Save It For A Rainy Day, Guv

Rick Hamada
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Wednesday - October 28, 2009

When you mention the state Hurricane Relief Fund, eyes tend to glaze over. It’s not the sexiest thing to bring up in conversation. But with our recent financial travails, the Hurricane Relief Fund has now become the most popular girl at the dance. It seems everybody wants a twirl around the floor.

The recent announcement by Gov. Linda Lingle that she is now open to using the HRF to offset teacher furlough days next year is curious, to say the least. Up until now, she had been consistent in her refusal to use the approximately $180 million to shore up the state budget. As of this writing, there hasn’t been any further explanation in the change of direction from the Fifth Floor. It will be interesting to hear the justification for the apparent policy U-turn.


I have consistently maintained that the fund should remain intact, for several reasons.

First, our relentless pursuit of money masks the systemic problems of our state. The continuous cycle of raiding funds and raising taxes prevents us from changing the fundamental structure of government. The Department of Education is a prime example. I don’t want to regurgitate the financial statistics of the most funded state agency, but it is clear that as long as the DOE (and the state) maintains the status quo, we are doomed to experience these financial crises time and time again. Throwing money at a problem rarely works. Repairing a broken system will ultimately benefit all.

Second, raiding the HRF will be a one-time cash infusion. It may bridge the immediate budget gap, but what happens when the HRF is tapped out? The next budget cycle will prove to be just as challenging. What’s next to be raided? Which fund is most vulnerable? In the desperation to find money to close another inevitable budget shortfall, to what lengths will the state go to get that cash? Did someone say “tax hike”? The thirst for revenue your government has can rarely be slaked.

Third is the impact on the floundering real estate industry and individual homeowners. I spoke with a Realtor and principal broker, and he tells me if the HRF is raided, this could signal the exit of existing hurricane insurance carriers. If they were to pull out, what would prospective and existing homeowners do? It is a requirement that hurricane insurance be a component of homeowners insurance. It is renewed every year. Without the assurance of the HRF, carriers may elect to leave Hawaii, thereby stranding homeowners without mandatory insurance. At that point, the lender may invoke a “forced” policy where the homeowner must buy their insurance at a premium that’s much more expensive than their previous coverage. This can be a substantial additional expense that could prove to be a deal breaker for many families.

On top of these concerns, the raid of this fund also jeopardizes our bond rating. If the rating goes down, the interest rates on bonds go up and taxpayers are forced to pay more.

I am hopeful Gov. Lingle will remain firm and not raid the HRF. The short-term benefit does not justify the long-term negative impact to our state and her citizens.

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