Friday, March 5, 1999

Hawaii State Seal

Looks like state’s tax
glass was half-empty
after all

By Mike Yuen


Flash back to last year's gubernatorial campaign.

Remember Gov. Ben Cayetano's insistence that the isle economy had bottomed out and was now on an upswing? Remember how Cayetano pointed to tax revenue collections from early in the fiscal year, which began July 1, as proof he was right because the numbers were running way ahead of the Council on Revenues' year-end projection?

Well, with four months left in the fiscal year, the state's economy is still struggling.

And from at least one corner of the council, whose members are leading economists, there's a sense of vindication that the panel's less rosy view -- while not the material for re-election campaigns -- is turning out to be more accurate.

While not aiming his comment directly at Cayetano but rather at Cayetano's budget director, Earl Anzai, panel member James Mak, a University of Hawaii economics professor, said: "He's eating crow today."

Mak's remark yesterday came as the council was mulling tax revenue collections and economic indicators in preparation for its meeting next week when it is to decide whether to keep its revenue growth forecast for the current fiscal year at 1 percent. One percent growth would mean only $30 million would be collected above the previous year's tax deposits into the state's cash-strapped general fund.

The council's forecasts are used by the administration and the Legislature in shaping the state budget, which is required by the Hawaii Constitution to be balanced.

Another council member, UH associate professor of Economics Carl Bonham, said he was open to lowering the group's projected revenue growth to 0.5 percent.

The council's chairman, Michael Sklarz, added: "We don't think anything has fundamentally changed in the economy. We've basically been seeing this nominal growth."

Sklarz said while the council was bashed last year for being overly pessimistic, "We didn't take it personally."

The council's forecast took into account the revenue losses caused by Cayetano's personal income tax cuts and other factors, Sklarz said.

Kathleen Racuya-Markrich, Cayetano's spokeswoman, said Cayetano wouldn't comment.

In October, during Cayetano's first joint appearance with Republican nominee Linda Lingle and Libertarian candidate George Peabody, Cayetano said: "There is money for us to consider restoring some of the money that was cut, but there is not enough money to restore everything we cut."

But now the House and Senate are mulling cuts to Cayetano's proposed budget for the fiscal biennium that begins July 1.

The council has forecast that tax revenue collections for the coming fiscal year will run 1.6 percent behind this year's.

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