Budget crisis tests leaders


POSTED: Thursday, March 05, 2009

The federal government's stimulus plan will do most of the work making up the $650 million needed to balance Hawaii's state budget.




Finding the money

        Here are some of the key portions of Gov. Linda Lingle's plan to balance the 2010-2011 state budget:

» Take $320 million in Medicaid reimbursements from federal stimulus funds, freeing the state money for other needs.


» Tighten Act 221 to reduce tax credits for high-tech investors, saving an estimated $44 million.


» Raid the tobacco settlement fund by putting 14 percent of the money in the general fund, giving the state an extra $14 million over two years.


» Tap the tobacco tax by taking $33 million that would have gone to the Cancer Research Center.




But lawmakers and Gov. Linda Lingle admit that more work probably will be needed next week.

Lingle answered legislators' calls yesterday for more details on how the state would meet the shortfall that occurred after the state Council on Revenues said tax revenues would drop 3 percent.

Nearly half of the shortfall, $320 million, will come from extra funds in the Federal Medical Assistance Percentage funds. The money comes from the federal stimulus package and would be used to pay for federal Medicaid reimbursements, freeing the state's Medicaid money to be used to make up the shortfall.

Most of Lingle's plan consists of transferring money from a variety of funds or taking the federal money; none of it is a recurring new source of money, and that concerns legislators.

“;The federal stimulus money will help, it will stop the bleeding, but this is a one-time source of money,”; said Rep. Marcus Oshiro, chairman of the Finance Committee.

The new plan is a change in tactics for Lingle, who said last month she would give legislators a new budget only after next Thursday's Council on Revenues meeting.

The latest plan rules out tax increases and state-worker layoffs and furloughs but includes reductions in some state benefits.

Legislators, briefed on the Lingle plan before the governor's afternoon news conference yesterday, said Lingle's addition is still short because her original budget sent in December took too much money from various state funds and failed to count other revenue drops. Legislators said Lingle's budget cuts $60 million from the Judiciary that cannot be cut, and the recycling special fund does not contain the money Lingle estimated it to have.

“;When you add it up, there is clearly an issue as to whether it does balance out,”; said Senate President Colleen Hanabusa (D, Nanakuli-Makua). “;If this budget doesn't balance, it doesn't balance.”;

Sen. Donna Mercado Kim, Ways and Means Committee chairwoman, said her math shows the December budget to be $80 million short.

“;Without even taking issue on how she is going to back up the $650 million, I am concerned about this missing $80 million,”; said Kim (D, Kalihi Valley-Halawa).

Oshiro also noted that two of the House bills that Lingle is relying on in her new budget, HB 1715 and HB 1726, which delay the minimum retirement age for state workers and drop state-funded life insurance programs, are dead in the House Labor Committee.

Lingle, who previously has said “;everything is on the table”; in terms of ways to raise money for the state budget, knocked the idea of tax increases far off the table yesterday.

“;The idea that you could put one more penny of burden on people during this time, I just don't understand — unless you are so out of touch with families all across this state,”; Lingle said.

And she warned critics who say her budget will hurt the poor, the mentally ill or the environment that “;the faster we face reality, the better off we will be and the quicker we will come out of it.”;

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Also questioned by legislators were Lingle's plans to require state workers to make up the drop in the employee medical benefits plan.

The state Employer-Union Health Benefits Trust Fund reports that it needs to increase premiums by 29 percent.

Lingle said negotiations with the unions would determine who was responsible for paying.

Shifting the burden to state workers, Lingle said, would save the state $96 million.

She said yesterday that her ideas have not been opposed by the state's unions.

“;I can tell you the reaction has been very supportive from everyone I talked to, recognizing that tough decisions have to be made,”; Lingle said. “;I don't think you are going to find a huge outcry at this point.”;