Lawmakers may tap emergency fund to pay for raises

By Kevin Dayton
Advertiser Capitol Bureau Chief

The so-called "rainy day fund" lawmakers set up two years ago in case of emergency may end up helping to pay for public worker raises, including those of school teachers.

The fund, established two years ago as part of the state's settlement with tobacco companies over health costs caused by smoking, is to receive 40 percent of the settlement's $1.3 billion over 25 years.

Officially known as the Emergency and Budget Reserve Fund, it will collect $40 million by June 30 and another $40 million in settlement payments over the next two years, said Wayne Kimura, deputy director of the state Department of Budget and Finance.

The law establishing the fund specified money there is to be used "during times of emergency, economic downturn or unforeseen reduction in revenues."

Although tourists are arriving in record numbers, state tax collections are growing and no economic emergency is pending, senators yesterday said they were considering rewriting the law to allow rainy day fund money to be spent on education.

"I guess we feel that it's basically a special fund. It's monies that we can use for various purposes," said Senate Ways and Means Chairman Brian Taniguchi, D-11th (McCully-Mo'ili'ili-Manoa).

"Forty million (dollars) isn't really going to make a dent in term of Felix (special-education related costs) and other stuff, but we feel we need to expand the use of that money," he said.

In the House, Democrats last month tried to use money from the rainy day fund to pay for new computers and textbooks for schools, but shelved the idea when Republicans objected.

And the 19 House Republicans made their own pitch to dip into the rainy day fund for money for drug treatment programs.

House Speaker Calvin Say, D-18th (Palolo-St. Louis-Kaimuki), said he is open to either the Senate proposal or the House Republicans' plan.

But Say agreed this situation isn't exactly what lawmakers had in mind when they set up the fund.

"I really thought it would be for emergency situations," Say said. "But what is the definition of an 'emergency situation?' It could be anything. An emergency crisis for substance abuse?"

Officials with Gov. Ben Cayetano's administration argued the rainy day fund would help cushion financial crisises such as the one Cayetano encountered during his first term in 1995.

Cayetano resorted to laying off state employees that year to balance the state budget.

State Budget Director Neal Miyahira told the Senate Ways and Means Committee yesterday the administration strongly opposes the proposal to use rainy day money to help pay for education.

The Senate proposal is part of a larger plan to raid a variety of special funds where money has accumulated to finance purposes ranging from driver education to agricultural loans.

Lawmakers had hoped that strategy would allow them to raise as much as $100 million to help balance the budget, but Taniguchi said it now appears that somewhat less is available.

He deferred action on the bill yesterday, but said he expects the Senate will advance the measure.

The 1999 law establishing the rainy day fund prohibited using money there to pay for public worker raises, but under the Senate proposal lawmakers could use the fund to cover other education expenses, which in effect would free up other money to cover the raises.

The rainy day fund law also requires a two-thirds vote by the House and Senate before money can be spent from the fund, but Say said House lawyers for the House Democrats believe that provision isn't actually binding on the Legislature.

House Minority Leader Galen Fox, R-21st (Waikiki-Ala Wai), said the rainy day fund should be used for health needs, specifically drug treatment and prevention.

"The rainy day fund is supposed to deal with budget emergencies, and should not be raided for the sake of handling expenditures that really should be taken out of the general fund," including education, he said. "We have to face up to our fiscal responsibilities."

Correction: The state expects to receive about $1.3 billion over 25 years as its share of a settlement with the tobacco companies. Of that money, 40 percent is slated to be deposited into the state's so-called "rainy day fund." Because of an editor's error, a previous version of this story misstated the amounts the rainy day fund is expected to receive.