Honolulu Star-Bulletin Local News

By George F. Lee, Star-Bulletin
Gov. Ben Cayetano delivers his State of the State
address to the Legislature this morning.



State of the State address

Gov. Ben Cayetano

Tuesday, January 21, 1997

MR. President, Mr. Speaker, Lt. Gov. Hirono, Chief Justice Moon, members of the Legislature, Mayors of our counties, distinguished guests, my fellow citizens. It is a privilege to once again speak on the State of the State.

First, let us look at where we were two years ago. Then, my administration was brand new. The state was in its worst fiscal crisis ever. The budget submitted to you was not mine. We struggled to find answers to the huge fiscal problems before us. State spending had skyrocketed.

Between fiscal year 1987 and fiscal year 1995, general fund expenditures for the Executive Branch grew from $1.6 billion to $3 billion. A whopping 88.9% or an annual increase of 8.3%! Every state department had grown by leaps and bounds except one, the Office of the Lt. Governor.

Dozens of unnecessary boards and commissions were established to oversee virtually every state agency and to deal with nearly every state problem. A federal court consent decree loomed over our prisons because of overcrowded conditions. Our State Hospital entered its 22nd year of non-accreditation because it could not meet national mental health standards.

Our state bureaucracy was a maze of red tape. Our cumbersome state regulatory rules frustrated and slowed private sector economic development adding to Hawaii's reputation as a poor place to do business. And our workers' compensation and no-fault auto insurance premiums were among the highest in the nation. We rolled up our sleeves and went to work. We made the hard decisions. We have made good progress.

Progress

First we put our fiscal house in order. Under our financial plan, there is no need for layoffs or furloughs. Moreover, our plan provides enough funding for modest tax relief for our people and modest pay raises for our state workers.

The 12-year old federal consent decree will be lifted this summer after the improvements to the women's prison at Olomana are completed. Recently, the State Hospital regained the national accreditation.

We eliminated more than 20 boards and commissions, 15 nonessential programs and streamlined 60 programs to improve efficiency. We cut red tape. Two years ago, it took five years to build a school. We've cut that time by at least one third and we will do even better this year.

We hired outside engineers from the private sector to cut our backlog of clean water permits. We adopted new rules which will speed up the process. We reduced the size of state government by approximately 3,000 positions.

Over the past two years we have kept the growth of our state government below the rate of inflation and the rate of our population growth.

And with your help, we reduced Hawaii's workers' compensation premiums by 27%, a $100 million savings for Hawaii's businesses. Let me now speak about some of the issues we must deal with over the short term.

Auto insurance

Hawaii's auto insurance carriers enjoyed record profits over the past year. It is now time to give Hawaii's consumers a break. We will submit a no-fault automobile insurance bill which will reduce premiums by 25-30%. Based on my informal discussions with your leadership, I feel confident we will reach common ground on this issue.

Hawaiian issues

In my first year as Governor, I vowed to resolve the long-standing issues that have plagued the Department of Hawaiian Home Lands. I strongly supported the passage of the $600 million settlement because it was the right thing to do.

This year my budget not only funds the annual $30 million payment - it doubles the amount paid, giving the department $60 million each year over the next two years. This prepayment will save the state money and give the department more resources for housing.

But building more homes is only part of the solution. Thousands of Native Hawaiians remain on the waiting list - but only a small number qualify to buy homes.

To address this problem, the department is introducing new and innovative means of financing such as a new rent-to-own policy for homesteaders who would not otherwise qualify under conventional means.

So far, 349 homes have been completely built, with 1,148 homestead lots in various stages of construction. Another 1,151 are currently under design. By the end of my first term, we hope to complete or begin construction on 3,000 homestead lots.

This session we face another challenge. We must resolve the state's differences with the Office of Hawaiian Affairs over ceded lands. It is truly important that we resolve this matter in a way that is fair to all of the people of this state. It is a difficult task, but I believe working together in good faith it can be accomplished. Therefore, I will ask OHA to join me as I convene a Task Force of community leaders to work out a settlement of our differences.

Crime

Making Hawaii a safe place to work, to live and to visit is a high priority of my administration. As Governor, I intend to use all of the crime-fighting tools under my control to reduce crime and its impact in Hawaii.

First, we need more prison expansion in all counties. With your help, we will build 1,000 new prison beds over the biennium. In addition, we will lease prison beds from the federal government when it completes its new prison at Elliott Street.

