Over the objections of tourism industry groups in some cases, the Hawaii Senate pushed through several bills last week to boost state revenues by as much as $137 million per year, according to estimates by the Department of Taxation.
“The state needs to practice more fiscal restraint, pursue public private partnerships and identify more efficiencies so it can live within its means,” Senate Ways and Means Committee Chair Donovan Dela Cruz said in a statement Friday.
The biggest potential revenue-generating measures are Senate Bill 2489 to increase the taxes paid by timeshare owners and Senate Bill 2699 to capture tax revenue from resort fees and online platforms such as Expedia that book rentals through their websites.
The tax department expects $19.4 million from SB 2699 and $20.2 million from SB 2489 for fiscal year 2019, which starts July 1.
Blake Oshiro, executive director of the American Resort Development Association, said in his testimony on SB 2489 that increases to the tax rate will “send a potentially negative message to visitors, and especially timeshare owners, that they are being targeted to bear the burden of the increases.”
Hawaii Tourism Authority CEO George Szigeti said he opposed SB 2699 because it would increase the cost for residents and visitors to vacation in the Hawaiian Islands.
Last year, he said, Hawaii’s visitor industry supported 204,000 jobs and brought $1.96 billion in tax revenue.
Both measures passed unanimously last week.
The additional revenue could help offset $33 million that won’t be coming in from Senate Bill 2963, the so-called Airbnb bill that the Senate unanimously passed. That’s because the online rental company says it won’t help the state collect the taxes under the current language in the bill. It was expected to raise $67 million a year going forward.
Ige and state lawmakers had to adjust their financial plans accordingly as a result.
Dela Cruz said the goal of all the revenue-increasing measures is to create a long-term financial plan for the state that is sustainable.
Under the current six-year plan, the state will be spending more than it brings in by $208 million in fiscal year 2019, $263.2 million in 2020, $209.7 million in 2021 and $105.4 million in 2022. In fiscal 2023, the plan shows $43.3 million in surplus.
The state plan balances the budget by relying on a $1 billion carryover balance from fiscal 2017, which would dwindle down to $169.8 million by 2023. With the Senate’s tax increases and other revenue generators, there would be $301.4 million in 2023.
Dela Cruz said the extra revenues will help offset the expenses of a growing aging population.
“We can’t just keep kicking the can down the road,” he said.
The state Council on Revenues, which forecasts how much tax revenue the state will collect over the next six years, has its next quarterly meeting Tuesday. At its last meeting in January, the council slightly increased its revenue projections, to 4.5 percent from 4.3 percent for the current fiscal year, which gave lawmakers an extra $12 million to work with in the budget.
The House Finance Committee, chaired by Rep. Sylvia Luke, passed its version of Gov. David Ige’s proposed budget on Wednesday. The committee trimmed $35 million from the governor’s $7.4 billion proposal for fiscal 2019.
After the budget bill passes the full House, which is expected this week, it goes to the Senate for its consideration. The Ways and Means Committee has the lead on it.
Here’s a look at the measures the Senate passed that are expected to generate revenue if they go on to become law, as compiled by the Ways and Means Committee.
All the Senate bills that were passed last week cross over to the House for its consideration.
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