Gas price cap delayed 1 year as session winds up

By Kevin Dayton and Lynda Arakawa
Advertiser Capitol Bureau

Legislators yesterday pushed back the start of proposed price caps on retail and wholesale gasoline prices until 2004 in an effort to shore up Neighbor Island lawmakers' support for the plan, clearing the way for final approval of the bill tomorrow.

Still pending last night was a measure that allows the state insurance commissioner to regulate health insurance rates.

Lawmakers also approved a cigarette tax increase as part of a $3.8 billion spending plan for the coming year, and transferred $29 million from the Hawai'i Hurricane Relief Fund to help balance the state budget.

A late lobbying effort by rural gas station owners eroded support for the bill to cap gas prices, particularly among Neighbor Island lawmakers. To keep Senate Bill 2179 alive, lawmakers took the unusual step of amending the measure on the House and Senate floors yesterday, delaying its effective date by a year, to 2004.

Rep. Helene Hale, D-4th (Ka'u, Puna), said the state has the legal authority and duty to regulate gas prices, which "everyone acknowledges are unreasonably high."

But Hale said gas station owners in her district told her the measure would put them out of business, in part because their sales volumes are relatively small and they need to charge more per gallon to cover operating costs.

Although the bill allows higher prices on the Neighbor Islands, the differential is an average that does not fit the situation in her rural Puna district, Hale said.

Delaying the effective date of the bill until 2004 will give the next governor and Legislature an opportunity to study the problem and hold full public hearings on the measure, she said.

Rep. Jim Rath, R-6th (N. Kona, S. Kohala), said the mere possibility the state will regulate gas prices in two years will scare the oil companies, and "they will find a way to appease the public and self-regulate." Other supporters of the bill also have predicted the public will see lower prices even before the price caps take effect as the oil companies try to hold the line on price increases.

Senate Consumer Protection and Housing Chairman Ron Menor, D-18th (Mililani, Waipahu, Crestview), said delaying the effective date a year might not satisfy the public. "I believe the consumers are asking for near-term relief from high gas prices," he said. But he acknowledged the bill would not have passed the House without pushing back the effective date.

Drug, bottle bills

Opponents argued government is overstepping its boundaries by setting price controls on pharmaceutical companies, but supporters said it would help the more than 200,000 Hawai'i residents who lack adequate drug coverage.

Lawmakers passed the so-called bottle bill, which would impose a nickel deposit on most bottles, cans and plastic beverage containers beginning in 2005.

Those deposits would be refunded to consumers when the beverage containers are returned for recycling.

The bill also phases in an additional charge of up to 1 1/2 cents per beverage container, which the state Health Department would use to subsidize the recycling industry. When fully phased in, that charge would raise about $12 million a year and would not be returned to consumers.

Senate Water, Land, Energy and Environment Chairwoman Lorraine Inouye, D-1st (Hawi, N. Kona, Waimea), said the bill would increase recycling, help preserve the environment and divert millions of bottles from landfills.

Opponents said it would hurt businesses and do little to encourage recycling.

Ko Olina aquarium

Lawmakers also approved a unique $75 million tax credit to encourage development of an aquarium and marine mammal research facility at Ko Olina, which Ko Olina Development Co. manager Jeff Stone said would spark development of at least two new hotel or timeshare projects there.

Stone contends the tax credits will allow for construction of a "world-class" aquarium without a large up-front investment of public money, and he has said the aquarium has the potential to attract 750,0000 visitors a year. Supporters said the bill would trigger economic development and create jobs in the Leeward resort area.

"We just need to pass this bill and allow the private sector to do what it does best, and that is stimulate our economy," said Rep. Willie Espero, D-41st ('Ewa Beach).

Gov. Ben Cayetano yesterday said he is leaning toward vetoing the bill, though he has not made up his mind.

He has said repeatedly he wants to meet with the investors who plan to build hotels if the aquarium is built, to confirm they are committed to the project if the tax credits are approved.

Budget passes

After hours of debate, lawmakers also approved a budget and related bills yesterday that will increase general treasury spending next year by about $200 million, to about $3.8 billion.

House Finance Chairman Dwight Takamine said lawmakers cut services and denied requests for money that would be granted in an ordinary year, but preserved the "basic social safety net."

Republicans countered that the Democrats are ignoring the fact that state government is too large, and chose short-term fixes that will get the state only through the next year.

Funds raided

With tax collections coming in lower than expected, lawmakers resorted to a number of temporary fixes to balance the budget. They approved an increase in the tobacco tax from $1 per pack to $1.40 per pack, and transferred $29 million from the reserves in the Hawai'i Hurricane Relief Fund to the general treasury to help cover expenses.

They also grabbed $140 million from various special funds, where money is parked for specific purposes, and tapped the so-called "budget reserve fund" for $10 million. All of that money was deposited in the general treasury to help cover costs for next year.

Cayetano told reporters yesterday it is possible he will veto the budget, but said he is still considering the matter. The governor said he was concerned lawmakers did not allocate enough money for social service programs.

Advertiser reporter Andrew Gomes contributed to this report. Reach Kevin Dayton at kdayton@honoluluadvertiser.com or 525-8070.