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Income tax cut
halted in Senate;
vote 14-11

Meanwhile, the House
submits a $14.4 billion
biennium budget proposal

Bills that passed this week

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By Richard Borreca
and Pat Omandam
Star-Bulletin

The state Senate has taken back a planned state income tax cut, saying it was showing support for teachers' pay raises and making Gov. Ben Cayetano's budget balance.

In the House, debate was on how the state would spend money in the state budget.

The Senate voted 14-11 in favor of repealing the tax rollback. The bill also grants an unspecified tax credit to compensate local residents for the tax on food.

Yesterday was the deadline for the two legislative houses to swap financial legislation tied to the budget.

Opponents called the rollback bill a tax increase.

"I believe Hawaii's majority party made a promise to Hawaii's taxpayers. If this bill passes, it will be a promise broken," said Sen. Les Ihara (D, Kaimuki).

"Make no mistake, this is a tax increase," said Sen. Sam Slom (R, Hawaii Kai). "I recall how legislators ran on this last year and stood proudly with the governor, saying the tax cut helped the economy."

Makiki Democratic Sen. Carol Fukunaga called the action the "worst possible tax policy we could adopt. ... We are increasing taxes, and we are demonstrating that government cannot be trusted to carry out an independent tax policy," she said.

But Ways and Means Chairman Brian Taniguchi (D, Manoa) argued that while "there is no good time for a tax increase," the budget will not balance without additional money.

"We also need to send a strong message to the House and governor that we are serious about funding a pay increase for teachers," Taniguchi said.

After the session he told reporters he has won assurances from the House that it will hold a hearing on the tax bill.

Cayetano, however, has said he would veto any bill that cancels the income tax rollback.

"We are talking to him, and he still doesn't like the idea," Taniguchi said.

The House yesterday sent the Senate a two-year state budget that reflects the chamber's "cautious optimism" about the state economy, said House Finance Chairman Dwight Takamine (D, Hilo). The $14.4 billion biennium budget -- $7.1 billion in 2002 and $7.3 billion in 2003 -- is about 25 percent less per year than what the governor has proposed in additional and general appropriation funds, Takamine said.

The House budget, which six Republicans opposed yesterday. also cuts $457 million from Gov. Ben Cayetano's request for a billion dollars in construction projects, with most of the capital improvement funding going to public school facilities, the University of Hawaii, state hospitals and state parks.

Overall, the budget focuses on children, the physically and mentally ill, the elderly, the disabled and the poor, Takamine said.

"Every dollar appropriated in this budget is a dollar entrusted to this Legislature to spend wisely on behalf of our entire community," he said.

The proposed budget increases the Department of Education's operating budget by $172 million in 2002 and $54 million in 2003. It provides the public university system with an additional $58 million in the next two years, primarily for community colleges.

To help state welfare recipients who will be forced off the welfare rolls at the end of this year, $4.5 million has been directed to the First to Work program and $3.2 million in new federal funds for preschool programs. An additional $11.6 million was given to the Child Welfare Services.

Takamine explained that "must-fund" items consume about $1.4 billion, or 40 percent of the $3.5 billion general-fund budget in 2002.

Republicans complained that the budget increases general-fund spending by 11 percent in 2002 and 16 percent the second year, and will add an extra 945 jobs over the next two years. While it limits additional spending proposals, it does not cut into the base budget.

"At a time when we should be tightening up, we're getting large," said House Minority Leader Galen Fox (R, Waikiki).

Rep. Chris Halford (R, Kihei) said state agencies must be more accountable for their funding. He said the budget's growth outpaces inflation and gross state product, and there is no way to measure the value of the money spent.

"This budget has no courage and no uplifting vision," Halford said.

Republicans are also frustrated that much of the budget talks have been within the majority leadership and not shared with the minority, even those on the Finance Committee. House leadership denied any conspiracy.

Besides, you cannot please everybody, responded Rep. Willie Espero (D, Ewa Beach), who urged both parties to work together for what is best for the state.

'Must-fund' items These are the costs of "must-fund" items that total $1.36 billion, about 40 percent of the $3.5 billion of general funds in the 2002 state operating budget. The money bill was passed yesterday by the state House and is now before the Senate: Debt service: $417 million Employees Retirement System: $250 million Public Employees' Health Fund: $260 million Felix Consent Decree: $356 million Developmentally disabled (Makin settlement): $8.5 million Adult mental health services: $73 million

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Legislation passed

Here are the bills passed by the House and Senate this week:

Campaign and Election Reform

Mandatory recounts would be called for if vote totals are 1 percent or less.
City Council election would be publicly funded under pilot program.
Reverse the Campaign Spending Commission prohibition against political donations to charities.
Prohibit contributions from contractors doing business with the state.

Environment

Fund improvements to the state parks with tourist tax money.
Allow power company customers with renewable energy systems to sell electricity back to the electric companies.
Beverage containers would be required to be sold with a deposit charge.

Law and Order

Increase penalties for crimes based on victim's religion, race or sexual orientation.
Require persons under 16 to wear helmets when riding scooters or skateboards.
Require drivers under 18 to have a licensed driver over 21 in car when driving between 11 p.m. and 5 a.m.
Prohibit the sale or possession of fireworks on Oahu except for religious or cultural purposes.
Bounty system for police nabbing drunk drivers by increasing fines by $100, with the money going to the police department.

Education

Taxpayers would be able to dedicate $2 of state income tax for repair of public schools.
Special-education students would get vouchers for special-educational services.
Board of Education would permit military representative on board and student representative to vote.
Automatic annual pay raise for all qualified public school teachers.

Hawaiian Affairs

Hawaiian Homes Commission would be separated from state government.

Bread and Butter

Unspecified tax credits for food purchases.
Minimum-wage increase to $5.75 from $5.25 an hour by next year.

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