Gov. Josh Green is taking over state government when funds are plentiful even as federal relief money that flowed to Hawaii during the pandemic is expected to ebb.

State spending in Green’s first year is expected to increase about $666 million over the current fiscal year, which ends in June. General fund expenditures of $9.1 billion this fiscal year are estimated to rise to more than $9.8 billion in the 2024 fiscal year, which begins July 1.

Even with the spending increase, the state is still expected to end the next fiscal year with more than $2.3 billion in surplus funds, according to state budget director Luis Salaveria.

Green is taking advantage of that surplus by planning to increase the rainy day fund by $500 million and upping payments on government debt and retiree benefits by hundreds of millions of dollars in the next two fiscal years as part of his budget proposal to the Legislature.

“We’ve historically done very well, as far as our investments go. We’re good at that, but that can’t last forever,” Green said of the need to shore up the state’s finances at a press briefing on his budget.

Gov. Josh Green unveiled his administration’s $9.8 billion spending plan Monday. David Croxford/Civil Beat/2022

Salaveria and Green were confident that the projected budget surplus would be enough to cover most of the initiatives the administration and lawmakers propose in the months ahead. Many of those details were still being worked out, Green said.

The governor also announced that the state Attorney General’s Office was able to work through a log jam that earlier this year stalled the release of $50 million worth of state grants to local nonprofits.

At issue was a disagreement between the previous AG’s office and lawmakers over how a bill appropriating those grants was written.

Attorney General Anne Lopez said that the last administration “took a very conservative, narrow interpretation” of state law governing the release of grant funds. Lopez said she had a broader interpretation, allowing the funds to go out to more than 100 nonprofits that provide services for homeless individuals, sex trafficking survivors and other community service programs.

Green highlighted health care initiatives in his first budget presentation since becoming governor.

He said his administration plans to eventually cover 100% of payments to Medicaid providers and over the next two years will increase state payments on Medicaid coverage by about $30 million. The state currently spends more than $1.1 billion on Medicaid and other health entitlements.

The governor is also asking lawmakers to set aside $50 million in bond funds in 2024 to expand the intensive care and medical surgical units at the Hilo Medical Center. Doing so could reduce the dependence on other area hospitals and possibly reduce the number of emergency flights to Oahu for patients who can’t get treatment on other islands.

The Covid-19 pandemic laid bare Hawaii’s chronic doctor shortage. Green estimates that the state was short 600 doctors and 700 nurses during the pandemic. His budget proposal includes some ideas to address those shortages.

Green wants to put $10 million in 2024 and $20 million in 2025 towards loan repayment programs that could provide assistance to those studying to become doctors, nurses, social workers and psychologists.

He’s proposing an additional $4.4 million a year to fund 60 positions at the University of Hawaii aimed at teaching students in those professions.

He wants to add $15 million in both of the next two fiscal years for the state’s Ohana Zones program, which dedicates state funds to homeless service providers.

The governor said the administration plans to introduce a bill that would eliminate the general excise tax on food and medicine. He said he also was considering tax credits targeted at low-income households. The cost to the state from ending that portion of the GET and extending additional tax credits is unknown. Previous estimates have put the cost of the GET provision at $150 million a year.

Green also plans to introduce a bill charging a climate impact fee on all tourists. How that is levied – whether on travelers as they arrive or through hotel fees – has not yet been decided, Green said.

The majority of the state’s funds go to paying Medicaid obligations and retirement benefits for government workers. Both those payments would increase under Green’s plans. David Croxford/Civil Beat/2022

Most budget details were still being hashed out by state departments. The governor said he plans to introduce amendments to his budget proposal in February while lawmakers are considering the spending plan.

One notable absence was funding for housing initiatives. Green said he plans to announce a housing package during his first State of the State speech slated for the end of January.

Green said that the housing initiatives his administration does put forward could take up “a significant portion of the rest of the budget.”

Lawmakers will be awaiting those details to see how it meshes with their priorities. One of them is Senate Ways and Means Chairman Donovan Dela Cruz, who along with his counterpart, new House Finance Chairman Kyle Yamashita, have significant discretionary power over how state funds are spent.

“There are things he talked about that I think certainly some of us can get behind,” Dela Cruz said. “It’s just a matter of how is the language going to be drafted. Or how they are planning to send the information down to us.”

Housing will certainly be one component lawmakers and the governor focus on, Dela Cruz said. But they are still awaiting details on what projects need funding and the cost.

The Senate will also be considering those measures, along with others focusing on agriculture, education and the economy.

Although the state is projecting a budget surplus at the end of the next two fiscal years, that picture could change depending on forecasts set by the Council on Revenues, a board of tax experts and economists who predict the rate of growth in state tax collections.

The council typically meets in January and March, ahead of budget deadlines for the House and Senate to amend their plans accordingly.

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