Legislators wrap up
budget agreement
But a House-Senate fight on privatization
By Mike Yuen
could necessitate extending the session
Star-BulletinIn stark contrast to deadlocked public talks just two days prior, House and Senate conferees needed only 40 minutes early this morning to formally wrap up work on the state's $11.5 billion operating budget for the biennium that begins July 1. The agreement by budget conferees makes it likely that an extension to the legislative session won't be needed, allowing lawmakers to adjourn on Tuesday as scheduled, said House Speaker Joe Souki (D, Wailuku).
But a House-Senate fight over a bill to clarify that the state and counties can continue contracting out public services to private agencies could extend the session, Souki said. But he hopes it doesn't. Conference negotiations on that bill were to begin this morning.
It took eight hours of secret deal-making that ended about 5 a.m. yesterday to get the House and Senate to agree on the budget. Participating in the talks were Souki, Senate President Mizuguchi, Senate money co-chairwomen Lehua Fernandes Salling and Carol Fukunaga, and House Finance Chairman Calvin Say (D, Palolo).
The budget apparently was able to move because it was separated from discussions on proposed tax-credit incentives, such as the Senate-favored exemption from the 4 percent general excise tax for all exported goods and services, and the House's tax break for hotel renovations.
Say said negotiations on tax breaks could still occur before tomorrow's midnight deadline to have bills in their final form if the Senate also puts on the table other bills the House might be interested in considering. He did not specify what those measures might be.
Say added the Senate's proposal to impose a tax on time-share condominiums similar to the hotel room tax was essentially dead.
The agreements that budget conferees formally endorsed this morning included:
Limiting budget cuts to $279 million, instead of the $460 million -- branded as "devastating" by Gov. Ben Cayetano -- that the Senate wanted.
Yesterday, Mizuguchi said both sides have also agreed to raid the state highway fund reserves, bringing in $70 million to the cash-strapped state general fund.
Mizuguchi and Say said both sides agreed to retain a preferential tax credit for local insurance companies.
Its elimination would have brought $51 million into the general fund during the biennium.
The decision to keep the special insurance tax nixes a settlement that Gov. Ben Cayetano made with about 50 out-of-state insurers, who in 11 lawsuits claim the state's 1 percent insurance premium tax credit is discriminatory and violates their constitutional right to equal protection under the law.
Mizuguchi and Say also said both sides agreed that the counties' revenues from the hotel room tax would not be capped to pay for the state convention center. Instead, general funds would be used to pay for the center's debt service and operation.
Officials from the Department of Business, Economic Development & Tourism said the budget restores from zero the entire $25 million that the Senate was proposing to cut from the Hawaii Visitors and Convention Bureau in the second year of the biennium.
The finishing touches to the budget would have been completed sooner if Senate Human Resources co-chairs, Sens. Brian Kanno (D, Ewa Beach) and Suzanne Chun Oakland (D, Liliha), hadn't tried to unravel the deal Souki and Mizuguchi had engineered to help get the budget completed.
Kanno and Chun Oakland late yesterday wanted to restore a bill provision that would raise from 19 to 24 the age of full-time students covered by the Public Employees Health Fund. While they said the change would have no fiscal impact on the state, House colleagues thought that it would -- to the tune of $200,000 annually.
Budget talks recessed for 15 minutes while Kanno and Chun Oakland huddled outside the committee room with Mizuguchi, Senate Co-Majority Leader Les Ihara (D, Kaimuki), Fukunaga and Fernandes Salling. The turning point to their discussions apparently came when Souki, in a booming voice, told the senators: "We made a deal! That's it!"
The deal stood.
Lingle using ‘scare tactic,’
By Mike Yuen and Gary T. Kubota
Rodrigues says
Star-BulletinGary Rodrigues, the union leader whose lawsuit called into question government's practice of contracting out a variety of public services, has accused Maui Mayor Linda Crockett Lingle of using a last-minute "scare tactic" to pressure the Legislature, which is now embroiled in the issue. Lingle is threatening to cancel 263 contracts with private firms and agencies that provide public services if the Legislature doesn't clarify the law allowing the state and counties to farm out public services.
State lawmakers have two bills addressing the issue. House and Senate conferees were to meet at 10:30 a.m. today to try to resolve differences on the measures. Conferees have until midnight tomorrow to shape a compromise bill if the House and Senate are to vote on the issue Tuesday, the Legislature's scheduled adjournment.
Lingle said she would void the contracts a week from today.
"Let her cancel all those contracts. Let her get sued by all of the businesses," United Public Workers leader Rodrigues groused yesterday. "Let's see what happens."
The contracts that Lingle is vowing to terminate cost $23 million total and provide services such as a crisis line, animal control and transportation for the elderly and handicapped.
Unlike Lingle, Rodrigues said, other state and city leaders haven't overreacted.
A spokeswoman for Gov. Ben Cayetano said state officials will review all contracts and consult with public-workers unions over what services can be privatized.
At Honolulu Hale, city officials are already reviewing contracts to decide if there's any work that should not be farmed out and should be done by city workers, Rodrigues said.
Maui Council Chairman Patrick Kawano said Lingle acted prematurely in threatening to cancel contracts privatizing government services since the Legislature has yet to act.
"Let's not get the people all excited," Kawano added. On Rodrigues' lawsuit, the state Supreme Court ruled that the Big Island violated civil service statutes when it privatized the operation of the Puuanahulu landfill, calling into question hundreds of other contracts privatizing government services.
As a result, the House, backed by the Cayetano administration and the county mayors, moved a bill that gives the state and counties the flexibility to continue to contract out government services to private businesses and agencies as long as civil-service jobs are not jeopardized.
The Senate, with the support of Rodrigues and his blue-collar union, is proposing a yearlong moratorium to study the issue.
The Senate's position still leaves the state and counties exposed to lawsuits challenging their contracts, said Maui Corporation Counsel J.P. Schmidt.
Like Lingle, Kauai Mayor Maryanne Kusaka said if state lawmakers don't pass legislation authorizing privatization contracts government has entered into, they will have to be canceled.
Kusaka said she hopes the Legislature will act or the state Supreme Court will narrow its decision when it decides on a motion for reconsideration.
State Sen. Norman Sakamoto (D-Moanalua) said the Legislature needs to take swift action to clarify the issue.
Sakamoto cited a state attorney general's opinion that stated the Hawaii Supreme Court's ruling was so expansive that "any taxpayer could maintain a suit if they could show that the cost of government would be increased by a decision either to privatize or not to privatize a government function."
