Use rainy day fund for human needs


POSTED: Tuesday, March 17, 2009

Gov. Linda Lingle is determined not to raise taxes in the midst of the economic meltdown. Unfortunately, one of her methods to comply with the constitutionally required balanced budget is to siphon most of the state's rainy day fund to the detriment of programs aimed at providing assistance to the most vulnerable Hawaii residents.

Lingle announced in January that she intended to withdraw $60 million from the $74 million fund, created by the Legislature a decade ago to be tapped in times of emergency. The fund was intended “;to maintain levels of programs determined to be essential to public health, safety, welfare and education”; and “;provide for counter-cyclical economic and employment programs in periods of economic downturn.”;

Using the fund to balance the budget during the current financial crisis appears to be within the parameters of the 1999 law that established it. The law specifically forbids it from being used to pay for legislative expenses or wage raises for appointed state officials, who have accepted a wage freeze.

Two-thirds votes of approval by both the House and the Senate are needed for Lingle to dip into the fund, and her proposal is not popular among legislators. Lawmakers are considering other ways to balance the budget by raising taxes, and Lingle has vowed to veto any tax increase.

“;I'd like to say no taxes, no labor cuts, no nothing,”; says Sen. Donna Kim, chairwoman of the Ways and Means Committee, “;but the hospitals are in trouble, mental health, all the safety nets are coming crumbling down.”; Lingle responds that raising taxes or laying off employees “;would further weaken our economy.”;

Lingle and legislative leaders can avoid a train wreck by reaching a compromise that could include tax changes — removal of the state's tax deduction for gambling losses should be at the top of the list — while directing most of the rainy day funds at state programs and nonprofit organizations aimed at helping the needy. Any tax increase should have an expiration date of a year from now.

The National Alliance on Mental Illness noted last week that Hawaii's system of mental health care “;has improved substantially since its dismal days in the 1980s and 1990s, but the state is now at risk of sliding backwards.”; The state's disbanding last fall of teams that provided specialized services to seriously mentally ill people was “;a step backward,”; the alliance pointed out.

Using the rainy day fund solely to prevent budget shortfalls while programs critical to the most needy would be a further step backward, and those programs would be difficult if not impossible to quickly repair after the economy recovers. A pending Senate bill that would direct the rainy day fund to human needs should be enacted.