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Tax bills, layoffs near face-off


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POSTED: Sunday, April 26, 2009

Legislators have approved a range of tax increases aimed at achieving a balanced budget to avoid wage cuts or layoffs of state employees. Gov. Linda Lingle's possible vetoes of tax measures and the question of whether her vetoes will be overridden will prolong the uncertainty. Increasingly, layoffs and furloughs seem probable if the economy continues to deteriorate.

The refusal of Hawaii's public-employee unions to consider wage cuts or furloughs could backfire. New York Gov. David A. Patterson has threatened to lay off 9,000 of that state's 200,000 workers if they refuse to agree on concessions, and that scenario may be repeated in Hawaii if conditions worsen.

Lawmakers have approved increasing the hotel room tax from the present 7.25 percent to 8.25 percent in July and to 9.25 percent in July 2010; the income tax rate for singles making at least $150,000 a year and couples making more than $300,000; the tax on real-estate sales above $2 million, and the tax on tobacco products. Revenue expected from the tax hikes is aimed at keeping wages for the 49,000 state employees at their present levels.

Other states are facing the same problem as the recession continues. At least 15 states are in various stages of considering or carrying out furloughs, requiring employees to take a day or two off without pay every month. Federal stimulus packages fall short of filling the need.

“;The fiscal situation facing states is like a bad horror movie,”; says Corina Ecki, director of the National Conference of State Legislatures'' fiscal program. “;The details get more gruesome, and the story never seems to end.”;

While Hawaii's public-employee unions are refusing any cuts in pay, Lingle has left open the possibility of furloughing workers and reducing medical benefits to keep the budget balanced.

“;But furloughs are fundamentally a cut in pay,”; Hetty Rosenstein, director of New Jersey's largest state-worker union, explained to The New York Times. “;And furloughs are a cut in service. If you don't have people working, the work isn't going to magically get done.”;

Businesses make similar decisions to lay off or furlough employees to stay in the black during times when demand for their products has dropped. However, government chores typically increase during economically hard times, as more people register for unemployment benefits and other services.

In seven states, 2,700 state workers who administer the federal Social Security Administration program have been furloughed, resulting in delays in processing tens of thousands of disability claims that already took more than a year and four months to resolve.

In other states where furloughs have been implemented, public assistance to those who need it most has declined.