Climate Resiliency

by Tom Yamachika, President, Tax Foundation Hawaii

Sooner or later, we and Hawaii will have to face problems caused by increased risk of catastrophic events due to global climate change. In recognition of this danger, the governor has gotten together a blue-ribbon panel, called Hawaiʻi’s Climate Advisory Team (CAT), to develop community-informed policy recommendations to drive the state’s climate-related disaster policies for the 2025 legislative session.  Recently, the CAT released its recommendations.

Not surprisingly, they’re expensive.

The CAT recommended that two new funds be set up. The Hawai‘i Climate Resilience Fund, to receive $1.375 billion over five years, would fund grant programs for improvements that would increase climate resiliency, including retrofitting homes.  The Hawai‘i Disaster Recovery Fund, to receive $500 million over five years, would provide a funding source for residents who get injured or displaced as a result of a natural disaster.

So here are our comments on the two new funds.

Big funds with large amounts of money sitting around become, now or over time, tempting targets for lawmakers to raid or divert.  We are not looking at a budget surplus, with the economic outlook rosy, that wasn’t so just a few years ago. At that time, lawmakers were frantically turning over every loose rock to find idle monies to raid.  Some of that raiding had adverse long-term consequences, such as when lawmakers in the 1990s skimmed off earnings from the state employees’ pension fund.  The current underfunding in that pension plan, ERS, as well as the state retirees’ healthcare system, EUTF, are two of the budget issues that are so big that they need to be slowly resolved by fiscal discipline not over years, but decades.

Regarding the disaster recovery fund, it seems to us that we already have a rainy-day fund with $1 billion in it that is supposed to be available for “rainy days,” which would include hurricanes, tsunami, wildfires, and other natural disasters. So the question we’d like to ask is whether this new fund really needs to be additive to the rainy day fund we already have.  And if the answer is yes, our recommendation is to make this new fund a sub-account of the rainy-day fund because it serves many of the same purposes.

And for the climate resilience fund, we shouldn’t need to wait five years for the balance in the front to ramp up. These grants and other programs recommended by the CAT should get up and running already.  As the CAT pointed out, we already are in a world of hurt because the insurance industry is starting to see Hawai‘i as a place where the risk of catastrophic damage from a natural disaster is not insubstantial.  When that happens, insurance premiums go up or insurers decide not to write policies.  We are already seeing these effects.  (If you don’t believe me, ask some condo owners.)

According to some of the studies cited by CAT, spending $1 now on climate resiliency can save us $6 in disaster relief later.  The challenge will be actually getting the work done, on time and on budget, before the next natural disaster comes our way.