Gov. David Ige’s new two-year budget proposal would eliminate the jobs of 149 state employees who are scattered in departments across state government, and may also involve some as-yet unspecified tax increases.
But Ige expressed hope Monday that the new pandemic relief bill working its way through the U.S. Congress will provide money to help with the state budget crisis, and may allow for a delay in the state public worker furloughs that are scheduled to take effect Jan. 1.
Ige also told reporters that “we are looking and anticipating that there may be a need for tax increases, and we would be making those proposals when the Legislature opens.” He declined to be more specific.
The proposed budget that the administration released publicly on Monday would eliminate 550 vacant state government positions, and also wipe out the jobs of 149 active employees who could end up being laid off.
The administration is trying to shift as many of those workers as possible to other vacant state jobs “so that the number of people who would actually be involved in a layoff would be minimized,” Ige told reporters.
Ige first raised the possibility of state employee furloughs with the leaders of the public worker unions last April, but has repeatedly pushed back the start date. Earlier this month the governor finally announced furloughs for more than 10,000 state workers beginning on Jan. 1, but now he is apparently reconsidering.
“I’m hopeful that federal aid will allow us to refrain from imposing furloughs until later,” Ige said in a written statement accompanying a summary of his new proposed budget. Ige has said he intends to save $300 million per year by imposing furloughs of two days per month on thousands of state employees.
U.S. Sen. Brian Schatz said that he pushed for federal funding to get rid of Hawaii’s operating deficit completely but that didn’t happen. Still, he said the $200 million in the measure for Hawaii schools can be used to pay for teacher salaries and urged state officials to recalculate their revenue projections.
“There’s no reason for us to proceed off the cliff of furloughs if we don’t even know how the math works out for several weeks,” he said.
Hawaii House Finance Committee Chairwoman Rep. Sylvia Luke told Civil Beat furlough discussions should be suspended, not delayed, and she doesn’t expect to return to them this year given the planned influx of federal funding.
She noted Ige only expected to save about $150 million in the first year of teacher furloughs and the money in the latest COVID-19 relief bill more than makes up for that.
Those furloughs would amount to a pay cut of about 9.2%, but the public worker unions are opposing the plan. The unions say Ige does not have the power to unilaterally impose multi-year furloughs, and the Hawaii State Teachers Association has said it will fight Ige’s furlough plan in court.
Ige unveiled his final two-year budget on Monday, which proposes spending $7.6 billion in general funds in the fiscal year that begins July 1. That would be a reduction of 4.5% or nearly $362 million from this year’s spending.
For the fiscal year that begins July 1, 2022, Ige is proposing to spend $7.7 billion in general funds, which would be a reduction of 3.1% or nearly $250 million from the current budget, according to a fact sheet released by the administration.
State tax collections dropped off sharply as Hawaii’s tourism industry shut down in the pandemic, and Ige said he is coping with a $1.4 billion budget shortfall in each of the next two fiscal years.
State general treasury tax collections dropped from an all-time high of $7.14 billion a year ago to $6.69 billion in the fiscal year that ended June 30. The Ige administration responded by restricting hiring and spending last fiscal year, and spent $648 million from the state’s “rainy day” budget reserve fund.
Tax collections are expected to drop again this year to $5.96 billion, and the administration in October borrowed $750 million to help make up the difference in the current fiscal year that ends June 30.
During the next two years, Ige said he is proposing “a significant reduction” to the budgets of both the state Department of Education and the University of Hawaii. However, Ige said he is hopeful the new federal pandemic relief bill will include federal funding for education to offset much of the cuts in state funding.
Under Ige’s proposed budget the public school system would lose 70 positions and absorb a budget cut of $165.7 million for each of the next two years beginning July 1. For the University of Hawaii, the budget reduces state support for the university by $70 million a year for the next two years, Ige said.
In another move that may draw criticism, Ige said his proposed budget would scale back on the pace of borrowing and spending on new state construction projects.
Ige said he is proposing the state issue $1.19 billion in general obligation bonds during the next two years to borrow money for construction, which is $800 million less than was budgeted in the current two-year budget cycle.
“Certainly that was a conscious decision, because we do want to reduce the long-term debt,” Ige told reporters. “This is certainly a way to ensure that we can prevent further cuts in the future, to maintain our borrowing capacity should there be further actions that we need to take.”
But accelerating construction spending is generally regarded as one of the few things state government can do to quickly create jobs and directly stimulate the economy in a downturn.
Senate Ways and Means Chairman Donovan Dela Cruz said he does not understand why Ige would ease up on the pace of construction now.
“We know that construction will help stabilize parts of the economy, and we know we have lots of big projects that we should be focusing on,” including corrections projects, Aloha Stadium and infrastructure for housing, he said.
Dela Cruz said he also wants the state to focus on projects that will help diversify the economy, such as investment in broadband infrastructure.
Some online commentators have been harshly critical of Ige’s budget-cutting plans, arguing the state can and should take steps such as legalizing and taxing marijuana, legalizing and taxing gambling, or simply raising taxes on Hawaii’s wealthiest residents to balance the budget.
House Speaker Scott Saiki all but ruled out those ideas on Monday, saying that none of them offer a realistic fix for the state’s budget crisis.
“None of those options would bring immediate relief, and none of them would bring complete relief,” he told reporters Monday. “Even if we were to raise taxes, we would not make up for the projected shortfall.
“We would have to increase the general excise tax several percentage points to make up for the shortfall, which is something I’m sure the Legislature would not do.”
As for marijuana, it is unclear when the state might see an increase in tax revenue, he said, because it would take time to set up and regulate the new market. Gambling very likely would involve similar challenges and delays.
“We want to look at long term fixes, and we don’t want to react to this crisis with a general response that we will just tax our way out of it,” Saiki said.
Civil Beat reporter Anita Hofschneider contributed reporting to this story.
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