Capitol View
AFTER a while it does no good to just pound the horn. You either have to get out of the way or hit the air bag. That's where Hawaii's economy is now. State finances are
headed for a crisisWarnings only work for so long and then there is a crash.
We have a library full of warnings. The wise men and women have met, the counsel has been given and ignored. Now it is time for the people who will be hurt the most in the upcoming crash to grab the wheel.
Simply put, Hawaii's economy has not gotten better and those in state government spent the winter and spring making matters worse.
What the Legislature and Gov. Ben Cayetano's administration did was to actually raise state spending by more than 4 percent, while cutting taxes.
"We are basically headed for a catastrophe," says Lowell Kalapa, Hawaii Tax Foundation president. But Kalapa is no fan of the Legislature or the governor, so it is understandable that his warning would be ignored.
Last year a more impartial group, the state's Council on Revenues, which is charged by law with coming up with a projected estimate of the state's tax revenues, hit the alarm.
The council members' fear one year ago was that there was no clear way the state would pay for last year's tax cuts. To make matters worse, they also thought the tax cuts wouldn't do enough to get the state out of its economic slump.
James Mak, one of the economists on the council, said he doubted that the tax cuts would help. And Paul Brewbaker grumbled that the Legislature was taking money from special funds, like the pension system, instead of cutting government spending.
Now remember that was what the council said last year.
This year, they just threw up their hands and said in essence: "You guys are running the state broke. There is no more money left."
Last year the Legislature cut $750 million out of the budget by reducing personal income taxes. This year legislators cut another $150 million by reducing the pyramiding of the general excise tax.
And they found some more pension money to grab onto.
Here's the tricky part with these economic warnings: Things happen slowly. The disaster the state is readying won't occur this year; it will come about two years from now.
Even the speaker of the House, Calvin Say, predicts the state will get through the next year or two, but he is worried about what happens then.
HERE'S the answer: The public employees will want lots more money because the Legislature passed a bill forbidding the public employees to get another raise for two years. By then they will be good and hungry.
"Two years down the road, we will reach critical mass," Kalapa predicted this week.
"We can't raise taxes, we can't fire anybody and the bill collectors will be at the door.
"Believe it or not we are headed for a financial crisis," he said.
This time, however, the crisis will mean state and county workers will have to be laid off, because the state and the counties won't have the money to pay them.
That is why it is time for the union leaders to lead intelligently.
Instead of sitting on study groups and commissions in order to save public work jobs, the public employee union leaders now need to come up with a viable plan for the state government.
The budget will be written either with them or despite them. It is up to the unions to choose.
Richard Borreca reports on Hawaii's politics every Wednesday.
He can be reached by e-mail at rborreca@pixi.com