The state has the responsibility and the organization to lead the fight against crime. I take this responsibility very seriously. Last year, Attorney General Bronster chaired the Law Enforcement Coalition which includes every police chief and prosecutor of this state. The Coalition produced a crime package which I strongly support. The new legislation will accomplish the following:

Mandate a jail term for repeat criminals convicted of 3 misdemeanors within a 5-year period;

Provide public access to information about sex offenders;

Make the 8% of the youth population who commit more than 50% of the crimes accountable for their actions by lowering the age at which the courts may treat them as adults;

Impose a 'truth-in-sentencing' which requires defendants to serve 85% of their sentences.

There is no greater threat to our society than illegal drug abuse. We must do more to win the fight against drugs. For that reason I am proposing legislation that:

Strengthens our drug laws;

Expands by 200 beds our successful KASHBOX program at Waiawa.

These efforts to reform our laws and build prison beds must be coupled with community programs in order to truly make a difference. In New York City, and in other cities throughout our nation, crime reduction has resulted from effective use of more police and strong community partnerships to fight crime.

In this regard, I have asked my top National Guardsman, General Richardson, to develop security watch programs in neighborhoods which do not have one. This program, manned by volunteer national guardsmen, is called the Na Koa Watch.

Finally, remember the victims. Too often, the victims of crime are ignored. We spend a lot of money protecting the rights of offenders, but we need to also use our resources to help the victims of their crimes by continuing the Victim Witness Assistance Programs.

The ocean state

Our people are blessed to live in a state with the best natural resources on earth. Hawaii's environment is the God-given treasure that provides us with an unsurpassed quality of life. Hawaii is an ocean state with the fourth longest shoreline and the largest coral reef system in the United States.

And yet, we spend less on protecting our aquatic resources than desert states such as Arizona, Idaho and Montana. This neglect threatens our fish species like onaga and endangers the life of our coral reefs. As an ocean state, we must protect these resources. And we will.

To achieve this, I propose to double the state aquatics budget by $4 million over the biennium and substantially increase the number of conservation enforcement officers. The added manpower will expand our law enforcement capability and provide more aquatic scientists to protect our marine resources.

Over the past two years, we have paid much attention to sustaining Hawaii's unique and special natural resources. For example, with volunteer help, our parks on Kauai and on the Big Island were transformed from eyesores to true island wonders. Soon we will add Ka Iwi to our string of wilderness pearls.

Welfare reform

Last year, Congress made some significant changes in the nation's welfare laws. States now have much more responsibility for designing and funding their own welfare programs.

The new welfare law provides a five-year life time limit on all cash assistance. All able bodied welfare recipients are now required to find work or become actively involved in preparing themselves for work. Hawaii's new welfare program ends the old idea of "entitlement" and stresses individual and family responsibility.

Our new program will reduce benefits, but encourage people to work by permitting them to keep more of their income and assets. The program encourages individual responsibility, and we are already seeing positive results.

Family and individual responsibility is an important theme in my administration. However, to help people go to work, we must create jobs.

The private sector must now step up to the plate and work with us to provide job opportunities. The Department of Human Services has begun a new Public-Private Employment Partnership that provides incentives for hiring welfare recipients.

In addition, I have asked all of my department heads and state offices to assist in providing training for welfare recipients. This program, called WORK PLUS, calls for state workers to help train welfare recipients on the job. Helping welfare recipients is not in their job description - but it should be in their hearts, because getting people off welfare should be everyone's business.

Finally, our state has a strong tradition for caring for all its people. And even though the federal government is withdrawing funding for legal immigrants, this Governor will not do it in Hawaii. It is not right. It is wrong.

Education

Nothing is more important than the education we give our children. A quality education system goes far beyond preparing our children to earn a living. Our entire society is uplifted when everyone is better educated.

I stated many times that education is my highest priority, and I demonstrated my commitment in the shaping of our budget over the past two years. While other state departments were suffering budget cuts ranging from 10 to 22%, the DOE's budget was cut only 3% in 1995, in the administration area, but not one cent was cut from the instruction budget. By mid-1996, the DOE was the only state department to be restored to full funding.

My commitment to public education continues. My proposed $1 billion CIP budget will double the yearly $90 million appropriation for the DOE's construction projects. This means $360 million will be spent over the biennium to build new schools, classrooms, libraries and cafeterias. To ease overcrowding in our schools, we will build 377 new classrooms.

We have an unexpected bonus in our public schools. A few months ago, we reached agreement with GTE Hawaiian Tel to add 7,000 new telephones in our public schools at very little cost. This will address the serious shortage of telephones for teachers in our public schools. Although new classrooms and telephones can help, the disappointing test scores indicate that significant fundamental changes must be made before real gains can be made in our public schools.

