Lawmakers wary on spending
A predicted slowing of the state's economy has legislators urging caution on finances
Lawmakers head into the 2007 session knowing a tax refund in some form is required by law and that pay raises are expected for the state's public employee unions.
But the size of these and other fiscal matters still has to be determined, and lawmakers say a predicted slowing of the state's economy -- outlined yesterday by top economists -- will force them to take a cautious approach in crafting the state's two-year financial plan.
"We're going to be very cautious in scrutinizing every proposal that would decrease revenues, as well as looking at every proposal that would be a continuing cost," said Senate Ways and Means Chairwoman Rosalyn Baker (D, Honokohua-Makena).
The Legislature's money committees have begun hearing from state agencies and the counties this week on their budget requests for the upcoming fiscal biennium, which begins July 1.
Yesterday, members of the state Council on Revenues briefed the committees on its latest revenue forecast, presented last month.
The council has predicted general fund tax revenues of $4.7 billion in the current, 2007, fiscal year, which ends June 30. Revenues for the 2008 fiscal year were pegged at $4.98 billion.
Those figures amount to an economic growth rate of 6 percent each year.
Growth is expected to drop to 4.1 percent in fiscal year 2009 before edging upward to 4.6 percent in 2010, then 4.5 percent in 2011, 4.9 percent in 2012 and 5.6 percent in 2013.
The deceleration can be attributed to several factors, including a slowdown in construction and military spending, a leveling off of tourism and inflation, said Jack Suyderhoud, a University of Hawaii economist and vice president of the Council on Revenues.
However, both Suyderhoud and council member Carl Bonham of the University of Hawaii Economic Research Organization said the economy shows no "red flags" indicating that a recession could be on the horizon.
"I don't see a serious trend developing that needs to be addressed," Bonham told lawmakers.
House Finance Chairman Marcus Oshiro (D, Wahiawa-Poamoho) described the forecast as a "mixed bag" and said lawmakers would proceed cautiously.
"I think we need to heed the council's recommendation that we are in a decelerating economy," Oshiro said.
Lawmakers are still waiting to hear Gov. Linda Lingle's wish list for the fiscal biennium.
While Lingle has presented the Legislature with her budget proposal heavy on spending for education and social services, she has not provided details on new spending proposals.
When asked by committee members about the size of any proposed tax refund or collective bargaining raises, state Budget Director Georgina Kawamura deferred, saying the governor would provide details in her State of the State speech Jan. 22.
Kawamura said only that the administration was setting aside what it believed was a "reasonable" amount for collective bargaining raises.
"Whether or not the union agrees is what we need to go through in negotiations," Kawamura said.
Said Oshiro, "I can appreciate where management would not want to disclose that in public while there's ongoing negotiations, but that's going to be factored in and needs to be addressed somewhere down the road."