Over the next 30 years, expect the costs to fix Hawaii’s aging infrastructure, protect its islands against climate change and meet the state’s public employee retirement obligations to exceed $88 billion, a new report out from influential local executives warns.
The magnitude of such a steep price tag, the report’s authors say, could reshape the role of government in Hawaii since statehood. It already presents a tough challenge in a state where public services have gradually grown more expensive. It’ll be even tougher if the local economy continues to lag behind the rest of the nation and leaves fewer tax dollars to work with, the executives add.
Their report, “Troubled Waters: Charting A New Fiscal Course For Hawaii,” was shared earlier this month at the Hawaii Executive Conference, an annual invitation-only forum of local players in business, nonprofits, academia and politics.
“I think that it alarmed a lot of people,” said Colbert Matsumoto, who chairs the HEC committee that drafted the report. “Seeing all of the numbers aggregated in that fashion was somewhat eye-opening. People see it in bits and pieces, but they don’t see it put all together.”
The HEC report lays out most of the infrastructure, pension and healthcare costs involved. It criticizes Hawaii’s elected leaders, saying they’re incapable of planning long-term to address the challenges. It warns that as those costs mount, local government will be hard-pressed to deliver all of the services that local residents rely on.
The report offers no specific solutions, however.
“There are no easy answers and we offer none,” it states.
Instead, it broadly proposes that leaders from various sectors help build consensus on a plan to tackle what Matsumoto sees as a serious budget crisis poised to hit local government in the next five to 10 years.
In a phone interview, Matsumoto said it’s the local private sector — not the public one — that’s more capable of developing such a plan.
“Elected officials are political animals, and they tend to make decisions based on when their next election is coming out,” he said. “They’ve deferred hard decisions.”
“I think the private sector is in a much better position” to address the challenges, he added.
Rep. Sylvia Luke, who chairs the state House Finance Committee, agreed that the state faces daunting challenges and that the government won’t be able to handle them alone.
Still, she called Matsumoto’s comments a “nice soundbite” that fails to provide enough detail.
“They need to be very clear in what they mean as far as the private sector needs to pick up the slack because the private sector is already doing a lot of that work,” Luke said Tuesday, referring to the myriad government contracts that go to private sector firms.
The price tag in “Troubled Waters” includes the cost estimates to build sufficient affordable housing, replace crumbling water mains and faulty sewage lines, invest in badly needed public school facilities, upgrade the state’s harbors and airports — and yes, to finally finish Honolulu’s rail transit line.
It also includes the $15 billion estimate that state Department of Transportation leaders have given to protect the coastal highways vulnerable to sea level rise, and the $345 million U.S. Army Corps of Engineers project to help guard the Ala Wai watershed from severe flooding.
The report notes that climate change will also mean added costs to protect harbors and airports — but the state Department of Transportation hasn’t released any estimates for the impacts on those facilities yet. (A separate 2017 report from the state’s interagency climate commission estimated that climate change could cost Hawaii’s economy $19 billion.)
The state’s existing $300 million for services under the Compact of Free Association will climb in order to aid climate refugees seeking shelter in Hawaii as sea level rise claims their home islands in the other parts of the Pacific, the HEA report projects.
Finally, the report’s total includes nearly $26 billion in public pension and healthcare costs. By 2022, more than half of the state’s general fund dollars will go toward retiree pensions and healthcare, debt service and Medicaid, the report states.
This will leave fewer dollars available for schools, public safety, environmental protection and other social services, it states.
“This is sadly not a new statistic that we’re looking at,” said former state Sen. Jill Tokuda, who led the Senate Ways and Means Committee.
During her time there, the spending on schools and other critical social services steadily outpaced the money available.
“It’s scary. If this is your house, your bills are higher than the income you’re bringing in,” she said.
As the problem worsens, the role that government has played in Hawaii over the past 50 years will need to be reconsidered, Matsumoto said.
“Going forward we need to have leaders in our community come together — how do we address these kind of fiscal challenges? It may mean that we re-examine what government does and whether government should continue to do those things.”
Luke warned of putting too much faith in the private sector to solve what remain public problems. She pointed to last year’s proposed constitutional amendment that would’ve given the Legislature power to impose property taxes to support public schools.
The measure was staunchly opposed by a consortium of county governments and business leaders, including Matsumoto. The Supreme Court invalidated the ballot measure before it could come to a vote.
Following its defeat, Luke said, there were pledges from its private sector opponents to help support public education and find better ways to fund it.
“The unfortunate reality is, after the defeat, we haven’t really seen any active dialogue along those lines,” she said Tuesday.
Read the HEC report here:
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