Hawaii stands alone
in budget crisis

A survey finds nationwide
recovery from 1990s economic woes,
except in the isles

By Pete Pichaske
Phillips News Service

WASHINGTON -- Only one state has had to trim spending in the middle of the current budget year, a dramatic drop from a half-dozen years ago, when 35 states were forced to make spending cuts to avoid deficits.

The bad news for Hawaii residents: They live in that one state.

More evidence that Hawaii's grim economy is out of step with the rest of the nation surfaced today in the semi-annual fiscal survey of the states, released here by the National Governors' Association and the National Association of State Budget Officers.

The 50-state survey found that while other states have recovered from the economic woes that forced repeated budget cuts in the early 1990s, Hawaii has not.

Hawaii officials trimmed $24.6 million from the 1998 budget, cutting education programs, the state employees' retirement system and health insurance, and mental health services, among other areas.

In the midst of the national recession in 1992, 35 states made mid-year cuts. Last year, the figure was seven. This year, Hawaii stood alone.

In fact, most states now have reserve budget stabilization funds, rainy-day funds that, in some cases, have reached hundreds of millions of dollars.

The report also found that 44 states, cheered by robust economic outlooks, plan to spend more money next year. But Hawaii was one of the half-dozen planning to spend less.

"It seems that what's driving that economy is different than what's driving other states," said Stacey Mazer of the budget officers' association, who helped prepare the report.

Hawaii is "pretty much alone in some of its experiences," added Becky Fleischauer of the National Governors' Association.

Both said Hawaii's unique reliance on Asian financial markets and tourists has hurt the economy, a belief common among analysts.

First Hawaiian economist Leroy Laney said the results were not surprising.

"The rest of the country is doing great, and Hawaii is bringing up the rear," said Laney.

"But we're not talking about a cyclical problem here anymore. There are structural problems plaguing us, and they'll take longer to work out."

Those problems, he said, include a high cost of living, a bad reputation as a place to do business or invest, and high taxes.

Nationally, the survey found that most states, despite healthy economies, are being prudent: increasing spending only slightly and, at the same time, paring back and consolidating services.

"State budget ledgers reflect a prudent foresight in the nation's statehouses," said Raymond C. Scheppach, NGA's executive director. "History has taught states that good times are not always here to stay, and responsible budgeting prepares for economic downturns."