Spending Would Rise Nearly $1 Billion Under Gov. Abercrombie’s Legislative Proposals

If Hawaii’s Governor Neil Abercrombie gets his way, the state would add about $1 billion in new and reclaimed programs and personnel in 2014 and 2015.

If his proposals are enacted by the Legislature, island consumers will pay more at the grocery store when they check out, more when they buy a soda, more at the gas station when they fill up their cars, and more at the end of the month when their electric bills are due.

In addition, new homebuyers will see a hike in the state conveyance tax for properties over $2 million, and those wanting to put solar panels on their home will get less of a credit than consumers who went solar before them.

The governor unveiled these and other new spending and tax increase and tax credit readjustment proposals during his 2013 State of the State address at the Hawaii State Capitol on Tuesday – his third such speech since taking office in 2010.

While legislators offered the governor polite applause during his 50-minute speech, some of his ideas received a lukewarm response from both Democrat majority and Republican minority leaders.

Senate President Donna Mercado Kim, D-Moanalua, promised the Senate would “work collaboratively” to formulate and frame the right questions to address the challenges facing the State, but she did not outright embrace the governor’s ideas.

Instead Kim said: “While we will consider the new initiatives the Governor mentioned in his State of the State address, we must reevaluate and reassess what we have in place to achieve our purposes more efficiently and effectively.”

The House minority Republicans, who make up 7 of 51 members, said they will “likely” oppose the governor’s tax increase proposals. In the past, the House GOP caucus pledged to oppose any and all tax increases.

Under new leadership since the 2012 November election, House Minority Leader Aaron Ling Johanson said: “We’ll thoughtfully consider the real impact that any tax burden would place on low-income residents, working families and small businesses. Especially while taxpayers are still recovering from the recession, it is our responsibility to protect people from excessive cost of living increases.”

Johanson said the Minority Caucus finds “common ground” with the Governor’s priorities to increase transparency, focus on education, address unfunded liabilities and support veterans. But Johanson asked how the Governor will pay for his “ambitious agenda.”

“It is our responsibility as leaders to ensure that we stay on a path toward long-term financial solvency to best honor our state’s obligation to its people,” Johanson said.

Part of Abercrombie’s plan is to bring more money into state coffers to protect Hawaii’s watersheds and “shrinking” forests through a new tax.

“One is an increase in the conveyance tax, but limited to high-end property transactions – properties valued at more than $2 million. The bill would generate an estimated $10 million for watershed protection. The other approach is to look at a 10-cent fee for single-use checkout bags to go into the natural area reserve fund. This could generate an estimated $15 million,” Abercrombie said.

Abercrombie wants to ensure food and energy security in Hawaii by making permanent the temporary $1.05 tax per petroleum barrel. When the tax was enacted several years ago, the money was supposed to protect Hawaii’s environment from invasive species and guarantee food security, but like many of Hawaii’s special funds, lawmakers have repeatedly raided the funds to balance the operations budget.

The governor’s proposal is to increase spending by 8 percent in FY 14 and 11 percent in FY 15 to fund all of his programs and services.

Senate Minority Leader Sam Slom, the lone Republican in the 25-member Senate, said he doesn’t believe the state’s economy is on the rebound, despite what the governor said, and will not support more taxation, spending and debt.

“Primarily the governor and the Senate Minority have a very basic difference of opinion about the health of Hawaii’s economy upon which his increased budget is based. My professional belief is that Hawaii’s economy has not turned around or strengthened with the exception of Hawaii’s visitor industry. Construction has not rebounded significantly. Retailing, wholesaling and manufacturing have all declined,” Slom said.

Slom, who opposes any new tax increases, asked why was there nothing in the governor’s speech that would directly reduce the tax burden endured by Hawaii’s residents, why was there nothing in his speech to directly help small businesses who suffer under the yoke of some of the nation’s highest tax burden and employer mandates, where the details and actual costs are for the governor’s new initiatives, and where the money is coming from to pay for nearly $1 billion in new budget proposals.

“Taxpayers should resist politicians’ use of the term “investment” when politicians mean taking more money from individuals and families and spending it on programs they have determined are beneficial without voluntary choice by those who earned the income,” Slom said.

Abercrombie and a well-funded lobbying group are pushing an education initiative for Hawaii 4-year-olds that would be funded by taxpayers at an initial estimated cost of $32 million per year.

Both the Senate Majority and Minority and the House Minority questioned the plan when previous early childhood programs have failed and when the state’s K-12 existing education system is below par.

Rep. Bob McDermott, R-Aiea, said the Governor’s proposals on early education are commendable, but represent only a small portion of the comprehensive reform that is needed in the education system.

He advocates returning to a plan commissioned by Hawaii’s Business Roundtable in 1988 that was supported by three previous governors, but failed to gain legislative support.

“Preparing our preschoolers simply to enter one of the least effective public school systems in the country is not providing them any advantages. ..  “What we need is the political will to do more than talk about fixing the education system. We know what needs to be done…and our children’s future depends on it,” McDermott said.

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See the governor’s full speech here

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