Revenue growth still expected

By Gordon Y.K. Pang
Advertiser Capitol Bureau

With its members saying it is too early to determine the impact of the concrete strike on Hawai'i's economy, the state Council on Revenues maintained its forecasts that state tax revenues will continue to grow for the 2004 and 2005 fiscal years.

The council voted unanimously to project growth of 5.2 percent in state revenues for the current fiscal year, which ends June 30, and an increase of 7.9 percent for fiscal year 2005.

Lawmakers use the figures to determine how much they have to spend in the general fund during a given year. The 5.2 percent increase represents a forecasted growth of about $150 million in general fund revenues over 2003.

The 7.9 percent will be factored into the fiscal year 2005 supplemental general fund budget, which is expected to be approved by the House today and then sent to the Senate for consideration.

Council member Carl Bonham, executive director of the University of Hawai'i Economic Research Organization, said that if the 35-day cement strike ends quickly, the impact on the revenue picture may be minimal.

But if the strike lasts through June, he said, it could mean a drop in state revenues growth of at least 1 percent, which translates to about $30 million.

"It's all about the catch-up time," Bonham said. "How much can you catch up and continue to do the things you have planned and there's a limit to that."

On the recommendation of Council Vice Chairman Rick Von Gnechten, members agreed to insert qualifying language in its report indicating their concerns about the uncertainties tied to the concrete strike. However, the Council concluded it did not have enough information on the strike to lower its projections and stuck to its Dec. 23 projection.

"Right now, we don't have data to point to say clearly we should reduce the forecast," Council Chairman Mike Sklarz told reporters after the meeting. "We know there's a lot of momentum in the economy."

A report issued by the Department of Taxation yesterday showed that through the first eight months of fiscal 2004, state general fund revenues are up about 3 percent. That means monthly intake during the next four months will have to average 8 percent in order to reach the 5.2 percent forecast, Council members noted.

But they pointed out that the report said February's revenues were up 11.2 percent when compared with February 2003, and that they expected similar growth in three of the remaining four months of the year.

As for fiscal year 2005, Bonham said the return of Hawai'i military personnel now deployed abroad, an anticipated increase in Mainland and international visitors, and several military construction projects expected to get under way next year should contribute to strong economic growth.

The Department of Taxation's monthly revenue report showed a 15 percent increase in general excise and use taxes collected from the previous February, as well as a 2.9 percent growth in individual income taxes.

Reach Gordon Y.K. Pang at 525-8070 or at gpang@honoluluadvertiser.com.