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Monday, January 22, 2001

State of Hawaii

State of the State

Gov. Ben Cayetano

'The economy is back'


Mr. Speaker, Mr. President, members of the Senate and House, Mayors Apana and Harris, Council chairs, distinguished guests, and my fellow citizens.

This morning it is my privilege to make my seventh address on the State of the State.

I thank the people of Hawaii for giving me the honor of leading our beloved Hawaii into the New Century.

I thank my wife, Vicky, our children, our families, friends and supporters, who helped make this day possible.

I congratulate all of you who were successful in your elections. For those for whom this is the very first time, our people have given you a privilege, a great honor, an experience given to a lucky few.

By all accounts, the year 2000 was a great year for our State. There were great stories of individual successes: Angela Baraquio crowned Miss America; Leslie Lam Mrs. America; Brian Viloria representing Hawaii in the Olympics.

One of the most notable was Benny Agbayani. Benny overcame adversity early in the season to win a starting role with the New York Mets, and he was instrumental in getting the Mets into the World Series. He inspired us and he made Hawaii proud.

He is with us this morning and I want to introduce him. Ladies and Gentlemen, members of the Legislature, join me in honoring Hawaii's Come Back Kid, Benny Agbayani.

Thank you, Benny.

Out of respect for the limits of your endurance for long speeches, I have prepared a booklet that gives more details of my agenda for the next two years.

Last year, was a great year for our State.

The State government finished the year in sound fiscal condition. State bond ratings were upgraded and we were given high marks by national organizations for our fiscal practices.

The State's economy, which started to recover in late 1998 through 1999, is now expanding. And the signs of positive economic growth are convincing.

In 1995, our unemployment rate was 5.9 percent. Today, it is down to 3.7 percent -- the lowest since 1992 -- and well below the national average of 4 percent.

In 2000, the Real Gross State Product increased by 3 percent -- the strongest growth in a decade. And this year, personal income will show a 5 percent growth -- the biggest increase since 1992.

For 2001, we expect a 2 percent growth in jobs or 10,000 new jobs -- the fastest growth rate since 1991.

Tourism is up. Private construction is up. Auto sales continued at record levels for the second consecutive year. Real estate sales are up. Consumer confidence is up.

Hawaii's economy is back, expanding, stronger, and more diverse than ever in the past decade.

Our challenge is to keep the momentum going, to develop a strong, sustainable, and diverse economy. And to do it without destroying our beautiful environment and compromising our core values.

The importance of a strong economy cannot be overstated. The past eight years of economic stagnation has taught us that a weak economy impairs the State's ability to provide services to the poor, the needy, and the disabled.

That is the reality and simple truth.

The current slowdown in the U.S. economy, the lingering recession in Japan, the rise of oil prices make it imperative that we continue to restructure our economy, reform our State government, and invest in our economic future.

The Economy

Some of our past investments are paying off.

Tourism had a record year last year, and this year might be even better.

One reason is our three-year old, state-of-the-art, $300 million Hawaii Convention Center, one of the most beautiful in the world, which is already drawing repeat conventions.

Another is the $60 million we give the Hawaii Tourism Authority to market Hawaii each year.

Last year, nearly 7 million tourists visited Hawaii and spent nearly 10 percent more than in 1999, reversing a three-year decline in expenditures.

This year, we will focus on expanding our cruise line industry.

In 1998, the total impact of the cruise industry in Hawaii was about $304 million. In four years, we expect it to skyrocket to 1.4 billion dollars!

Cruise lines are a very important part of Hawaii's tourist industry, especially for places such as Hilo and Kauai, which have not shared fully in our economic expansion.

Therefore, we will submit a request for funding to improve docking and pier facilities with priority for Hilo and Nawiliwili harbors.

I am pleased to report that our efforts to position Hawaii as an international meeting place -- a "Geneva of the Pacific" -- is making great progress.

The Pacific Basin Economic Council meeting last year was such a big success that the group -- made up of 1,100 corporations from more than 20 countries -- will return in 2002, 2003, and 2004.

Getting PBEC was a homerun. But this year, Hawaii will score again when we host the prestigious Asian Development Bank meeting in May.

Finance ministers from 60-member nations, CEOs and presidents from the world's top banks and financial institutions, along with hundreds of foreign and American news people, will be here.

And because it is ADB's custom for the President of the host country to address its members, we may even see President Bush here in May.

These international meetings go a long way towards convincing people that Hawaii is a good place to do serious business. But we need to do more.

