Negotiators agree on two budget packages
By Gordon Y.K. Pang
Advertiser Capitol Bureau
A House and Senate conference committee last night advanced a two-year $7.6 billion state general fund budget that restores some money for public schools and the University of Hawai'i system.
But it offers no money for the Hawai'i Health Systems Corp. in the second year of the 2004-05 biennium.
The conferees also approved a two-year capital improvements package of about $400 million, $150 million less than proposed by Gov. Linda Lingle when she submitted her budget in February.
The two budget packages now go to the full House and Senate for a final vote before the Legislature is scheduled to adjourn next Thursday.
Because Democratic legislators control the conference committee as well as both the Senate and the House, the budget proposals likely will be approved. But Lingle, the state's first Republican governor in 40 years, has the authority to veto parts of the budget.
Lingle's budget director, Georgina Kawamura, sat in on the proceedings but had little comment afterward, saying that she and her staff will need time to study the changes made.
"I think in an especially challenging time ... we've passed a budget that reflects, hopefully, what the people of Hawai'i have said — and that is education should be the top priority," said House Finance Chairman Dwight Takamine, D-1st (N. Hilo, Hamakua, N. Kohala). "And so we've tried to put back cuts in education that the governor made to provide for additional resources."
Senate Ways and Means Chairman Brian Taniguchi said: "The Senate's goal was try to do as much as we can for education and I think, given the economic situation and revenue picture, we did the best we could."
According to legislative budget staff, about $16 million annually has been restored from cuts that the Lingle administration proposed in the Department of Education budget. That would include $8 million to replace anticipated federal impact aid that would have supplanted general fund money, $5 million for priority items like charter schools and school security, $2.7 million for adult education and $500,000 for the library system.
The administration has contended during the past few months that while it sought 5 percent across-the-board budget cuts at other agencies, DOE cuts were not sought on 95 percent of the department's $1.3 billion annual budget, which makes up 36 percent of the overall general fund budget.
The UH system is now slated to be cut about $1.8 million annually, nearly all of it from the Manoa campus, after the conference committee restored $1.6 million to what had been a $3.2 million annual cut.
The conferees elected not to raise taxes or raid the Hawai'i Hurricane Relief Fund to balance the general fund budget. The House rejected a plan that had moved out of the Senate which would have increased the excise tax from 4 percent to 4 1/2 percent to pay for education initiatives. House Democrats also chose to forgo Lingle's plan to narrow the qualifications for Act 221 tax credits given to high-tech companies, a move the administration believes would save $55 million over the biennium.
The budget plan does, however, take $10 million from the rainy day fund to restore "safety net" programs in the health and human services realm. It raids more than $70 million from various special funds. The administration had proposed grabbing $42.7 million to help balance the budget and had objected to further takings.
The deepest cut announced last night involved the Hawai'i Health Systems Corp., a quasi-private entity established in 1996 to take over from the Health Department 12 community hospitals on five islands that provide acute, rural and long-term care. The organization carries 1,200 beds and 3,000 state employees. The plan calls for giving HHSC $31.9 million in subsidy for the first year of the biennium, but no money in the second year.
The agency has been under scrutiny since its inception. While larger facilities such as the Hilo Medical Center and Maui Memorial Medical Center have been self-sustaining, some of its smaller, more rural centers are heavily subsidized.
HHSC leaders say management at the hospitals is improving, estimating that its subsidy from the state amounts to only 10 percent of its operating costs. They also note that state laws prohibit them from reducing or eliminating services without legislative approval, a hindrance that forces them to continue programs that lose money.
Taniguchi, D-10th (Manoa, McCully), said that while the original intent was for the system to be self-sufficient, HHSC officials "will have the opportunity for them to make a case for the second year."
HHSC president Thomas Driskill Jr. said that while the thought of not having money the second year of the biennium is unsettling, there were previous instances in which the Legislature had left the agency in similar situations. "Clearly, we validate what we do this coming year," Driskill said.
Other cuts made last night included about $1.2 million in state travel from across all state agencies and an unspecified amount of overtime from the Department of Public Safety budget.
The budget also does not provide for any pay raises for state workers, even though all 13 collective bargaining units have contracts that expire on June 30. Lingle has stated she wants raises only for essential services such as police and fire personnel. Nor does it reflect the possibility that the Council on Revenues next month may revise its growth forecast downward.
Tax Director Kurt Kawafuchi said his agency likely will be recommending that projected growth for the year be lowered to 3.3 percent rather than 4.3 percent, which could mean a $30 million drop in actual dollars available in the state treasury.
Also yesterday, the Senate approved a bill that would authorize the attorney general to seek civil penalties against a caregiver who abuses or neglects a dependent person 62 years of age or older.
Under Senate Bill 78, which now goes to the governor, those who are found liable in such a civil case would be subject to a penalty of $500 to $1,000 for each day that the abuse occurred, as well as the costs of investigation.
Staff writer Lynda Arakawa contributed to this report. Reach Gordon Y.K. Pang at gpang@honoluluadvertiser.com or at 525-8070.
