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Whoever is elected as Hawaii’s next governor will inherit an economy that, on the surface, is about as good as it gets.
A 2 percent unemployment rate means just about everybody who wants a job has one. Tourism is booming; hotel occupancies were 80 percent in May, the Hawaii Tourism Authority said.
Economists foresee enough construction work in the pipeline to sustain some 36,000 jobs through the end of the decade. Military spending also is expected to remain strong, economists predict, boosted in part by $90 million in funding for the Army’s command center at Fort Shafter.
Still, Hawaii’s next chief executive faces an overarching challenge: a cost of living so high that residents are fleeing Hawaii despite the booming economy. Hawaii was one of only a handful of states to lose population in 2017, according to the U.S. Census Bureau.
Honolulu is so expensive that federal housing guidelines define a $65,350 salary for a single person as low income.
So along with the frequent questions about lowering the cost of living and ensuring there are enough affordable residences to house the workforce, one question facing the next governor is not simply how to create jobs, but how to create higher paying ones.
It’s a tough task given some of Hawaii’s unique attributes. It’s one of the world’s most remote island chains, which presents logistical challenges for manufacturers. And the Hawaii Constitution strongly protects the environment and Native Hawaiian cultural resources, which often poses challenges for developers.
For example, one of the most expensive private construction projects in recent memory, the Thirty Meter Telescope proposed for the summit of Mauna Kea, now estimated to cost $2 billion, has been hamstrung for years by lawsuits brought by Native Hawaiian and environmental activists concerned about the state government’s management of the mountaintop. It’s just the latest of several high-profile projects to stall after Hawaii courts found developers or the government didn’t follow the law.
Clarification: An earlier version of this story implied TMT developers were accused of not following the law. In fact, the lawsuit was filed against the state not the telescope developer.
Meanwhile, the state has spent hundreds of millions of dollars in tax credits to promote certain industries, like the technology, renewable energy and motion picture businesses, but it’s far from clear that the investments have created self-sustaining industries that can continue to grow without ongoing taxpayer support.
Join the conversation in-person at Civil Beat’s upcoming event series on the gubernatorial race — “Know Your Candidates” — at Hawaii Pacific University’s Aloha Tower Marketplace.
(U.S. Rep. Colleen Hanabusa declined multiple invitations to participate in this series.)
For more information, please visit our event page.
Part of the problem with tax credits is “they haven’t been falling on fertile ground,” said Paul Brewbaker, principle of Tropic Zone Economics. A former chief economist for Bank of Hawaii, Brewbaker said the best thing policymakers can do is promote the development of housing and infrastructure and ease regulations that inhibit growth.
Tourism is low-hanging fruit that shouldn’t be overlooked for the sake of trying to catch the next big high-growth industry, Brewbaker said.
“I’m not omniscient enough to know what the next big thing is,” Brewbaker said.
The gubernatorial candidates have a variety of strategies.
The incumbent Democrat’s vision for economic development not surprisingly focuses on much of what the administration has been doing.
Housing is definitely an issue, Ige said, and has cited the creation of 5,300 new homes during his term, including 2,000 affordable units. The goal is to construct 10,000 more units.
Much of Ige’s vision for diversifying the economy involves developing technology coming out of Hawaii’s universities and the energy sector.
“I still think when you look at all of the case studies about economic diversification you know it starts with a strong world class university,” Ige said. “So we’ve been supporting the university’s efforts to increase research and development funds.”
Ige cites his support of the University of Hawaii’s Cancer Center. And the governor had a clear hand in supporting the state’s current energy policy. While his predecessor, Neil Abercrombie, wanted to use liquefied natural gas as a bridge to renewables, Ige eschewed LNG and supported legislation calling for 100 percent of the state’s electricity to be produced by renewable resources by 2045.
That move has forced the Hawaiian Electric companies to radically modify their electric grids while opening up opportunities for private investors.
“What we’re doing in our grid here is definitely light years ahead of any other utility grid in the country,” he said.
Ige said the state should continue to support agriculture, and he pointed to the state’s farm to school program as an initiative implemented under his watch to support local growers by buying their produce to serve in public schools.
Concerning the tension between development and the environment, Ige said, “I really think it’s about balance.”
As an example, Ige points to a mediated settlement approved by the Hawaii Water Commission, which restores water rights to Hawaiian homestead lands on Kauai. The 2017 Waimea Watershed Agreement was praised not only for providing water for farming on Department of Hawaiian Home Lands properties, but also for paving the way for a renewable energy venture involving DHHL and the Kauai Island Utility Cooperative, which supplies electricity to the island.
