Furloughs: The Guv vs. Dems And Unions

Rick Hamada
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Wednesday - June 24, 2009

The dust-up between the Lingle administration and organized labor is no big surprise.

This past legislative session revealed the governor’s priorities and the objectives of labor leaders. The governor did not want to raise taxes and labor wanted to raise taxes.

I know it’s a pretty simplistic assessment, but that’s what it boiled down to.

Yes, the governor said at the outset of the session that all financial options would “be on the table.” But like a buffet, just because it’s there doesn’t mean you have to eat it. The governor considered a tax increase to deal with the burgeoning budget deficit, but the immediate negative effect on our economy coupled with the inevitable delay on any recovery proved to be bad fiscal policy.

There are many who agree.

There were calls to increase taxes by majority Democrats and their prime constituency, organized labor unions. Of course, this is nothing new. But the call for a tax increase in order to preserve and protect public-sector union jobs at the expense of all taxpayers smacks of more than a touch of hubris. There is a very real sense that unions, specifically their leadership, just don’t want to give up anything in our down economy. Instead of making the hard decisions and sacrifices that countless employers, employees and families are doing every day, union leadership is doing everything possible to insulate their members from the storm.

The reality is these union leaders are doing exactly what they are supposed to be doing. They are advocating for their constituencies. I can’t totally disagree with that. But our political process is so tremendously influenced by union power that their advocacy becomes a liability for our community.

A case in point: the recent exhortations by Hawaii Government Employees Association president Randy Perreira that instead of employee furloughs and layoffs, the governor and Legislature should simply increase the General Excise Tax. He insists that the governor is trying to balance the state budget on the backs of the unions. His rationale is that the GET increase would mean everybody would share the burden. But the GET is the most regressive tax. It simply hurts those who can least afford it and mitigates economic growth. In Hawaii’s case, the proposed tax increase during the dismal of economic times would be disastrous.

It’s clear that Democrats and unions would like to see the governor’s furlough plan fail. The recently submitted lawsuits by the three major public sector unions are designed to do just that.

So let’s say the unions are successful. They are demanding the governor negotiate contractual terms with them. But what is there to negotiate? The governor won’t raise taxes, the unions want a tax hike and the Legislature is out of session. Of course, there could be a special session where the Legislature, if so inclined, could raise taxes again. The governor would veto and the legislation would be overridden. The tax increase would become law, the unions will be overjoyed and you will be stuck paying the bill.

An unfortunate aspect of this scenario is just how much would the increase need to be to cover more than $770 million of debt? Remember how Oahuans recoiled at implementation of the 0.5 percent GET increase to pay for rail?

Consider this: The fluctuating and volatile tax collections over the past year or so indicates the government’s tax take is dwindling. It’s estimated than an immediate increase of the GET to 8 percent from 5.67 percent would be necessary to generate enough cash to meet our financial obligations.

Are you willing to take that bullet?

If things don’t get better soon, look for a proposal to institute a VAT (Value Added Tax). I hope I’m wrong, but nothing would surprise me today.

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