For more than 50 years, our tourist industry has successfully marketed Hawaii as a place of leisure. As a result, Hawaii has been repeatedly ranked as one of the world's top tourist destinations.

To sell Hawaii as a good place to do business, we need to change our marketing strategy.

Therefore, I will submit legislation to require the HTA to use one-third of its marketing fund to promote Hawaii as a business destination.

The challenge to maintain and improve Hawaii's standing as a world-class tourist destination never ends. We must keep an eye on our competition and make the changes necessary to keep our competitive edge.

Survey after survey on Hawaii tourism reach the same conclusion: To compete, to meet the challenges of global competition, Hawaii must provide a greater diversity of exciting and interesting experiences for our visitors.

In response, we have included in our budget request appropriations to develop more diverse experiences and to improve Hawaii's parks, marine and wilderness areas.

For Waikiki, I have requested funding to build our proposed new Visitor Center at the old Canon Club at Diamond Head, and to evaluate the feasibility of an urban park at the site of the Ala Wai Golf Course.


And we have developed a vision for Kakaako.

Kakaako is the last large parcel of undeveloped state-owned land in urban Honolulu. Its central location is perfect for a development that will serve residents and visitors alike.

The State has been trying to develop Kakaako for more than 30 years.

We've poured hundreds of millions of dollars into building infrastructure mostly on the mauka side of Ala Moana Boulevard.

The State made huge investments in Kakaako and private land values have gone up, but little in the way of development has happened.

When I took office in 1994, we decided to focus on developing state-owned land, mostly on the makai side of Kakaako.

We see Kakaako Makai as a gathering place for residents and visitors alike -- a place to work, to play, to teach and to do research.

We propose that the state invest in developing a complex of attractions designed to highlight Hawaii's historical and cultural history and its science and technological achievements.

First, we propose a world-class aquarium. Second, a science and technology center. Both will compliment the existing Children's Discovery Center, the UH Pacific Biomedical Research Center, and our proposed Medical School.

We believe that our proposed aquarium will be to Hawaii what Baltimore's famous National Aquarium has been to Baltimore. Back in the 1970s, Baltimore's political leaders had the vision and courage to boldly step forward and give their city the icon it needed.

Today, the aquarium is Baltimore's top attraction, generating nearly $200 million in revenue each year. It's educational partnerships and programs service more than 200,000 children annually.

The second part of the complex is a proposed science and technology center, which will showcase Hawaii's strengths in astronomy, ocean marine sciences, biotechnology and volcanology.

A few weeks ago, we took a big step forward in making this project a reality when the Bishop Museum Board decided to relocate their proposed Science and Technology Center to Kakaako.

This is a win for Bishop Museum, which you designated last year as a state museum, because Kakaako is a far superior site for their science center than Kalihi. And it is a win for the State because the Bishop Museum's plan fits perfectly in our vision for Kakaako Makai.

In each case, the State is working in partnership with the private sector. On the proposed aquarium, a private 501-C nonprofit foundation was formed. The task force, headed by Walter Dods of First Hawaiian Bank, is comprised of leaders from the University, business, labor and community groups.

The task force has pledged to raise $20 million in private funds to augment the State's investment of $50 million -- $ 20 million of which will be revenue bonds.

The fact that a group of respected private citizens are prepared to raise $20 million for the aquarium is remarkable. I know of no other state project for which such a large commitment was ever made.

Whether it is civil service reform, economic development, or education, the people of our State expect and deserve bold action from their political leaders. But nothing big will ever be done by people who think small.

I believe we have an opportunity to do something bold, something which will redefine the character of our waterfront. And after emerging from eight years of economic stagnation, I think the time is right.

If we work in partnership with the private sector, with business, labor and the community, I believe Kakaako can become -- as one of our daily newspapers put it -- a "grand statement.... a masterpiece of design that will instantly become a worldwide symbol of Honolulu's rebirth."

The Environment

Our greatest asset in marketing Hawaii to the world is our breathtaking natural environment.

Limited resources cannot support unlimited growth. And economic growth should never come at the expense of our natural environment.

With your approval, I propose a long-range analysis of our State's carrying capacity to help evaluate our State's ability to endure growth.

I have asked Dr. Seiji Naya of DBEDT to head this project. We will look at whether the State's infrastructure and our natural resources can survive such growth without being damaged.

The results of this analysis will be used to create a strategic plan to make sure we balance our economic interests in maintaining tourism with our duty to protect our natural environment.

For years, our State parks have served our needs. They have been a haven for our people to take a break from their busy lives to enjoy the outdoors.

