Special funds, Gov. Linda Lingle is recommending that the state Legislature balance the budget by raiding special funds, refinancing construction projects and clamping down on tax credits.
tax credits figure
in Lingle budget
She vows not to raid the
Compromise offered on office funding
rainy-day fund in making up
a two-year, $67-million shortfall
By Richard Borreca
rborreca@starbulletin.com
In a news conference yesterday at the state Capitol, Lingle said her stated budget cuts will handle problems with the state budget for this year, fiscal year 2003. Those cuts, including reductions of up to 5 percent of the discretionary spending for some departments, have prompted protests from social service agencies and the state library system.
Turning her attention to the next two-year period (2003-2005), Lingle said the state needs to find $67 million to cut to make the biennial budget balance. The state will also look at special funds and bond refinancing to come up with more money or savings, but the governor did not give specific amounts.
The governor said her proposals do not include using the state's $175 million Hurricane Relief Fund and $60 million rainy-day fund, which she said are being kept in reserve.
"By having a reserve, it gives you one more option," she said.
"Because of the impact a war could have on our visitor count and therefore on our revenues, we may need to have an emergency look at those funds in the future," Lingle said. "Once you spend them, they are gone."
The governor said the biggest challenge for her and the Legislature is "to end the abuse that is found in some of the tax credits."
"The reason this is a challenge for us is because almost all of us campaign by saying we would not make any changes to the high-tech tax credit known as (Act) 221," she said.
"The problem is that 221 has not been applied, I believe, as the Legislature intended," Lingle said. "There are people making investments getting back 2-1/2 times what they invested in the form of a tax credit. I don't believe that could possibly be what the intention was."
The administration will propose that a separate "research and development" tax credit be applied in the same way as the federal government's tax credit, so it is only for the growth in research and development spending, not on the total spending, she said.
"It's so you're not getting a windfall for something you would have done anyway," Lingle said.
Lingle has proposed a tax cut that would raise the standard deduction that people take if they don't itemize their taxes. The bill, Lingle says, would help the working poor -- a group that she said has no lobby at the Legislature.
"I have been told that because they have no interest group, it is considered 'helping only poor people,'" Lingle said.
"Our taxes are unfair to the lowest-paid in the state. This will allow more money to stay in the private sector," she said.
A bill proposing a tax credit of $7.5 million a year is needed to help encourage development in the area, Lingle said.
A similar bill passed in the last session of the Legislature, but was vetoed by then-Gov. Ben Cayetano.
Sen. Brian Taniguchi, chairman of the Ways and Means Committee, which is now reviewing the state budget, said he still questions whether the new Lingle proposals will balance the budget.
Taniguchi is pushing an increase to the state's 4 percent general excise tax to raise more money for education.
Lingle said she is still opposed to such an increase.
The governor acknowledged that by refinancing state bonds, the state will get a lower rate, but is likely to extend the length of the bond notes, which extends the state's obligation.
But she said the result "will not cost any more."
The Associated Press
contributed to this report.
Office of the Governor