The state is in such an immediate financial crisis that taxes must be increased, worker benefits cut and legalized gambling should be explored, says House Speaker Calvin Say.

Say is one of the key players in both the state Legislature and state Democratic politics. He is entering his 11th year as speaker of the House and is known both for his experience with the state budget and opposition to raising taxes.

Now he is introducing a package of bills that would increase almost all state taxes.

Say also would halt state funding for the Office of Hawaiian Affairs until 2015 and repeal the requirement that 1 percent of funds for state construction projects be used for works of art.

While Say is introducing legislation for gaming, he discounted the effect it would have on the state's budget crisis.

He says the state budget is in much worse shape than calculated by Gov. Linda Lingle because her plan to delay tax refunds until the new fiscal year will mean the next governor will have to carry over $275 million in owed refunds every year.

“;How am I going to get a balanced budget?”; Say asked.

“;I don't know if I have the votes, but I wanted to give the finance (committee) chairs all the different options and tell the unions, 'What else do you want us to do, continue layoffs?'”; Say said.

In past years, Say has been a roadblock to legislative attempts to raise taxes, but now he says there is no other choice.

Say has introduced a bill to raise the general excise tax to 5 percent from 4 percent (4.5 percent on Oahu) and increase some food tax credits, but also scrap the tax credits for many groups.

He also wants to increase the tax on wholesale manufacturing and producing to 1 percent from 0.5 percent (House Bill 2880) and increase the tax on insurance commissions from 0.15 percent to 4 percent (HB 2881).

Say estimates the GET tax increase (HB 2876) would bring in an extra $488 million and repeal of tax exemptions for nonprofits (HB 2878) is estimated to be worth an extra $422 million by 2011.

Say also has introduced a bill to permit a casino in Waikiki (HB 2396), but he doubts that it could be enacted in time to help ease this year's budget crisis.

“;I introduced it for discussion purposes because I don't want to be criticized that we didn't explore all options,”; Say said, adding that even if the controversial measure passed, it would take years to raise money.

“;You have to come up with a gambling commission, put out bids for proposals—I would say one or two years to get it off the ground,”; Say said.

Besides raising taxes, Say also wants to lower the cost of government by changing state worker retirement benefits.

For instance, Say wants to lower retirement costs (HB 2893) by saying that a worker's pay for retirement calculations does not include overtime, bonus or pay differentials.

The state could collect an extra $105 million if it adopted Say's plan (HB 2873) to take the hotel room tax money now given to the counties. Another Say proposal (HB 2852) would raise $71 million next year and $142 million by 2012 by imposing a tax on nonprofit health insurers like the Hawaii Medical Service Association and Kaiser Permanente.

Say, a former House Finance Committee chairman, calculates that the governor's budget does not account for $500 million in state expenses. He also figures that the state Council on Revenues will again lower its tax collection forecast in March, resulting in an increase in the state budget shortfall to $1.4 billion.

But he said that if the state could pick up an extra $400 million in savings and taxes, it could stop layoffs and Furlough Fridays and restore other state services.

“;I don't think we can tax ourselves out of this and if we defer everything, we are just going to compound the problem. I want to make the Legislature aware of this,”; Say said.

Linda Smith, Lingle's senior policy adviser, said she has talked to Say about his concerns and doesn't agree.

“;The governor submitted a balanced budget, a six-year financial plan that shows our spending,”; Smith said.

She agreed that Say “;has understandable concerns”; about some issues such as the retirement system and state medical insurance program, but the administration is working on it.

Instead of just cutting and raising taxes, Smith said, the Lingle administration is proposing a series of bills to create more jobs and encourage construction.

“;We recognize that we have short-term issues to deal with, but we are focused on programs that will create jobs, spur new hiring and encourage construction and renovation,”; Smith said.