Increased consumer spending, spurred by savings from lower gasoline and heating fuel prices, should help the U.S. economy overall and in turn have a positive impact on Hawaii’s economy, state economists predicted Tuesday.
The improved economic outlook prompted the state Council on Revenues to revise upward its forecast for the current fiscal year, predicting revenue growth of about 4.5 percent, up from the 3.5 percent growth predicted in September.
"The U.S. economy is very strong, and a lot of our tourists are from the mainland U.S.," Kurt Kawafuchi, Council on Revenues chairman, said after the meeting. "With the lower price of gas, people are going to have more money to spend because they’re paying less for gas and electricity.
"We hope that contributes to more spending, more tourists and more spending in Hawaii."
The council’s quarterly forecasts of how much money the state can expect to collect are used by lawmakers and the governor in determining the state budget.
Another council member, Carl Bonham, professor of economics at the University of Hawaii at Manoa, was equally optimistic about the economy, adding he expects continued growth in construction.
"I’m still bullish on construction," said Bonham, executive director of the University of Hawaii Economic Research Organization. "There’s several (projects) in Kakaako that are going up right now, and we’re starting to see the neighbor islands start to contribute.
"Maui and Big Island are both seeing some growth that we didn’t see at all a year ago or two years ago."
Under the new forecast, the state is expected to bring in roughly $55 million more in tax revenues in the current fiscal year, which ends June 30.
Key lawmakers were pleased with the improved forecast but reluctant to start doling out money for a slew of new programs and initiatives.
State Rep. Sylvia Luke, House Finance Committee chairwoman, and state Sen. Jill Tokuda, Senate Ways and Means Committee chairwoman, both noted the state has mounting obligations and is on a path to spend more than it takes in for another fiscal year. The deficit spending has eaten away at some of the state’s cash reserves.
"We will be looking at the budget in a very conservative way," said Luke (D, Punchbowl-Pauoa-Nuuanu). "We don’t want to do anything that’s going to throw economic growth out of whack by spending beyond whatever we’re supposed to."
The revenue forecast came the same day budget hearings began at the state Capitol.
The Legislature’s money committees Tuesday began hearing budget requests from state departments, starting with the offices of the governor and lieutenant governor, the Office of Hawaiian Affairs and the state Judiciary.
Requests included $240,000 for additional positions in the Governor’s Office, $21,000 to continue operating a lieutenant governor’s office on Lt. Gov. Shan Tsutsui’s home island of Maui, and additional requests to pay vacation payouts from the previous administration.
"Every department is going to be coming forward with a variety of requests — some that they’re going to feel are emergency appropriations to those that they feel are good to have," Tokuda (D, Kailua-Kaneohe) said. "This budget’s just not gong to be able to handle that, even with this increase to 4.5 percent.
"That’s something that we’re really going to have to keep everyone very mindful of — that we have significant obligations, and that means we’re going to have to continually rein people in in terms of what those expectations can be going into this legislative session."
The budget submitted by Gov. David Ige last month increases state government spending by 4 percent and 8 percent in each of the next two fiscal years, due mostly to obligations owed to state workers under new contracts negotiated by the previous administration.
Ige has stressed that the state must live within its means in the short term.
"I think this administration has continuously tried to — I don’t want to say dampen expectations — but they’ve wanted to make it very clear that the obligations we have are significant, and even with increasing revenues those obligations are significant," Tokuda said. "We must be very mindful of how much we grow those expenditures going forward."
Kawafuchi, the council chairman, also cautioned that while the U.S. economy remains strong, global concerns still could have an impact on Hawaii.
"The strong U.S. economy has a downside," Kawafuchi said. "As the dollar gets stronger, it makes it more expensive, for example, for Japanese tourists or Chinese tourists to come to Hawaii.
"I think there’s optimism, but people are being very cautious and careful."
The council left the remaining years of the forecast, fiscal years 2016 through 2021, unchanged, with projected growth of 5.5 percent in each of those years.
The 2015 legislative session begins Jan. 21.
__________
CORRECTION: A previous version of this story had reported Carl Bonham’s title as an associate professor.