Ige has been criticized for not taking a more active role in resolving the ongoing Mauna Kea disputes, but he said it was important that all of the parties had a chance to be heard. He said he was pleased the matter has made it through the contested case process and is now awaiting a decision by the Hawaii Supreme Court, which is likely to determine the project’s future.
“You know we are committed to ensuring that the process was appropriate and fair to all parties,” he said.
Hanabusa, a Democrat, declined to share her vision on economic development. After repeated requests for comment, Hanabusa’s campaign initially asked for more time to weigh in, then declined to comment.
The perennial Republican candidate’s plan — much of his campaign, in fact — focuses on overturning the federal Jones Act. Also known as the Merchant Marine Act of 1920, the measure requires goods transported between U.S. ports to be carried by ships built in the U.S. and staffed by U.S. crews. The Jones Act is widely thought to drive up the price of goods carried to and from Hawaii.
Carroll says that overturning the act would bolster Hawaii exports by reducing shipping costs to the continental U.S. Hawaii agriculture products should be a major export, Carroll said, but are hurt because of shipping costs “20 to 40 percent higher” than goods shipped from foreign locales.
Carroll said manufacturing could also benefit from overturning the Jones Act.
However, he said he would support only clean manufacturing industries. “Protecting the environment is the No. 1 issue,” he said. “I do not want any businesses here that will be polluting. Period.”
A former Hawaii schools assistant superintendent, L’Heureux is a relative latecomer to the Republican primary race.
A retired Marine colonel previously in charge of the Marine One helicopter program, L’Heureux said Hawaii should try to develop industries around emerging technologies.
“Biotechnology and nanotechnology are going to explode,” he said. “It’s just going to touch every aspect of life.”
He said the state should create an economic council to recruit new industries and communicate the vision inside and outside of the state.
“How do you message this so that everybody understands what we’re doing?” he said.
Like Ige, L’Heureux said Hawaii’s environmental values aren’t necessarily antithetical to economic development. The renewable energy sector particularly offers opportunities, L’Heureux said.
Concerning the Thirty Mater Telescope, he said it is important to understand cultural sensitivities, but he added, “You can’t automatically buy into the idea that it’s an insult to the aina.”
The GOP representative from West Oahu has a clear vision about Hawaii’s economy.
“What we should do is invest in agriculture,” she says. “It’s a no-brainer.“
Tupola acknowledges that building Hawaii’s agriculture industry “won’t happen overnight.”
The state has to invest money for infrastructure, like irrigation, and identify crops that can be lucrative enough to support an industry over the long term. Tupola has pointed to the need for business accelerators like Mana Up, which provides advice to companies creating value-added food products, like chocolate, rum and tea.
The 37-year-old former music teacher has no illusions about building a technology industry in Hawaii. It’s simply unrealistic to think Hawaii can be “the Silicon Valley of the Pacific,” she says.
A graduate of Brigham Young University’s flagship campus in Provo, Utah, Tupola witnessed the growth of what’s now known as Utah’s Silicon Slopes stretching from Salt Lake City to Provo and Park City. Unlike Hawaii, Utah has plentiful land for tech company campuses and a flow of information technology majors from large universities like BYU, the University of Utah and Utah State University.
“If you don’t have a pipeline of people studying that, you can’t thrive,” she said.
When it comes to environmental issues, Tupola said that too often people simply want to use resources without giving back. At the same time, she said, often people using natural resources, like fisherman and farmers, are given too little voice in policy decisions, even though they have first-hand understanding of the land, mountains and ocean — plus a deep interest in responsibly managing the resources.
A Kamehameha Schools graduate, Tupola pointed to traditional Hawaiian principles of taking care of the aina and not just taking from it.
“If you don’t go and take care of the commons, then you don’t get to hunt, you don’t get to fish,” she said, describing the traditions. “But that practice has been lost. Now people take, take, take, take, and use, use, use, use, but they don’t give back.”
As for TMT and Mauna Kea, Tupola said she fervently disagrees with the state’s management of the mountaintop, which has been managed by the Department of Land and Natural Resources and the University of Hawaii. Tupola pointed to a series of state audit reports – in 1998, 2005, 2014 and 2017 — which, she said, “All point to the same thing: UH has been negligent in stewardship of the mountain.”
“The mismanagement of the mountain has to be addressed,” before she’ll support the project, she said. “And we have to decide what we want for the mountain.”
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