With state in the black, taxpayers get some back

The Constitution says a rebate is required if revenues set a mark two years in a row

It may not be much, but a tax rebate is on the way for beleaguered Hawaii residents.

And it is backed by a constitutional guarantee.

"There is going to be a rebate," House Speaker Calvin Say said yesterday. "We're obligated by the Constitution to support a rebate."

"As far as how much, it all depends on how the Legislature and the executive (branch) want to work on it," Say said.

According to the state Constitution, whenever the general fund balance at the close of two consecutive fiscal years exceeds 5 percent of the general fund revenues, the Legislature must refund or credit the excess to taxpayers.

Actual numbers for fiscal years 2005 and 2006 showed growth of 16 percent and 10.9 percent, respectively.

Gov. Linda Lingle pushed for the rebate last session, but a technical provision meant a rebate was not required at that time.

Say (D, St. Louis Heights-Wilhelmina Rise-Palolo Valley) said 2007 is projected to mark three years of significant growth in general fund revenue.

Still, Say said there are many unmet needs throughout the state for roads, sewers, harbors and education, among other items, saying he hopes a "reasonable" agreement can be reached on the size of any rebate.

Lingle is likely to call for a tax rebate again this year when she presents her two-year budget proposal to the Legislature on Monday.

Her proposal for the next two fiscal years comes as a panel of economists predicts no change in the state's tax revenue picture in the near term.

The state Council on Revenues yesterday maintained its September forecast for tax revenues of $4.7 billion in the current 2007 fiscal year, which ends June 30. Revenues for the 2008 fiscal year were pegged at $4.98 billion.

Council members revised their forecast for later years, predicting a slight drop-off in fiscal years 2009 and 2010.

The forecast is key because the governor's budget proposal is predicated on the numbers predicted by the council.

State Budget Director Georgina Kawamura said the administration had expected the forecast to remain largely unchanged, but said "it still is a strong indication" that Hawaii's economy is faring well.

"It does, again, recognize a slowing in it," she added.

Actual numbers from the state Tax Department yesterday showed total tax collections for November came in at $359,608, up 1.1 percent from the same month a year ago. For the current fiscal year, general fund tax revenues were $1.84 billion, compared to $1.79 billion during the same five-month period a year ago, an increase of 3.8 percent.

Say also noted the slowdown of economic growth in later years.

"It's a signal that we should be very cautious as far as how we move out the budget," he said.

Council Chairman Paul Brewbaker, chief economist for Bank of Hawaii, said the prediction of more modest economic growth is based mainly on two factors: lower inflation and the fact that Hawaii is moving into the tail end of an economic boom spawned by home building.

"It takes a big piece of the economy with it," he said.

Council members debated the impact of the half-percent general excise tax increase scheduled to begin Jan. 1 on Oahu.

Brewbaker said the tax likely would have minimal impact on the economy, because the money will go to the county to fund a mass transit system.

"It's kind of a pass-through," Brewbaker said. "The half-percent comes in the front door and goes out the back door to the county."

Policy analyst Lowell Kalapa, executive director of the Tax Foundation of Hawaii, disagreed, saying he expects tax revenues to increase over time as consumers and businesses adjust.

"Eventually, the numbers are going to be higher than what they have in the forecast," said Kalapa, who is not a member of the Council on Revenues.