On Politics
By Richard Borreca
Sunday, October 7, 2001
This one really isn't that complicated, but solving it is. If you do, you may be ahead of many of the 76 legislators now puzzling over Hawaii's financial crisis. Try to solve the Hawaii
economic conundrumThe terrorist attacks of Sept. 11 wounded economies across the country, but probably none are so damaged as the tourist-based economy of Hawaii.
If people aren't flying because they are scared, worrying or just don't think this is the right time, then Hawaii goes down in flames.
Carl Bonham, the University of Hawaii economist, says spending by tourists accounts for about 25 percent of Hawaii's overall economic activity, including both direct and indirect effects.
If new money in the wallets of new visitors doesn't stay in Hawaii, we simply fold our doors and, in the words of Lanai's Councilman Riki Hokama, start learning to live off the land.
The simple joys of a subsistence economy, however, are not going to meet the needs of Hawaii, nor are they going to pay the $3.3 billion state budget.
Paying that budget is worrying everyone at the Capitol. The unspoken dread is that the budget passed in May, which just barely balanced, is about to flame out.
"We had a two-year budget premised on an 11 percent growth rate, 6 percent the first year and 5 percent the second," says Rep. Ed Case, (D, Manoa), an outspoken critic of the basic budget assumptions.
"Several of us questioned those figures and asked what would happen if they declined, well, since then, but before Sept. 11, the U.S. economy declined and the Japanese economy has gotten worse.
"You can get to the conclusion very fast that the budget was stretched and was probably unbalanced within months of passage," Case says.
After Sept. 11, things for Hawaii didn't get worse, they just stopped. The money just isn't coming in.
There is no growth.
Even Gov. Ben Cayetano, who is to leave today for Japan on a mission to encourage the Japanese to return, knows there is a huge problem awaiting the state.
If Hawaii is going to do all the stuff it said it would do in the budget -- pay teachers, professors, nurses, secretaries, social workers, mechanics, cafeteria managers and janitors more money; and if Hawaii is going to run the airports, harbors, hospitals, schools, clinics and prisons, then the budget has to grow 6 percent this year and 5 percent next year. The budget can't stay the same, the budget can't get smaller, if has to get bigger or we can't pay off all our promises.
But as Cayetano noted, even Walter Dods, Hawaii's most optimistic banker, says if everything goes right we can get our economy back to where it was on Sept. 10 in about six months.
Others in the tourist business say it will take at least a year.
Unfortunately, while we are having no growth the state is also looking at spending more money to help the thousands of deserving workers who lost their jobs.
And finally, while the state is not growing, while we are spending more, the tax collections are dropping, no one is publicly saying how much, but the income tax and general excise tax figures are expected to be dramatically down.
When asked if this is something to worry about, Cayetano delivers one of the great understatements of the crisis: "That is a very reasonable proposition," he says.
His budget director, Neal Miyahira called the worrisome scenario "a good observation" but added "Until we get a better handle on it, I don't want to speculate and get people panicked."
Case, who is one of Cayetano's strongest legislative allies, says "our options are virtually exhausted."
He predicts that Cayetano will not leave office without another round of painful budget restrictions.
Over in the Senate, Colleen Hanabusa (D, Waianae), who is no ally of the governor, is close to speculating about a grim choice.
"The problem is where is the money going to come from?" Hanabusa, vice chairwoman of the Ways and Means Committee, asks.
"I don't want to see anything happen to our employees, but what if the choice is losing a job versus sacrificing," she says, getting close to what may be the only way out.
"What I haven't heard is whether the administration should ask the unions for relief on future pay raises," Hanabusa said.
Case doubts that the Legislature has the willpower to actually go that far, but without a turnaround something has to change.
Solving that puzzle gets you an A in both economics and political science.
Richard Borreca writes on politics every Sunday in the Star-Bulletin.
He can be reached at 525-8630 or by e-mail at rborreca@starbulletin.com.
