Legislature to
trim $96 million
from $3.7 billion
state budget

Lawmakers hope business tax
credits will spur the economy

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By Richard Borreca
rborreca@starbulletin.com

The state's $3.7 billion budget will be cut by $96 million, according to the House and Senate legislative budget committee.

The budget committee report, released yesterday, says the Legislature agreed with Gov. Ben Cayetano's 2 percent across-the-board budget cut and also plans a 10 percent reduction in vacant staff positions.

"Although your committee had preferred to rely on additional revenue-generating legislation, the committee has determined that reductions to the FY 03 (fiscal year 2003) biennium budget base cannot be avoided," the committee said in its report.

The budget is expected to be approved today by the state Legislature.

The Legislature figures that it will be able to stimulate the economy by handing out tax breaks to businesses willing to invest in new construction.

For instance, the developers of Ko Olina Resort Marina would get a tax credit of up to $7.5 million a year until the total tax credit reaches $75 million for construction performed during the next six years.

Seiji Naya, business and economic development director, calculates that the state will reap $170 million in new tax collections by 2012 if the entire Ko Olina development goes forward.

"You can project that if tax incentives were needed to ensure financing for the overall project, there would be a net gain for the state in the long run," Naya said in a letter to state legislators.

At the same time, the Legislature had to make some deep cuts to existing state programs.

For instance, the state administration asked for an additional $8.4 million for outpatient community-based mental health services. But the Legislature declined.

The Legislature also raided the state's rainy-day fund, taking $10.4 million for specific programs that at one time or another during the session were cut from the budget.

The additions funded through the rainy-day fund include $2.1 million for substance abuse treatment, $2.3 million for rural hospitals, $1.6 million for medically uninsured and $1 million for homeless programs.

Although the Legislature did not include any extra money for the so-called Cayetano administration transition that would pay for appointees who had accumulated holiday and vacation pay, it did allow the governor to transfer funds from other state funds to "provide vacation termination payments to employees affected by the change in administration."

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