No new taxes next year.

That’s the message from Gov. Neil Abercrombie and the state’s budget chief Kalbert Young.

With an aggressive tax revenue forecast in hand, Abercrombie has proposed adding $189 million to next year’s existing $10.9 billion operating budget. The governor made clear at a news conference Monday afternoon that no tax hikes would be needed to pay for the added costs.

The spending increase includes nearly $120 million in additional expenses to the general fund, bringing the entire budget from all revenue sources to $11.1 billion for the year that begins July 1, 2012.

“This budget represents a very rational and reasonable budget submission that is accountable to balance without the need for additional tax revenues being proposed,” Young said.

The mood of the announcement was in stark contrast to last December, when the Abercrombie administration had to come up with a financial plan to address a forecasted $843 million shortfall for the following two fiscal years. That deficit later ballooned to $1.3 billion.

The plan introduced Monday is based on the most recent Council on Revenues forecast of 14.5 percent general fund growth. It will serve as the starting point for lawmakers when the Legislature convenes Jan. 18.

“We are in an excellent position today to move forward in this legislative session to deal with the policy issues that are before us, but to deal with it from a sense of confidence and security with regard to the fiscal foundation of the state,” Abercrombie said.

Cautiously Optimistic

Sen. David Ige, chairman of the Senate Committee on Ways and Means, said he feels cautiously optimistic about the governor’s budget.

“It’s a relief to know that the core plan doesn’t require us to implement any tax increases,” Ige told Civil Beat.

(Not surprising, considering next year is an election year, when politicians are unlikely to propose any unpopular measures.)

Ige did note, however, that he feels the Council on Revenues‘ forecasted 14.5 percent growth is too high. “We’re planning — at least in our preliminary planning — using a lower number,” he said.

Total tax revenues into the general fund were up nearly 18 percent1 through the first five months of the fiscal year compared to the same period last year, according to preliminary numbers released Monday by the Department of Taxation.

The $120 million in added general fund expenses will be offset with about $86 million in savings from things like debt payments and health care premiums for public employees. The net increase to the general fund would be $34 million.

Increases for Human Services, Education, IT

Here’s a look at some of the proposed increases in spending:

  • $100.7 million to restore safety nets at the Department of Human Services, including $46.4 million for contracts for the Child Protective Services program and $23.4 million for the Temporary Assistance for Needy Families program.
  • $46.1 million for the Department of Education and University of Hawaii, including $25 million for the Education Department’s school bus program. (Read Civil Beat’s Taken For a Ride — Series on Hawaii’s School Bus Costs)
  • $8.2 million for essential state services, including $2.4 million for Army National Guard facility maintenance.
  • $19.2 million for New Day initiatives, including $10.4 million for improvements to the state’s information technology infrastructure and $5 million for the Watershed Initiative.

The $86 million in savings to the general fund includes:

  • $25 million in reduced debt service payments in part due to recent refinancing.
  • $22.5 million in lowered FICA and public pension payments due to decreased labor costs.
  • $38.4 million in lowered health premiums due to lower rates and reduced enrollment.

Apart from the operating budget, the governor is proposing adding $1.2 billion to the capital improvements budget. That’s on top of the $1.01 billion already budgeted for fiscal 2013. Of the added amount, $300 million would come from general obligation bond funding.

The $300 million would go toward 18 projects, including:

  • $7.3 million for low-income housing tax credit loans
  • $8 million to reseal the State Capitol roof
  • $10 million for the Kapiolani Community College Culinary Institute of the Pacific
  • $18.8 million for improvements for Hawaii Public Housing Authority properties
  • $20 million for improvements at Hawaii Health Systems Corp. facilities
  • $50 million for Department of Education projects

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