Friday, January 4, 2002

Hawaii State Seal

Gov. Ben Cayetano met with Star-Bulletin reporters and editors in his office yesterday to discuss his budget proposals. During the meeting, the group watched a slide show prepared by the governor's office.

Cayetano defends
revenue plan

He says he needs to use hurricane
relief funds to avoid cuts

By Pat Omandam

Gov. Ben Cayetano warned yesterday that the state could face budget cuts of up to 18 percent in 2004 if he cannot use the $213 million Hawaii Hurricane Relief Fund to offset a $315 million tax revenue shortfall in the next two years.

Moreover, the governor said, other ways to make up the shortfall, such as through attrition of full-time state workers, would make only a $12 million dent. This idea has been discussed by both majority and minority members of the Legislature, but the governor believes it is not enough.

Cayetano spoke to the Hono-lulu Star-Bulletin's editorial board yesterday at his state Capitol office about the state's fiscal situation and ways to address the problem, as well as other issues.

He reiterated that the use of Hawaii Hurricane Relief Fund money and his proposed doubling of the state liquor tax are essential parts of his financial plan.

The governor laughed during the question-and-answer period.

Even with proposed across-the-board state budget cuts of 1 and 2 percent in fiscal 2002 and 2003, the state would still have to impose a 7 percent budget cut in 2004 to balance the budget if it did not use the hurricane fund money, said state Budget Director Neil Miyahira.

And, Miyahira said, if the state made it a priority to exempt the state Department of Education and the University of Hawaii from these cuts, the restrictions to all other departments jump to 18 percent in 2004.

"Should this battle on the Hawaii Hurricane Relief Fund become politicized that people don't want to do it, then you see the consequences," the governor said.

The fund was created in 1993 to provide coverage to homeowners after private hurricane insurers left the Hawaii market after Hurricane Iniki in 1992. The state stopped writing hurricane policies when insurers returned a few years ago.

Many who testified against using the hurricane money at a legislative budget hearing last week said the money should either be kept in the fund in case of another hurricane or should be returned to those who paid into it.

As for doubling the state liquor tax, the governor said his proposal -- which would raise another $40 million in revenue -- will face strong opposition from lobbyists, restaurants and other businesses this upcoming session. But he considers wine, liquor and beer as luxury items not essential to the health and welfare of the state.

Meanwhile, the governor said, other ideas to help address the shortfall, such as seeking a delay in public worker pay raises, is problematic because the state is bound by union contracts.

Unlike private-sector employees, state workers are unlikely to voluntarily agree to delay a pay raise or take pay cuts, Cayetano said.

As for gambling, the governor said he would probably approve a casino bill, under certain circumstances, if it made it through the legislative session this year. One idea that appeals to him is awarding an exclusive state gambling license with the proceeds funding college education for qualified Hawaii students, such as Georgia's Hope Scholarship.

Still, Cayetano said, he does not think the Legislature will approve any specific form of gambling.

Given the scope of the issue, he said, state lawmakers may let Hawaii voters decide. He said the Legislature could suggest a constitutional amendment that allows the state to give a casino license for 20 years, after which the Legislature would decide whether to make it permanent.

Even then, voter approval is a long shot, given opposition to gambling here by the churches, lobbying groups and others. And the economy may improve to a point where people will say they do not need gaming here, the governor said.

"With those kinds of odds, why not put it before the people? And then if they vote it down, once and for all, that settles the question."

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