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The Honolulu Advertiser
Posted on: Tuesday, April 17, 2001

Budget battles must have a shared reality

University of Hawai'i public administration professor Dick Pratt came up with a phrase this week that should become a watchword as the Legislature struggles to write a budget that covers prospective union pay raises.

What is needed, Pratte told Capitol Bureau Chief Kevin Dayton, is a "shared reality" among all parties over how much money the state will have to spend over the next two years.

Instead, every player appears to have his or her own version of the state's fiscal reality. That makes serious budget-writing almost impossible.

Gov. Ben Cayetano says the state is at a bare-bones level and simply cannot afford raises at the amounts being pursued by striking teachers and University professors. He continues to make the case that substantial union raises would come at the cost of crucial human and social services.

The unions say there is enough money to offer decent raises and maintain an acceptable level of state services. The trick, they say, is knowing where to look for spare cash in what is — in effect — a padded budget.

House and Senate money committees have put their own form of wriggle room into the budget by scaling back as much as $200 million from the spending plan originally proposed by Cayetano. Note, however, that these are not necessarily the same $200 million in cuts.

Arguably, there may be $200 million worth of cuts possible in this budget, but certainly not $400 million or anything close to it.

By law, everyone must use tax-growth projections from the Council on Revenues, which officially remain at between 5 and 6 percent over the next two years. But most lawmakers suspect those numbers will be revised downward as the impact of the economic slowdown on the Mainland and in Japan shows up in returns from our visitor industry.

What gets missed here is that while the council's tax-growth numbers are the official standard, there is nothing to stop lawmakers from treating those numbers conservatively. That is, they cannot budget on a tax-growth rate higher than that of the council, but they certainly could use lower numbers.

Finally, there are various budget proposals to dip into special funds, budget carryover balances (or surpluses) or special reserves. This is definitely short-term thinking, since there is no guarantee at all that these one-time sources of money will be there next time around.

There is no magic to any one of these budget scenarios, from governor to unions to Legislature. But until the various parties come up, in Pratte's words, with a "shared reality" about the state's financial position, no satisfactory conclusion is possible.

So we would argue for a timely and universal agreement on a set of income and spending assumptions. Ideally, this agreement should stick to sources of funds that are likely to be around — not just for the immediate future, but for a long time to come.