Posted on: Tuesday, September 16, 2003

State panel sticks with 6.2 percent revenue growth projection

By Bruce Dunford
Associated Press

HONOLULU — The state's Council on Revenues yesterday affirmed its forecast that state general fund tax revenues will grow by 6.2 percent this fiscal year over last year, fixing a procedural glitch when it made the same determination Sept. 3.

The panel of economists had failed to give the required six-day public notice of the earlier meeting, making any action during that meeting invalid.

The delay gave the council the opportunity to review August's tax collections, which jumped 11.5 percent over August of last year, offsetting July's downturn to lessen the two-month cumulative decline to 6.2 percent.

Council Chairman Michael Sklarz said the August figures are in line with what the panel had expected, so there was no need to change the Sept. 3 prediction.

State Budget and Finance Director Georgina Kawamura said the forecast reflects an improving economy and the administration's "fiscal discipline to bring spending in line with revenues."

She said with the new projections in hand, her department will be working with all state departments and agencies to release their budgeted allotments.

The forecast of 6.2 percent growth in the fiscal year that began July 1 means the state will have about $35 million more to spend than the council had forecast in May.

Council member Carl Bonham pointed to strength in the Mainland visitor market, strong job growth and a surge in building permits driving a booming construction industry as support for the higher tax revenue forecast.

He also pointed to relatively low inflation, although he said it could jump in the next year or so.

"We're looking at a fairly robust economy," he said.

Sklarz said closer scrutiny by the Department of Taxation of claims for high technology tax credits also played a role in the decision to raise the revenue forecast. Gov. Linda Lingle's administration had blamed the tax credits as the cause of an unanticipated drain on tax revenues earlier this year.

Sklarz said that despite the fact that revenues through the first two months of the fiscal year are still down 6.2 percent from a year ago, the council members believe there will be offsetting growth over the remaining 10 months to end the year with 6.2 percent growth.

Democratic leaders in the state House and Senate leaders have pointed to the improved revenue forecast as evidence that Lingle should relax first-quarter spending restrictions she imposed based on the earlier lower forecast.

"Because of the calculation by the Council on Revenues, the governor should take a second look and restore the spending, especially to education and human-services programs," said Senate President Robert Bunda, D-22nd (North Shore, Wahiawa) yesterday.