Growth forecast for Hawai'i left at 5.2 percent

By Jaymes Song
Associated Press

Despite apparent signs of growth in Hawai'i's economy, especially in tourism and construction, the state Council on Revenues yesterday left unchanged its earlier 5.2 percent growth forecast for the fiscal year ending June 30.

"Actual numbers as of February suggests that construction right now is down 2.4 percent for fiscal year to date," council vice chairman Rick von Gnechten said. "While we think it's going to be stronger than that, we just don't have actual results yet to show that.

"I think given all that activity out there we will see those numbers coming in strongly," he said. "Basically, we didn't adopt that negative number in our forecast. We assumed continued strong growth in construction."

The panel of economists, which sets the revenue forecast on which the governor and Legislature base the state budget and spending plan, also reaffirmed its prediction of 7.9 percent growth in fiscal year 2005.

"I think the economy is coming back," said Lowell Kalapa, of the Tax Foundation of Hawai'i.

He added that more money is staying in the state's pockets with fewer people taking advantage of tax credits, such as Act 221, which was created in 2001 to spur technology investments and diversify the state's economy away from tourism and the military.

But Act 221 came under harsh criticism after it was learned that moviemakers were using the law to reap substantial tax breaks for one-time shoots in Hawai'i.

"I found out the hoopla and the ballyhoo about the credits being abused, a lot of people shied away," Kalapa said. "A lot of people got scared.

"What I would predict is that collections will go up mainly because people aren't claiming the tax goodies, such as the credits."