Well, our parks system needs our attention now. We must repair worn facilities, upgrade older ones, and otherwise beautify these parks.

I am proposing spending $22 million in capital improvements to repair and maintain our State parks.

For the long-term care of our parks, I am proposing that half the money from the hotel room tax that does not go for marketing be used to improve and protect the wonders of our State parks system.

Every day, I am thankful that I live in the most beautiful place on earth. Over the years, so much of it has changed. Where there were once overgrown kiawe trees, now there are hotels, and where there were cane fields, now there are homes and businesses.

But there are still a few places left in Hawaii where native plants grow wild and undisturbed. The State has been slowly acquiring some of the most treasured pieces so that we can keep these wild places wild.

We acquired the historic compound south of Kona that once served as the residence of a chiefess of Hawaii.

On Maui, we got the famous - or infamous - road to Hana designated as one of the nation's "Millennium Legacy Trails."

With your help we bought the spectacular Ka Iwi Coastline here on Oahu.

On Kauai, we have ended a 20-year controversy by banning commercial motorized boating on the beautiful Hanalei River.

And just this month, we acquired beautiful Lumahai Beach, made famous in the movie "South Pacific."


In my first State of the State address six years ago, I shared with you my belief that Hawaii's potential for economic diversification was promising in three areas: High technology, healthcare and biotechnology.

There were some skeptics who thought Hawaii had no chance for success in developing a high technology industry.

Well, they were wrong. The number of high technology companies in Hawaii has nearly tripled in just five years.

The passage of Act 178 in 1999 and Act 297 last year gives Hawaii's high technology companies some of the best incentives in the nation.

This session we will propose additional changes to these laws to give greater incentives, which will make Hawaii more attractive to high tech businesses.

We have already attracted a number of impressive high tech companies, and I am pleased that they have recruited many of Hawaii's best and brightest to return home.

Last Wednesday, a speaker lamented the brain drain of Hawaii's best and brightest to the Mainland. Many were forced to leave Hawaii because of the lack of opportunities. Well, we are bringing them home.

We invited a few of them to be here this morning, but when word got around a whole bunch showed up. They come from about a dozen of Hawaii's high tech companies. They came home because they found good paying, challenging high tech jobs, and because they love Hawaii.

They are an energetic and dynamic group. They've organized and will help spread the word to other Hawaii residents on the mainland about the opportunities in Hawaii's growing high tech industry.

Mark my words, I believe these young professionals and entrepreneurs, Hawaii's best and brightest, will be a vibrant and dynamic force in building Hawaii's high tech industry.

Members of the Legislature, please join me in welcoming home Hawaii's best and brightest.


Nothing is more important than the education of our children.

That's why we spared the Department of Education's budget, while cutting every other department.

Over the past six years, we made education our highest priority. We increased teacher salaries, extended the school year by seven days, and built a record number of new schools and classrooms.

This year, I ask you to approve my request for $290 million for school capital improvements -- $90 million for the construction of new schools and classrooms, $100 million for repair and maintenance, and an additional $100 million to renovate our older schools and bring them up to par with the new schools. In all, it totals $290 million -- or 29 percent of our capital improvement request.

In addition, I propose spending $21 million to buy 18,000 new computers for our public schools. This will bring down the ratio of students to computers from 6:1 to 4:1.

Hawaii's children must learn to use this technology because it will open doors of learning and knowledge ordinarily not available to them. It will help teach them the skills of critical thinking. It will allow them to learn from student counterparts around the world. And it will help them discover and experience the exciting world of the Internet.

And when our students are given the proper tools they can compete against anyone. Members of the Legislature, I would like to introduce to you a group of students from Kapolei Elementary School who will make all of us proud of our public schools.

These six children competed in a national computer competition called ThinkQuest Junior. They walked off with the top simulation award in the nation with their interactive site entitled, "Values: Making Choices for Life."

They are here in the gallery today with the Kapolei Elementary School technology coordinator Michael O'Connor.

Thank you, Mike, and students.

Pre-plus Program

When I had the honor of serving as your Lieutenant Governor, we created the "A-Plus" after-school program. For nearly 12 years now, "A-Plus" has been providing quality after school care to elementary, latchkey children.

More critical than "A-Plus," however, is the need for quality preschool care for three and four year olds. Learning has its greatest impact during a child's formative years. This is why preschool is so important to a child's development.

When our Administration began in 1994, less than 1,000 of about 16,400 needy three- and four-year-old children in Hawaii had access to preschool.

