But the “green fee” to slap extra charges on tourists failed, and bills to change the state tax code turned out to be more modest than the governor proposed in January.

Gov. Josh Green unveiled an ambitious and specific policy agenda in his first State of the State address in January to confront some of Hawaii’s glaring problems, but he needed lawmakers to cooperate to make it happen.

In large part, they did.

After a confusing flurry of House and Senate conference committee meetings last week that peaked on Friday evening, it became clear lawmakers gave Green authorization to move forward on a number of his initiatives.

Green expressed much satisfaction with the session and his administration to date in a written statement Saturday, pronouncing that “In just under five months we are already initiating major directional changes for Hawaii.”

Gov. Josh Green outlined his priorities for housing, tax relief and other issues in his first State of the State speech in January. Lawmakers embraced some of his ideas, and provided partial funding for others. (David Croxford/CivilBeat/2023)

In particular, Green praised what he called the start of “generational tax reform” to assist lower income families to cope with the cost of living, but he acknowledged lawmakers approved only about half of his ideas this session for a tax overhaul.

The governor had proposed a complex package of changes to state income tax brackets, deductions and exemptions, but that idea was rejected by House Speaker Scott Saiki early on.

Saiki said he was concerned that the 30 pages of tax changes offered by the Green administration were too complicated, and he wanted a simpler fix.

Another factor that likely played into the death of income tax reform this year was the risk of a recession. The income tax is the state’s second-largest source of tax revenue, and lawmakers learned at mid-session that state tax collections have been growing more slowly than expected in recent months.

The state has been projecting a budget surplus of about $2 billion at the end of this fiscal year — which is quite large by Hawaii standards — but lawmakers were apparently made cautious by the crisis of the pandemic.

Instead of rushing to spend all of the surplus, the House and Senate agreed this year to bank $1 billion in the emergency budget reserve fund, better known as the “Rainy Day fund.” And a new contract with Hawaii’s unionized public school teachers absorbed another $187 million over the next two years.

Green had better luck with his proposals to enhance tax credits that the state already offers to working families, making them more generous for lower-income taxpayers.

Those include the earned income tax credit for lower-income working families, and the food tax credit that is designed to offset the impact of the state’s excise tax on food. Lawmakers also agreed to improvements in the existing child and dependent care tax credit.

House Bill 954 would double the value of the earned income tax credit for the taxpayers who qualify for it, an adjustment that is expected to cost the state about $42 million a year.

The food tax credit would also be doubled at a cost of $36 million, while the child and dependent care credit would be sweetened by about $47 million per year, according to House Economic Development Committee Chairman Daniel Holt.

The total package of tax credits would cost the state about $125 million per year, and is almost certain to win final approval next week in floor voting in the House and Senate. The original package of tax relief proposed by Green in his January speech would have cost more than $300 million a year.

Another Green proposal that didn’t make the cut at the State Capitol was his proposal to eliminate the excise tax on food and medicine. The administration introduced bills to exempt those items from the tax, but those measures stalled in both the House and Senate in February.

During last year’s campaign the governor also proposed a climate impact fee or “green fee” to be imposed on arriving tourists to help pay for initiatives to protect Hawaii’s fragile environmental resources, but that also fell by the wayside.

Green said that fee could raise on the order of $500 million per year, and lawmakers advanced a variation of that idea that involved charging tourists $50 for a permit to use state parks, beaches and other attractions. But that proposal also failed during the last minute flurry of activity on Friday.

Coping with homelessness was also a priority for Green headed into the session, and the Legislature appears to have supported his key proposals on that topic.

A camp site yards from Iolani Palace and the State Capitol. Lawmakers were generally supportive of Green’s homeless requests, but provided less than he asked for in state subsidies to develop affordable housing for low-income residents. (David Croxford/Civil Beat/2023)

Budget Still Not Public

As of Saturday afternoon lawmakers still had not made the proposed budget for the next two years public, but they released a detailed statement last week announcing what they agreed to in private meetings, and several items related to homelessness made that list.

For example, according to the lawmakers’ statement the new state budget includes $48 million over the next two years to develop kauhale village projects, clusters of tiny homes on state lands that Green has pitched as a partial solution to Hawaii’s intractable homelessness problem.

Lawmakers also put up $15 million for next year for the Ohana Zones program, a project the Legislature initiated in 2018 to quickly get the homeless into housing. Green has supported Ohana Zones, and requested $30 million for that initiative over the next two years.

To tackle the housing issue, Green proposed committing $1 billion in state funding to housing initiatives, but the Legislature cut back considerably on that sum.

The governor had proposed contributing $500 million over the next two years to the dwelling unit revolving fund, which is used to develop infrastructure to support affordable housing projects. However, lawmakers said in their statement that they only committed $50 million to that fund.

Green also proposed the state contribute another $400 million over the next two years to the Rental Housing Trust Fund, which helps to finance affordable rentals, and he had more success there: Lawmakers said they budgeted $280 million for that effort.

The new budget also includes $72 million to increase Medicaid payments to health care providers, which sounds wonky but has real-world consequences.

The stingy payments offered to physicians who treat low-income patients who rely on Medicaid coverage prompted many Hawaii physicians to limit how many poor people they will serve, which aggravates the statewide physician shortage.

Lawmakers also embraced Green’s loan repayment initiative for health care professionals, providing $30 million over the next two years to encourage more doctors, nurses, social workers and psychologists to deliver services in Hawaii.

Overall, Green described his administration’s performance to date as “one of the most active periods for government in recent memory and we are grateful to be able to make change for the better in the coming months and years.”

“There is still work to do on proposals such as the Green Fee and early education (which the Lt. Governor is spearheading), but the seeds have been planted for the coming years,” Green said in his statement.

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