Cayetano: 'We must restructure' economy

He proposes eliminating
agencies, programs

By Miky Yuen

HAWAII will remain in stormy financial waters unless its economy is restructured to allow businesses to flourish, Gov. Ben Cayetano said today in his State of the State address.

This is the state's most difficult challenge, even transcending the seemingly endless state budget crises he has confronted since taking office three years ago, Cayetano said.

"Like the ancient Hawaiians, we know we cannot control the storm but we can control our boat, and where and how to steer it," Cayetano asserted.

Without corrective action, the state's budget woes will continue, as the state faces a projected shortfall of $280 million in fiscal year 2000 and $244 million in 2001, Cayetano said.

As expected, Cayetano charted his course by emphasizing the importance of the recommendations of his economic task force in revitalizing the economy. But, he vowed, his administration will work with the Legislature and the public to make the proposals better.

Gov. Benjamin Cayetano
By Craig T. Kojima, Star-Bulletin

Key Points of the Speech

Major themes

Hawaii is at a crossroads: The state, in adjusting to a global economy, must become more productive by creating an environment that allows businesses to thrive.

We're in this together: The challenge ahead is for the entire community -- not just government.

Economic revitalization task force: Its recommendations will improve productivity.

The problem ahead

Money woes: If nothing is done, the state faces a projected shortfall of $280 million in fiscal 2000 and $244 million in 2001.

Excise tax increase

If critics believe the task force's proposal to raise the general excise tax from 4 percent to 5.35 percent will unfairly hurt the poor and the retired, adjustments can be suggested during the legislative process.

Government restructuring

Consolidate three departments -- Accounting and General Services, Budget and Finance, and personnel -- into two departments.

Consolidate departments devoted to developing and regulating businesses.

Form the Hawaii Maritime Authority by merging four state agencies, the Harbors Division, the Hawaii Community Development Authority, the Aloha Tower

Development Corp., and the Small Boat Harbor Program.


Have a private firm build a 2,300-bed prison at Kau on the Big Island and possibly have a private company manage the facility.

Read the full text of Gov. Cayetano's
State of the State speech

"I understand the concerns about the increase in the general excise tax (from 4 percent to 5.35 percent), but if there are fairness questions, let's work them out. If the proposed tax changes fall unfairly on any particular group, let's make adjustments, because this is what the legislative process is all about," Cayetano said, generating a round of applause.

Unlike previous State of the State addresses, the unveiling of new initiatives took a secondary role in Cayetano's speech. Rather, he used the few initiatives he announced to underscore Hawaii's new economic reality -- that the state's economy is no longer fueled by booming outside investment that allowed government to grow as the economy did. This foreshadows a painful transition period to leaner state budgets and fewer government services, Cayetano said.

To downsize, Cayetano announced that he's proposing the consolidation of three departments -- Accounting and General Services, Budget and Finance, and personnel -- into two departments and the consolidation of departments responsible for developing and regulating businesses, such as Agriculture, and Business, Economic Development and Tourism.

Another Cayetano plan calls for the formation of a Hawaii Maritime Authority by merging four state agencies -- the Harbors Division, the Hawaii Community Development Authority, the Aloha Tower Development Corp. and the Small Boat Harbor Program -- to centralize waterfront, harbor and shoreline responsibilities.

To continue to push the privatization of government services, Cayetano is proposing that a private company build a 2,300-bed prison at Ka'u on the Big Island and possibly have a private company manage the facility.

"Up to this point, we've been trimming budgets to cope with the loss of revenue. There isn't much left to trim, so now we must restructure," said Cayetano, who has been accused by fellow Democrats and Republicans of moving too slowly in the downsizing or elimination of government departments.

Cayetano also acknowledged a longstanding public complaint of poor government services. "Our services need to be more accessible and require less runaround," he conceded.

He promised to send legislators a message next week "that will list the state agencies and programs that we propose to eliminate."

Cayetano's address carried the theme "Doing what needs to be done." While it struck a sobering tone as to the magnitude of the economic problem the state faces, it was also marked by optimism -- optimism that the economic revitalization initiatives, as they emerge from the legislative scrutiny, will win public support despite skepticism.

"But I have faith in the good judgment of Hawaii's people," Cayetano said. "If we speak candidly, they will respond because they know it's better to take action than to do nothing."

To legislators, Cayetano said he has faith that they will rise to the challenge.

"As we head into the 21st century, how we meet the challenge we now face -- perhaps the most difficult since statehood -- now will be the defining moment of leadership for all of us," Cayetano said.

"We see where we must go and what we must do. The choices are not easy but they are clear."

Ka‘u legislator supports
governor’s prison proposal

By Gregg K. Kakesako

Gov. Ben Cayetano's proposal to place a 2,300-bed medium-security prison at the economically strapped Big Island community of Ka'u has won the support of one Democratic legislator who represents the area.

Democratic Rep. Robert Herkes said today that the prison would be "an economical shot in the arm" for his district, which has run into hard economic times since the sugar plantations stopped harvesting cane.

Herkes also pointed to the petition signed by 800 Ka'u residents last year endorsing the construction of a prison in their back yard, saying the "people have spoken."

Herkes noted that besides the ILWU, the Ka'u Lions Club endorsed the prison proposal.

However, Rep. Nestor Garcia, chairman of the House Public Safety and Military Affairs Committee, said his major concern is bringing in water, sewer and power lines to the remote southern Big Island community.

"I am also concerned whether there is the human infrastructure to support a prison in Ka'u," Garcia said. "I am talking about whether there will be teachers, doctors and social workers needed to support a prison."

Cayetano suggested the Ka'u prison be built with private funds and possibly managed by a private firm.

He said: "Today we spend about $79 per day for every prisoner. With this new program, the cost will be be $50 per day. This will save us $23 million a year."

Herkes said he visited the residents of Oceanview Estates and businesses in the area this weekend, which "generally support" a prison there.

Construction of a prison also would keep the Ka'u Hospital open, which Herkes said has been losing $1 million a year in revenues. "It's the only medical facility within 50 miles," Herkes said.

There has been at least one private developer -- the V-Group based in Cleveland -- that has expressed an interest in building a prison at Ka'u.

The V-Group's proposal calls for a 1,500-bed medium-security facility with a price tag of $112 million.

Monday, January 26, 1998

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