A panel of local economists, tax professionals and business leaders expects the state to collect about the same amount of tax dollars over the next several years as the group had forecast at its last quarterly meeting in September.
The Hawaii Council on Revenues unanimously voted Monday to slightly increase its projection for this fiscal year, which ends June 30, upping the forecast for general fund growth to 4.5 percent from 4.3 percent.
That gives members of the Legislature, which convenes Jan. 17, an extra $13 million to play with as they work on the state’s roughly $7.2 billion operating budget. That’s not a lot of money to fund the ever-increasing requests to restore, maintain or expand a litany of government services.
The council’s general fund growth forecast for fiscal 2019, which starts July 1, remains unchanged at 4.3 percent. Its forecast for 2020 to 2024 is 4 percent each year.
Council Chair Kurt Kawafuchi said he sees the federal tax cuts that President Trump signed into law last month as a “minor stimulus” for the state economy this year. But it could be 18 months before the law’s full effects are felt.
Council members said consumer spending will likely increase somewhat as a result, which could nudge state tax collections up. But they said there are too many uncertain variables in the rest of the economy, with construction lagging and visitor spending not keeping pace with soaring visitor arrivals, to make a strong case to boost the revenue projections much more.
“I think it’s a risky time,” council member Ed Case said. “There’s a lot we don’t know.”
Case, the former Democratic congressman who served on the U.S. House Budget Committee before leaving politics to work for Outrigger Hotels and Resorts, said it’s a “safe assumption” that the visitor industry will grow the next six months as well as it did the past six months.
But he had concerns about the ability to make accurate projections about the tourism industry with so many visitors now “off the grid,” staying in vacation rentals and spending less.
“Can we really trust the data anymore?” he said.
Other council members were concerned about Hawaii’s population declining and unease over North Korea’s nuclear threats.
Council member Jack Suyderhoud said Hawaii’s economy will continue “trudging along.”
With Hawaii’s record-low unemployment levels, he said he anticipates wages rising followed by some inflation when businesses pass those costs on to consumers. And he said the feds will likely be eying an increase in interest rates as a result.
State economist Eugene Tian and Carl Bonham of the University of Hawaii’s Economic Research Organization, who is a member of the council but was absent Monday, painted a fiscal picture for lawmakers last week at the Capitol.
They cautioned about housing not keeping up with demand, with prices soaring as a result and construction jobs declining. And they underscored the change in visitor spending habits.
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