Therefore, I propose two fundamental changes. First, I agree with you Mr. Speaker that it is time to return to an appointed Board of Education. I have the utmost respect for the elected members of the Board of Education. But unlike the elected school boards on the mainland - our Board of Education does not have the power to raise revenue to finance our schools. A school board without the power to raise revenues is limited in its ability to govern. We need to return to an appointed school board. This change will clear the lines of accountability and hold the Governor fully accountable for public education.

Second, we must extend Hawaii's school year. Hawaii has a 180-dayschool year - the shortest in the country.

By comparison, Japan's school year is 240 days, of which 210 are committed to basic instruction. The disadvantages to Hawaii's school children are obvious; and the disappointing test scores and critical reports show it.

We have proposed an extended school year in our collectivebargaining negotiations. We will find the money to pay for it. I am hopefulthat the teachers will accept our proposal.

A few years ago, the Legislature passed a law that perrnitted teachersto take early retirement without penalty. More than 900 teachers retiredtaking with them invaluable classroom experience which the DOE was unprepared to replace.

The early retirement law was a mistake. It is doubtful whether it produced any savings, but it is very clear that too many of our mostexperienced teachers left the classroom prematurely. Our children needexperienced teachers back in their classrooms.

I will send to you a bill which will permit our retired teachers toreturn to the classrooms full time without penalty.

I propose that we permit this for a limited time - perhaps four years - in order for the DOE and UH to develop a plan to train more local teachersto make up the shortage.

University of Hawaii

With respect to the university, I am pleased that we recently reached an agreement with the faculty over a four-year contract. The agreement was timely. And it was fair. Both sides worked hard to avoid a strike that would have affected our students' academic program. It is a major step forward for the students, faculty and the university.

On another front, we are proposing that 22% of the CIP initiative be applied to long-standing construction needs of the University. First, we will build a new marine science building for UH Hilo, a telecommunications and media center at Maui Community College, the third phase of Hamilton Library at UH Manoa, the design and construction of new educational centers in West Hawaii and on Molokai, and the plans for the West Oahu campus in Kapolei.

All across the country, public funding for state universities have declined. As a result, state universities have embarked in major fundraising campaigns. The University of Hawaii has successfully raised approximately $25 million each year since 1994. The University is now considering mounting a major five-year campaign in 1997. As Governor, I wholeheartedly support this effort and I urge the public and UH alumni to join me.

Therefore, I propose that the state match the earnings from the additional endowment funds raised in this campaign. This means that the state will contribute to the university's operating budget for every newly endowed chair, scholarship, or program.

Accelerate our economic momentum

Our biggest challenge is to stimulate the economy and provide more jobs.

Two strategies available to government that can help increase the number of jobs in the near term are: 1) increasing expenditures for capital improvement projects, and 2) increasing our expenditures for tourism promotion and marketing.

I have submitted a $1 billion CIP budget for the next two fiscal years.

Many of the projects represent investments in the future prosper1ty and strength of our community.

We will work with the City and County of Honolulu to revitalize Waikiki. We will open the Convention Center on time. We will dredge and improve the Ala Wai Canal.

In Kakaako, we will provide the infrastructure for the development of a major regional shopping center that will involve private investment of $200 million and create 1,700 jobs.

We are also planning a Children's Center near the Waterfront Park with the Children's Museum and Theater at its core. Our plan to include a world-class aquarium in the area is moving forward.

Despite all the benefits of an expanded construction program there has been criticism that we can't afford to do it. On the contrary, we can't afford not to do it.

The construction sector has lost nearly 10,000 jobs in the early 1990s. We need to put them back to work.

Hawaii's tourist industry is the engine that drives our economy. The industry provides approximately 178,000 jobs. Last year, tourists spent $11 billion, generating approximately 25% of our tax revenues. To help boost our tourist industry, I will be sending you an emergency message for an additional $10 million to HVB for marketing and promotion.

While tourism remains a primary industry, we should continue to encourage economic diversification.

Encouraging economic diversification

We should recognize our strengths. We have a superior quality of life available to employees. A good example is Square, USA, a large computer graphics and animation firm. They are planning to set up a design center here employing 200 professionals to take advantage of that quality of life.

To ensure that Hawaii residents get jobs, they have donated equipment and have offered to cooperate with the University to develop relevant classes.

We are finally moving forward on our Enterprise Zone program after years of inactivity. This program promotes expansion of current businesses and location of new businesses in distressed areas by offering tax relief for seven years. The counties and the state have designated 10 Enterprise Zones, including the recent designation of Molokai and three on Oahu. Approximately 25 new businesses have enrolled in the program with more applications being received every week.

We have been active in our Asia-Pacific initiatives.

During the past year, I and members of my cabinet led several trade and investment missions. Upon invitation of the respective governments, we visited China, Japan, Okinawa, Korea, Taiwan, and the Philippines.

