Slower growth seen in state’s economy
While the isles' construction industry remains steady, a decline in tourism and some "fallout" locally from the nationwide mortgage crisis are expected to slow economic growth in Hawaii this year, the state's top economists predicted yesterday.
The state Council on Revenues revised its forecast for the current fiscal year to a 4.9 percent increase, down from 5.7 percent predicted in August.
One percentage point is equal to about $45 million in state revenue, meaning lawmakers have about that much less to work with as they craft the supplemental budget for the 2009 fiscal year.
"What it means is, adjustments will have to be made," said House Finance Chairman Marcus Oshiro (D, Wahiawa-Poamoho).
The revision is slightly above actual tax collections. Through the first six months of the 2008 fiscal year, preliminary figures show those collections are running at about 4.5 percent, said state Tax Director Kurt Kawafuchi.
The news was slightly better for 2009. Helped by the steady growth in construction -- which is likely to continue as more public works projects proceed -- revenue growth for fiscal year 2009 was forecast at 4.1 percent, up from 3.8 percent previously.
Lawmakers now are in the process of hearing funding requests from all state agencies, libraries, the Lingle administration, the University of Hawaii and others.
Gov. Linda Lingle, whose supplemental budget request proposes to increase general fund spending by about 1.9 percent, has said she would consider 4 percent to be a "good, healthy, steady, moderate rate of growth."
Oshiro says the Legislature will approach funding with cautious optimism while waiting to see if the forecast changes when the council meets again on March 12.
The lower forecast for 2008 was not surprising, as economists had warned last year that the economy showed signs of slowing.
"There is a problem with tourism, which does seem to be worsening," said Council on Revenues Chairman Paul Brewbaker, chief economist for Bank of Hawaii.
According to the most recent state figures, visitor spending rose to $933.8 million in November, just 0.1 percent above November 2006 levels. Tourist spending for the first 11 months of the year totaled $11 billion, a 0.6 percent increase from the same period last year.
Meanwhile, visitor arrivals, which peaked in 2005, fell another 1.1 percent to 6.7 million.
Brewbaker added that the nationwide mortgage crisis -- fueled by scores of home buyers defaulting on loans -- has not had as much of an impact in Hawaii because Hawaii has the lowest default rate in the country.
However, "there does seem to be some fallout," he said. "We're seeing home sales a little softer, inventory is piling up a little faster than we thought, we're seeing builders having to adjust. A number of those things caused us to adjust the current fiscal year forecast."
A look at the state Council on Revenues forecast for the current and upcoming fiscal years. The 2008 fiscal year ends June 30. One percentage point equals about $45 million in tax revenue.
January 2008 forecast
» FY 2008: + 4.9 percent
» FY 2009: + 4.1 percent
August 2007 forecast
» FY 2008: + 5.7 percent
» FY 2009: + 3.8 percent
Sources: Council on Revenues, House Finance Committee