Economic Misfortune Can Fix Our “Shadow Budget”

by Tom Yamachika, President, Tax Foundation Hawaii

In recent weeks, we have been reporting on Hawaii’s “shadow budget.”  We found out that a first responders’ campus in central Oahu, even when a bill to create it was stomped on, shaken violently, and killed in the House, could still be funded via the State’s budget bill due to some behind-the-scenes machinations involving the powerful chair of the Senate Ways & Means Committee.

That, however, may change because of some misfortune.

In the most recent meeting of the State’s Council on Revenues, economists came back with a more dire forecast for Hawaii‘s economy, lopping a cool billion dollars off the State’s forecasted revenues. 

In response, Governor Green just did something very unusual.  He met with legislative leaders, including the senator we mentioned above, and told him that he intends to line item veto parts of the budget bill in order to accommodate the billion dollars that we’re not going to get.  Our Constitution, after all, requires that our budget be balanced.  This was unusual because the Governor still has quite a bit of time before the deadline to notify legislators of bills he plans to veto.  And even if he didn’t line item veto the budget, he certainly has the authority to withhold funding for items in the budget given that some of the income on which the budget was based is not going to materialize.

So our Governor had a weekend meeting with this powerful senator and said, “Look, we need to invest in established state priorities, such as housing, homelessness, health care, and the environment, and here you have a $50 million project for first responders but our Honolulu Police Department, who ideally should be one of the prime users of this project, has said they don’t like it and won’t participate in it.  So, that project is going to be line item vetoed.  But we’ll find other ways to modernize the State’s emergency response facilities.”

The good Senator issued a statement recently saying that he understood where the Governor is coming from.  Perhaps that means he is plotting revenge later but realizes he can’t do anything now.  Could the Legislature override the veto of the budget bill?  That would be extremely tough given that the Senate would need the House to vote to override as well.  Further, even if the override did occur, the budget would then be out of balance, and the Governor could restrict funding for certain items at his discretion to make the budget balance.  Thus, funding for the first responders’ center still would not happen.

In the meantime, the Governor is also taking sensible steps such as line item vetoing $500 million out of the $1 billion that the budget bill would add to our rainy day fund.  Adding $1 billion to the fund, which sits in a bank somewhere waiting for an emergency to happen, would be questionable even if we had the spare cash given that we have current uses and needs for that money.  Now, with the downbeat economic forecast, it’s questionable whether we even have the cash to spare.

Other significant proposed reductions include funding for teacher housing, reduced from $170 million to $50 million; boating and ocean recreation, with $60 million eliminated; water and irrigation infrastructure, from $94 million to $5 million; Iwilei/Kapalama transit oriented development infrastructure design and construction, from $86 million to $25 million; and Hawaii Green Infrastructure Authority solar energy storage loan program, from $100 million to $50 million.

Sometimes it takes a bad situation to make another bad situation better.  This might be one of those times.