The good news is that the just-concluded Hawaii Tax Review Commission blinked on the issue of raising the general excise tax.
The bad news is that the now-expired commission produced enough reports, studies and white papers to give ammunition to anyone searching for a reason to raise taxes next year.
Unlike other tax commissions, a panel selected by the governor and approved by the state Senate, this group spent much of its time studying whether the state needed more money and then looking for ways to get it.
The commission’s chief consultant, the mainland-based PFM Group, said Hawaii soon would face huge budget deficits, so it needed more money.
In something of an Alice in Wonderland moment, however, the consultants both readily admit that the state can’t run such deficits and that it better get ready to pay for those deficits.
"Of course, the magnitude of the budget gaps projected by the model cannot actually occur: As with 48 other states, Hawaii has an obligation to balance its general fund budget on an annual basis; however, the growing gap between ongoing revenues and expenditures is a sign of a structural issue — which suggests that the current revenue structure is insufficient to meet near- and long-term needs of the state," said the PFM report.
Earlier this year, when drafts of the report were first floated, a majority of Democrats in the state House responded with their own Grover Norquist moment by signing a pledge that the state would not raise the excise tax.
Lawmakers told the commission that the report was "expenditure driven," meaning it was looking to spend money, not save it, and then searching for ways to pay for the spending.
If the idea was to talk about taxes and spending plans, a lot of ideas were ignored, said Lowell Kalapa, president of the independent Hawaii Tax Foundation.
"They could have talked about how effective was the high-tech tax credit. They could have talked about airport financing. Or they could have talked about financing the highway system," Kalapa said.
The overarching problem, according to the commission, is that if the state keeps spending like it is today, and continues to owe increased pensions to state workers and medical benefits to retirees, the state will go broke.
Legislators note that "projecting future state expenditures is the jurisdiction of elected policyholders," not the tax review commission.
Perhaps you recall the old "no taxation without representation" thing or the stuff about the power to control the purse.
So, faced with the opposition, the commission suggested that next year’s Legislature come up with another commission to monitor government and figure out ways to manage.
"Our state faces an ever-expanding budget shortfall that, if left untended, will grow to billions and billions of dollars by 2022 and 2025," the commission warned.
The compromise solution is a state commission similar to the failed federal SimpsonBowles Commission, which urged both cuts to federal programs and revenue enhancements.
Kalapa noted that past legislators and governors have ignored the looming payments coming due on pension and medical expenses, and instead continued to increase spending for government services, including new pay raises.
There is, he noted, a relationship between the things we as a state buy and the money we have to make the purchase.
The question to answer next year will be which hurts more: saying yes to tax increases or no to continual spending increases.
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Richard Borreca writes on politics on Sundays, Tuesdays and Fridays. Reach him at rborreca@staradvertiser.com.
