Clock is ticking on tax relief
By Gordon Y.K. Pang
Advertiser Capitol Bureau
Chances of tax cuts moving out of the Legislature this year remain questionable as the session winds down to its final week.
The $9.9 billion biennial general fund budget passed by House and Senate conferees late Monday includes $241 million in raises for three labor unions, money for anti-drug programs, education initiatives and the
Superferry, but no money for tax-cut proposals such as an increase in the standard deduction or an earned income tax credit.
Senate and House leaders were expected to begin discussing the tax-cut bills in conference committees today and will have until Friday to find money from what Senate Ways and Means Chairman Brian Taniguchi, D-10th (Manoa, McCully), described as "a tight margin" between revenues and expenditures in the general fund over the next two years.
Ideally, the general fund should see a year-ending balance of between $10 million and $20 million on June 30, 2007, the end of fiscal 2007, Taniguchi said yesterday. "Basically, we're trying to see what our carryover balance is. From there, we can get a better idea of how to set up priorities for the different bills we have left."
"It seems as though the fiscal impact of what the governor negotiated with the teachers, as well as UPW, will make it a challenge to find enough resources for any kind of tax relief," said House Finance Chairman Dwight Takamine, D-1st (N. Hilo, Hamakua, N. Kohala).
"It takes up a lot of the financial resources that would have been available."
Over the weekend, the state reached settlements with both the Hawai'i State Teachers Association and the United Public Workers. Contracts were reached through binding arbitration with the Hawai'i Government Employees Association units on April 22.
According to numbers provided by state Budget Director Georgina Kawamura, the contracts will cost the general fund $60.8 million in the coming year and $180.1 million in 2007. The figures do not include increased state contributions to worker health plans that would add an additional $7.65 million next year and $20.4 million in 2007, Kawamura said.
Gov. Linda Lingle's original budget in December did not include any pay raises for government workers. The governor said she did not want to show the unions how much money management was prepared to offer. The administration eventually offered across-the-board increases of 1.5 percent each of two years that would have cost the state about $79.4 million over the biennium.
"Obviously, it's a large commitment on behalf of the state and we're working hand-in-hand with the Legislature to accommodate that," Kawamura said of the actual settlement amounts.
The administration believes a tax relief plan can still be attained this year. Kawamura noted that the governor's original plan called for increasing the standard deduction, for those who don't itemize, over a three-year time frame. It would not begin until 2007 and, even then, would only cost the state about $6.6 million in that first year, she said.
Kawamura also noted that the Council on Revenues, which makes the forecasts on which the state bases its budget, in March raised its projected revenues for the year. That gave lawmakers an additional $70 million over the biennium to factor into the budget that she did not have when she submitted her budget in December, she said.
Senate and House leaders were expected to begin conference committee hearings today to discuss proposals to lower standard deduction, earned income tax credits and related proposals.
With lawmakers insisting that the differences between revenues and expenditures are so tight, alternative means of paying for tax relief are still being considered.
One idea floated in the House would use federal welfare tax dollars to pay for earned income tax credits.
In the Senate, lawmakers have discussed using a portion of a proposed excise tax increase for tax credits or, possibly, to raise the standard deduction.
Faith Kwock, a Mililani credit representative, said she empathizes with lawmakers and their budget dilemma.
Government workers, especially teachers, deserve raises, she said. On the other hand, Kwock believes all Hawai'i families could use some tax relief.
"I wish our state had the money for it all."
Reach Gordon Y.K. Pang at gpang@honoluladvertiser.com or 525-8070.
Correction: The Legislature is appropriating $22.7 million for the University of Hawai'i system. A graphic in a previous version of this story incorrectly said the amount went only to the Manoa campus. Also, the $22.7 million is less than the $25 million proposed in the budget submitted by Gov. Linda Lingle. The graphic implied it was in addition to the governor's budget.
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