Tax revenue decline takes a sharper turn


POSTED: Friday, September 11, 2009

Hawaii's latest tax collections fell 5 percent in July and August, a drop greater than predicted for the full fiscal year by the state's Council on Revenues.

The Council forecast in August that tax collections would drop 1.5 percent this year.

The tally issued yesterday worried Gov. Linda Lingle, who said the state must take “;decisive action to ensure that the state maintains our fiscal viability.”;

Lingle used the report to put more pressure on the state's four public worker unions to settle their outstanding labor contracts and take unpaid furloughs to save money.

“;The reality is we can no longer afford to maintain the current level of labor expenses,”; Lingle said in a news release, adding that she hopes to reach a negotiated settlement before an arbitrator reaches a binding labor decision in December.

Lingle is expected to meet today with one or more of the public union representatives, and a source close to the negotiations says the state's teachers union is also close to reaching agreement this weekend.





        The report from the Hawaii Tax Department yesterday shows that corporate income tax was down 229 percent from July and August 2008, while individual income tax revenue was down 6.4 percent.

General excise and use taxes amounted to $194 million in August, according to the department. The largest single category of collections fell 5.5 percent in the first two months of this fiscal year over the previous year.


Collections of the transient accommodations tax, also known as the hotel room tax, were $20 million, a 4 percent drop compared with last year.


Individual income tax collections fell to $111 million, 6.4 percent less than the previous year.


There was a slight increase in other tax collections, including the public service company tax, franchise tax, liquor tax, cigarette and tobacco taxes, insurance tax and conveyance tax.




Lingle, however, told KGMB-TV on Wednesday that the negotiations are being hampered because the state and the unions do not trust each other.

“;The big issue to overcome right now is a lack of trust on both sides—a lack of trust I have for the union leaders and how they've dealt with me, and I'm sure they see the same thing,”; Lingle told the television station.

Meanwhile, Senate President Colleen Hanabusa says Lingle's reaction to the tax report on the first two months of this fiscal year is overly dramatic.

Hanabusa reasons that the Council on Revenues first said the state would have a 9.5 percent drop in collections and that the drop for this fiscal year would be another 1.5 percent.

“;But if we are at minus 5 percent, we are making the move up from minus 9.5 percent,”; Hanabusa said. “;It shows you that we are trending up. I don't agree with the governor's read on the numbers.”;

Paul Brewbaker, chairman of the Council on Revenues, offered his own take on the tax report. Brewbaker said the tax report could mean that the decrease in tax collections during a fiscal year's “;transition to a 3 or 4 percent increase ... would not be inconsistent with the council's minus 1.5 percent revenue forecast.”; That is, early losses and more modest, late gains over the year could average out to a 1.5 percent drop.

But Brewbaker, a longtime Bank of Hawaii economist, said “;the governor's general approach is eminently prudent, irrespective of the details, given that virtually all of the risks of the revenue forecast are to the downside.”;