Hawaii's four counties could feel the brunt of the state's financial crisis in the coming fiscal year as the governor looks to close a $1.23 billion budget hole using money usually allocated to the counties.

The scoop of the hotel and resort room tax money, also known as the Transient Accommodations Tax, was among the key proposals Gov. Linda Lingle unveiled yesterday in her supplemental budget proposed for the coming legislative session.

Lingle's plan seeks further savings by delaying state income tax refunds, restructuring debt, continuing restrictions on departmental spending and increasing taxes on insurance commissions.

Her plan also does away with state subsidies to pay for Medicare Part B for spouses of government retirees and life insurance premiums for government employees and retirees.

County mayors criticized the diversion of the TAT as a reversal of Lingle's previous position to leave it intact for counties.

“;I would have hoped that as a former Maui mayor, Governor Lingle would understand that taking resources from the counties does not solve the problem,”; Hawaii County Mayor Billy Kenoi said in a statement. “;The counties rely on the Transient Accommodations Tax to balance their budgets, and for the state to take away that source of funding puts pressure on the counties to raise taxes at the county level.”;

Honolulu Mayor Mufi Hannemann fought proposals last year to divert the TAT money and is likely to do so again.

In a statement, Hannemann said the governor “;is opening the door to the possibility that local residents will have to pay more in property taxes so that the counties can continue to provide essential services such as police, fire, paramedics and lifeguards for the state's No. 1 industry.”;

Kauai Mayor Bernard Carvalho Jr. said any TAT loss would be “;devastating,”; while Maui Mayor Charmaine Tavares said the harm to counties would be “;severe.”;

“;Maui County invests heavily in our visitor industry,”; Tavares said in a statement. “;This investment generates the TAT revenue and it is unreasonable to expect our county to accept that none of the revenue generated here would come back to help recoup our own investments into the visitor industry.”;

Any diversion of the TAT money would require legislative approval.

The proposal was floated last year but ultimately died. With a $720 million budget shortfall in the current fiscal year ending June 30, the idea may be better received.

“;At this point, I support the suspension of the TAT from the counties and using it for the state of Hawaii,”; said House Speaker Calvin Say.

Senate Ways and Means Chairwoman Donna Mercado Kim last session offered to give counties the authority to implement a sales tax as a revenue generator to offset the loss of TAT money.

She stopped short of saying the Legislature would back Lingle's proposal, but said she will gauge “;the mood of the rest of the members.”;

“;It's a re-occurring pot of money, which is good. It's not a one-time source like the rainy day or Hurricane Relief Fund, so it's something we've got to look at.”;

Lingle's proposed budget would not raid the Emergency Budget and Reserve Fund, better known as the rainy day fund, nor the Hawaii Hurricane Relief Fund, but she noted that both are there if lawmakers choose to try and use them.

Lawmakers in the past have sought to use the funds to plug holes in education and social services funding.

“;We really have to look at how we're going to parcel that out and try to plug some of the holes,”; Kim said of funding social service agencies. “;I don't think we can restore them entirely, but I don't think we can make further cuts.”;

Lingle added she was hopeful lawmakers would not consider an increase in the general excise tax.

“;I think they have enough other options that they don't have to go to the GET at this point,”; the governor said.

Say said he has always considered a GET increase to be a last resort.