- Special Projects
Hawaii Finance Director Wes Machida sidestepped a host of questions from members of the House and Senate money committees Monday, but assured lawmakers that he will provide more details about the overall state spending plan in the coming weeks.
The lack of information frustrated Finance Chair Sylvia Luke and Ways and Means Chair Jill Tokuda, who grilled and scolded him during the two-plus-hour session at the Capitol.
“Time is running out. It’s not excusable to say you’re going to get back to us,” Luke said, noting that the next legislative session starts Jan. 20.
She also fired a warning shot to the other department heads in Gov. David Ige’s burgeoning administration that are set to come before the money committees over the next two weeks.
“You better have people who can answer the questions,” Luke said. “Otherwise, you’re wasting your time, and you’re wasting our time.”
The budget briefings give lawmakers a chance to ask the finance director about the administration’s overall approach to the budget for the coming year and question department heads about their spending requests before the session begins.
Big-ticket requests for next year include $160 million to rebuild the Hawaii State Hospital in Kaneohe, $179 million for improvements to airports in Kona and Honolulu and $161 million for affordable housing.
In December, Ige unveiled a $13.7 billion overall budget for fiscal year 2017, which starts July 1. Of that, $7.7 billion would come from the state general fund, the rest from the federal government and other sources.
The state ended fiscal year 2015 last June with an $828.1 million carryover balance and expects to end fiscal year 2016 with $764.8 million left over. But the administration is proposing to deplete much of that by spending $488.4 million more than the state expects to collect next year.
Machida said the administration expects to get a better picture of just how much money the state will have to work with in the coming years after the Hawaii Council on Revenues issues its fiscal forecast Thursday. At its last quarterly meeting in September, the council upgraded its projections for 2016 to 6 percent general-fund revenue growth, but lowered its forecast for 2017 to 5.5 percent.
The governor wants to tuck away an additional $100 million in the emergency budget reserve fund and more aggressively pay down the state’s massive unfunded liability for public employee retirement and health benefits.
Machida, who headed the Hawaii Employees’ Retirement System before joining Ige’s Cabinet, had more answers for lawmakers when defending the administration’s proposal to reduce the state’s $8.52 billion unfunded liability for public employee health benefits.
Ige has likened the plan to paying a 30-year mortgage — putting down more now will result in greater savings later.
Under a law passed in 2013, the state and counties have until 2019 to gradually work their way up to pay 100 percent of their annual required contributions, but the governor wants the state to begin paying its full amount next year.
The state was set to pay 60 percent of its annual required contribution next year. The extra 40 percent would cost an additional $163.9 million.
If the state had been making its payments to fully fund the retirement system in the past, Machida said there would have been an extra $2.2 billion over the last 10 years that could have gone to other public purposes. Going forward, he said this more aggressive approach is expected to save several billion dollars.
Still, Tokuda said she wants to see the cost-benefit analysis in greater detail — information Machida said he would provide to her.
While much of the discussion during the briefing focused on unfunded liabilities and budget highlights, Luke took Machida to task in a few different areas.
Last month, a working group released a report putting forward a bill for next session that would give the counties a greater share of the hotel tax revenue the state collects.
The proposal called on state lawmakers to lift the $93 million cap and instead give the counties a 45 percent share so their funding can grow as the tourism industry does. Reverting back to this system — the Legislature put the cap in place in 2011 during tough economic times — would mean an estimated $60 million to $70 million hit to the state.
“I’m sorry, I should have paid more attention to that committee.” — Wes Machida, budget director
The 13-member State-County Functions Working Group that unanimously approved the report included representatives from four state agencies, including Budget and Finance, which Machida heads.
As such, Luke said she had assumed that the administration supported the working group’s proposal. But instead, Machida said that’s not the case and ended up apologizing.
“I’m sorry, I should have paid more attention to that committee,” he said.
As of now, the budget does not account for giving the counties more hotel tax money. If that changes, Luke said, she expects at a minimum that the state departments that supported the proposal would revisit their budgets and determine what areas will be cut to account for the loss in state revenue.
Before Ige took office in December 2014, the Legislature had started working with former Gov. Neil Abercrombie’s administration to improve budget transparency by eliminating vacant positions that departments had come to rely on to cover vacation payouts and other expenses. Ige was head of Ways and Means at the time.
“Was the Abercrombie administration not telling the truth?” — Rep. Sylvia Luke
Luke said she recalled then-Budget Director Kalbert Young telling lawmakers that one of the achievements of that administration was eliminating all unbudgeted positions. And yet, Machida said the current administration is still working to do so.
“Was the Abercrombie administration not telling the truth?” Luke said, pressing Machida for an explanation.
Tokuda jumped in too, asking how many unauthorized positions still exist and how the administration has been able to create them without legislative approval.
“We’ll get that information to you,” Machida said.
Luke and Tokuda also asked him why the financial plan doesn’t reflect collective bargaining cost increases and why the budget includes $400,000 in grants-in-aid to the counties, since that money traditionally goes to support nonprofits.
Machida acknowledged that continuing to provide annual raises to union workers as expected in the coming years could mean adding “significant numbers” to the financial plan.
“There’s a lot of X factors in here,” Tokuda said, adding that she hopes the administration focuses more on reining in costs and not just making investments.
Read Machida’s written testimony to the House-Senate panel below.