The House Finance Committee unveiled its first draft of an ambitious new budget on Wednesday, but the chairman warned that a decline in tax collections may force changes.

The House Finance Committee unveiled a proposed two-year, $36.7 billion state budget Wednesday that earmarks $1.3 billion to cope with deferred maintenance in government facilities and natural resource protection across the state over the next few years.

The House financial plan also assumes lawmakers will approve bills that provide tax relief for lower-income families, including changes in income tax brackets, a more generous state earned income tax credit, and an increase in the food excise tax credit, said House Finance Committee Chairman Kyle Yamashita.

The state is expected to have a sizable budget surplus of more than $2 billion at the end of this fiscal year, but the state Council on Revenues on Tuesday reduced its projections for state tax collections in the years ahead.

That slowing of tax collections already has state lawmakers on the alert, with Yamashita announcing the lower tax collection estimates will mean lawmakers have $1.2 billion less to work with over the next two fiscal years than they had expected.

Lawmakers will have $1.2 billion less to work with over the next two years now that the state Council on Revenues has reduced its estimates of state tax collections in the years ahead. (Anthony Quintano/Civil Beat/2018)

State Budget Director Luis Salaveria told the committee the new and reduced tax collection estimates will reduce the projected state general fund cash surplus at the end of this fiscal year on June 30 from $2.4 billion down to $2.1 billion.

The new estimates also drop the projected year-end cash balance for the fiscal year that ends June 30, 2024 from $1.7 billion to $1.3 billion. And the projected year-end cash balance for the fiscal year that ends June 30, 2025 then drops from $2.1 billion to $1.7 billion because of the reduced tax collection projections, he said.

Those are still healthy year-end surpluses by Hawaii standards, but the numbers are trending in the wrong direction. It also means the state has less cash available than the Green administration expected when it submitted a bundle of proposed budget amendments last month.

Yamashita said the governor’s packet of budget amendments only reached the Finance Committee in mid-February, which didn’t give lawmakers and staff enough time to properly analyze them. Those proposals were therefore not included in the House draft the committee presented Wednesday, he said.

He said a major theme in the proposed new House budget is to embrace one-time spending initiatives that will not increase costs to the state in future years. One example is the spending on deferred maintenance.

The proposed administration budget submitted to lawmakers in December listed more than $1.28 billion worth of deferred maintenance of state facilities, and Yamashita said the House budget would whittle that down.

“We have neglected a lot of our own buildings throughout the years, and we feel that this is a high priority,” he told the members of the Finance Committee.

In addition to the $1 billion that would be spent on deferred maintenance at state facilities, Yamashita said another $376 million in funding will be directed to the state Department of Land and Natural Resources for boating infrastructure, forestry and wildlife protection.

The budget draft also earmarks $500 million to be banked in the emergency budget reserve fund — also known as the “rainy day” fund — and more than $70 million over two years for “boating and ocean resources,” according to a statement from the House majority staff.

Another $118 million would be routed to DLNR over two years for forestry and wildlife programs, and $170 million would be committed to improvements in state parks.

Another $150 million would be earmarked for affordable housing, $96 million to pay for deferred maintenance in public schools, $32 million in improvements to the public library system and $132 million for wastewater and drinking water projects.

Hawaii Tourism Authority CEO John De Fries speaks during the arrival of ANA's A380 aircraft at Daniel K. Inouye International Airport.
Hawaii Tourism Authority CEO John De Fries said the House draft of the budget was $40 million less than the HTA requested.

The proposed House budget would also commit $35 million to the Hawaii Tourism Authority, which is less than half of what HTA requested to fund its tourism promotion activities.

HTA President and CEO John De Fries said in a written statement that is “an appropriation for which we are grateful, but $40 million less than our budget request, which causes me extreme concern.”

“This will cause significant across-the-board funding cuts that impact HTA’s operations, destination management and visitor education programs we fund in our communities and in markets around the world, and the cultural events, festivals, and sporting events we support,” De Fries said in his statement.

“This is not a prudent approach especially given the anticipated softening of the global economy and its potential impact on Hawaii,” he said. “We will continue to work with our legislators to demonstrate the importance of having a well-funded, comprehensive program for destination management and visitor education to serve the people of Hawaii.”

The budget also earmarks more than $43 million over two years to cover increases in the cost of management and operation of the tram and shuttle service at the Honolulu Airport.

It also includes $22.7 million to expand the Hawaii Promise Program that provides free tuition to in-state students. The plan is to expand the program from the community colleges to the four-year campuses.

The House budget draft now goes to the House floor for a preliminary vote, and will then undergo revisions in the state Senate as well as more changes in conference committee in April.

“We have much more to do in analyzing budget proposals until we get to the final version in May,” Yamashita said.

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