Gov. David Ige unveiled his administration’s first biennium budget Monday, seeking almost $1.5 billion in new spending over the next two years.
The governor said most of the increased costs are beyond his control — a result of contractual agreements with public-worker unions and actions the state made before he took office Dec. 1.
Ige’s $25.77 billion biennium budget proposal largely mirrors the proposal Gov. Neil Abercrombie left for him to ensure a smooth transition. Ige said he expects to put more of his “imprint” on the budget in January after he’s finished appointing the rest of his Cabinet.
“We consider this executive budget to be a starting point from which my administration can build,” Ige wrote in his message to the Legislature, which will start hammering out the final version of the budget after the next session convenes Jan. 21.
The overall state budget calls for $12.63 billion in fiscal 2016, which starts July 1, and $13.14 billion in 2017 — representing increases of 4 percent and 8.2 percent, respectively.
Looking at just state general funds, Ige is proposing a $6.48 billion budget for 2016, a 4.7 percent increase over current levels, and a $6.8 billion budget for 2017, a 9.9 percent increase.
The state Council on Revenues in September downgraded its financial forecast to 3.5 percent growth for next year and 5.5 percent growth for the next several years thereafter.
During a press conference Monday afternoon at the Capitol, Ige talked again about his philosophy of the state “living within its means.” He said there are likely going to be millions of dollars in project requests from state departments that won’t get funded and he believes the state stands to gain “hundreds of millions of dollars” in new revenue by modernizing its tax collection system.
Still, Ige’s budget relies heavily on the state’s record $844 million carryover balance from 2014. Last year, when Ige headed the Senate money committee, the state used $179.2 million from its surplus and cut millions of dollars from Abercrombie’s supplemental budget request.
The trend of the state spending more money than it’s taking in is expected to continue through 2018, draining the carryover down to $35.8 million before it’s projected to rise again, according to the multi-year financial plan.
Ige said his administration won’t be pursuing any broad-based tax increase to balance the budget and acknowledged how the carryover balance has helped.
“The fiscal reality is that there isn’t a whole lot of money,” he said. “Past decisions made are driving the bulk of the increase.”
Ige’s proposed capital improvement projects budget is $1.14 billion for 2016, $683.4 million for 2017. The request for 2017 is $118 million over the appropriation ceiling, which Ige attributed to the “substantial costs of social assistance, entitlements, support for public education, debt service and fringe benefits and other critical requirements.”
Among the major adjustments in the executive budget request are $65.5 million for retirement benefits payments in 2016 and $99.8 million in 2017. Health premium payments and pre-funding for other post-employment benefits are similarly steep, with a requested addition of $87.4 milllion in 2016 and $216.3 million in 2017.
Pay raises for the University of Hawaii faculty union are expected to cost over $54 million in general funding over the next two years.
The budget didn’t note any funding specifically to help the university’s 10-campus system pay for soaring electric costs, something UH officials underscored in a legislative briefing last week. The university’s two-year budget request seeks $51 million just for utility costs.
Notably absent was any funding for the Hawaii Health Connector. The Legislature approved $1.5 million last session for the health exchange, but as of now the nonprofit is hoping federal funds sustain it through next year.
Ige was particularly critical of the Health Connector when he was running for governor, calling it a “disaster” and criticizing the board Abercrombie appointed to run it. Ige has said there are better alternatives to covering Hawaii’s uninsured residents.
“There is no appropriation at this time for the Hawaii Health Connector in this budget because there is no appropriation for the Health Connector in this budget,” Ige said when asked why there was no money in the budget for it.
He said there have been preliminary discussions about the future of the Health Connector. Once there’s a more specific game plan, he said the administration would make a request for whatever funds are necessary.
Ige has appointed Wes Machida to be his budget director. Machida had headed the state Employees’ Retirement System during Abercrombie’s administration.
Here’s the executive budget in brief: