In a political tit for tat that foreshadows Hawaii’s U.S. Senate race next year, Gov. Neil Abercrombie and his predecessor Linda Lingle are clashing over who’s done the better job managing the state’s finances.

The dust-up continued Thursday as Lingle’s people downplayed the significance of a recent state bond sale that Abercrombie says show’s the state’s in great shape under his tenure.

Fiscal management is the key issue in Hawaii’s Senate race, which is considered one of the most competitive in the country and could help decide which party controls the Senate.

Lingle, a Republican, has made jobs and the economy her top campaign issue. She believes her two terms as governor and Maui mayor before that demonstrate she has a strong track record when it comes to fiscal policy.

Democrat Abercrombie, who will need federal help to implement his New Day vision for the state, will support the winner of his party’s primary, either Mazie Hirono or Ed Case. He is also using the state’s improved finances to defend himself against critics following a rough first year in office.

Tit for Tat

While Abercrombie has often found fault with Lingle’s actions during her eight years in office, he ramped up his criticism in an interview with Civil Beat on Nov. 28. Among other things, Abercrombie said Lingle left him with a “fiscal disaster.”

Lingle’s former chief of staff, Barry Fukunaga, quickly fired back, arguing that fiscal accountability was one of the “hallmarks” of Lingle’s two terms in office.

“The fact is, the Lingle Administration successfully guided the state through the 2008 global financial and economic collapse,” Fukunaga wrote.

Abercrombie continued the war of words in his Dec. 1 announcement that the state completed the largest bond sale in its history.

The governor told reporters gathered for a press conference at the Chamber of Commerce of Hawaii that his administration deserved credit for rescuing the state from Lingle’s “fiscal nightmare.”

The latest salvo came Thursday, when Fukunaga and two other former Lingle cabinet members penned an essay, widely distributed to the media: “Recent State Bond Sale Is Not All It Appears To Be.”

“Taking a victory lap due to the success of this new borrowing is misleading if the underlying factors that made it possible are not considered,” wrote Fukunaga, joined by former budget director, Georgina Kawamura, and former comptroller, Russ Saito.

Political, Not Personal

Abercrombie wasted no time striking back. The Lingle column had only been in reporters’ email boxes a few hours when the governor again addressed what he says was the sorry state of state finances he inherited.

In his keynote at a Hawaii Tax Institute luncheon, Abercrombie reiterated his contention that the state’s fiscal problems were “severely understated” by his 2010 campaign opponent, James “Duke” Aiona, Lingle’s lieutenant governor.

The governor also said his characterization of the budget he’d inherited as a “fiscal nightmare” and a “tidal wave” of deficit dollars was nothing personal. He even praised Lingle’s budget director, Kurt Kawafuchi, an Abercrombie friend.

Asked about the latest attack by Lingle’s surrogates regarding the bond deal, Abercrombie pointed to positive ratings for Hawaii from three national ratings agencies.

“The facts speak for themselves,” he said. “Standard & Poor’s says, ‘It’s Governor Abercrombie’s aggressive fiscal policies that have changed things all around.’ I’ll let those objective, outside sources speak for themselves.

Pressed by a reporter on whether the repeated tit for tat was political, Abercrombie exclaimed: “Of course it’s political! Absolutely it’s political. Everything’s political for her. She’s running for office, isn’t she?”

Abercrombie’s point is that Lingle will “have to own up for her record.”

“I don’t know any other way to put it,” he said. “That’s a description of the situation that we ran into. It’s not personal; it’s a commentary on her leadership capacity.”

Fact-Checking the Claims

Lingle’s former staffers made three points in their critique of Abercrombie’s bond sale. (The full text is at the bottom of this article.)

Their first claim is that Abercrombie is wrong to take credit for a successful bond sale when he raised taxes to shore up the state’s financial picture in order to get the bond sale.

Indeed, lawmakers approved about $600 million in new tax revenue — coupled with spending cuts, labor savings and tapping the state’s reserve funds — to help pay for the state’s two-year budget.

But, in announcing the bond sale, Abercrombie and his budget director, Kalbert Young, touted praise from rating agencies that affirmed Hawaii’s bond rating following the transaction. Standard & Poor’s, for example, cited Abercrombie’s “willingness to implement aggressive solutions … to balance the fiscal 2011-2013 biennial budget in light of a projected budget shortfall.”

The second claim from Lingle’s people is that the Abercrombie administration intends to repay the Hurricane Relief and Rainy Day funds using “borrowed” money from the bond sale. In fact, Young stressed that the repayments will be made with “pure cash” and not borrowed money from the bond sale.

The cash would come from the $59 million in savings on interest payments achieved through refinancing existing debt at lower rates. Young said the state also will save between $23 million and $43 million a year on previously budgeted interest payments because it achieved low interest rates on the $800 million in new debt.

“They actually misstated what the cash source was going to be for being able to pay the Rainy Day fund back,” Abercrombie said. “If they can’t even get the basic math correct, I say draw your own conclusions.”

The third claim is that the success of the bond sale was due in part to a financial report covering Lingle’s term in office. Lingle’s group said “the success of the bond issuance was also based in large part on the 2010 Comprehensive Annual Financial Report … This CAFR is a report card on financial management during the Lingle administration.”

It’s true that the CAFR covered Lingle’s last fiscal year in office. But that report was issued in October — 16 months after the end of the 2010 budget year. Had the report been finished earlier, the state accountants might have been able to produce an even more current report.

Jan Gouveia, the state’s current deputy comptroller, said at the time of the CAFR release that the delay was mostly due to lack of staff, furloughs, an antiquated accounting system and stricter government accounting standards. Some of the staff cuts and furloughs were implemented by Lingle.

Here is the complete critique of Abercrombie’s bond sale from former Lingle staffers:

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