PHOTO ILLUSTRATION BY DAVID SWANN / DSWANN@STARBULLETIN.COM

Construction, tourism
feed state tax haul

The government is on pace
to bring in $3.45 billion this year,
the Council on Revenues says

The state Council on Revenues said yesterday a booming economy will keep the state on target to hit the council's forecast of 8.8 percent growth in state revenue for the current fiscal year.

"We're looking forward, hopefully, to a very positive year," said Pearl Imada Iboshi, the Lingle administration's chief economist and a council member.

In a briefing to legislators at fiscal 2005's mid-way point, council members said they were maintaining their original projection of $3.45 billion in revenue for the full year, encouraged by record visitor levels, an accelerating construction industry and steady growth in personal income.

The 2005 fiscal year runs from July 2004 to June 2005.

The council's forecasts are used by the governor and Legislature to set the state budget, and the upbeat 2005 projection could mean more money will be available to fund state programs that may have faced cuts, said Sen. Brian Taniguchi (D, Moiliili-Manoa).

"It looks good. We're not going to go wild but hopefully we can catch up a bit with funding some programs," said Taniguchi, chairman of the Senate's Ways and Means Committee.

Barring a cataclysmic terror attack or natural disaster, council members forecast steady annual growth in state coffers of between 5.3 percent and 7.4 percent over the next six years thanks to expected strength in tourism and construction.

The tourism industry has graduated from the post-9/11 recovery phase to "good, healthy" status, led by solid growth in domestic visitor arrivals, said Byron Gangnes, graduate chairman at the University of Hawaii's Economics Department.

Likewise, the construction industry should morph from its boom-and-bust nature of the past into more of a stabilizing force as billions of dollars in spending on military housing projects gets underway in 2005, he said.

"Now we'll have an aspect that is not cyclical. It's nice to have something to count on," he said.

But council members acknowledged that hotels already are running at near-capacity and that hopes for further upside in the visitor industry's earnings lie in higher room rates and bigger-spending tourists.

This could mean that the council's projections are overly optimistic, said Lowell Kalapa, president of the Tax Foundation of Hawaii.

"I'm sure the Legislature would like to break open the champagne but it might be a little too early for that," he said.

Kalapa worries that an excessively "rosy" forecast might prompt legislators to overreact on spending in the legislative session beginning this month.

"It would be nice if they could put a little money in the bank for the future," he said.