Saturday, April 26, 2003

State budget
restores $30 million
to education

The $7.5 billion budget includes
health benefits for most public workers

Just before yesterday's midnight deadline, the state Legislature readied a $7.5 billion biennium budget that includes $61 million in increased health benefits for most public workers and restores $30 million in public education programs trimmed from an earlier draft.

Lawmakers were also poised to approve a $400 million capital improvements budget that focuses mainly on myriad transportation and public school projects. And the budget carves out several other items, such as $300,000 next year for new artificial turf at Aloha Stadium and another $300,000 in 2005 to plan for a new stadium on Oahu.

State of Hawaii Copies of the general-fund operating and construction improvement budgets found in House Bill 200, CD1, have not yet been released to the public. But Republican legislators are disturbed by trends in both the construction and general-fund operating budgets, said Senate Minority Leader Fred Hemmings (R, Waimanalo).

"Our preliminary numbers, in working with research, find that they are increasing the number of people on public payroll; they are shifting a lot of funds into payroll, and government is growing," said Hemmings, who added that construction projects seem to be mostly in Democratic-controlled legislative districts.

"But what really should be said here is that the Lingle administration basically has inherited a state on the brink of bankruptcy, and both the Lingle administration and the Legislature has had to deal with that," he said.

With state revenue projected to grow more slowly than expected in the upcoming year, lawmakers had considered ways to generate more revenue to avoid deeper cuts to state programs, especially education and health and social services programs.

Among the ideas considered but not approved this session was a proposed 12.5 percent increase in the general excise tax, to 4.5 percent from 4 percent, to raise an estimated $180 million for education.

Other stalled revenue boosters included a 1 percent county sales tax in exchange for a smaller share of the hotel room tax revenue for the city, as well as proposed amendments to the high-technology tax credits in Act 221 that proponents said could have saved the state $55 million.

"I'm very proud that we didn't utilize any of the tax increases and the hurricane relief fund," Calvin Say (D, Palolo), House speaker, said last night.

"We took the recommendations of the governor, as far as looking at as many cuts as possible, along with financing the debt services and special fund transfers," Say said.

Because of lower tax revenue estimates, lawmakers had to find an additional $54 million. They reallocated about $60 million in surpluses from various state special and revolving funds. An extra $10 million was swept from the state rainy-day fund for health and human services programs.

Also, the state budget cuts travel expenses by 30 percent in all departments except lower and higher education, and the state Public Safety Department must cut its overtime pay by 18 percent by 2005.

Still, the state's economic situation was such that Gov. Linda Lingle could not offer public worker unions any pay raises over the next year. But the state was able to reach contract extensions or new contracts with nearly all public worker unions by offering $61 million in increased health benefits which Lingle said the state will pay for over the next two years.

"The Legislature has been working with us through this process," the governor said yesterday. "So they are anticipating what we are sending down to them: that there would be no salary increases but that there would be increases in our health-fund costs."

Senate Ways and Means Chairman Brian Taniguchi (D, Manoa) said lawmakers have indeed accounted for some increased health costs but not all of them.

"I think we can fit it, but our carry-over balance will be lower and we can fund less bills," Taniguchi said.

Last night, House and Senate conferees were still considering various tax-credit bills that faced the midnight deadline. Those include an investment tax credit for a motor sports facility at Kalaeloa, additional motion picture and TV production tax credits, and an extension of the existing hotel construction and remodeling tax credit.

Also, lawmakers were still considering a nonrefundable tax credit for a resort facility at Ko Olina featuring marine and educational facilities. Under the latest versions of Senate Bill 377, however, the tax credit would not be effective until general-fund tax collections exceed 7.5 percent for two successive fiscal years.

The Legislature is scheduled to adjourn Thursday.

State of Hawaii

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