Panel hunts
sparks to rekindle
isle economy

State senators are told to
look to better schools and
a lot less red tape

By Mike Yuen
Star-Bulletin

A first-rate public education system and less-stifling government regulations are needed if Hawaii is to recover from its nearly decade-long economic slump, a labor economist and a tax specialist have asserted.

Moreover, added Lowell Kalapa, president of the Tax Foundation of Hawaii, lawmakers have to demonstrate that they believe it is acceptable to make a profit in the isles before investors will warm to putting their money into Hawaii.

The comments by Kalapa and Lawrence Boyd, University of Hawaii labor economist, came yesterday as state Sen. Rod Tam (D, Pauoa) appealed for solutions to the state's economic woes. "I'm asking what we should do," Tam implored. "We know what the problems are."

Tam sits on the Senate Ways and Means Committee, which began pre-legislative session hearings on the economy and Gov. Ben Cayetano's budget proposals for the two-year period that begins July 1. The House Finance Committee begins its inquiry today.

Cayetano is proposing what he describes as an "austere" two-year budget of nearly $13.5 billion. That includes $12.1 billion for operating costs and $1.3 billion for public works.

While Kalapa painted a bleak picture, state economist Pearl Iboshi was cautiously upbeat. When she's asked if the economy is improving, she said, her stock answer is: "Yes -- sort of."

"We expect some (economic) indicators to improve, while others worsen," Iboshi said. "Many of the changes made in the last legislative session will begin to be felt in 1999. Personal income tax reductions will help keep money in people's pockets, and the increased spending for the marketing of Hawaii will stabilize arrival numbers and help in the development of new markets."

Kalapa, however, warned that tourism, the state's No. 1 industry, is sputtering because visitors are finding the cost of a Hawaii vacation to be increasingly expensive. Lawmakers can't simply pass on to visitors the cost of increased taxes and other public costs because tourists will go elsewhere, Kalapa said.

UH's Boyd said long-term economic revitalization is dependent on turning the statewide public-school system and the University of Hawaii into first-rate institutions that can turn out the skilled workers needed to attract high-technology industries.

"A coherent plan" that demands accountability as well as educational improvements and public-private partnerships is needed, Boyd said.

Kalapa said legislators have far too long equated generous funding -- the public schools get 34 percent of general funds and UH 17 percent -- with educational excellence. Money, he said, has never been the problem with isle education, it's cutting red tape to get the funds into the classrooms.