Budget 'losses' hard to quantify

By Jerry Burris
Advertiser Editorial Page Editor

Make no mistake. That "budget crisis" they're struggling with at the state Capitol is real.

But the histrionics over what should be done about the crisis are less real. They are a bit of kabuki theater, designed for positioning and political advantage.

There's no question that the events of Sept. 11 and the sudden falloff in tourism hurt the Hawai'i economy and, with it, the state's tax collections. Budgets that were written on assumptions of healthy tax growth in the 4 percent range suddenly had to be made to fit an actual decline in tax collections of 0.7 percent. That adds up to better than $150 million a year in tax losses for both 2002 and 2003.

But "loss" of what? It is a loss of predicted gains, not so much an actual hit on what had been spent over the previous budget. So what's happening at the Legislature is a struggle to "unspend" the new money that before Sept. 11 they thought they would be getting.

The simplest solution would be to keep the budget at previous levels. But that solution is unrealistic. For starters, there are collective-bargaining raises to cover, as well as other increases in fixed costs that cannot be avoided.

So some "growth" is inevitable, even with zero additions for new programs and services.

The problem is that new spending was already all but promised. Help for our schools, protection of social services and welfare, promotion of the economy — you get the picture.

Gov. Ben Cayetano offered his thoughts: Grab the $200 million or so in the hurricane fund, boost liquor taxes and launch a $900 million construction binge that would have had a "dynamic" impact on tax collections of around $40 million to $50 million a year.

Those ideas gave hives to some legislators, particularly the idea of wiping out the hurricane fund.

So the games began. A House Finance Committee hearing was a particularly instructive exercise. State department heads were asked to paint a picture of what would happen to their efforts if spending was cut by 2 percent or even up to 5 percent. Lots of pain, lots of blood.

But the Finance Committee staff trumped that exercise with its own "doomsday" hypothetical scenario of an additional 5 percent cut for all departments. Carnage. Inmates running amok in the streets, classrooms filling with extra students, welfare recipients being forced to live below poverty levels.

Then late last week the House Democrats came up with yet another plan that would take

$100 million of that hurricane fund money and pump it into the budget, but they attached the dollars specifically to some of our most valued education and human services programs. Say no to that idea and, politically, you're saying no to widows, orphans and schoolchildren.

The budget will be balanced by snatching dollars from every spare fund, trimming spending in less-crucial areas, raising taxes and fees around the edges and — once again — making more optimistic assumptions about how the economy will perform. The budget drama will end not with a bang, but with a whimper.

Reach Jerry Burris through letters@honoluluadvertiser.com.