Hawaii Gov. Neil Abercrombie wants the public to remain optimistic about the economy despite tax revenues coming in lower than expected.
The state Council on Revenues reported Thursday that tax collections were roughly $70 million, or minus 1.8 percent, lower than expected for the fiscal year ending June 30. But the council still expects at least 5 percent growth for each of the next five years.
It’s that long-term forecast and the way the economy has grown over the past five years that has the administration feeling upbeat.
Council on Revenues Chair Kurt Kawafuchi, March 12, 2014.
PF Bentley/Civil Beat
“While the fiscal year 2014 revenue collection is down 1.8 percent compared to fiscal year 2013, revenue growth over a five-year period from fiscal year 2009 to fiscal year 2014 has been substantial – about 21.7 percent,” Finance Director Kalbert Young said in a statement.
Abercrombie has highlighted the state ending fiscal 2014 with a $664.8 million ending balance even after replenishing the Hurricane Relief Fund with $55.5 million and putting $100 million toward paying down the state’s unfunded liability for retiree health care benefits.
“Hawaii’s economy is running at a sustainable level and regardless of short-term revenue cycles, we are focused on long-term fiscal stability,” Abercrombie said in a statement.
He described the outcome of the council’s meeting as “another reason for us to remain optimistic about Hawaii’s strong and vibrant economy.”
The state had been expecting a larger carryover balance though. In December, the administration’s multi-year financial plan estimated a $766.5 million ending balance for 2014, just over $100 million more than what actually came in.
The plan anticipates a further eroding in 2015 of the record $844 million surplus the state ended 2013 with before things start turning around.
“As finance director, my approach is to manage the budget and financial condition across multiple fiscal years,” Young said. “As a result, near-term revenue forecasts are evaluated and incorporated into the state’s six-year plan.
“As in the past, the state’s financial management team is prepared to exert measured controls of the state’s budget to ensure that programs are sustainable through any economic cycle. You will continue to see that exhibited in fiscal year 2015.”
Young restricted departments’ discretionary spending by 10 percent — roughly $14 million — at the start of the current fiscal year, July 1. He said at the time that it would be restored if tax collections met the council’s revenue projections.
The July forecast marks the fourth consecutive time the council has dropped its revenue prediction.
At the quarterly meeting in May, the council revised its forecast for growth in state general fund tax revenues in 2014 from zero to minus 0.4 percent, which translated to almost $22 million less than expected for fiscal 2014 and roughly $25 million less in each of the following six years.
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