'Hawai'i's economy is back,' governor says

Gov. Ben Cayetano proposed an ambitious agenda of new public initiatives from preschool education to the repair of state parks yesterday, winning praise for his good intentions but raising questions about his budget calculations.

Gov. Ben Cayetano’s proposals: Taxes: Suggests reducing the top state income-tax rate by one percentage point, and wants to offer a 4 percent tax credit to the owners of commercial buildings to encourage them to renovate. Education: Wants to provide preschool to all low-income 3- and 4-year-olds, which would bring up to 8,000 more youngsters into preschool. Also proposes spending $290 million in school renovations, maintenance and new construction. Higher Education: Proposes to use interest income from $175 million in the Hawai‘i Hurricane Relief Fund to provide full-tuition scholarships for all students with a B average who attend the University of Hawai‘i system. Environment: Proposes a study to determine how to manage future growth and impact from tourism. Also wants to spend an extra $22 million to repair and maintain state parks, and wants to designate money from the hotel room tax as a permanent funding source for park improvements.

Cayetano used his annual State of the State address to the Legislature to suggest that with the state economy expanding, it is time to spend millions more on new schools and school renovations, a new medical school for the University of Hawai‘i, expanded preschool for low-income families, and scholarships for college students.

"Hawai‘i’s economy is back, expanding, stronger and more diverse than ever in the past decade," he said.

He proposed a modest income- tax cut that would take full effect in six years, and a new tax credit for owners of commercial buildings to encourage them to renovate their property.

Legislators and some members of the public who watched Cayetano’s address gave it mixed reviews, with most saying they appreciated his intentions but questioned whether the state could pay for his proposals.

"He’s always saying he’s going to do this and that, but where is this money?" said Nova Nagareda, a special education major at the University of Hawai‘i’s College of Education. "Where is this money at? We don’t have the money."

Senate President Robert Bunda expressed similar concern.

"He put a lot of stuff on the table for us to chew on," Bunda said. "Do we have enough money to take care of them?"

Sen. Fred Hemmings (R-Kailua, Waimanalo) said the governor is still relying too much on Democratic policies of big government, but praised Cayetano for continuing his push to make government more efficient and to encourage privatization of government services.

"I think the governor’s a good man trying to do a good job, but his speech today is business as usual," Hemmings said.

‘Rainy day fund’

For college-bound students and their parents, Cayetano proposed using interest from money collected by the Hawai‘i Hurricane Relief Fund to finance scholarships for public and private school students.

Cayetano said there is $175 million in the fund that is no longer needed for hurricane insurance and suggested that money be moved to the state’s new "rainy day fund." The interest earnings from that fund should then be used to provide scholarships for high school students who have a B average or better and want to attend the University of Hawai‘i system, he said.

State Budget Director Neal Miyahira said the interest would total about $12 million a year for scholarships, an idea warmly received by some students.

Sheila Dagarag, a 22-year-old University of Hawai‘i senior, said the scholarships would motivate students to work for better grades, and encourage parents to pay closer attention to students’ performance in high school. "Tuition is, as they say, going up in the next five years. So I’ll support that," she said.

Legislators were less enthusiastic. House Speaker Calvin Say (D-Palolo, St. Louis, Kaimuki) said a scholarship fund is an idea lawmakers have supported in the past, but questioned paying for it out of the Hawai‘i Hurricane Relief Fund.

"We’d like to have the fund increase with the interest earnings, just in case there is a major disaster," Say said. "What about all the policyholders? Do they want it refunded back?"

House and Senate Republicans also argued that the money should be returned to policyholders who paid into the fund. Private companies now are offering hurricane insurance, and the state plans to shut down the fund at the end of this year. State law requires that any extra money from the fund be deposited in the state’s general treasury, Miyahira said.

Bunda, for one, liked the idea of skimming the interest off the Hawai‘i Hurricane Relief Fund, saying, "It’s very attractive."

The preschool program, which Cayetano called Pre-Plus, would help pay for preschool for about 8,000 additional low-income Hawai‘i children, ages 3 and 4, by 2004.

Cayetano said Lt. Gov. Mazie Hirono will be in charge of developing the program, which would be operated by Kamehameha Schools, the Head Start program and other private preschools.

Cayetano said the program would be financed from federal and private sources, and won’t require any new state funding to operate. But he said the state would chip in $40 million in construction money over the next four years to build new preschools.

LeMahieu backs plans

Schools Superintendent Paul LeMahieu said he supports the Pre-Plus program "because as everybody knows it’s the investment in children in their earliest years that pays off many times over the course of their lives.

"Hawai‘i has had a historical record of being really at the forefront of early childhood care in a variety of areas and then over the years it’s sort of atrophied," he said. "It’s getting back to our roots and I think it’s extremely important."

LeMahieu also praised Cayetano’s plans to increase funding for school repairs and maintenance. The governor suggested spending $290 million over the next two years for new schools, renovations of older buildings and repairs and maintenance.

"People are understanding that this is a performance issue," LeMahieu said. "If you want to expect high performance from the children you’ve got to give them schools that support that kind of performance. You’ve got to have places where you can expect kids to learn and where professionals can be proud to serve."

As he promised he would, Cayetano also pitched a plan to spend $21 million for 18,000 new computers for public schools. And as he had previously said, he wants to spend $141 million to build the first phase of a new medical school for the University of Hawai‘i at Kaka‘ako.

Parks not forgotten

Cayetano also proposed spending $22 million to repair state parks and facilities neglected over the past decade because of cuts.

And he proposed a major new marketing initiative to try to attract business travelers, suggesting the state use one-third of its marketing fund to promote Hawai‘i as a business destination.

The state provides $60 million a year to the Hawai‘i Tourism Authority to market the state as a visitor destination.

Bob Fishman, the Hawai‘i Tourism Authority’s chief executive officer, said about $7 million from the HTA’s fund already is allocated for marketing for conventions and other business meetings.

But House Minority Leader Galen Fox (R-Waikiki, Ala Wai) said it would be a mistake for Cayetano to dictate to the Hawai‘i Tourism Authority how to spend its marketing money. "It’s not right for politicians to interfere in those types of decisions," he said.

Cayetano appears to be proceeding cautiously with his proposal to convert the Ala Wai Golf Course into a park, and yesterday proposed that the state "evaluate the feasibility" of the park plan. He also proposed converting the site of the former Cannon Club at Diamond Head into a visitor center.

Cayetano acknowledged after the speech that he may have a problem getting lawmakers to go along with the Ala Wai proposal.

As expected, Cayetano proposed trimming the top income tax rate to 7.25 percent. That would cost the state an estimated $145 million a years. Lawmakers were skeptical when Cayetano earlier floated that proposal.

As he did last year, the governor also urged lawmakers to increase the minimum wage. The latest proposal would increase it from $5.25 an hour to $5.95 an hour this year, to $6.10 next year and to $6.20 in 2003.

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