Isles earn a C
for finances

A study examines how states
handled dealing with adverse
economic conditions

The financial downturn of the last few years left states with ailing tax systems, neglected infrastructure and aging work forces, including Hawaii, a new nationwide analysis concludes.

It also says that many states struggle with basic flaws in their tax systems, bringing their governments too little money to pay for everything from roads to health care to schools.

The silver lining, according to the Government Performance Project released today, was that the fiscal crisis drove many states to become innovative and more efficient. The authors of the report, academics drawn from across the country and journalists at Governing magazine, hope that state leaders will share examples of good governance highlighted in the analysis.

"There isn't any state that can't learn from the others," said Don Kettl, a political science professor at the University of Pennsylvania and the project's academic coordinator. "No state really has everything under control, and different states have different lessons to teach."

The study, a project of the University of Richmond that was funded by the Pew Charitable Trusts, an independent, nonpartisan group, awarded letter grades to each state on how it handled finances, personnel, infrastructure and modern information systems through the downturn, plus an overall grade.

Hawaii scored a C. The study cited the state's heavy spending on public education, yearly raids on the rainy-day fund and too little funding dedicated to maintaining its own facilities.

The report said that because the State of Hawaii is responsible for every public school in the islands, its debt tends to be very high, which leaves little room for borrowing, and also noted that "a series of generous agreements with the state's powerful public employee unions has put the budget under chronic stress."

Hawaii lawmakers have also taken $10 million from the state's rainy-day fund each of the past couple of years, "leaving it stuck in the sand at the $50 million figure, too little to be of much help in a serious fiscal crisis," the authors said in their summary of the state.

The study's authors, however, praised Hawaii's human resources management, noting that a law that took effect in 2002 has made it easier to fill crucial positions within the state government.

The study said that although Gov. Linda Lingle's administration says it is ready to make substantial management improvements, it has a long way to go.

"There is certainly room for improvement," state Budget Director Georgina Kawamura told the study's authors.

No state failed. Utah and Virginia scored the highest overall, each with an A-minus. Alabama and California scored the worst, each with a C-minus.

The report sought to accentuate the positive, and particularly praised Virginia's management of finances and Georgia's handling of personnel.

"We want these results to be in the hands of decision-makers," said Susan Tompkins, project director. "We're going to travel to the states and talk to anybody that wants to talk to us."

Several widespread problems emerged, especially "structural deficits" that left many states struggling to bring in enough taxes to provide the revenues that run government. The problem has been widely acknowledged by state leaders, who have complained that their tax systems are geared to a 1950s manufacturing economy, not a 21st-century service- and technology-centered one.