At this point near the start of last year’s legislative session, lawmakers were filled with ambition to enact some powerful changes to state programs, including major investments in supports for affordable housing, tax relief for working-class families and increases to the minimum wage.
Then the coronavirus pandemic struck, and everything changed drastically. State tax coffers dried up and even the 2020 session largely had to leave its ambitions on the table.
And now, almost a year into Hawaii’s battle with COVID-19, legislators have turned their attention to something that now seems more critical: reframing government to make the most of severely limited funds.
Estimates of the budget shortfall range from $1.4 billion to $1.8 billion annually. And any recovery that will begin this year could extend well into the future: Gov. David Ige projects that this deficit will extend over four years.
The good news: Elected leaders are thinking seriously about making structural changes that have long been needed.
One of the guiding principles of the session will be “to see how we can reform state government,” House Speaker Scott Saiki told media representatives on a call after the Legislature convened Wednesday. “If we can’t do it in a pandemic, we will never do it. State government needs to be a little more effective.”
Make that “a lot more effective,” because the sudden recession doesn’t mean the problems of housing and poverty go away; if anything, they will be much worse.
In the near term, lawmakers won’t have the approximately
$15 million for discretionary grants to nonprofit agencies that help provide critical services for the poor. An improvement in the earned income tax credit could help low-income residents on the margins, but it won’t be enough.
The shortage in affordable housing units that has been mounting for decades will surely deepen further as job losses and business closures push more people toward the financial edge.
The federal government could ease the pain, but perhaps not as much as the Democratic leadership team had hoped. State Rep. Sylvia Luke, who chairs the House Finance Committee, said the state had borrowed some $700 million in federal dollars to replenish the unemployment insurance fund, which had been quickly drained to provide benefits to those suddenly jobless due to the pandemic.
At first lawmakers had thought the federal government would forgive such loans as part of coronavirus relief to the states. However, Luke said, only 17 of the 50 states had been hit severely enough with job loss to request that help; many of them, like Hawaii, a Democratic Party-led government. Hawaii, dependent on a tourism economy that was crushed, has slid a lot farther downhill than others.
This means the inclination of Congress to consider the loans a bailout is anything but unanimous, she added, meaning that debt very well could be simply added to the pile to be financed, and repaid.
So it is a relief to see lawmakers feeling the impetus to rein in wasteful spending, rather than raising broad-based taxes to cover the budget holes.
Perhaps what was most intriguing was Luke’s assessment that there are positions that could be left unfilled in various departments by pooling staff resources.
Some jobs demand expertise that is not easily transferrable, but she said there are clerical positions that could cross agency boundaries.
“Is it time for us to consolidate certain agencies?” Luke asked rhetorically. There’s a direct answer to that: Yes.
This likely won’t be a reorganization to be completed in time to head off the immediate fiscal stormclouds, but that work can and should start now.
In addition, it’s good to see a healthy aversion to wide-ranging tax hikes as a solution. The general excise tax has the greatest revenue yield, but it burdens already strapped businesses and disproportionately affects low-income residents.
There are special funds to be tapped and fees that could be charged: Luke said this is being examined closely as an alternative way of supporting state parks and other resources. Tourists now are much more drawn to hiking and other uses of natural resources, she said; they could help pay the costs of upkeep.
Lawmakers are examining other ways to increase per-capita spending by visitors, but that pursuit should be done with an eye on the other tourist-based tax hikes levied over recent years.
Other sundry fees and charges should be on the table, but realistically, it would be hard to avoid some increase in taxation. The Ige administration is weighing some form of “wealth tax” on the higher income brackets. That should be explored, although its potential contribution to state accounts is unclear.
Such strategies would help extinguish the budget fires that are near at hand. But Hawaii has a long-term sustainability challenge as well, so the biggest round of applause should go toward efforts to bring a bloated, inefficient state government under control at last.