On Politics
BY RICHARD BORRECA
Under Lingle, state plays
only with real moneyBack when Linda Lingle was owner, publisher, editor, reporter and photographer for the Molokai Free Press, her finances were simple: Real dollars come in, real dollars go out, whatever's left over is profit.
Now, however, Governor Lingle is confronted with a moving target of billions of dollars needed to run the state government. No one knows what real dollars are coming in, or when. But there is still an ever-increasing amount of real dollars going out.
"There is a real art to drawing up the budget," Sen. Brian Taniguchi, Ways and Means chairman, says.
In past years, the art of the budget took an especially fanciful turn, when then-Gov. Ben Cayetano decided to include "dynamic impact" as a part of the revenue projections.
Simply put, the theory behind dynamic impact is that for every dollar spent by government to build something, government would get something back in the form of taxes paid to build the school or bridge or housing project. More money would flow into the state as workers spent new paychecks and stores stocked up with goods to supply new demand.
Former state business and economic department director Seiji Naya, a well respected University of Hawaii economist, is said to have persuaded Cayetano to consider a project's dynamic impact when including it in the budget.
But then the state decided to actually treat a project's dynamic impact as if it were real money and use it to balance the budget. Marie Okamura, former state tax director, who could collect only real dollars to put in the treasury, nearly went into shock and campaigned against the concept.
The Legislature then figured out the dynamic impact "something for nothing" scheme.
The result of letting the Legislature believe it was adding money to the budget by increasing the amount of money spent on construction was similar to giving beer and a Corvette to a teenage boy: a wreck.
Despite warnings from those such as former state Rep. Ed Case, who said "the 'dynamic impact' of other revitalization efforts won't generate the necessary revenues fast enough to avoid the difficult choices we must make," the Legislature roared ahead.
Dynamic impact was proving to be the crack cocaine of financial planning, as legislators were unable to withdraw from its addictive effects. Instead of just construction projects, dynamic impact was added to the budget for tax credits, such as the Ko Olina resort.
Sen. Sam Slom, a small-business advocate, called the dynamic impact ploy "virtual money."
"Let's get real. The budget should be the budget," Slom said recently.
Lingle has warned that her slim budget would include only real money, without any extra push from the dynamic impact of any new construction.
Still, the seductive reasoning of "something for nothing" is likely to be around this year to tempt another Legislature.
Richard Borreca writes on politics every Sunday in the Star-Bulletin.
He can be reached at 525-8630 or by e-mail at rborreca@starbulletin.com.
