh, we’re $32 trillion. What’s $200 million, Malia? Come on, it’s not that much, right?”

Hill: I mean, if you think about it, that, OK, it’s hopefully slightly more than a million, but let’s just say a million. That’s $200 from everybody [in Hawaii]. [laughs] Do you have a use for $200?

Hamada: Oh.

Hill: Because I do. [laughs]

Hamada: Sister, where do we start? [laughs] I hear you. But the vetoing of HB525 and SB945, folks may not really be clear on what a bad cryptocurrency bill is made of. Can you help us understand these two?

Hill: Yeah, these are very frustrating because it’s almost … You know, we hear so much really about “We need to diversify our economy, let’s look at other things.” And then you get something, like cryptocurrency, just a small little, you know, it’s not the answer to all the economic issues in the state, but, “Hey, here’s a new industry. Here’s an emerging you know avenue.” And the state’s response is 80 pages of regulation.

Hamada: Yeah.

Hill: Let’s just snuff that out before it could even get started.

Hamada: Right.

Hill: SB 945 is 80 pages of regulation on cryptocurrency. It is extremely heavy-handed. It basically gives the commissioner of the Division of Financial Institutions [the] ability to just govern and regulate every possible avenue, portion of the cryptocurrency industry. Somehow she or he is going to do this without falling afoul of federal regulations and without killing the industry completely. I really don’t see how that happens. 

And it creates this sort of regulatory uncertainty and just stifling amounts of regulation that will make it extremely difficult for any business that is in this sphere to operate in Hawaii. It just becomes expensive. It becomes expensive because there are licensing fees. It becomes expensive because just navigating all the regulations is expensive.

Hamada: It sounds a little protectionism to make way for the Fed [Federal Reserve] and the utilization of digital currency through our Fed, eliminating our paper currency and making us vulnerable to perhaps a seizure of personal wealth. But that’s for another day. [laughs]

Oh my, we’re already at 9:27, I can’t thank you enough. 

Since based out of D.C., if I could just ask quickly, you know, debt ceiling and the debate discussion, I’ve called it kabuki theater since day one, but it is what we have. What’s the buzz around town and in the hallways about what’s taking place in Congress today?

Hill: Well, it is … You’re right that there’s a lot of buzz, you know, it has gone through the House, and, you know, I don’t want to come off so cynical as to say that everyone is going to make it happen, because government likes to do nothing more than spend money, but that is my take [laughs].

Hamada: Yeah. It’s so funny, when you look into the details, this is a useless, senseless bill and especially when it’s purported to shave off expenditures and cash, when you look at it, it comes out, I think the percentage was, reduction, was at or less than 1% that’s actually going to be realized, and I just shake my head in astonishment.

Hill: Yes, I know, it feels like an argument between the people who want to spend a lot and the people who want to spend a lot but slightly less than that.

Hamada: [laughs]  Well, I think you just described every family home in America at this point. So, Malia, I want …

Hill: Possibly.

Hamada: I think it could be. I can’t thank you enough, again. I hope you can be a part of the program in the future and I wish you all the best in D.C.

Hill: Oh my pleasure. Thank you so much for having me.

Hamada: It’s a pleasure. Thank you, Malia, Aloha.

Hill: Aloha.

Hamada: Malia Blom Hill, policy director of Grassroot Institute of Hawaii, based in Washington, D.C.