As a result, Hawaii has received 26 investment petitions from foreign investors, representing $35 million in new investment and about 180 jobs. We have also been asked to undertake projects in Asia that will provide employment for our architects, engineers, resort developers, urban planners, market specialists, among others.

Last year, I spoke of Hawaii as the Health Care Center of the Pacific. Together with the private sector, we are promoting Hawaii's expertise and facilities to gain visibility in Asia and the nation. Several of our hospitals have formed partnerships with globally-known health centers. Last year, The Joslin Diabetics Center and the Ningen Dock diagnostic program joined Straub Hospital; and this year, Hamamatsu Photonics Inc. joined Queen's Medical Center. M.D. Anderson, a leading cancer center in the world, is likely to form a cooperative relationship with our hospitals and doctors in the near future.

Our strategy to make Hawaii a world-class center for state-of-the-art medical and health services is taking shape.

The opening up of former sugar lands has created new opportunities in diversified agriculture. We have seen a dramatic increase in the production of vegetables and fruits formerly imported from the mainland.

Today, 95% of sweet potatoes and watermelons, 85% of our bell peppers, 70% of our tomatoes and 60% of our cucumbers are home grown.

To help our farmers export their products to the mainland and foreign countries, the state and the county of Hawaii will work together to build irradiation facility in Hilo.

Forestry is also becoming a new growth industry in Hawaii. Hamakua Timber has already begun planting on former sugar land. We are finalizing negotiations to lease state lands in Hamakua to OGI paper company, one of the largest paper companies in the world.

Tax relief

I am also proposing major changes in tax policy to deal with the issues of economic development and tax relief.

One of the major concerns we face is that when the Convention Center is opened later this year, we will not have enough first-class hotel rooms in Waikiki. To encourage economic development, I propose a twoyear window in which hotel operators are encouraged to renovate their properties by being able to claim as an income tax credit the entire amount of the general excise tax paid for such renovations.

The excise tax credit will also encourage renovation of hotels in the established areas of the neighbor islands.

Export services

Hawaii needs to do more than stimulate tourism. We need to expand our business frontiers beyond our state. I propose we eliminate the excise tax on export services to allow our architects, engineers, and professional consultants to compete effectively for employment outside the state of Hawaii.

Home buyers

To stimulate affordable home construction in the next two years, I propose tax credits to first-time home buyers purchasing affordable homes.

These Hula Mae eligibles would receive a 2% income tax credit applied up to $200,000 of the purchase of a home resulting in a maximum credit of $4,000. The 2 x 2 program should assist in wiping away the current inventory of affordable homes and create additional home construction activity.

Tax moratorium

There is no doubt that the current economic situation has hurt Kauai and Molokai more than the other islands.

Therefore, I am proposing an 18-month moratorium from the collection of excise taxes for businesses on both islands.

Tax relief for low income taxpayers

Taxes for individuals should also be reduced. It is especially needed to assist those at the lower end of the economic spectrum; for those with extraordinary expenses; and to encourage post-high school education. I propose eliminating the current $27 food tax credit per person and in its place reduce state income taxes by 25%-100% for those with incomes less than $22,000. This would provide tax relief to at least 250,000 taxpayers.

Long-term care

I have long been concerned over the extraordinary expense endured by those caring for their loved ones.

I am proposing a tax deduction of up to $50,000 for amounts paid for qualified long-term care services and qualified long-term care services andpremiums.

Tax deduction for tuition

In this era of rising post-high school tuition costs and the ever more pressing need for more education, I am proposing a $5,000 tax deduction for all post-high school tuition costs. There are some who may wonder where we will get the money to fund the proposals I have made today. Let me state that we have accounted for every proposal - dollar for dollar - in our financial plan.

Conclusion

As I sat in this House last week and listened to the leaders of both parties, I thought about the first time I sat here 22 years ago. Today I am thinking of the future. I see a common thread that connects the leaders of both our parties - Democrats and Republicans, Liberals and Conservatives.

We all love Hawaii. We want a future for Hawaii with productive, well-educated people with high quality jobs in a diverse dynamic economy. A smart economy, where Hawaii has the latest technology and the value added is knowledge.

We want a Hawaii where our children will have the opportunity to enjoy a fulfilling life. We want a Hawaii with compassion for the less fortunate. We want a future where our unique environment is still alive and beautiful - a future, where we are safe and secure. A Hawaii where people continue to care deeply about each other, where the Aloha Spirit is alive and well.

Over the last two years, we have worked together to lay the foundation for that future. Now together we must build on that foundation.

Thank you and Aloha.




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