Gov. Neil Abercrombie announced Friday the state will assess its budget needs in the wake of impending federal funding cuts and said a $25 million contingency fund included in his budget proposal to the Legislature will be sufficient — for now — to accommodate most of the cuts.
"Obviously, that can’t take into account every possible avenue of expenditure and time frame associated with federal dollars, but we think that gives us at least a solid financial foundation," Abercrombie said. "The contingency we have, we think, meets a reasonable standard of preparedness that will enable us to deal with the consequences as they unfold."
Spending cuts kicked in Friday after President Barack Obama and Congress failed to agree on how to tackle the federal deficit by a deadline set during similar debates in 2011.
State Finance Director Kalbert Young cautioned that the contingency fund facing legislative approval this session — setting aside $25 million in each of the next two fiscal years to account for the cuts — won’t make up for every federal dollar that would be lost.
"Make no mistake," Young said. "It is not presumed that every program that loses federal funds will be able to be accommodated to maintain their current operational level."
Young said the state has not yet heard from federal agencies regarding spending cuts, but it expects to receive details over the coming week.
Abercrombie said the state is assembling a Sequestration Impact Response Team to assess the effects. The response team will include representatives from all state departments as well as private and nonprofit groups that receive federal money.
Abercrombie said individuals are not likely to feel an immediate impact from the cuts, but instead will experience them in a ripple effect.
As an example, he noted that 19,000 civilian Department of Defense workers in Hawaii could face furlough days equivalent to a 20 percent cut in pay come April, which would shrink the local economy by an estimated $138 million.
"That affects your retail operations, that affects your discretionary expenditures, that affects whether you pay your bills on time, those kinds of things," Abercrombie said.
Abercrombie explained that the federal government is now operating on last year’s budget, which means new appropriations or programs that have not yet been accounted for will not be able to be funded.
"What that means is that anything you’re dealing with now or you might want to deal with now, say a repair of a ship or something of that nature, cannot be done because it did not exist in the previous year’s spending authorization," he said. "It creates a very, very difficult situation going forward because many of these projects and programs, if they don’t get under way, are not simply going to be able to be snapped into existence if and when the Congress actually passes a budget."
U.S. Rep. Colleen Hanabusa recently introduced a bill that aims to avoid defense cuts in Hawaii by authorizing the military to transfer excess "investment account" funds to the operations and maintenance budget, which can be used for civilian staff salaries and permitted contracts, her office said.
U.S. Rep. Tulsi Gabbard, D-Hawaii, said dozens of workers at Schofield Barracks on Oahu have been furloughed and 70 have lost their jobs as a result of the impending cuts.
According to White House estimates, Army bases in Hawaii could lose more than $100 million, and Air Force operations would lose $15 million. The state could also lose about $4.7 million for schools, about $1.3 million for clean-water and air-quality programs, and significant funding for unemployment, law enforcement, public health and social programs.
Abercrombie said he is hopeful the government will come to a budget agreement before too much damage occurs.
"I’ve gone through one shutdown myself of real significance in the mid-1990s, and that turned out to be a complete disaster in political terms for the Republican party of Mr. (Newt) Gingrich at that time, and it affected the presidential election and congressional elections," he said, adding that the issue was "addressed fairly quickly after it became a reality."
"I’m going to operate on the basis that common sense and the desire to preserve oneself politically will prevail and that we’re going to be on track sooner rather than later."
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The Associated Press contributed to this report.
