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The Honolulu Advertiser

Posted on: Tuesday, July 16, 2002

State tax collection figures signal caution

While far from a major crisis, the latest tax collection numbers available to the state suggest that the days of scrimping, saving, cutting and scrambling are far from over.

It's crucial that the Cayetano administration treat these latest figures as real and immediate. There is enough in the till to cover the shortfall, but that doesn't mean the state should simply sit back and let things sort themselves out.

Gov. Cayetano indicated he may impose immediate spending restrictions in the face of the latest numbers. This makes sense because modest restrictions now are far preferable to big, emergency cuts later on if things do not improve.

In round numbers, the state closed out its fiscal year with $109 million less than had been collected the year before. The new budget was written with the expectation of a shortfall of about $25 million.

It may appear that these numbers are minuscule against a state budget that runs at many billions of dollars a year. But the vast bulk of that money is locked in; the state has little or no discretion on how it will be spent.

It is only on the "margins" — perhaps about 10 percent of the overall budget — where the state has any substantial flexibility to spend or not spend.

Everyone hopes that the Hawai'i economy will rebound, and there are some substantial signs that it will. But the tax collection numbers are real, not expectations or predictions.

The budget must be managed on the reality of what has been collected. If conditions (and tax collections) improve, then so too can the pace of state spending.