STAR-BULLETIN FILE Hawaii Gov. Linda Lingle wants to give taxpayers a break.

Gov. Lingle wants to give taxpayers a $300M refund

A rosier-than-expected economic forecast leaves room for heavy spending on health and schools

>> Nearly $500 million would go to public education, health and other areas

WITH A state budget surplus expected to top $570 million at the end of the current fiscal year, Gov. Linda Lingle is proposing to return more than half of it to taxpayers.

In her supplemental budget proposal for the coming year, unveiled yesterday, Lingle set aside $300 million for some form of tax refund.

It is based on the state Council on Revenues' forecast from September predicting that revenues for the fiscal year that ends June 30 would be up 6 percent from the previous year. However, at its most recent meeting Friday, the council predicted an 8 percent increase, meaning the state's surplus could be higher than the $570 million projected by the Lingle administration.

Overall, state spending from all sources of revenue would increase by $528 million in fiscal year 2007. General-fund spending would make up $239 million of that amount.

Spending on capital improvement projects would increase by about $927 million.

With the significant surplus at hand, Lingle said she plans to discuss all tax refund ideas with lawmakers.

Her plan, she said, is likely to include proposals to raise the standard deduction -- something she has tried to do in each of her first three years in office -- and to adjust the state's income tax brackets, a proposal that was introduced last year by Senate President Robert Bunda.

She did not offer specifics, but said more details would come in her State of the State address next month.

"I can't imagine anybody not supporting tax relief at this time in the state's history when you have a combination of a very high and increasing cost of living and an economy that everyone is predicting to be bright for many years ahead," Lingle said.

"We're not being overly exuberant in the tax relief, but we're saying people need it right now," she added. "It's very tough on families, and we have the opportunity ... to get that money back in the hands of families all across the state."

LAWMAKERS SAID they would wait for more details on Lingle's tax proposals before pronouncing judgment. Similar tax proposals were introduced in the 2005 session but ultimately died.

"I asked (the administration) about tax relief -- a tax rebate or a tax cut -- and they mentioned that they were going to look at it," said Bunda (D, Kaena-Wahiawa-Pupukea). "Obviously, for us, we had touted expanding the tax brackets, and we're going to stick with that position."

However, Bunda said he believes many taxpayers would be willing to forgo tax assistance in favor of putting the money back into the state's ailing public schools.

"They really want the Legislature -- the government -- to at least look into those needs that we're sorely lacking in the area of, say, repair and maintenance of schools," Bunda said. "If our dollars went to repairing our schools, I think the people will be willing to forgo the tax rebate and some kind of a tax cut."

Lingle's supplemental budget sets aside $40 million in cash for school repair and maintenance, and $50 million for capital improvement projects. The Department of Education is seeking $160 million from the capital improvement fund and additional money for new school construction.

Lingle said the $40 million would be available for schools immediately, for "things that are ongoing repair and maintenance that, if let go, would create much larger expenses for us later on."

Budget Director Georgina Kawamura acknowledged that the administration did not propose everything the department asked for, but said the spending approach should help the agency meet its needs.

"We're trying to look at it differently," Kawamura said. "If they can address those types of needs early -- have the flexibility to do that with cash -- they won't turn into CIP projects."

Kawamura noted that 98 percent of the new spending was in five key areas: health, human services, public safety and higher and lower education.

Bunda said it is up to the Legislature to be prudent, adding that he would not support a plan that uses up all or most of the budget surplus.

"I think the Legislature is going to have to really look at it," he said. "I think we should save. I think we should save a significant amount of those dollars to meet those unmet needs."

Nearly $500 million would go to public education, health and other areas

» $138.8 million for public education, including $40 million cash for school repairs and maintenance.

» $45.6 million in operating funds and $251.6 million for capital improvement projects for the University of Hawaii, of which $175 million are private funds for development of UH-West Oahu.

» $87.5 million in operating funds for the Department of Human Services, primarily to maintain and expand medical and dental services for those in need.

» $85.7 million in operating funds and $17.4 million for capital improvements for the Department of Health, primarily to provide services for developmentally disabled individuals and to meet increased costs of medical services.

» $82.8 million in operating funds and $42 million for capital improvements to preserve and protect natural and cultural assets, including $10.5 million in improvements for state parks and $10 million in improvements for small boat harbors, docks and facilities.

» $20.3 million in operating funds and $462.5 million in capital improvements for state harbors, airports and highways, including $195.2 million for major renovations at Honolulu Airport.

» $35 million in operating funds and $6.2 million for capital improvements to continue investment in public and affordable-housing projects.

Source: Office of the Governor