Halfway through the legislative session, it appears coronavirus will hang over lawmakers’ decisions for the remainder of the year.

It’s still unclear to what extent COVID-19 will impact Hawaii’s economy and government operations. Still, the Legislature, state economists and Gov. David Ige’s administration are digging in for what could be a lengthy ordeal with a disease scientists are still trying to learn more about.

“We want to be prepared,” House Speaker Scott Saiki said Wednesday during a Civil Beat panel discussion. “We don’t want to see the state have to take drastic measures.”

House Speaker Scott Saiki wants the state to be prepared for economic effects from coronavirus. Ku’u Kauanoe/Civil Beat/2020

There are no confirmed cases here in Hawaii. But countries with residents who travel to Hawaii like Japan, China and now the U.S. all have people who have tested positive for COVID-19.

In 80% of cases, patients experienced only mild symptoms and made total recoveries. Only 2% of people who contract the disease die, and they are mostly elderly. But even if the virus may not be deadly, fear of being quarantined, or traveling or catching the disease may impact air travel to Hawaii.

The first indication of direct impact on the state will likely come Wednesday, March 11 when the Council on Revenues meets to set projections of tax revenues for the next six fiscal years.

Lawmakers use the council’s projections to build the state’s budget, and with economic uncertainties stemming from a possible downturn in flights to Hawaii, it’s not yet clear how much money the Legislature actually has to spend.

“I assume it will go down,” Saiki said. “We will have to make our decision based on those numbers.”

Saiki wants to avoid having to make drastic cuts to the budget like what happened during the economic downturn in 2008 and 2009.

“We still feel the effects of those cuts,” Saiki said, adding that they impacted mental health services and funding for housing and homeless programs.

The budget bill cleared the House and is now in the Senate, which will play a large part in deciding what state programs can be funded with the projections from the council.

Senate Majority Leader J. Kalani English said his chamber plans to work with the state to ensure it can sustain its operations and services if Hawaii were to experience an outbreak.

He noted that there are several new programs lawmakers want to start. Some of them are a part of the joint legislative package the House and Senate passed Tuesday.

Programs to use $200 million to develop affordable housing, set up a school facilities agency and expand access to pre-K education for 3- and 4-year-olds are among the dozens of proposals that could be impacted if the council lowers state tax projections.

Civil Cafe Leg Update 2020 J. Kalani English
Senate Majority Leader J. Kalani English said the Senate is looking at how the state can continue operations if an outbreak were to happen. Kuʻu Kauanoe/Civil Beat/2020

Saiki and English said they are both still committed to seeing the joint package pass.

English has already asked the state to stockpile supplies on neighbor islands, including medical supplies, in case the shipping industry and supply lines are affected.

English said the Senate is also closely watching flights from the U.S. mainland for indication of a drop in visitor arrivals.

Air travel from the U.S. West Coast, which makes up 44% of visitor arrivals each year, has not yet seen any changes since the COVID-19 outbreak began. Visitors from Japan, the third largest market that flies to Hawaii, have dropped about 23%.

Carl Bonham, executive director of the University of Hawaii Economic Research Organization, has also been watching those developments closely and plans to have new projections on COVID-19’s impact on the state in the coming weeks. 

UHERO’s first forecast in February reported that Hawaii could see a 2% drop in visitors in the first half of the year with travel recovering by the third quarter of this year.

Those were based on assumptions that COVID-19 would go the way of the SARS virus and die out soon. But with the virus spreading from China, then to Japan and other countries, that may not be likely.

“The thing we need to know the most is where the virus is going and how long it will last and no one knows either of those things,” Bonham said. “No one knows either of those things.”

Developing forecasts for how the virus will impact the economy has been difficult, Bonham said, given how rapidly the situation is developing in Hawaii and around the globe.

Ige issued an emergency proclamation on Wednesday to expedite state spending relating to the virus. The proclamation can speed up purchase of supplies and equipment to deal with the virus if it spreads.

“Our number one priority is the health and safety of our communities across the state,” Ige said in a press release.

Bonham, who is a member of the Council on Revenues, doesn’t think state tax revenues will be hit hard this year. He noted that economic impacts typically come with some lag time.

“I think the state has time to get their planning down and prepare,” Bonham said.

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