The One Dollar Solution

by Tom Yamachika, President, Tax Foundation Hawaii

The Governor’s final veto decisions are in.  Out of 267 bills that the 2026 Legislature sent to him, he vetoed one of them and reduced an appropriation line item in another.

This week we will be discussing the line-itemed bill, SB 2600.

Back in 1978 when we last had a constitutional convention, delegates thought that government shouldn’t be keeping the people’s money if it didn’t have to.  “Your Committee believes that it is proper for the State’s taxpayers to benefit from any surplus in the State’s general fund balance,” they said.  Thus, they put before the voters, and the voters approved, what became Article VII, section 6 of our Constitution.  It says that if our general fund balance is more than 5% of general fund revenues for two fiscal years in a row, then the legislature is supposed to enact a tax credit or refund to give some of that money back to us taxpayers.

As we wrote about earlier, it only took lawmakers a couple of years to squash this provision into insignificance.  In nearly every year between 1983 and 2009, lawmakers gave us a $1 credit, called the general income tax credit, whenever the constitutional provision was triggered.  The exceptions were in 1989 and 1990.  And in 2010, at lawmakers’ urging, we voters approved an escape hatch for this provision, allowing lawmakers to feed our rainy day fund instead of giving us a credit.  In later years, again at lawmakers’ urging, we approved other amendments allowing lawmakers to send the surplus to funds intended to pay down the State’s debt or fund its pension obligations to State workers.

In recent years, our Legislature routinely considers a bill to satisfy Article VII, Section 6.  The bill provides for a tax credit in a blank amount, an appropriation to the rainy day fund in a blank amount, and appropriations to the debt service and post-employment benefit funds, again in blank amounts.  SB 2600, as originally introduced, was that bill this year.  It was what we call a Blankety Blank bill.

As the bill traveled through the Senate, and then through the House, lawmakers were urged to approve the bill as is, although it was impossible to know whether they were thinking about giving taxpayers a credit in any amount, or how much general fund money was going to go through one or more of the three constitutional escape hatches.

Lawmakers played along.  That’s why the subsequent drafts of the bill, Senate Draft 1 and House Draft 1, look pretty much the same as the original, with none of the blanks filled in.  The only draft that had a specific number in it, Conference Draft 1, was filled in after closed-door conference committee meetings.  At that time, no public input was invited or accepted.

It’s like going to an appliance dealership where the salesperson asks you to sign a contract to buy an appliance where the price and terms are blank.  “Don’t worry!” says the salesperson.  “I’ll get you the best possible deal on the best possible terms!  Trust me on this!”

I would never sign such a contract or recommend that anyone do that.  “Know what you are signing before you sign” is essential consumer advice, so shouldn’t it apply to lawmakers too?  To me, asking lawmakers to vote on a Blankety Blank bill fails to respect the lawmakers and their responsibilities.  It’s telling them to vote on a bill when they have no idea of or control over its content.

The final draft of SB 2600 appropriated $50 million to the rainy day fund.  The Governor didn’t like that because our rainy day fund already has more money in it than it has ever had and we have current and pressing state needs, so he cut the amount down to $1.

That, for this year, was the one dollar solution.