Thursday, March 6, 2003

Iraq war may bring
bigger state deficit

Lingle grapples with all options
on how to cut more from the budget

By Richard Borreca

The looming war with Iraq has triggered a round of emergency budget meetings as Gov. Linda Lingle scrambles to plug a hole in the state budget that may grow by $60 million next week.

Lingle told reporters yesterday at Washington Place that she met for two hours Tuesday evening on the budget problems and plans to spend all of Saturday reviewing her options on how to further cut the state budget. The Republican governor refused to comment on the Senate's action Tuesday to raise the general excise tax to 4.5 percent from 4 percent, a 12.5 percent increase, and dedicate the extra money to education.

Lingle said she will not have any firm new figures until the state Council on Revenues meets next Thursday and gives a new estimate on state tax collections.

But she said the chances are good that the council will drop the revenue estimate from 6.1 percent growth to 4 percent, which translates into a $60 million shortfall. Lingle has already submitted a balanced budget proposal that attempts to plug a $180 million shortfall.

"I think there is such a high probability that we are going to go to war, and the impact is going to be substantial on our tax revenues because of the decline in tourism and business activities in general," Lingle said.

Lingle is hoping to meet with the author of the general excise tax increase, Sen. Brian Taniguchi (D, Manoa), chairman of the Senate Ways and Means Committee.

"We are going to have to work cooperatively, so I don't want to comment specifically on any of their ideas, but people are aware of our feelings on the negative impact of a tax increase," Lingle said.

The governor said she will stand by her pledge not to lay off any state workers and not to touch the balance in the Hurricane Relief Fund, but outside of that, the state will have to be flexible to get through the latest round of budget cuts.

Taniguchi said yesterday that Lingle is likely to have a difficult time with the budget because when she tried to cut spending by 5 percent, many departments appealed, and the resulting cut was only about 3.5 percent. The 5 percent reduction would have amounted to a $40 million cut, but Taniguchi said she was only able to cut $24 million.

"If there is a 2 percent drop in revenues, it is $60 million, and she already couldn't do $40 million, so now she would have to do another $60 million, and that is a whole new ball game," Taniguchi said. "It doesn't look good."

Taniguchi said his plans for a tax increase were buoyed by a recent meeting back in his Manoa district when residents asked him why he has not raised taxes to pay for needed public services.

"People are looking for something, and that is why we felt we had to move something out," Taniguchi said. But the veteran Democrat is already starting to count his votes, in case the tax bill is vetoed by Lingle.

He noted that in the Senate's 16-9 vote this week, he was one vote shy of the 17-vote two-thirds majority needed to override a veto.

"The vote was good, and if we had one more, it would be better," Taniguchi said.

Office of the Governor

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