The new budget includes $170 million to build teacher housing across Hawaii, and $280 million to subsidize rental housing.

Negotiators from Hawaii’s House and Senate agreed late Tuesday on a state budget for the next two years, a step that clears the way for finalizing dozens of other bills in a race toward a critical deadline on Friday.

The new budget earmarks more than $4 billion for state construction spending over the next two years, including more than $750 million in federal and state funds for maintenance projects in schools, the University of Hawaii and various state buildings including the Capitol.

Lawmakers have not yet finalized proposals for tax cuts and tax credits aimed at supporting working families in Hawaii, but one key lawmaker was optimistic that will happen in the next few days.

“We still have to negotiate those now that the budget is done,” Senate Ways and Means Chairman Donovan Del Cruz said of the tax proposals. “We’re close. The positions (of the House and Senate) were very similar.”

Representatives and senators applaud at the end of a meeting of the conference committee Tuesday night that finalized a new state budget for the next two years. (David Croxford/Civil Beat/2023)

The tax relief proposals still on the table as the Legislature nears the May 4 end of this year’s session include initiatives to double the state food excise tax credit and to make the state’s earned income tax credit for lower-income residents more generous.

Also under consideration are plans to increase the child and dependent care tax credit to support families with children in daycare, and to double standard deductions and personal exemptions for state income tax purposes.

When the legislative session began in January, the state was projecting a $2 billion general fund budget surplus at end of this fiscal year, largely because of generous federal funding during the coronavirus pandemic.

However, tax collections have slowed in recent months, and Gov. Josh Green’s administration recently negotiated pay increases for unionized state teachers that are expected to cost on the order of $140 million a year over the next four years. Those developments have made lawmakers somewhat cautious

Dela Cruz said the House and Senate plan to deposit $1 billion over the next two years in the state’s emergency budget reserve fund, better known as the “rainy day” fund. That would push the balance in the fund to about $2 billion, which would be an all-time record.

The new budget also commits $40 million in grants to subsidize nonprofit arts and social service organizations across the state, and provides $170 million to develop housing for teachers at sites in each county.

Another $280 million over the next two years would go to the rental housing trust fund to develop affordable rentals, and $100 million over the next two years would go to the dwelling unit revolving fund to subsidize infrastructure development for affordable housing projects.

The budget also includes $10 million to continue planning for a new jail on Oahu to replace the aging Oahu Community Correctional Center.

A House and Senate conference committee worked in private for more than a week to finalize the budget. Lawmakers will turn their attention in the days ahead to putting the finishing touches on dozens of other measures that require separate appropriations.

The deadline to finalize all bills is Friday, and the Legislature is scheduled to adjourn for the year on May 4.

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