The news is certainly not all bad from the University of Hawaii Economic Research Organization (UHERO), which this week identified some persistent signs of strength in the Hawaii economy. This may comfort those worried about sustainability in the medium term.
However, those headwinds of recent weeks, the federal government shutdown in particular, have cut into Hawaii’s more immediate prospects, and that ought to sound alarm bells for lawmakers and others planning how much the government has to spend.
“As the vigor of the tourism boom abates, the growth impetus is shifting to other sectors, including an accelerating construction industry,” the report’s summary asserts. “Against a generally healthy backdrop, there have been some signs of softening recently, with both job creation and income growth slowing since the beginning of the year.”
Among the factors cited in the report for the economic softening are belt-tightening in federal spending, even before the two-week shutdown that was sparked by political clashes in Congress. Furloughs associated with the federal budgetary sequester and the elimination of payroll tax cuts affected family budgets and decisions about holiday destinations, according to UHERO.
Further, a weaker yen has depressed the discretionary spending by Japanese tourists, and that will put a dent in the general excise tax collections.
Perhaps what’s most distressing, however, are the observations that “consumer confidence nationally has taken a nosedive since the first day of the shutdown.” Nobody has faith in a permanent fix — or trusts that another shutdown won’t happen — so people are quite rationally keeping a tighter grip on their purse. For mainlanders, that vacation to Hawaii falls to the bottom of the must-have list, and for local people, any kind of luxury spending can seem risky.
The bottom line is that the Hawaii outlook is modestly less rosy than it was a few months ago. For example, the forecast is for visitor arrivals to go up by 4.3 percent, year over year, instead of the 5.5 percent increase projected in August. Gross domestic product projections are for a 3.1 percent rise, compared to 3.3 percent.
That’s still growth, but diminishing growth forecasts across several economic measures constitute a worrisome pattern.
It should worry legislators as they watch the supplemental budget requests come in from state departments. Those requests were due last Wednesday at the governor’s finance office as it prepares a supplemental budget to go before the Legislature when it convenes in regular session in January.
Among the many line items are petitions for:
>> An extra $2.5 million in general funds for Preschool Open Door program subsidies, accommodating needy late-born children who no longer will have the option of enrolling in the state’s pre-kindergarten program.
>> Funds to help support University of Hawaii at West Oahu as it seeks alternative financing for new campus construction.
>> From the capital budget, $25 million to install air conditioning in more schools, as well as the state Board of Education’s $40 million supplemental request for operating expenses at Hawaii schools.
Lawmakers will have to review every supplemental request very carefully, holding back especially on many new commitments that will incur ongoing costs. Further, it’s time for them to comb through many old programs — and old special funds on the state’s books — to see which are effective and which are a drain.
It’s hard to believe that this many years out from the global financial crash, Hawaii would still be picking through the rubble. But as the current projections make clear, we’re not out of the woods yet.
