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Businesses give
state low marks

A survey of local entrepreneurs
finds discontent despite
economic recovery

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By Russ Lynch
Star-Bulletin

DESPITE the improving Hawaii economy, 53 percent of local small-business owners say they would not start operations in Hawaii if they had to do it all over again, according to a survey released today.

And 61 percent of the members surveyed by the 4,000-member Hawaii chapter of the National Federation of Independent Business rated the state's small-business climate "poor," while 33 percent called it "fair" and 25 percent were unsure how they felt about it.

Seiji Naya, director of the state Department of Business, Economic Development & Tourism, said there is general improvement in the economy and all businesses are affected by it.

Naya also said that small businesses in particular will benefit from the state's reduction in personal income taxes.

The second phase of the three-phase reduction went into effect yesterday. "As most small businesses are sole proprietorships, partnerships or limited liability companies, this will directly help them," Naya said.

About 22.5 percent of the local NFIB membership, or about 900 small-business operators, responded to the survey. Their biggest complaints had to do with the soaring cost of health insurance coverage they must provide for their employees and other expenses required by law, such as premiums for workers compensation insurance, according to Bette Tatum, state director for the NFIB.

"After 10 long years of economic gloom, the sun appears to be peeking through the clouds for certain segments of Hawaii business, but apparently that isn't the case overall," Tatum said. "This survey should be a wake-up call to our elected leaders who believe the worst is over and have forgotten that small business is the state's largest job and revenue producer," Tatum said.

Tatum said more than 60 percent of those responding said they plan no change in the number of employees they now have. However, 31 percent said they plan to increase staff and 52 percent said they have a hard time finding employees to fill vacancies as they occur.

Concerns listed by the survey respondents included the longtime complaints of small businesses about what they see as excessive state rules and regulations, state taxes and fees and the expense of answering lawsuits and liability claims.

In all, 83 percent of the business operators filling in the survey forms said they would have to trim some employee benefits -- those not required by law -- or else cut into future wage increases to meet increases in their health insurance premiums.

More than one-third -- 37 percent -- of the firms replying to the survey said their health insurance premiums went up 5-to-10 percent last year, 24 percent reported increases of 11-to-15 percent, and 15 percent saw premiums rise between 16-to-75 percent, Tatum said.

Still, Naya said all sectors of the Hawaii economy -- tourism, retail sales, construction, real estate and others -- have contributed to the improved economy. "Tourism statistics show we are reaching record levels, which also impacts small businesses," he said.

In a separate statement today, DBEDT said Hawaii's economy is expected to grow at a "sustainable pace" of 2.7 percent this year after a 2.8 percent estimated growth in 2000. The department's quarterly review based its prediction on statistics for labor, income, tax revenue, tourism and construction.

State Web Site