Thursday, November 15, 2001

Hawaii's drop in tourism will cut about $158 million
from state tax revenues, according to the latest projection
from the state Council on Revenues. The council's
forecast was changed from an estimated
growth of 4.1 percent.

State coffers seen
losing $158 million

Council on Revenues estimates
tax haul will fall by 0.7 percent

By Richard Borreca

In the blink of an eye, the state lost $158.4 million as the state Council on Revenues yesterday projected this year's general fund revenue will drop by 0.7 percent.

The drop, from an earlier prediction of 4.1 percent growth from last year, is based on the estimate that 1 percent of general fund revenue is worth $33 million, according to Michael Sklarz, Council on Revenues chairman.

Lowell Kalapa, executive director of the Tax Foundation of Hawaii, called the decline a sign that the state and the Legislature will have to reduce spending.

"They will have to look for ways to cut expenditures or lay off people or furlough them, or perhaps not implement the second of the planned state work pay raises," Kalapa said.

The call for pay cuts or delays in pay raises was quickly rejected by Senate President Robert Bunda, who said it is "not on the table."

Bunda also rejected any plans for a tax increase to make up for the revenue drop. "A tax raise is not in my vocabulary," Bunda said.

The reduction is prompted by the state's lowered tourism numbers and is tempered only by national interest rate reductions, according to state economists.

"The numbers say we are having this severe effect like an earthquake, and then we bounce back -- it is a big shock to the system," Sklarz said after the council's meeting.

The council is charged with setting the projections for how much money the state will collect in taxes. That number is then used by the state administration to prepare a budget.

The new figures mean the state is expected to have to cut $158.4 million from the present budget of $3.3 billion.

The 0.7 percent drop is not unprecedented; there were similar declines after the Gulf War in 1992, according to state economists, but the fall from a 4.1 percent increase was still startling.

"This is close to my own projections, but it is still painful to see," said Pearl Imada Iboshi, a Council on Revenues member.

Kalapa insisted that the new revenue projection is "a serious blow" to the state's budget plans.

"We are going to see our officials tested to see if they have the wherewithal to make those cuts," Kalapa said.

Bunda, however, says September and October tax collections are encouraging.

"I think the Council on Revenues has looked at it and sees that certain numbers are increasing and they see a positive upswing for next year," Bunda said.

Sklarz said the state's revenues will grow 5.1 percent during the next fiscal year, but after the drop for this year, the state budget will not be back to pre-Sept. 11 numbers until 2003.

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