Struggles over fund damaging

By Gov. Ben Cayetano

Because of the Sept. 11 terrorist attacks, 44 governors and legislatures are having to struggle with unexpected budget deficits and finding ways to revive their state economies. States with heavily tourism-based economies, such as Hawai'i and Florida, were hit the hardest. In Hawai'i, thousands lost their jobs and dozens of businesses closed their doors.

Gov. Ben Cayetano says the state's economy is recovering. Advertiser library photo

Hawai'i's economy has weathered the storm better than expected for two main reasons:

• The structural reforms made to state government, tax cuts and the increased productivity of Hawai'i's businesses have strengthened our economic infrastructure.
• The spirit of cooperation and selflessness demonstrated by the state, counties, business, labor, community leaders and thousands of individual residents provided the spark which grew innovative ideas and strategies that helped mitigate economic damage and avoid a repeat of the terrible economic devastation Hawai'i suffered as a result of the 1991 Persian Gulf War. This spirit of cooperation and selflessness — the Spirit of Sept. 11 — shows what can be done when everyone works together for the common good.

Unfortunately, in the political arena, the spirit that prevailed shortly after the Sept. 11 attacks has waned with each passing day. And nowhere is the dissolution clearer than in the Legislature's struggle over the $350 million budget deficit and the Hawai'i Hurricane Relief Fund.

Politically driven statements by the leading candidates for governor have not been helpful and have only increased the public's confusion on the issues.

On the one hand, we have Republican Linda Lingle, whose formula for recovery is based on politics rather than common-sense economics. Lingle, who snatched defeat from the jaws of victory in 1998 because the voters finally caught on that her economic recovery plan was no plan at all, is singing the same tune.

Not only does Lingle oppose using the Hurricane Relief Fund to ease the state's budget shortfall, she has said she does not want to eliminate state services, wants to reduce class size in public schools, provide more dental care for needy children and has promised not to lay off any state workers. She intends to pay for all of this by "expanding the economy." Democrats Anderson, Case and Harris all should pray she sticks to this song during the 2002 campaign.

On the other hand, we have Democrat Jeremy Harris, who says he will cure the $350 million deficit by using attrition to reduce the state work force without layoffs. If Harris had asked — and he hasn't — I would have told him that we have been using attrition to keep the state work force in check for the past seven years; that since 1994, growth in education and special education increased by 19 percent, while cumulatively the work force in all other departments was reduced by 12 percent. And guess how we cut that 12 percent? Mostly by attrition.

According to the American Legislative Exchange Council, Hawai'i ranks third in the nation for the lowest growth in state budgets from 1990 to 2000. Is attrition still a useful tool for reducing state government? Of course, but the fact is that if education, special education and the prisons are excluded, one should not expect big savings from attrition. Education, special education and prisons are growth areas for state government. Hawai'i's inmate population, for example, grew from 2,834 in 1994 to 5,168 in 2002. Because of increased enrollment, the Department of Education may need as many as 1,500 new teachers.

State Rep. Ed Case opposes using a single dime from the Hurricane Relief Fund for our budget crisis. Case prefers to use that money to protect Hawai'i homeowners from yet-to-happen hurricanes rather than the fiscal hurricane that now threatens state government. Case wants all state employees "from the governor down" to take a pay cut to balance the budget. Case's proposal will go over real big with the 13,000 teachers who went on a painful three-week strike for better wages. One can only wonder what Case is thinking. Politics after all, is supposed to be the art of the possible.

Like Lingle, Case does not have a specific plan. Instead, he is given to making broad policy statements. Case recently offered this thought: "None of the options we want to pursue are possible until we face the fact that our government simply costs too much in relation to the gross state product." Nice for television sound bites, but Case has been around long enough to produce some beef. Where is it?

New Democrat Andy Anderson thinks "government needs to be smaller, but that displacing state workers in this weak economy would only increase pressure on social services." So far, Anderson has not offered a specific plan to deal with the $350 million deficit, but he clearly understands what's at stake and, unlike the others, has avoided offering politically motivated, simplistic solutions.

If the Republican minority in the Legislature has accomplished anything this session, it is that they have managed to dupe — yes, dupe — thousands of former hurricane fund policyholders into believing the fund balance belongs to them. Never mind that it cost the state $385 million to buy $1.2 billion in hurricane coverage from reinsurance companies, and that the premiums paid amounted only to $336 million, requiring a $49 million subsidy drawn from an assessment on insurance companies and mortgage recording fees.

Never mind that the law required that any balance left over in the fund be paid into the state general fund once the hurricane fund is terminated — indicating clearly no refund was ever intended. In duping former policyholders into believing they are entitled to a reimbursement of their premiums, the Republicans never shared these little details with them. Well, this shibai was too much even for the conservative, Republican-leaning Maui News, which editorially denounced the Republican minority's act as "irresponsible" and "political."

By politicizing the Hurricane Relief Fund issue, the Republicans succeeded in scaring some Democrats into jumping on their bandwagon. And it caused other Democrats, concerned about angering former hurricane-fund policyholders, to look everywhere but at the hurricane fund for money to deal with the budget crisis.

At this point, reality is beginning to sink in. The House majority has proposed using $100 million of the approximately $213 million in the Hurricane Relief Fund to ease the $350 million budget deficit. It's a start, but leaves a balance of $250 million that must be made up by cutting other state programs.

After seven years of budget cuts and belt-tightening, when state programs are cut these days, more people get hurt. The Department of Education, virtually untouched by previous budget cuts, now will have to bear its fair share. This is unfortunate. Times like these justify greater investment in public education, not less. There will be pain and anxiety for many in the days ahead. All of this because it's been politics as usual in the Legislature.

But the session is not over. There is still time for our legislators to set politics aside and do what's reasonable and right for our people. The Republicans should reassess their position on the hurricane fund — or at least come up with an alternative that is reasonable, fair and doable. The Democrats should do what Democrats are supposed to do — suck it up, put our needy, our poor and the education of our children first — and leave politics second.