So it was no surprise that as the session wrapped up yesterday, there were no solutions offered to frequent business complaints about healthcare, workers' compensation and liability insurance costs, as well as burdensome regulations that darken the state's business climate.

Other measures, such as a bill of rights for small businesses, died, and the starting date for a gasoline price cap that might have affected businesses for good or ill was delayed until September 2005.

Perhaps the most significant economic measure to come out of the Legislature was an extension of technology tax credits and the creation of the State Private Investment Fund or SPIF — a $36-million, state-backed venture capital fund for businesses in need of money.

However, that's not the kind of broad changes some small businesses expected when Linda Lingle became the state's first Republican governor in 40 years.

After Lingle's second session as governor, businessman Terrence Rodrigues feels that so far she hasn't fulfilled promises to improve the state's business climate.

"I think she's doing a pretty good job in running the state," said Rodrigues, who owns a tree-trimming company, rubbish removal firm, and firewood and charcoal business. "But for the small guys like us with 20 employees or less, I don't she's doing anything to help us small businesses."

Lingle blames Democrats

The governor cites progress in several areas, such as fee cuts at the Department of Commerce and Consumer Affairs, and a measure allowing business associations to negotiate group healthcare rates. But she faulted Democratic lawmakers for failing to take many of her pro-business proposals seriously.

"We had a very aggressive pro-jobs, pro-business agenda ... that we'd hoped to get some major progress on, and we got some things done," Lingle said. "I think we're able to go own and start to check off these things, but I feel there were just a lot of missed opportunities in this session.

"There are some among the Democrats who understand the need to pass laws that recognize the importance of small business to our well-being and not make it more difficult for them to exist, and I think there are others who just don't care about business and what their points of view are," she said.

Tom Jones, president and co-owner of the two Gyotaku Japanese Restaurants, agrees the Democratic-controlled Legislature has prevented Lingle from doing more to improve Hawai'i's business climate.

"There's no question it's now more business friendly," Jones said. "She's on the right track. I just wish the Legislature would follow suit and start working with business instead of making it more difficult for us. I don't think they get it."

Heading into the legislative session, lawmakers focused their attention on such issues such as education and dealing with the state's crystal methamphetamine epidemic. Later, just balancing the budget was a struggle with mandated raises for state workers and concerns over a revenue shortfall.

In the end, one business leader said the highlight of the session for small business was not what legislators did, but what they didn't do: raise taxes.

"We're pleased the Legislature stayed true to their pledge not to raise taxes," said Jim Tollefson of the Chamber of Commerce of Hawai'i. But he added: "Some of the major issues that impact the business community really weren't addressed."

Workers' comp changes

Among those long-simmering issues is workers' compensation. Lingle was unsuccessful in pushing through reforms meant to ease the burden on small-business owners faced with rising workers' comp costs. Proposed as a sweeping reform, the package failed to make significant headway.

In the end, only one part of Lingle's original plan passed — a proposal allowing those who successfully investigate fraud to share any fines levied and recoup any costs. A second administration proposal allowing DCCA to investigate fraud claims passed, but it was altered to only allow examinations of self-insured businesses and insurance companies.

The most significant section of the Lingle package, which would have required employees to see an employer-approved doctor or physicians' group for the first 120 days after an injury, stalled in committee.

"I think we have worked well together on some issues and we agree to disagree on other issues," said House Majority Leader Scott Saiki, D-22nd (McCully, Pawa'a) of the Democrats' relationship with Lingle's administration. During the summer, "we'll continue our discussions with the business community on workers' comp and other issues."

Saiki said the state wants to lower the cost to employers. "On the other hand you want to ensure that injured employees receive appropriate healthcare and insurance."

For small-business owner Rodrigues, 43, lowering workers' compensation and other insurance costs is of paramount importance.

"If the cost of insurance keeps adding up, eventually I'm going to have to run my companies without insurance and that's not good," Rodrigues said. "When you add them all up, small businesses like me are larger than all of the hotel employers. That's what keeps our economy going."

Compromise on Act 221

On growing the state's fledgling technology industry there was broader bi-partisanship. That cooperation resulted in extending the Act 221 technology tax credit law through 2010.

The extension came with a tightening of eligibility requirements for the credits, which have been criticized as overly generous, a drain on state revenues and subject to abuse.

Lingle proposed tightening the law in 2003, but those efforts were largely blocked by House Democrats, who said more time was needed to work on changes.

Even among technology industry advocates there lacked a consensus on which Act 221 changes were warranted.

"It was a hard-fought process," said Patrick Sullivan, chief executive of Hoana Medical. "The thing that's interesting about the legislative process is it's like making sausage — you wouldn't want to watch it being made because then you wouldn't want to eat it."

Even with the restrictions, Act 221 remains one of — if not the most — generous technology tax-credit programs in the country, Sullivan said.

Other tax credits fail

While legislators and Lingle agreed to continue and expand tax incentives aimed at boosting the technology sector, the hotel and entertainment industries weren't so fortunate.

Bills to expand tax breaks for film and TV production and hotel renovations and a proposal to provide tax credits for university research partnerships died for lack of money and a growing concern about the revenue drain caused by the credits.

The hotel industry, which last year watched as the Ko Olina Resort developers landed a $75-million tax credit, sought an increase in an existing credit to cover 8 percent of costs for projects valued at $10 million or more, up from 4 percent. Hotel interests also pushed for a 10-year extension of the credit, which expires at the end of next year.

Hotel industry advocates maintain the credits are needed to spur renovation, particularly to older Waikiki properties.

Another measure killed would have increased the current tax credit for performing arts including film and TV productions to 15 percent of costs on O'ahu and 20 percent on Neighbor Islands, providing that certain spending and hiring goals were met.

The added credits, capped at $10 million a year, were needed to help the state be more competitive with less expensive locations, said Judy Drosd, chief officer for the Arts, Film and Entertainment division at the Department of Business, Economic Development and Tourism.

Outlook optimistic

Despite the lack of pro-business legislation, Hawai'i's economy is likely to continue to grow, said Paul Brewbaker, chief economist at Bank of Hawai'i.

"The most important thing you can say about Hawai'i's economy is that it has managed to generate 2 to 3 percent real economic growth every year since 1996 in spite of global disturbances and the cumulative deadweight of questionable economic policy decisions by state government," he said.

"Hawai'i's economy probably will do so again in 2004 in spite of this legislative session."

Tollefson of the Chamber of Commerce agreed that businesses have reason to be upbeat about the future. "There's a lot to be done and it doesn't happen overnight, but I definitely see movement in the right direction and the business community sees movement in the right direction," Tollefson said.