A Legislative Reach For Revenue

Larry Price
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Wednesday - January 21, 2009
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The sad economic news out of the U.S. Commerce Department has been so consistent, it’s almost boring. The news is there is no news, only rehashed and over-analyzed figures about consumer spending.

The dreary song goes like this: Retail sales plunged far more than expected in December, a record sixth straight monthly decline as consumers were battered by a prolonged recession, a severe credit crisis and soaring job losses.

The prediction is the current recession will continue at least until the second half of this year. Fear about banks’credit problems now include concern over bad mortgages, credit card debt and auto loans. It seems the analysts are trying to justify their “bailouts” by the government. In the media business, like it or not, there is more criticizing than understanding.

It’s all a little discouraging, and rightfully so, but isn’t there a point where it’s like beating a dead horse? It’s starting to sound like a contest over who can complain the most about the financial condition of the nation.

When you compare Hawaii’s situation to the financial woes of Wall Street, we are not really doing that poorly. Our banking institutions are in good shape, and the aloha spirit is perking right along.

But there is a new challenge, and this one is political in nature. As the 25th state Legislature convenes Jan. 21, all of the powers in the state will be targeting the search for new revenue. For that reason, it will likely be one of the most interesting legislative sessions to observe.

If you remember, this is not the first time our Legislature and other branches of government have been faced with a stiff budgeting situation. Most of the strategy employed has already been leaked to understanding members of the media. It’s a good technique developed over the years to ferret out possible responses. The spokesperson for the governor said she even will discuss tax increases as one solution to the state’s formidable budget woes.

It is one of the surest bets that every time the state faces a formidable budget crisis someone will float the “gambling balloon” to see who shoots it down. Sen. Norman Sakamoto floated the familiar solution to make up shortfalls in the Department of Education’s budget, a 1 percent increase in the excise tax.

And while raising and cutting taxes may be on the table, that’s about as far as they are likely to go.

The same is true for a gambling bill that would be used to supplement the state’s coffers. Over the years, the state has developed a formidable Anti-Gambling Coalition that has stopped any discussion to pass any kind of gambling legislation and is poised to do battle as we think about it. What’s comical is if they put the question to the public, it would probably pass, yet every time gambling comes up in the Legislature it is killed without ceremony.

There are many reasons given for the lack of thrust for gambling. The state does need revenue now, and it could take several years before gambling would make money for the state. Casinos in Waikiki and off-shore gambling platforms are not likely to be interim solutions this time around.

Furloughs and voluntary unpaid vacation are going to rule instead. An unpaid vacation is forced time off without pay. It’s an employer strategy that’s sweeping the nation and is based on the idea of temporary layoffs that amount to one-time pay cuts for employees and an immediate cost savings for employers.

Since we usually follow the lead of Mainland companies that own many of the businesses in Hawaii, it’s interesting that the cost-cutting tactic of unpaid vacation is at a 17-year high on the Mainland. Hawaii’s government leaders, facing lower revenues but stymied by the long process required to cut public-sector jobs, are using “wiki-wiki” furloughs as a way to trim payrolls immediately.

Also, raiding of state special funds is certain to occur. Most of them have already been targeted.

There are more than 300 special funds in Hawaii. Not all of them can be raided because it depends on the method of financing involved - whether they’re funded by user fees or taxes determines their fate. This tactic is immediate, because it’s just a matter of transferring accounts. Another guarantee is a traditional favorite of law-makers, a rise in “sin taxes,” especially tobacco and liquor. Not as fair, but little resistance.

All this may be a bit disappointing, but at least there should be more collaboration among the powers-that-be in this session.

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