Posted on: Wednesday, February 12, 2003

Revenue shortfall has state looking for solutions

By Bruce Dunford
Associated Press

Lawmakers are weighing raising taxes, additional spending cuts as high as 15 percent and tapping the Hawai'i Hurricane Relief Fund to address the failure of a significant rebound in state tax revenues, key lawmakers said yesterday.

Tax revenues are trailing official projections used by lawmakers and the Lingle administration to draft a balanced, two-year, $15.2 billion state budget.

"We're going to have to talk to our members about tax increases, and maybe talk to our members about using a portion of the hurricane relief fund, and balance all those options along with the cuts," said Senate Ways and Means Committee Chairman Brian Taniguchi, D-10th (Manoa, McCully).

"The cuts, more than we have now, are going to reduce services, and it's going to mean folks may be laid off. And I think the governor has made a commitment not to lay anyone off, so it's going to put a lot of pressure on her financial plan," Taniguchi said.

Gov. Linda Lingle said she feels it's too soon to become alarmed or start revising her financial plan.

Total revenues of $307.9 million in January were 9.6 percent below the previous January, when the state was beginning to feel the economic impact of the Sept. 11, 2001, attacks, the Department of Taxation reported.

Through the first seven months of the fiscal year, revenues are running 1.9 percent ahead of the same period last year, compared with the state Council on Revenues' forecast for 6.1 percent revenue growth for the fiscal year ending June 30.

If revenue growth does not improve in the next five months, the administration's budget plan will be shy $126 million.

The Council on Revenues panel of economists is scheduled to meet March 13 to reconsider the official forecast it made Jan. 7.

House Finance Committee Chairman Dwight Takamine, D-1st (N. Hilo, Hamakua, N. Kohala), said lawmakers are awaiting more information.

"At this point, I think we want to look at all the options," he said. "It might be premature to make any specific predictions."

Lingle said she met Monday with her tax and budget officials to discuss the January figures, released yesterday.

"If this trend continues, we project through the end of June it'd be about a $63 million loss in revenue," she said.

But Lingle said she did not think January's tax take would be indicative of the rest of the year.

January revenue was bolstered by an 11 percent increase in general excise and use taxes — a reflection of business activity that accounts for about half the revenue total.

For the first seven months, that category was up 8.7 percent. However, the growth reflects some overflow from last fiscal year, resulting from a change in the filing threshold after the terrorist attacks, the department said.

Dragging down the January income was a drop in corporate and individual income tax revenues.

Net revenue from the corporate income tax fell by $37 million, and personal income tax revenue dropped $16 million. January is when the year's last installment of estimated taxes is due.

"Apparently, many taxpayers dramatically reduced their final installments upon examining their projected annual incomes," said Kurt Kawafuchi, deputy director of taxation.