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Thursday, June 26, 2003



art
ASSOCIATED PRESS
Gov. Linda Lingle pointed at a chart as she discussed the state budget yesterday during a news conference in Honolulu.



Shortfall means
more state cuts

Government spending has to
be kept in line with Hawaii's
income, the governor says


State departments, already forced to trim 5 percent from their operating budgets earlier this year, face further spending cuts because of a $152 million projected shortfall in the two-year budget approved by this year's Legislature, Gov. Linda Lingle said yesterday.

State of Hawaii "The state will not have enough resources to finance expenditures authorized by the 2003 Legislature for (fiscal year) '04, much less for FY '05," Lingle said in a memo to department heads dated Monday.

During a televised address last night, Lingle called the budget situation serious and said significant changes are needed in how state government spends tax dollars.

"For a long time the state government has been spending more money than it has been taking in, and we must stop doing that," Lingle said. "Just as you do in your family budget, we have to get spending in line with income."

Lingle repeated her promises not to raise taxes nor to raid the hurricane relief fund to balance the budget.

According to Monday's memo, state departments will receive 100 percent of the money budgeted for fixed costs such as debt service, employee fringe benefits, public welfare assistance and Medicaid/Quest allotments but will get just 80 percent of the money allocated for all other costs.

Individual departments will be responsible for determining how to restrict spending to meet the cuts.

The memo also states that previous cost-cutting measures will continue for now. Those measures include a hiring freeze for most departments, the discontinuation of student hires and a moratorium on spending for motor vehicles, training, furniture and equipment, and consulting services.

"It's not an insurmountable problem but it's a serious problem," Lingle said earlier yesterday to a meeting of Associated Press member newspaper editors and reporters. "I want the people to know the financial condition of the state and what steps we're taking to address it."

The shortfall in the two-year, $7.5 billion general-fund budget stems primarily from a downturn in tax revenues forecast in May by the state Council on Revenues.

In March the council had forecast a 4.3 percent growth in tax revenues in the current fiscal year -- which ends Monday -- the figure on which the budget approved April 29 by the Legislature is based.

The panel reduced the growth forecast to 1.8 percent on May 16, working out to $73 million less than had been expected for the current fiscal year. It also revised its growth forecasts for the next two fiscal years, projecting $70 million less revenue.

"This will be a moving target," she said. "Every month, we get a new revenue report."

Lingle has said many of her recent vetoes have been based on those bills' financial impact on the budget.

Sen. Russell Kokubun, vice chairman of the Senate Ways and Means Committee, called that "erroneous," saying research has shown that the measures she vetoed would only save about $4 million in the next fiscal years.



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