Legislators consider budget options


POSTED: Thursday, January 22, 2009

The state, facing a budget deficit of more than $315 million in the upcoming fiscal year, is considering several options to make up for the shortfall - from mandatory furloughs to salary cuts and legalizing gambling.

  ;  The state could also keep all the funds collected from a business tax rather than credit a portion to Honolulu's planned multibillion-dollar rail transit system. It could also tighten restrictions on tax credits given to technology companies, or the state could dip into a fund for hurricane insurance.

As the state Legislature began its session yesterday, Georgina Kawamura, the state's budget and finance director, offered no recommendations or preferences of the several options presented to state lawmakers.

“;There were some very bold proposals made here,”; said Rep. Marcus Oshiro (D, Wahiawa-Poamoho), chairman of the House Finance Committee. “;I was a little disappointed. ... I thought they would have some idea where they wanted to go in addressing the current shortfall and daunting biennium budget shortfall.”;

The state is facing a $75 million deficit in the current year after the Council on Revenues projected earlier this month that the state would have $118 million less because of the worsening economy.

Next fiscal year, from July until June 2010, the state has an estimated deficit of $315 million. In fiscal year 2011, the state could have as much as $549 million to make up.

Some lawmakers have introduced the idea of legalizing gambling in Hawaii as a long-term solution to create some revenue.

However, Kawamura said she does not believe gambling is a “;viable alternative to address our short-term fiscal requirements.”; Implementing a gambling program could take up to two years and would require hiring more staff to administer the program.

“;Gambling would be on the bottom of the list,”; Kawamura said. “;All these options have been discussed. We're not saying we wholeheartedly agree to gambling rather than something else.”;

To avoid laying off any state employees, the state could negotiate to reduce employees' salaries. A 1 percent decrease for 40,000 employees will save $20.2 million without benefits or up to $25 million with benefits.

A furlough for every employee will save $7.8 million for every day without pay.

Oshiro said salary cuts or furloughs, though unfavorable, would be better than laying off employees.

Other options presented by Kawamura include:

» Repealing Act 221, tax credits given to technology companies, by July 1, which could save $112 million from fiscal year 2010 to 2011.

» Increasing “;sin”; taxes on cigarettes and alcohol. Charging another penny on every cigarette or 20 cents for every pack would raise $10.8 million.

» Convert certain special funds into the general fund that could produce $50 million in revenue.