Tax relief plan fades
in light of wage hikes

Cuts to property rates become
less viable with city cash woes

Property tax relief will have to take a back seat to public employee pay raises such as the 10 percent increase for the Hawaii Government Employees Association over two years, City Council Budget Chairwoman Ann Kobayashi said.

"We may have to cut back on (property tax relief) because we don't have enough money," she said.

That is because Friday's binding-arbitration award for white-collar government workers across the state came in higher than anticipated, city officials said.

"(The employees) deserve it, and the mayor did budget for a modest pay increase, but this is a little more than we thought," Kobayashi said.

The award means roughly $5.2 million in additional costs for the city for the next fiscal year and an estimated $11 million for the year after that, city officials said.

City spokesman Bill Brennan said the administration has $2.6 million budgeted for HGEA pay raises for next year.

Last month, another arbitration panel awarded firefighters a wage package of little more than 8 percent over two years, with the first year of the agreement costing $3 million and the second year $7 million.

And city and state officials say that a settlement could be announced soon for blue-collar workers represented by the United Public Workers.

"If we see similar pay raises, we're going to have to cut back on services, and I'm afraid they may have to look at raising taxes again," Councilman Charles Djou said.

Unlike the previous city administration, however, which did not budget for pay raises, Mayor Mufi Hannemann has put $23 million in an account for salary adjustments. Of that amount, $18.1 million is set aside for negotiated and arbitrated pay raises for the next fiscal year, according to city documents.

Kobayashi said she had hoped to provide some tax relief next fiscal year, especially for longtime residents attempting to cope with a 26 percent hike in property assessments.

Now, it looks like that cuts might be needed to instead fund the pay raises, Kobayashi said. She noted that she does not want to hike proposed fee increases, such as for Blaisdell Center rental fees, any higher than what the administration is proposing.

"It's going to be tough to find more revenue," Kobayashi said. "We need a little sharper pencil."

Djou said he agrees that cutting spending might be the only way to balance the budget in light of the pay raises, but the problem starts with these pay raises being approved "without question."

On the Big Island, Hawaii County Mayor Harry Kim said he does not see any problem in funding the $4.5 million in raises.

"So far we're OK. We're doing fine," Kim said.

He said if funding should come up short, he has directed his department heads to work within their budgets to make up the difference.

"If he thinks we can handle it, that's fine, but I want to take a better look at it," said County Council Chairman Stacy Higa.

Higa said the county budget looks good at this point and that HGEA-represented employees do good work, but there are many demands.

"I don't foresee any major problems (in approving the award), but we will have some debate on that because we do have some infrastructure needs," Higa said. "(The employees) need to be paid a fair wage. I'm only concerned because we have limited resources."

Spending on pay benefits
outpacing revenues,
governor says

HILO » While state revenues increased $1 billion during the past 10 years, state spending on pay benefits increased $1.1 billion, Gov. Linda Lingle told the Hawaii Island Chamber of Commerce yesterday.

She raised the issue when commenting on a recent arbitrator's decision to grant 5 percent pay raises to members of the Hawaii Government Employees Association in each of the next two years.

The Legislature has been able to pay more than it takes in by taking money from various specialized funds, she said.

The state has been criticize in the past for "raiding" the Highway Fund. "The raiding of the Highway Fund is really small compared to the housing funds," Lingle said.

"There are eight different housing funds that kept getting raided," she said.

She challenged legislators to impose a prohibition on themselves against raiding specialized funds for just three years.

Lingle also proposed reducing unemployment insurance taxes by lowering the cap on salaries on which the state would impose those taxes. A booming economy means the state has the lowest unemployment in the nation, yet the unemployment fund has a surplus of $400 million, she said. That fund is the only one the Legislature has not raided, due to federal oversight, Lingle added.

Another proposal would increase state income tax standard deductions to $2,500 for an individual and $5,000 for a couple. Current exemptions, $1,500 for an individual and $1,900 for a couple, have not been raised in 20 years, making them "almost worthless," she said.