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Surplus presents
dilemma for
Cayetano

Public employee pay raises,
social services, schools and special
education cannot all be
funded with $250 million

By Richard Borreca
Star-Bulletin

The state budget surplus is estimated at about $250 million for the year ended June 30, almost 60 percent more than the $147 million that had been forecast by state officials in January.

State Budget Director Neal Miyahira cautioned that while the news is good, there still is not enough money for sweeping pay raises for public employees.

He met with Gov. Ben Cayetano yesterday and after the meeting said Cayetano is working on using some of the extra money for increased social services and more computer education in the schools.

But Russell Okata, executive director of the Hawaii Government Employees Association, said the state should use any extra money to first pay the already arbitrated pay raises for HGEA members.

"He should fund the pay raises and submit a budget recommending the Legislature complete the process by approving it," Okata said yesterday.

But Miyahira figured that if all state workers -- white-collar, blue-collar and educators -- were given the same raise as in the HGEA settlement, the state would be in the red by 2003 or 2005.

The extra money came as the state closed out the fiscal year and calculated how much more had been collected in taxes.

The state tax office reported yesterday that collections for the fiscal year increased $120 million, or 4.2 percent, from a year before.

This is more than the state had predicted it would have in the treasury. That is important because those predictions are used to prepare the state budget for the next six years. With larger projections and a bigger surplus, the state can plan to spend more money.

"It is part of a growing trend, that Hawaii's economy is beyond recovery and now in an expansion mode. This is very good news for everyone," Cayetano said in response to the new figures.

The co-chairmen of the Senate Ways and Means Committee, Carol Fukunaga and Andy Levin, said that the money should not just be spent on new programs, but that some of it should be saved in a rainy-day fund.

"The economy and education continue to be the highest priorities, but taxpayers don't want us spending money simply because it is there," Fukunaga said.

Levin added, however, that the newfound depth to the state treasury makes it easier to consider government employee pay raises next year.

"It certainly enhances their argument. We should give fair consideration to the (HGEA) award. It looks like we are going to have dollars to fund it," Levin said.

Okata calculated the award at $111 million for the four-year contract.

The budget director, however, said the state has plenty of other new expenses before considering the pay-raise issue.

The Felix-Cayetano federal court case, in which the state has been found in contempt of court for not adequately providing for educationally handicapped students, is expected to cost an additional $30 million a year. That new cost is not calculated into the new surplus figures yet, Miyahira said.

Also, there are additional costs for the state convention center, which could run as high as $14 million, and another $30 million in costs because of a public utilities tax lawsuit, Miyahira said.

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