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That’s the tone Hawaii taxpayers can expect when Gov. Neil Abercrombie releases his budget update Monday. The so-called supplemental budget would lay out any additional expenses, revenues or restrictions to the existing 2012-2013 biennium budget.
The current budget is $11 billion. Whatever Abercrombie requests above that will be a starting point for legislative debate when the session begins Jan. 18.
The state’s deputy budget director says his office is encouraged by strong tax revenue growth and savings from the state’s recent billion-dollar bond sale.
“We’re still holding to a cautious, but optimistic financial picture,” Luis Salaveria, deputy director of the Department of Budget and Finance, told Civil Beat. “The most recent tax revenue data shows numbers are higher than last year, but hovering a little lower than what we anticipated.”
Tax revenue funneling into the state’s general fund was up 6 percent 1 through October, compared to the same time frame last year, according to the Department of Taxation. Preliminary figures for November were not yet available.
The panel said the forecast is made up of three parts: 5.2 percent pure economic growth; 4.3 percent attributed to the lingering effect of delaying tax refunds in July 2010; and 5 percent tied to tax increases approved by lawmakers earlier this year.
The progress of most of those tax hikes — which are expected to collectively generate about $600 million over 2012-2013 fiscal years — won’t be known until individuals and businesses file their taxes for the current tax year.
For example, the largest of the tax hikes suspends General Excise Tax exemptions for nearly two dozen business activities, and is expected to bring in an extra $173 million a year. Another measure eliminates the income tax deduction for higher income earners and limits the amount of itemized deductions they can claim.
One of the hikes that is trackable — the increase in the state’s rental-car tax — appears to be on pace to pull in the estimated additional $60 million this fiscal year.
The daily rental motor vehicle surcharge tax was increased from $2 to $7.50, with $4.50 of that slated for the general fund beginning July 1. The full tax previously went into the State Highway Fund.
The diverted fees generated $15.6 million for the general fund through October, according to Tax Department spokeswoman Mallory Fujitani.
Beyond tax revenues, the Budget Department’s Salaveria said the state’s recently completed $1.3 billion sale of general obligation bonds is helping infuse the state with extra cash and savings.
The sale included $800 million in new debt that will go toward capital projects across the state. The state also refinanced $488 million worth of existing bond debt at a lower interest rate, which is expected to save taxpayers $59 million over the next five years.
“Because the bonds were so attractive and sold at a premium, it generated above the $800 million — about $900 million,” Salaveria said. Any premiums from a bond sale must go into the general fund, according to Hawaii Revised Statute.
“With the bond sale, it’s allowing us to be a little more insulated from major deviations in projected tax revenue,” he said.
1. Technically, general fund tax revenues are up 21.3 percent over last year. The 6 percent growth factors out the $187.4 million in accrued tax refunds that were released in July 2010, creating an artificial boost. ↩
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