The Hawaii lawmaker now in charge of finalizing the state’s budget says the draft he’s been handed is out of date and no longer relevant in light of recent world events — and he predicts the deficit will top $1.2 billion, triggering even more spending cuts and potentially bigger tax hikes.
“Two weekends ago we went through the budget and thought we were in pretty good shape,” David Ige, chairman of the Senate Ways and Means Committee, told Civil Beat. “The assumptions we made then are no longer valid. All the factors have changed dramatically because the deficit essentially will double by the time we finalize our budget compared to where the House was. At least that’s the way we’ll be approaching the budget. It certainly is a bigger challenge.”
Ige is estimating the state’s shortfall will increase by another $250 million — that’s on top of the $250 million gap revealed recently when the Council on Revenues downgraded its revenue forecast for the current year, prompting Ige’s reference to deficit doubling.
Ige said the council’s lowered projection — to just 0.5 percent growth from 3 percent growth — is still too optimistic.
“That in and of itself resulted in another $250 million more for the deficit,” he said, referring to the council’s report. “We’re expecting another $250 million or more deficit that will become obvious in light of the earthquake. That would mean another $500 million or so that we’ll have to prepare for because I’m certain in just my looking at the current revenues that have come in for the last four months and trying to make even a simple straight-line projection, it’s obvious that the council’s projection is too optimistic.”
The council’s revision came just hours before the Japan earthquake struck, causing a tsunami that damaged parts of Hawaii. The downgraded forecast also meant the state’s deficit swelled to about $969 million for this year and 2012 and 2013. If Ige’s estimate holds true, the state’s shortfall would be more than $1.2 billion.
The House approved its version of a budget plan that called for $10.9 billion in spending in both 2012 and 2013, sending it over to Ige’s Senate Ways and Means Committee. While that draft did slash close to $400 million in spending that Gov. Neil Abercrombie had proposed, the House did not factor in the lowered revenue projection by the Council on Revenues.
Enter the tsunami. The wave caused tens of millions of dollars in damage to public and private property in Hawaii. Tourism from Japan — which makes up nearly 20 percent of the market — is expected to nosedive.
As a result, the Senate is taking a closer look at all spending proposals from the Abercrombie administration, Ige said, and looking for more areas to curb state spending.
“We’re revisiting all the governor’s adds and asking if it’s really necessary and looking at more cuts because that just has to happen,” Ige said.
On the revenue-generating side, Ige said the Senate will consider about two dozen House bills designed to raise about $300 million a year. These include familiar proposals including taxing pension income, eliminating state income tax deductions and raiding the Hawaii Hurricane Relief Fund. He hinted that some of the tax hikes may be broadened to raise more money.
“We do have the revenue enhancements that the House sent over,” Ige said. “We had examined a couple of them — eliminating the tax deduction for state income taxes, the issue of taxing pensions. Clearly we’ll be looking at those things. There will probably be very different decisions we’ll have to make now that the deficit is significantly bigger.”
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