State tax collections $150 million short
By Kevin Dayton
Advertiser Capitol Bureau Chief
The state faces $150 million shortfall in tax collections that will force Gov. Ben Cayetano and lawmakers to impose budget cuts, dip into the state's cash reserves or both.
The state Council on Revenues today predicted state tax collections will actually decrease by about one-half of 1 percent this year, the first time the state tax take has declined since 1995.
Before the Sept. 11 terrorist attacks the council had predicted state tax collections for the year that began July 1 would increase by about 4.1 percent over last year's collections.
Each percentage point drop in collections costs the state general treasury about $31 million, which means the council now expects the state to collect $148.8 million less than it previously had projected.
House Speaker Calvin Say said Cayetano and lawmakers will each offer their own proposals for trimming the $3.47 billion general treasury budget for this year.
Say, D-18th (Palolo, St. Louis, Kaimuki), also said the state may look to its cash reserves to help cushion the blow.
The state ended the last fiscal year with a cash balance of about $340 million, although the administration expects those reserves will be depleted somewhat as the state pays the negotiated raises to its teachers and other public workers.
The state also has about $213 million in the Hawai'i Hurricane Relief Fund that lawmakers may be able to tap.
Sen. Fred Hemmings, R-25th (Kailua, Waimanalo), called the budget squeeze "a blessing in disguise. It's going to force the state to do what we should have done a long time ago," including cutting the state budget and reducing the size of the state workforce through attrition.
Hemmings and Say both said they suspect the council on Revenues projections may be optimistic.
"I hope I'm wrong, but I think Council on Revenues numbers may be conservative," Hemmings said. "It may be worse. What we're seeing is closing down of companies that won't be paying taxes at all."
