Healthy construction and tourism markets coupled with state tax refunds going out sooner than expected prompted the Hawaii Council on Revenues to upgrade its forecast Thursday for growth in the state’s general fund this fiscal year.
The seven-member group of businessmen, accountants and economists voted to increase its forecast for the current year to 6 percent, which translates to roughly $180 million more than expected for the state budget.
But the council lowered its forecast to 5.5 percent for 2017, held it at 5.5 percent for 2018, and dropped it to 4.5 percent for 2020 to 2022.
The members had forecast 2.7 percent growth for 2016 at their May quarterly meeting, in large part based on advice from the Tax Department that $100 million worth of refunds for 2015 wouldn’t be paid until the following fiscal year, which started July 1.
But tax officials said they got the payments out in 2015, and on top of that didn’t have to refund as much as expected, which prompted the council to raise its forecast for 2016.
State lawmakers and Gov. David Ige’s administration use the council’s forecast to develop the overall state budget, which includes $6.6 billion in general funds for 2016 and $6.9 billion in 2017.
“It’s definitely good to see some modest gains for the current fiscal year that we’re in,” said Sen. Jill Tokuda, who chairs the Ways and Means Committee.
But she was concerned that the forecast for the outlying years was lowered, and that the state still may be spending more money than it takes in next year.
“While we’re looking at this and seeing positive signs for this year, we’re very mindful of the fact that we still have looming obligations and increased costs as well,” Tokuda said.
Many of the council members were surprised by the high rate of growth that their models showed, and they ultimately approved a six-year forecast that was lower.
“There’s some uncertain factors I feel very uncertain about.” — Kurt Kawafuchi, chair of the Council on Revenues
Uncertainty with China, the U.S. stock market, the weaker Canadian dollar and a multitude of other factors went into their decision.
Council member Marilyn Niwao, president of the CPA firm Niwao & Roberts, said she’s concerned that with the Canadian dollar at 76 cents to the U.S. dollar, fewer Canadian tourists will make the trek to Hawaii.
The state Department of Business, Economic Development and Tourism said in August that it expects visitor arrivals to reach 8.7 million in 2015, a growth of 4.3 percent from last year — and higher than the 2.5 percent projected in May.
Council member Carl Bonham, executive director of the University of Hawaii Economic Research Organization, said he thinks there needs to be a broader discussion about visitor forecasts. Seeing hotels near capacity, he questioned whether the forecasts are too high.
“There’s some uncertain factors I feel very uncertain about,” Council Chair Kurt Kawafuchi said.
Hawaii’s economic growth rate has lagged the national rate since 2008 and is projected to continue to do so through 2016, according to June data from the U.S. Bureau of Economic Analysis.
DBEDT expects Hawaii’s overall economy to grow 1.9 percent in 2015 and 2.3 percent in 2016.
“Although we haven’t seen the 5.0 to 6.0 percent economic growth rates experienced during the previous business cycle, our economy has recovered since 2011, Hawaii has been on the expansion path,” DBEDT Director Luis Salaveria said in a release last month.
“Our employment and payroll job count both were fully recovered by last year and during the first half of 2015, both reached the historic high levels,” he added. “Our unemployment rate during the first half of 2015 was the 7th lowest in the nation.”
The Council on Revenues’ next meeting is in January, which is when the next legislative session begins. The administration is expected have its proposed budget to the Legislature by December.