By working in partnerships with the Good Beginnings Alliance, Head Start and other private preschool providers, the State successfully placed 8,400 of these children in a preschool program.

We now propose a universal access preschool program for all needy children. No general funds are needed. Instead, we will utilize federal, private, and other monies to give preschool access to the remaining 8,000 children by 2004.

I consider this program, which we call "Pre-Plus," such a high priority that I have asked Lt. Governor Hirono to head it.

I ask for your support in bringing universal preschool to all our needy children.


The University of Hawaii is not just a place of higher learning; it is also a driving force for the economic development of this State.

That is why I am proposing we support Dr. Cadman's vision for a brand new, world-class medical school in Kakaako Makai.

The new medical school will be the foundation of Hawaii's healthcare and biotechnology industries. At $141 million for the first phase, it will not come cheap. But it will help develop a biotechnology industry that has the potential to bring more than 50-million new dollars into the State each year.

Last year, you supported my proposal to give an extra $1 million to four specific schools: Engineering, international business, medicine and high technology training.

I am pleased to report to you that the results were outstanding. The School of Business, for example, leveraged its $1 million dollars by four times to expand its school of e-commerce.

These disciplines are important to our efforts to develop a skilled workforce for high technology, healthcare and biotechnology industries.

I ask you again to appropriate $1 million each to the same programs. But, this year, I am also asking for an additional $1 million boost for the University's Department of Information and Computer Sciences.

Access to higher education is of great importance to me.

And I want to share with you my plan to give our high school graduates greater access to higher education.

I propose establishing a scholarship program, which would pay the full tuition of any public or private high school graduate with a "B" average who is admitted to a school in the University of Hawaii system.

I propose that the $175 million now sitting in the Hurricane Relief Fund be deposited into the State Rainy Day Fund, and that the interest derived be deposited into a scholarship fund called the Hawaii New Century Scholarship.

This is not a new idea. It is patterned after Georgia's immensely popular Hope Scholarship, which is supported by a state lottery. Hawaii can do the same things without a lottery. All we need is bold and innovative thinking. I ask for your support.

The Arts

I am pleased to report that the purchase of the Hemmeter building was completed. The State Foundation on Culture and Arts will begin planning for the Foundation's new home.

The purchase makes real a vision developed more than 30 years ago. When Governor John A. Burns established the State Foundation, the concept was to create an art museum. The idea was to display art in public buildings.

But Governor Burns himself believed the State Foundation would need a permanent home. Burns and Neal Blaisdell, the Republican Mayor of Honolulu, put together a search committee to find that home. And they did.

The committee recommended the YMCA building, now known as the Hemmeter Building. It took a while but when the State bought the building last December, John Burn's vision became reality.

Amazing, isn't it, what great things can be done when partisanship is set aside and political leaders work together?

Government Reform

Last year, we set an agenda to modernize state government. While some progress was made, much remains to be done. Therefore, we will renew our efforts to reform civil service and restructure government.

We will propose to revise the criteria used by fact-finding panels and arbitrators in making awards to require arbitrators to consider the entire fiscal condition of the State and County governments, including healthcare costs.

We will continue to follow a policy of only agreeing to collective bargaining agreements that increase the efficiency and productivity of government workers.

We will propose legislation that will give the state the right to privatize and curb overtime abuse. These reforms are long overdue, and I ask for your support.

Hawaiian Homelands

During the past year, the Department of Hawaiian Home Lands continued its unprecedented pace of building homesteads and returning Hawaiians to the land.

During this Administration, more homesteads will be completed than at any other time in the 80-year history of the program.

And, by the end of our Administration, we will have secured the resources and completed the planning to allow the next Governor to match our eight-year production in just four years!

In this coming year we will:

-- Welcome kupuna into the first ever Hawaiian Homes Kupuna project, a partnership with OHA;

-- Hand over keys to Hawaiian families entering the first ever rent-to-own project on Hawaiian Home Lands;

-- Complete the first ever multi-family development project at Kalawahine on Oahu; and

-- Break ground on the first-ever Hawaiian Home Lands community on Lanai.

What a great job Ray Soon and the Hawaiian Homes Commissioners have done!

Clouding the good work of the department, however, is the recently filed lawsuit -- Barrett vs. State of Hawaii -- challenging the constitutionality of OHA and the Department.

It is a broadside attack on Hawaiian programs and on our Constitution.

I believe that OHA, established under the State Constitution and approved by the people of Hawaii, and the Department of Hawaiian Home Lands, established by Congress 80 years ago, will withstand this attack.

And I pledge that I will use every authority vested in me as your Governor, every resource available to my Administration to successfully defend and protect the rights of native Hawaiians.

I also take this opportunity, however, to ask the Republican members of both houses of the Legislature to withdraw their proposal to merge OHA and the Department of Hawaiian Home Lands.

Under different circumstances, this may be an idea worth considering. But to lump both together under the cloud of the Barrett lawsuit only puts both at greater risk. OHA and the Department have different histories, origins, and purposes. I ask this in all sincerity and with the best intentions.

Social Needs

In recent years, I was forced to cut services to the most vulnerable among us. This, while we cut taxes to get the economy going again, tendered arbitrated pay raises, and spared the Department of Education from any budget cuts at all.

We tried to avoid cutting these social services. We left no stone unturned to find additional revenues. We raided special funds, implemented the payroll lag, froze hiring, eliminated positions, but in the end state programs for the poor, needy, the disabled -- the weakest among our citizens -- suffered.

Well, now that the economy has rebounded, this Administration's highest priority is to restore and, where appropriate, expand social services.

We've done much to improve the efficiency of the programs that provide people's most basic needs, such as food and shelter.

Our welfare reforms have received national recognition. Recently, the State received a $5 million cash bonus from the federal government for being a national leader in welfare reform. We lead the nation in getting more people on welfare working again, earning more and getting off the welfare rolls.

But we must do more.

Since 1992, the homeless population has decreased by 40 percent. And we assisted in developing 4,500 affordable rental-housing units -- a record for any Administration.

But we must and we will do more.


One-third of all of our federally assisted public housing units are located in the neighborhood where I was born -- Kalihi-Palama. These units are old and in dire need of improvements.

That's why I am proposing a $10 million appropriation to supplement federal funding that will revitalize the Kuhio Park Terrace and Kuhio Homes.

The people in our public housing programs deserve this, and I ask for your support!

Care Programs

Caring for our disabled and elderly is a huge problem for many families. I, personally, have known the struggles of trying to care for an elderly, infirm, parent at home. I will request $2 million in funding to expand our Kupuna Care and Nursing Home Without Walls programs. I ask you to support this modest request to help our senior citizens.

Minimum Wage

Last year, I asked you to increase the minimum wage. Our bill was bottled up in committee and died. I will again submit a new bill and ask you to support it.

I was heartened to hear the House Speaker last week support increasing the minimum wage. An increase will uplift the lives of more than 16,000 of Hawaii's workers. If we want more people to get off welfare and back into the workforce let's make sure they get paid a decent wage, and let's do it now.

Drug Treatment

Drug abuse is a problem that has devastated the lives of millions of people and their families. It is the major force that drives crime. It permeates society, affecting all walks of life, regardless of race, sex, age and social status.

For decades, the federal, state and county governments have waged a "war against drugs," relying mainly on law enforcement and punishment to deter illegal drug use.

Last year, the voters in California stunned political experts by approving Proposition 36, which declares drug abuse a health problem and mandates treatment for first and second time non-violent drug offenders.

Despite opposition by virtually all of the state's law enforcement community. most of the judges, and some health care groups, Proposition 36 was approved by 61 percent of the voters.

Proposition 36 signals a shift in philosophy for California, which has more than 200,000 inmates in state, county and local jails. It is expected to save the State alone, more than $200 million in incarceration costs and $550 million in capital costs for new prison construction.

California has followed the lead of Arizona, which in 1996 approved a similar law. The latest studies indicate Arizona experienced a 61 percent success rate.

It's time for a shift in philosophy here in Hawaii. Therefore, I will submit legislation that will mandate treatment instead of punishment for non-violent, first-time offenders.

To give the State time to take an inventory of available drug treatment programs and to establish "best practices" regulations to assure high quality, effective treatment programs, I propose that the bill go into effect on July 1, 2002. Funding for the new program has been requested and included in our budget.

This is a major departure from our current philosophy of treating drug offenders. I ask for your most thoughtful deliberation and support.


Over the next few months, you will be faced with making difficult decisions.

I urge each and every one of you to remember those to whom government has the greatest duty to serve -- the poor, needy, disabled -- those who cannot always provide for themselves.

After 26 years in public office, I am familiar with having to make tough choices. I have always let my conscience be my guide, regardless of the political consequences.

Making sure this State prospers in the 21st Century will require strong leadership and cooperation from all of you. It is my hope that we can work together to do what is right for the people of Hawaii.

The people of Hawaii deserve bold leadership -- let us give to them and guide our beloved Hawaii to even greater heights!

Thank you very much. Aloha!

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