Friday, January 1, 1999

Nationwide, Hawaii
is ‘the one state’
that's struggling

By Pete Pichaske


WASHINGTON -- A booming national economy continues to carry state governments to a promised land of financial vigor, a new report has found.

And Hawaii continues to miss the boat.

The semiannual survey of state budgets by the National Governors' Association and the National Association of State Budget Officers found that most states are enjoying healthy, moderate growth while simultaneously cutting taxes and building up "rainy-day funds" for emergencies.

But Hawaii is not among them. Asked if any states were faring poorly, Raymond C. Scheppach, NGA executive director, said: "I guess Hawaii is the one state that appears to be struggling. That's probably due to the Asian crisis."

The survey found, for example, that Hawaii is one of only two states that had to cut its most recent budget to make ends meet. Alaska is the other.

Hawaii also is one of only five states with a budget smaller this year than the previous year, and one of only six states without a rainy-day fund.

Moreover, the study found Hawaii had a "particularly high" unemployment rate -- 6.2 percent three months ago, a rate blamed on the lagging construction and business service industries -- and is one of the states hardest hit by the drop in exports to economically ailing Asian countries.

This is not exactly groundbreaking news in the isles.

"Hawaii has been in almost a struggle mode for eight or nine years now," said Bank of Hawaii regional economist Wali Osman.

"When the country was going south, in the late '80s, Hawaii was going north at a speed nobody expected. Now that the country has picked up, Hawaii has changed direction completely.

"The question is, when is this going to end?" he said. "And, I don't think anybody knows that. And when it ends, we don't know what will take its place."

Hawaii's ties to Asian economies (especially its reliance on Asian tourists), its physical isolation from the rest of the nation and its inability to take advantage of the high-tech boom have prevented the state from riding the national tide of recovery, said Osman.

"The real change that has literally transformed the country has not reached us," said Osman. "We don't know if it will."

The NGA survey found that while most states are fiscally sound, prudent state leaders have cut taxes by a total of $22 billion over the past five years and increased spending only slightly, hoping to avoid the bloated state governments that led to fiscal crises a decade ago.

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