Gathering Places


Thursday, April 19, 2001

$75 million worth of
‘nothing’ in state budget

PERHAPS the most surprising expenditure to be found in Governor Cayetano's budget before the Legislature is $75 million allocated to "nothing." It isn't under "nothing" in the budget document. Yet the budget contains $75 million with either no programs attached to the money or with expenditures appearing twice.

The budget process has guaranteed that the Legislature is thrown into chaos because it contains incredible gaps. These errors have produced a bitter and rancorous process because there cannot be a real discussion of needs and merit without first finding out what is real and not real. In this process, the victims are the taxpayers and democracy itself.

Here's where some of these items can be found:

Ten million dollars are under "Must Fund Other." This is $10 million set aside for unspecified "emergencies." As the state budget director, Neal Miyahira, described this, "it is a place holder." In other places he describes this as a prudent means of saving. But the state maintains a 5 percent balance of its general revenues precisely for emergencies.

Another $30 million can be found under "Legislative Grants and Additions." These allocations are for small projects. Yet there are no programs attached to this category. In a budget summary March 6, this category is listed as something that could be cut if pay raises are to be given.

Another $30 million is listed under "ERS" (Employment Retirement System) to fund the employer's share of Social Security taxes. This, however, appears twice in the budget, once under "ERS" and again in the calculation for employee raises. The governor's office says that this is "double budgeting," but claims that it is small.

Yet the proportional increase in these payments implies that the state government payroll would grow by 20 percent, which would hardly be trivial. It is in the rest of the budget, which projects no increase in employment and no wage increase for employees.

This problem could be corrected or it could continue to float around in the Senate and House budgets. Furthermore, in an April 6 press release, the governor's office continued to list this error as part of the budget and call it small.

Then there are projections based on dubious assumptions. Employee health fund contributions are projected to double from $200 million to $400 million by 2007. Or, as is sometimes reported, health fund costs will increase by $1 billion dollars over the next 10 years. This projection is based on a consultant's report that is a one paragraph memo with a table attached.

When the consultant was asked ask if there was anything attached to this memo (such as a risk assessment, demographic analysis, or medical cost projections), he said there wasn't. He assumed a series of things were happening with no real investigation. This adds $60 million to the budget in the next two years but the real jump occurs in three years, when premiums will supposedly double.

Given the quality of this study, this will not happen. Altogether, this is a rather sad picture of a budget-making process that has gone off the tracks.

Lawrence Boyd is an economist and Terry Gregson
and John Wendell teach accounting, all at
the University of Hawaii.

E-mail to Editorial Editor

Text Site Directory:
[News] [Business] [Features] [Sports] [Editorial] [Do It Electric!]
[Classified Ads] [Search] [Subscribe] [Info] [Letter to Editor]

© 2001 Honolulu Star-Bulletin