These surely are not the worst of times for Hawaii, economically speaking, but neither are they the best of times, and that realization should put some constraints on new initiatives the Legislature, convening today, can begin this session.
The signs have been encouraging: unemployment dropping, the tourism industry on an upswing, and the spending by those visitors increasing as well. Even fiscally, the state finished the last budget year $300 million in the black.
Now for the bad news. The state has bills to pay. Gov. Neil Abercrombie already has stated his intention to pay down some of the state’s unfunded liabilities for retiree pensions and health coverage, and lawmakers, with new leadership at the helm, should back him on that commitment.
But the bigger worry is about payments that will come due a lot sooner — in the pay packets of government employees. A draft arbitration award gives more than 2,700 members of the United Public Workers 3.2 percent raises from January through June of this year, an $8 million immediate cost item that lawmakers will have to fund. The blue-collar workers union managed to escape the 5 percent pay cuts that hit the Hawaii Government Employees Association and the Hawaii State Teachers Association and, over the long course of the contract dispute, managed to hang onto an old provision in which employees paid a lower share of health premiums than did members of other unions.
If this accord drives other unions to bargain for more in the next go-around, it could bust the budget going forward — a fairly dark cloud to be hanging over any lawmaking session. And the new session is certain to encounter pent-up demand from social-service nonprofits and other interest groups strained by the cutbacks of the recession.
All of this coincides with critical projects the administration wants to fund — including one to upgrade the state’s information technology networks and one to make early education more widely accessible — in a context of diminishing federal funding support. These are important initiatives that should occupy top spots on the to-do list, but financing them will be challenging.
That’s because, given all the rising costs that afflict the public purse, from rising energy bills to the increases in health care premiums that come off the household bottom line, the mission to keep a lid on new taxes also merits a high priority.
Another careful review of the tax money the state surrenders would be a smart course of action. Deciding how to dial down tax credits for solar installations, to name one high-profile example, must be part of the public debate this session. Solar power is a critical element in the state’s energy portfolio, but at some point the training wheels on the industry will have to come off.
Better use of public lands as an asset that could produce lease rent would be another prudent source of sustaining revenue, but generating that funding stream is a longer-term project. That means much of the new spending that will be considered should be scheduled in tandem with the development of new revenue sources.
There is no quick and easy solution to this problem. Lawmakers would be wise to think carefully before embarking on money-raising enterprises such as gambling; studies show that this money could end up diverted to address an increase in social ills that have been associated with gambling.
Abercrombie’s blueprint will come into sharper focus when he delivers the State of the State address next week. But the initial sketch of the spending plan makes a rational case for building a gradual onramp toward improvements Hawaii needs. The idea should be to invest in some careful planning over a longer time horizon for upgrades in education, IT systems and other elements of a strong economy. In this way the final product delivers the most bang for the buck.
The new leadership teams taking charge in the House and Senate will bring their own ideas to the table in what will be a test of fire. Here’s hoping for at least a passing grade.
