REINS ON SPENDING LIKELY TO REMAIN
Economic growth slows
Budget restrictions, increased scrutiny of all state expenditures and other spending policies enacted by the Lingle administration earlier this summer are likely to continue following the most recent forecast by the state Council on Revenues.
The council, a panel of top economists that sets the revenue forecast on which the state's two-year budget is based, predicted a slight dip in the economy over the next two years before an upturn in fiscal year 2010.
Preliminary calculations predict revenue growth of 5.7 percent in the current 2008 fiscal year, which began July 1, and growth of 3.76 percent in the 2009 fiscal year. In its last quarterly forecast, the council predicted growth of 6 percent and 4.1 percent, respectively. Each percentage point equates to about $45 million in actual revenue.
The downward revision was expected, after tax collections for the 2007 fiscal year came in at 3.4 percent -- about $115 million below the 6 percent figure that was predicted in March, when lawmakers crafted the state budget. In May, the council revised the 2007 predicted to 4 percent.
"We are still pleased that it is an estimate of growth -- albeit slower than originally anticipated," said state Budget Director Georgina Kawamura. "That being said, we will just continue with our cautious spending as we move through this current fiscal year.
"It's good that we started the fiscal year on this note of caution, and we'll have to continue and review our options as we move forward."
Economists said the slower rate is the result of flattening tourism numbers and a slowdown in construction that fueled recent double-digit increases.
Council Chairman Paul Brewbaker, chief economist at Bank of Hawaii, urged his fellow economists to keep a close eye on state revenues as they approach their December forecast.
"There's so much volatility," he said.
The council predicted a modest increase in revenues by the 2010 fiscal year, revising its forecast upward to 4.86 percent from 4.6 percent.
Brewbaker noted that tourism could increase by then, particularly if political situations ease travel restrictions on potential visitors from countries such as China and South Korea.
A look at the most recent economic forecast from the state Council on Revenues. The fiscal year begins on July 1.
» FY2007: 4 percent (predicted)
» FY2008: 6 percent
» FY2009: 4.1 percent
» FY2010: 4.6 percent
» FY2007: 3.4 percent (actual)
» FY2008: 5.7 percent
» FY2009: 3.76 percent
» FY2010: 4.86 percent
* August forecast represents preliminary calculations.