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Friday, March 10, 2000

State of Hawaii

Tax revenues
show state’s
economy growing

By Bruce Dunford
Associated Press


State tax revenues in February jumped almost 7 percent over the same month last year, providing further evidence the state's economy is rebounding.

Yesterday's monthly tax report came just before the state Council on Revenues revised its official tax revenue forecast by advising lawmakers they will have $45 million more to spend in the coming fiscal year than the panel of economists had forecast in December.

That word came just two hours after the state House approved its version of the $6.4 billion supplemental budget bill, which was based on the December forecast.

According to the Department of Taxation, revenues through the first eight months of the fiscal year are running 3.2 percent ahead of last year, compared with a 1.1 percent decline the council had forecast in December.

That difference of 4.3 percent equals about $129 million, if the growth rate continues through June.

But council Chairman Michael Sklarz said members only changed the revenue forecast for the current fiscal year from the 1.1 percent decline to no growth, a difference of about $30 million.

Despite the 3.2 percent growth in revenues through two-thirds of the fiscal year, Sklarz said members were cautious about the impact over the next few months from personal income tax refunds resulting from the 1998 tax cuts.

The Council revised the revenue growth figure upward by a half-percentage point in each of the next six years -- to 3.4 percent in 2001, 3.4 in 2002, 3.8 in 2003, 3.8 in 2004, 4.6 in 2005 and 4.5 in 2006.

"Generally, we have a more optimistic outlook as the numbers come in better than we had seen," he said.

It's a combination of improving activity in the real estate market, the visitor industry and construction, Sklarz said.

"All the driving forces are now moving together in a positive way for the first time in many years," he said.

Gov. Ben Cayetano said he expects the public employees unions to look upon the higher revenues as justification to seek pay raises.

"I hope that the generation of these unanticipated revenues will not get the civil service reform effort off the track, because we need to reform the government no matter what the revenues look like," he said.

The governor recalled that during his first four years in office, he was cutting programs and reducing welfare benefits on one hand yet, because of binding arbitration on labor contracts, was giving pay raises with the other.

"I'm determined that is not going to happen in my final four years," Cayetano said. "Before we give pay raises, we've got to take care of the poor, the disadvantaged and needy and people who need help and that's where, as far as I'm concerned, our money's going to go," he said.

If there is enough left for pay raises, "then I'd be open to that provided the unions and the administration can work out some changes to civil service regulations and laws as well as to issues which have to do with benefits and all of that," Cayetano said.

General excise and use tax revenues, which reflect business activity and represent about half of the state's total tax take, were up 10.1 percent in February and are 7.1 percent ahead for the year, according to the tax department.

Individual income tax revenues were down 13.9 percent in February and down 1.7 percent for the year, reflecting the refunds to taxpayers from tax cuts approved in 1998, it said.

General fund revenues in February, which had a Leap Year day, totaled $227.6 million, or $14.6 million over February 1999.

In eight months, the state has collected $1.99 billion, compared with $1.92 billion last fiscal year.

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