Richar Borreca

On Politics


The state well
finally runs dry

Here's the plan: After you think outside of the box, you are supposed to have thought up something new or different or even unique, but what is important is that your thinking is supposed to have produced something.

The problem with the Hawaii Legislature and its yearly budget battle is that it is not only does it not push the envelop in new thinking, it simply never comes up with any ideas period.

The Legislature last week opened the first act of the annual budget drama with the announcement that there was no money and little chance of getting any more. The only choice, legislators said was to cut. They would chop programs, they would stop hiring and they might even laid off some more state workers.

The budget is out of whack by about $300 million, not really that much considering the budget runs $3.4 billion a year.

The reason the budget doesn't balance is because the state isn't collecting enough tax money. The reason there isn't enough tax money is because the state is in a recession and people are not spending money. And that is one of the things wrong with the budget.

The state gets most of its money from the excise tax. People spend more, the state gets more; people spend less and Hawaii collects less. The budget then becomes a victim to every passing economic storm. If the Japanese yen weakens, few Japanese tourists come, and those that do, spend less. So because of forces completely outside of the control of anyone in Hawaii, even First Hawaiian Bank's Walter Dods, we get less money.

To understand how the state Legislature actually draws up its budget plan, it helps if you are a student of Charles Ponzi, the fellow from the 1920s who dreamed up a scheme whereby investors would contribute to a fund that would draw in more investors and the early investors would be paid off with the money put in by the later investors. Unlike the state budget, Ponzi schemes are completely illegal.

Republican Rep. Jim Rath asked recently during a House Finance Committee meeting if last year the budget balanced, why don't we just spend the same amount as last year and then the budget would balance -- sort of the declare-victory-and-pull-out-of-Vietnam strategy.

But it is not that simple, since last year the Legislature met and came up with a new budget and Gov. Ben Cayetano agreed to new contracts with the public worker unions. Interestingly, the cost of the salary increases is about two-thirds of the total budget deficit. But legislators, the governor and the unions are all in agreement that the salary increases have to be paid, even if it means there won't be enough money for everyone and some will have to be laid off.

Now the Legislature is seizing on the money left over in the Hawaii Hurricane Relief Fund to balance the budget. The house this week made that the option of choice by attaching specific budget items to actual dollars in the hurricane fund. In other words, if you wanted to continue to keep all the public libraries open, you have to raid the hurricane fund. Republicans, who have been the loudest self-proclaimed saviors of the hurricane fund, are saying the budget problems can be handled without touching the funds, a claim that the governor last week labeled "shibai."

The problem with all these calculations is that the Legislature is looking for money under rocks and hidden in mattresses; it isn't looking for new sources of money. The eventual result is that after a while, the Legislature will have found all the hidden stashes of money and just like Ponzi's scheme, the bank will be broke.

After almost eight years of grinding along with Cayetano's budget cutting there really is little left to uncover. The state's operating budget between 1995 and 2000 has grown only 4 percent, so when you figure into that increase, two rounds of employee pay raises, the state budget is close to flaming out.

Which brings the Legislature's dilemma full circle: With little money and little hope of more money -- the promise that things are sure to get better doesn't sound like something you would take to the bank -- or the voting booth.

Richard Borreca writes on politics every Sunday in the Star-Bulletin.
He can be reached at 525-8630 or by e-mail at

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