Revenues panel remains
optimistic about economy

By Pat Omandam
Star-Bulletin

The state Council on Revenues continues to believe Hawaii's economy is getting better but remains cautious because it doesn't know how recent state tax cuts will affect its forecasts.

The Council decided yesterday to forecast growth in state revenue this fiscal year at a 1.1 percent decline instead of a 1.6 percent decline. But it raised estimates for personal income growth to 3 percent, up 0.5 percent, said Council Chairman Michael A. Sklarz.

Sklarz said estimates for personal income were raised because members were optimistic about its long-term growth.

"All this just points to a gradually improving economy," Sklarz said.

Still, the seven-member panel spent more than an hour discussing the impact of the tax cuts passed over the last two years, including the depyramiding of the general excise tax on services that takes effect next year. The economists debated over how much the tax cuts will boost the economy and how much it will reduce government spending.

Some believe the tax cuts -- which total more than $2 billion over the next seven years -- will offset any gains made in the economy in the near term. Others disagree.

"It will be positive, but it won't be swamped," said council member Pearl Iboshi.

Sklarz said the revenue forecast for next fiscal year will be at a 1.9 percent growth, down from a May forecast of 2.4 percent. The decline is based on the implementation of the tax cuts.

Sklarz said the Council will revisit the revenue forecast once it gets more financial data next month.

The council prepares revenue estimates of state government for each fiscal year of the six-year state financial plan. It reports its latest revenue forecasts to the governor and the Legislature each quarter.

By law, its estimates must be considered by the governor and by state lawmakers in preparing the state budget.