House passes 2-year
$8.9 billion budget

The fate of tax-relief measures proposed by Gov. Linda Lingle and majority Democrats in the Legislature is now in the Senate's hands.

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As the state's Council on Revenues predicted as much as $40 million in new revenues for the current fiscal year, House lawmakers yesterday approved their version of Lingle's two-year $8.9 billion financial plan.

The budget was passed by the House two weeks ahead of its regular deadline.

House lawmakers "want to give the Senate much more time to address the council's increase and to see where (it) can fill the holes as far as what was not funded by the administration," said House Speaker Calvin Say (D, St. Louis Heights-Wilhelmina Rise). "There's a lot of pukas in there from the Department of Education, to higher ed, to housing, to the 'ice' issue, and it's something that the Senate will have a lot of time to address.

"They have the better opportunity because they have more resources to play with now."

Senate Ways and Means Chairman Brian Taniguchi did not say whether the state would be able to fund any major tax breaks or other programs. He noted that even though more funds are available this year, "basically, it's a wash" over the long run because future predictions were lower.

"It gives the impression that we have a lot more money, but we do a six-year financial plan," said Taniguchi (D, Moiliili-Manoa). "Because of that, it's basically flat. ... We don't have that much more money to play with."

Legislative leaders previously said any tax relief such as Lingle's proposal to raise the standard deduction or Senate President Robert Bunda's plan to adjust income tax brackets would be dependent on the latest forecast by the Council on Revenues.

The council yesterday predicted revenue growth of about 10 percent for the fiscal year that ends June 30. The forecast is up from the 8.8 percent growth predicted in September and again in January.

The change amounts to an additional $36 million to $40 million for the current fiscal year, the panel of economists said.

Forecasts for subsequent years were lowered because of the higher revenue base this year and because Hawaii is closing in on its capacity to accommodate visitors, which also is expected to slow down the rate of economic growth. The growth forecast for Fiscal Year 2006 was lowered to 5 percent from 5.3 percent and the forecast for the following year was cut to 4.9 percent from 5.7 percent.

The House's version of the budget was finalized by the Finance Committee last week and approved independently of the council's forecast yesterday.

It does not include $20 million earmarked by the governor for new scholarships at the University of Hawaii. Democrats also trimmed $48 million needed to fund Lingle's plan to raise the standard deduction for income tax and provide food and medical tax credits.

The House proposal restores about $54 million for public education programs and an additional $14 million for anti-drug programs.

Minority Republicans criticized the Democrats for dropping Lingle's proposals on scholarships and tax relief.

"That's where they got the money -- they didn't give any real help to the needy and the poor," said Rep. Mark Moses (R, Makakilo-Kapolei).

Minority Leader Galen Fox noted that the scholarship funds are needed to help the university offset planned tuition increases.

"Taking away scholarships is a dagger to the heart of the University of Hawaii's financial program," said Fox (R, Waikiki-Ala Moana).