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The Honolulu Advertiser
Posted on: Tuesday, October 23, 2001

Legislators ask governor to cut spending 5 percent

By Kevin Dayton
Advertiser Capitol Bureau Chief

House and Senate leaders have asked Gov. Ben Cayetano to immediately curb spending by all state departments by 5 percent to brace for an expected drop in state tax collections.

Republican legislators, including Reps. Barbara Marumoto, Mindy Jaffe and Emily Auwae, talked following Day 1 of the special session yesterday at the State Capitol.

Jeff Widener • The Honolulu Advertiser

There was less unanimity on other fronts as the special session of the Hawai'i Legislature opened yesterday, with Democrats and Republicans dropping most of the patriotic declarations of bipartisan cooperation that marked the days after the Sept. 11 terrorist attacks on the Mainland.

A partisan spat erupted in the session's opening hour as House Republicans protested the ruling Democrats' refusal to hold hearings on four bills the GOP introduced.

House Republicans also pledged to oppose a Democratic bill that would give emergency powers to Gov. Ben Cayetano to cope with the state's economic downturn. The bill would allow Cayetano to temporarily suspend any rule or law if it "regulates or imposes any obligation" on a business.

Cayetano called the Legislature into a special session to counter the state's sudden economic slump and shore up its tourism industry. House and Senate Democrats agreed in advance to pass 17 bills providing relief such as tax breaks to investors or additional benefits for laid-off workers.

In asking Cayetano to direct state departments to cut spending, House Speaker Calvin Say and Senate President Robert Bunda are hoping to offset the anticipated drop in tax revenue.

 •  How to be heard

The House Finance and Senate Ways and Means committees will hold a hearing at 10 a.m. today in the Capitol auditorium on the 17 bills lawmakers agreed to move through the special session.

The measures include those to provide a residential construction and remodeling tax credit, establish a capital gains tax credit for business-related property, give the governor emergency powers such as waiving lease rents to the state, relax procurement requirements and establish a state-resident preference for certain contracts.

The committees will also hear bills to extend unemployment benefits, provide temporary health insurance for people who lost health insurance on or after Sept. 11, and to appropriate $1.25 million for food and emergency shelter.

Cayetano has not decided whether he will withhold the money, said his spokeswoman, Kim Murakawa. The administration has already warned state departments to cut costs where they can, but the governor has not yet used his executive powers this year to force departments to cut spending.

State Budget Director Neal Miyahira said the administration has considered withholding some money from state departments, and has talked about a target cut of 5 percent of "discretionary" general treasury spending.

Discretionary spending would exclude fixed costs such as wages, employee fringe benefits and debt payments on borrowed money, and would also exclude school instructional and support services, he said.

Using those parameters, a 5 percent budget cut would amount to about $32 million, Miyahira said.

The $3.5 billion general treasury budget for this year assumes state tax collections will grow by about 4 percent, but many observers now think that is far too optimistic.

A more "conservative" estimate has collections growing by only 1 percent, which would mean the state will collect about $90 million less had been expected, Say said.

If tax collections grow by less than 4 percent this year, the state will have to cut spending, dip into its cash reserves or find some other way to cover the shortfall.

The administration has withheld or "restricted" money from state departments almost every year Cayetano has been in office, but did not restrict spending last year because tax collections were growing at a healthy clip, Miyahira said.

Instead of the usual prayer yesterday, the House began the session with a moment of silence in honor of the victims of the terrorist attacks, followed by renditions of "God Bless America," "The Star-Spangled Banner," and "Hawai'i Pono'i."

House Majority Leader Marcus Oshiro praised lawmakers' "shared sense of urgency and unity of purpose," but Republicans immediately clashed with the Democrats over four bills the GOP introduced.

The bills included a proposal to suspend the 4 percent excise tax on food, a proposal the Democrats have dismissed because they said it would cost the state too much.

The Democrats refused to refer the Republican bills to a committee where they could be heard, meaning they will die without a hearing.

"This is what they always do," said Rep. Mark Moses, R-42nd (Kapolei, 'Ewa Village, Village Park). "They tell you one thing, they do another. This is not the first time. This has been going on for years."

Say said the package of 17 bills advanced by the Democrats yesterday was agreed to by the House and Senate leaders and Cayetano, and said those bills are the first priority.

"What are the proposals that are bipartisan should be addressed first," he said.

Say said the Democrats incorporated some proposals by Republican members into the 17 bills, including proposals for capital gains tax breaks, tax credits to encourage hotels to build or renovate and plans to revamp unemployment insurance coverage for business owners.

Senate Republicans introduced 10 bills, including measures that would establish a general excise tax holiday, reduce the gasoline tax by 50 percent for one year, provide a commercial construction and remodeling tax credit, and exempt food and over-the-counter drugs from the general excise tax.

Senate Minority Leader Sam Slom, R-8th (Wai'alae Iki, Hawai'i Kai) said Senate Republicans will push for their bills to be heard because the measures would "take care of people that are not even taken care of in the other (Democratic package) bills."

Slom said every other state that is holding a special session has cut taxes, government spending and state debt, and stressed that such measures are needed to help the economy.

Senate President Bunda, D-22nd (Wahiawa, Waialua, Sunset Beach), said Democrats considered a tax holiday but decided against it because "given the downturn of the revenues in the state, we just wanted to be fiscally responsible."

House Republicans also objected to a bill to give the governor sweeping new powers to deal with the economic emergency, including a provision that allows the governor to suspend state laws, rules or regulations that affect businesses.

House Minority Leader Galen Fox, R-21st (Waikiki, Ala Wai), said lawmakers "abdicate our responsibility as representatives if we grant the governor the powers he is asking for."

Advertiser Capitol Bureau reporter Lynda Arakawa contributed to this report.