State anticipates
$150 million deficitThe budget director tells
department chiefs to come up
with cuts for the next fiscal year
State budget officials are projecting a $150 million deficit in the next two-year state budget and want department heads to start thinking about possible cuts.
The projection caused Georgina Kawamura, Budget and Finance director, to send a memo Tuesday to all state departments heads urging them to start preparing budget reductions.
"We will all have to put on our thinking caps to figure out how to work on this," Kawamura said yesterday in an interview.
For the 2005 fiscal year that began July 1, Gov. Linda Lingle has already instituted a 1 percent restriction in discretionary spending, which is designed to save about $6 million.
The Lingle administration is concerned that increased interest payments and retirement costs will affect the fiscal 2006-2007 budget.
"Right now, we have no definite means of covering the deficit. That is the reason for the ongoing dialogue with the departments," Kawamura said.
State department heads will have one-on-one meetings with Kawamura on the budget, which the Lingle administration plans to submit to the Legislature in December.
Under former Gov. Ben Cayetano, the state borrowed money for an aggressive state building campaign, so it now must start paying the interest, or debt service, on that borrowed money.
The state, under Cayetano, increased construction spending to deal with a dramatic downturn in the state economy and the aftereffects of the terror attack of Sept. 11, 2001.
Kawamura said the state's increased economy is not expanding fast enough to make up the impending deficit.
"Without more revenue, we have to look very seriously at expenses," Kawamura said.
The Council on Revenues estimates that state tax collections will increase 5.2 percent for the current fiscal year, but the council meets again in September and could raise the growth estimates.
"Unless the Council on Revenues does a huge change in revenue estimates, we will be faced with this challenge," Kawamura said. "The community is looking at record visitor numbers, the lowest unemployment rates in the nation, but we still have these financial obligations."
In her meetings with department heads, Kawamura said she will ask them to "seriously review" their programs.
"We are saying, 'Be creative,'" Kawamura said.
But she said it was too early to make budget reduction estimates by a dollar amount.
"We are not at a stage were we are saying, 'Cut by this amount,'" Kawamura said.