Hawaii needs better budgeting for Maui recovery

by Keli‘i Akina, President/CEO Grassroot Institute, February 26, 2024

Helping our Maui ohana recover from last year’s disastrous wildfires is paramount. But the only way to do that without hiking taxes or going into massive debt is to cut state spending.

We can rely on federal aid to some extent, but the local share of the expenses is spiraling out of control.

Gov. Josh Green’s administration had thought the Lahaina recovery costs would total about $600 million over the next four years. But now it appears that amount will cover only this year.

Unrelated to Lahaina’s wildfire recovery, consider that the state also is responsible for paying out hundreds of millions of dollars in back wages to state workers who were not given hazard pay during the COVID-19 crisis.

Ironically, it was only a year ago that state lawmakers had a healthy budget surplus to work with. But then they went on an ill-advised spending spree.

Even after Gov. Green chipped away $1 billion, total spending still busted through the constitutionally mandated state spending cap by more than $1 billion.

This year’s budget already was set to exceed that cap again, thanks to higher costs and disappointing revenue projections. But now, with the Lahaina recovery costs moving to center stage, the outlook is even worse.

For those who suggest taking on more debt is a viable option, I will point out that the state can’t really afford more debt, and debt doesn’t actually balance the budget anyway — it just makes the bill bigger in exchange for delaying the pain.

As for possibly increasing our taxes, Hawaii already has the nation’s second-highest tax burden, highest cost of living and highest average housing prices. We’re already taxed to the max and really can’t afford to take on any more, as indicated by our continually declining population and our stagnant economy.

That leaves budget cuts as our only option. Legislators seem aware of this, and some senators have suggested drawing up contingency plans for 10% to 15% cuts across the board.

This is something they should have considered long ago, even before the Lahaina disaster. The golden rule of budgeting is that government spending should not outpace the economy, yet between 2013 and 2022, Hawaii’s state budget ballooned by 87% while the private sector increased by only 24%.

Unfortunately, we can’t change any of that now. But we can start practicing responsible budgeting — especially if we want to make sure we can help our own in times of trouble.

Foremost, we need to forget increasing our taxes or going deeper into debt. We need to make do with the money we already have, and stick to that plan as much as possible.

It might sound counterintuitive, but tax cuts could help us out too. There is lots of evidence that lower taxes result in economic growth, and more economic activity means more tax revenue we could use in times of disaster.

The bottom line is that budget cuts do not mean that Lahaina victims would have to fend for themselves.

In fact, we need to cut the budget to ensure that we can continue to provide necessary aid — as well as better position ourselves for future emergencies.