Hawaii's economy is showing signs of recovery, but uncertainty remains about how long it will be before the state fully emerges from recession.

Slow recovery and uncertainty were reflected in the most recent forecast by the state Council on Revenues.

The panel of economists left unchanged its forecast for the fiscal year ending June 30, saying the state still should expect to take in about 2.5 percent less revenue than the previous year. But the council revised its expectation for next year, predicting revenue growth of 6 percent, compared with a projected increase of 7.6 percent in its December forecast.

The downward revision means state lawmakers chasing a $1.23 billion budget deficit now have to find about $50 million more in tax revenues or savings.

Paul Brewbaker, chairman of the Council on Revenues, said rebounding visitor counts, an increase in real estate sales and a leveling of unemployment all are indicative of a laggard recovery.

“;All of those things are part of the transition from recession through a slowly unfolding recovery and into an expansion that is still looking about a year or two away,”; Brewbaker said.

Tax collections have bounced back in recent months.

But Linda Smith, the governor's senior policy adviser, said, “;It's still tenuous, and it's too early to indicate whether this is going to be a permanent trend.”;

Smith said tax collections this fiscal year through February were down 3.5 percent — a recovery from the end of January, when cumulative collections were running 5.4 percent behind last year's.

The council's forecast does not take into account Gov. Linda Lingle's plan to withhold $275 million in state tax refunds until after the start of the new fiscal year on July 1. Including that money in the forecast could make the economic recovery appear stronger than it is, Brewbaker said.

Smith said the administration would closely monitor tax collections in the coming months before deciding whether to change its policy on withholding refunds.

“;It's a recognition that we have to preserve cash to be able to make it through this fiscal year,”; she said. “;The critical thing is for people to realize that they will get their tax refund; it just won't be at the same time they have in prior years.”;

    Council on Revenues reports less money

 

 

The state is expected to take in 2.5 percent less money this year than last year.

 

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Meanwhile, lawmakers say they still are keeping all options open to make up the additional $50 million.

Sen. Ways and Means Chairwoman Donna Mercado Kim said her committee would be meeting soon to discuss its budget options, adding that she preferred the governor's withholding of tax refunds if it meant not having to make further cuts in social services or education.

House Finance Chairman Marcus Oshiro said lawmakers are crafting a bill aimed at preventing the governor from withholding the tax payments — essentially placing that burden onto the next administration.

He said tax increases in some form would likely be considered to make up the deficit.

“;I think we're looking at some of the (tax) exemptions right now, some of the credits, some of the loopholes,”; he said. “;We'll have to wait and see what the Senate does.”;

The House passed its version of the budget to the Senate last week. The Senate will now make revisions before both sides head into conference committee to work out a final version to send to Lingle.