The Legislature is preparing to send a streamlined, two-year $16 billion general budget plan to Gov. David Ige within the next few days.

House Bill 2 was “decked” on Monday, which means the biennial budget proposal has been provided to lawmakers for a 48-hour review before being voted on by the full House and Senate.

But many of the biggest spending questions remain unresolved, guaranteeing a great deal more political wrangling over the budget before the session is scheduled to end May 2.

The budget, negotiated by House Finance Chairwoman Sylvia Luke and Senate Ways and Means Chairman Donavon Dela Cruz, doesn’t yet include any money for such high-profile items as disaster aid for the Big Island, the expansion of pre-K education and more tuition support for college students.

Joint Finance WAM budget meeting Chair Rep Sylvia Luke WAM Chair Sen Donovan Delacruz.
House Budget Committee chair Sylvia Luke and Senate Ways and Means chair Donovan Dela Cruz have upended the normal budget process this session. Cory Lum/Civil Beat

That funding still needs to be negotiated.

Some existing economic development initiatives and programs that serve the elderly and the homeless are also in limbo as a result of a new budgeting procedure in the Legislature that allows for extra scrutiny of targeted departments and agencies. HB 2 also includes no grants to nonprofit agencies, which typically cost around $30 million a year.

Dela Cruz expects the budget bill to be on the governor’s desk by the end of March.

The state is finding itself tighter on money than expected at this point because the Council on Revenues has predicted slower economic growth and less revenue coming in to the state coffers than previously forecast. So Dela Cruz thinks tax hikes, including some that target the affluent, will be needed to balance the budget.

Governor David Ige press conference post State of State address.
The top Senate budget writer says Gov. David Ige needs to make tough decisions about how to pay for the programs he wants. Cory Lum/Civil Beat

Ige will now need to make some decisions that the governor has so far avoided, including finding more money to pay for initiatives he has championed, Dela Cruz said.

“We would have hoped (the governor and his staff) would have some revenue-generating bills, but they don’t,” he said. “You’ve got to anticipate, especially in this time, you need to put some hard thought into what kinds of taxes you can raise without impacting the middle and lower class.”

The governor’s office, meanwhile, has begun its review of HB 2, looking for places where it differs from Ige’s proposal in December.

In addition to not including more money for additional pre-K classrooms, Ige’s UH Hawaii Promise scholarship program and some ambitious housing proposals aren’t yet funded.

A Swift Timeline

This year, the budget process has been speeded up by Dela Cruz and Luke.

They said it was done purposely to leave more time for debate later in the session and to find money for initiatives sought by lawmakers or the governor. An early schedule for the budget debate also leaves the Legislature more time to override any vetoes that may come from Ige’s office.

Time is always tight for the Legislature. Like many states, Hawaii has a part-time Legislature, with sessions typically running from around mid-January to early May.

The legislative session opened Jan. 16. HB 2, the primary budget-funding bill, was approved by the House unanimously two weeks later and moved to the Senate on Feb. 1. The normal deadline is in early March. The Senate drafted its own version and unanimously passed it March 15, more than a month earlier than normal. Conferees spent only about a week consolidating the two versions.

Luke told KITV that she believed this was the fastest budget bill ever passed in Hawaii.

The new budget plan calls for $4 million for security enhancements to the State Capitol; $276,500 to digitize archival records; about $9.5 million to add 139 new positions at the new Hawaii State Hospital building during the next two years; $3 million to hire 53 workers at the new mauka concourse of Daniel K. Inouye International Airport; and $1 million to address invasive species in the state’s biosecurity plan.

But there is no specific funding yet for the costs of collective bargaining of raises for unionized teacher and state workers, estimated at $40 million per year for wages and another $40 million for fringe benefits for each 1 percent pay hike. Many are predicting a 3 percent increase.

In a press briefing Friday, Luke said that lawmakers have made a deliberate decision not to place a dollar amount on how much the state might need to pony up as a result of upcoming contract talks.

“We never want to put aside a large amount for collective bargaining” because it undermines the effectiveness of the arbitration procedure, she said.

Another big ticket item that remains unfunded is disaster relief for the Big Island. Lawmakers have estimated about $60 million is needed.

There are other issues looming in the capital budget, as well, such as a proposed new $350 million facility to replace crumbling Aloha Stadium.

‘They Are Panicking’

The new budgeting procedure calls for review of department budgets by the committee chairs who oversee those departments.

That’s resulted in some specific programs, including the Agribusiness Development Corp., agencies within the Commerce and Consumer Affairs Department, the Department of Transportation’s commercial harbors and the Hawaii Energy Office, being set aside from the current budget for further review.

Legislators are expected to approve and send a budget to the governor’s office by the end of March, about a month earlier than normal. Anthony Quintano/Civil Beat/2018

Funding for additions to programs for housing, the homeless and the elderly are also undecided, leaving many advocates in the dark.

Dela Cruz said existing programs for the elderly and the homeless were not included in the current budget because they require extra consideration, particularly in light of efforts to increase funding. He said it is important to look at programs not just individually but how they operate together.

The new budget scrutiny, which requires agency heads to provide more detailed financial information to the Legislature than they had been asked for in the past and in a tight time window, has caused great concern among social service agencies, said Jim Shon, head of the nonprofit Kokua Council, which advocates for the elderly.

“They are panicking,” said Shon, a former legislator and now director of the Hawaii Educational Policy Center at the University of Hawaii.

Advocates of the change in budget procedure, which is known as “zero-based budgeting,” say it has boosted accountability by requiring state department heads and agencies to explain and justify their budgets to committee chairs.

But critics say the procedure was rolled out precipitously and chaotically, and that the process has been more time-consuming for agencies than in previous years.

Many social service agencies have found the changes “very unsettling,” said Lisa Maruyama, president and chief executive officer of the Hawaii Alliance of Nonprofit Organizations.

“The process at the Legislature is very different. Budget decisions have been given to committees,” she said in a recent interview. “It’s less clear to understand who the decision-makers are at any point in the process … We’re getting a lot of, ‘I don’t know what’s going on.’”

Dela Cruz acknowledged that some officials did not quickly recognize the magnitude of the change.

“It’s new for them,” he said. “Some agencies are politically astute, some are politically savvy, and some are just absent. If you are absent you are probably going to have a hard reaction. Must be present to win. You have to be involved.”

He said some state department heads had gotten too comfortable in the old system.

“Departments are used to it being delayed, they think they have a lot of time,” he said. “They like the delay because they can try to get stuff in.”

There have been some slip-ups.

Sen. Donna Mercado Kim, the chairwoman of the Senate Higher Education Committee, long known for her testy relations with the University of Hawaii, created a backlash by her proposal to cut $30 million over two years and eliminate 220 faculty and staff positions. Kim told the Star-Advertiser that she was trying to improve accountability at the university.

Within three days, on March 22, Kim had backtracked. In a press release, Kim said she had completed her review and found that widespread cuts would not be necessary.

Shon, of the Kokua Council, said the new budget initiative has had an “admirable goal — let’s democratize the budget.”

But he said that some committee chairs used the mandate to shake things up more aggressively. “It appears a lot of committees went beyond ‘let’s cut a little here,’ into eliminating positions. You could see that in spectacular fashion with Sen. Kim,” he said.

When they realized the changes were getting out of control, Luke and Donovan asserted control, he said, shutting down the discussion and finalizing the budget plan March 22.

“They basically said, ‘Thank you for sharing,’” Shon said.

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