State agencies must cut spending 5 percent
By Gordon Y.K. Pang and Lynda Arakawa
Advertiser Capitol Bureau
Gov. Linda Lingle yesterday announced a 5 percent across-the-board cut on all but the most critical spending by state agencies effectively immediately.
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The move, along with an expected statewide hiring freeze on many state workers, is expected to net $40 million in savings through June 30, the end of the current fiscal year.
Incoming Budget Director Georgina Kawamura said the department budget cuts exclude certain items.
Lingle officials have previously said they are seeking as much as $500 million in savings to help balance the budget and pay for her political initiatives such as reducing the excise tax on medical services.
The moves announced yesterday marked the first steps in Lingle's plan to avoid using $175 million from the Hawai'i Hurricane Relief Fund to help balance the state's $7.5 billion general fund budget over the next two years, as proposed by outgoing Gov. Ben Cayetano.
Incoming Budget Director Georgina Kawamura said the department budget cuts exclude certain items, including all debt service, personnel and fringe benefit costs, Felix Consent Decree-related expenses, costs related to higher or lower education instruction, and spending on public welfare and mental-health programs.
"We took out all of those exclusions from the base cost, and from that created a 5 percent restriction for each department," Kawamura said. Each agency was sent a memorandum announcing the cuts yesterday.
The largest cut will be in the Department of Health, whose annual budget is about $370 million, Kawamura said. It's after-exemption, discretionary funds amount to $162 million and a 5 percent cut would be about $8 million.
Other state agencies, such as the Department of Education, Department of Human Services or the University of Hawai'i system, may have larger overall operating budgets but less discretionary money and therefore be subject to smaller cuts, Kawamura said.
The broader impacts, however, could be on smaller agencies such as the governor's office. Already smarting from a $1 million trim because of legislative action this past session, the office is being asked to cut about $125,000 from a $2.5 million budget, Kawamura said.
"The whole issue is fiscal discipline, they'll have to tighten their belts," she said.
As for the hiring freeze, Kawamura estimated that there are 400 full-time jobs that are paid for but will not be filled.
The freeze will not apply to what are deemed essential positions such as jobs related to education, health and public safety. Also spared from hiring restrictions will be positions in the Department of Taxation where a freeze would hinder the state's ability to collect revenues, Kawamura said.
The $40 million estimate in savings is a "conservative" guess, she said.
The administration does not expect significant effects on services as a result of the actions.
"I don't think there will be any material changes to the services that we provide," said Bob Awana, Lingle's chief of staff. "It doesn't affect any other positions that are already filled, so we would expect those services to continue.
"Generally speaking, all of the departments know whether there's been some excess and we just need to step up to the plate."
Kawamura also stressed that there will no layoffs, and she added that her department will keep the door open to hear out agency chiefs with extenuating circumstances.
"We expect that to happen about those that are outside the exemptions," she said. "We may be asked to re-look things on certain, case-by-case issues."
Said Awana: "We're looking at every single penny that we spend, and we're asking tough questions: why are we spending it, why are we buying it, is there a better way to do it?"
Lowell Kalapa, president of the Tax Foundation of Hawai'i, endorsed the administration's cost-cutting measures.
"She's got to start someplace. There's no way she can deliver on her promises when she doesn't have any money," he said. "Until the governor can get her arms around the fiscal situation of this state, she won't be able to move the government forward."
The administration also announced that it wants to review all capital improvement projects now in the planning stage. Those already slated for construction, however, will be accelerated because "we want to stimulate the economy," Kawamura said.
Kawamura is scheduled to present a new, six-year financial plan as well as a revised, two-year budget the week the Legislature opens. Opening day is Jan. 15.
"These are tough times, and we really have got to tighten the belt and get it to the point where it hurts and then at that point release a little bit, breathe a little bit more," Awana said. "But fundamentally it's changing the whole attitude about how we spend money. It's not our money, it's the taxpayers' money."
Reach Gordon Y.K. Pang at gpang@honoluluadvertiser.com or Lynda Arakawa at larakawa@honoluluadvertiser.com. They can also be reached at 525-8070.
