The state will collect about $250 million less than lawmakers expected over the next 2-1/2 years as the record-setting Hawaii economy gradually slows, according to a panel of experts tasked with projecting Hawaii’s tax collections each year.
That new projection by the state Council on Revenues on Monday will require that state lawmakers do some additional trimming of the draft budget for the next two years. That budget was proposed by Gov. David Ige in December, and now will be amended by the state House and Senate based on the latest tax collection projections.
The council previously had predicted tax collections would grow by 3 percent this year, but on Monday pared that projection back to 2.5 percent growth.
The council also had projected tax collections would grow by 5 percent in the year that begins July 1, and 4.4 percent the following year, but on Monday reduced those projections to 4 percent growth each year for the next two fiscal years.
Tax collections have grown rapidly in recent years as the Hawaii economy boomed, and the state is expected to collect a total of about $6.5 billion this year in taxes. The state also had a record-setting $1 billion cash surplus when it closed the books June 30 on the last fiscal year.
Still, Senate Ways and Means Committee Chairwoman Jill Tokuda said it will be “extremely difficult” to cope with the slower-than-expected growth in tax collections based on the Council on Revenues’ new projections.
“Every half-percent makes a difference,” Tokuda said. “It seems like such small percentages, but it really makes a big difference in terms of what we will be able to fund or not fund from the budget perspective.”
Tokuda noted the state must pay billions of dollars each year for fixed costs such as salaries, health care for employees and retirees, retirement costs and debt payments on money the state has borrowed.
“I know it sounds like a lot of resources, it sounds like you’ve got a wealth of money available, but we have a huge amount of nondiscretionary costs that we have to account for and pay for before you even start to think of any kind of additional programs or services that people feel are necessary to have in place,” she said.
“Whether it be for education or homelessness or health care or environmental services or anything else, before you even start thinking about adding, we’ve got to pay for those commitments and obligations and bills that we started out with from years and years ago,” said Tokuda (D, Kailua-Kaneohe).
