Facing a nearly $1 billion state budget deficit, Hawaii Gov. Neil Abercrombie has said he’s “flexible” on raising the state’s general excise tax — something that has been anathema to the governor until very recently.
The revelation came in response to a reporter’s question about the governor’s position on raising the GET. Abercrombie had called reporters to executive chambers at the Capitol to announce the establishment of an Office of Information Management and Technology.
The governor answered a stream of questions on the state’s budget deficit through June of 2013, which was revised upwards last week by the Council on Revenues to nearly $1 billion just as the economic growth was revised downward from 3 percent to just 0.5 percent in the current fiscal year.
The global situation has changed dramatically in the last week as well, led by the ongoing catastrophes in Japan and the uprisings in the Arab world. The most immediate effect on Hawaii is the rise in gas prices and the expected dramatic falloff in visitor arrivals and spending from Japan, Hawaii’s third-largest market.
The governor said he did not want to speculate or make “rash assumptions” about such events, but he said the administration is in contact with the Council of Revenues on possibly re-evaluating its forecast.
(Not long after the press conference, the governor’s office released a third press release — a second release highlighted the governor’s first 100 days in office — this one that said in part, “Due to recent global events including the recent earthquake and tsunami in Japan, the Governor is requesting the COR to reconvene to consider revising their projections so that lawmakers have the best and most current estimates. … Raising the rate of the general excise tax is not currently being considered. We are exploring many other options and discussions have been positive.”)
The administration is in close consultation with the Legislature, where on Wednesday the state House passed its version of the budget submitted by the governor’s office.
But that budget was crafted before the latest economic forecasts and the Japan earthquake and tsunami, and House representatives acknowledged in floor debate Wednesday that the Senate, which takes the budget from here, has its work cut out for them.
(Budget and Finance Director Kalbert Young met with Senate leaders midday Wednesday.)
As for the GET, while the governor and some Senate leaders are more open to a GET hike than House members, Minority Leader Gene Ward said he’s hearing more talk that it might finally happen.
Ward, a Republican, opposes a GET increase, and House Democrats have not embraced the idea, either. But even House Speaker Calvin Say is growing weary of trying to balance the budget with “Band-Aid” approaches.
As House Finance Chairman Marcus Oshiro, who has also been reluctant to consider a GET hike until other revenue-raising avenues had been pursued, observed, “We simply do not have the money to pay for the government services we currently have, and we are not willing to pay for ones we want.”
A GET increase is just one idea, and the governor spoke of “different scenarios” in terms of how the global situation may impact Hawaii and how the state will respond. But it was his strongest signal to date that he’s open to the idea of raising the tax.
He declined to provide specifics but he did say he’s observed a remarkable degree of communication and “synthesis” between the executive and legislative branches to address the budget crisis.
“There’s no jousting,” he said. He said the state could not just “remain frozen.”
There are talks as well with the Hawaii Tourism Authority to assess the repercussions should Japanese travelers stay away from Hawaii, as they have traditionally down in times of natural and manmade disaster.
“We are not going to lay down,” he said.
To that end, a top priority is to send out the message that Hawaii is “open for business. We have been getting calls, so we are trying to redouble, triple, quadruple our efforts that we open and friendly. A drug cartel is not going to murder you here.”
He suggested as well working with the U.S. Department of State to “be more aggressive” visa waivers, in light of the Asia-Pacific Economic Cooperation in Honolulu this November.
The immediate task, however, is closing the $128 million deficit in the fiscal year that ends June 30. “It’s quite clear that it is going to be hard to close this year,” the governor admitted.
What to do about that is, as the governor put it, “in flux.”
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