Posted on: Tuesday, January 25, 2005

State of the State: Opportunities knocking

•	Full text of Lingle's State of the State address

The following are excerpts from Gov. Linda Lingle's State of the State address yesterday to the Legislature:

Flanked by House Speaker Calvin Say, left, and Senate President Robert Bunda, Gov. Linda Lingle calls upon the Legislature to focus on critical issues in an expanding state economy. Richard Ambo • The Honolulu Advertiser

Most people across the state are feeling optimistic. Consumer and business confidence levels are at all-time highs. People see good things ahead, and believe the future is bright.

But before looking to the future, let's glance back at the road we've traveled these past two years:

Over the past two years, we overcame state budget deficits in the hundreds of millions of dollars without laying off state workers or cutting important services.

At the same time, our economy has entered a period of growth and prosperity.

You can feel the energy and enthusiasm on the street, from the opening of the new medical school in Kaka'ako to the companies being created and flourishing at the Natural Energy Lab in Kona.

We are feeling good about ourselves again. But it's more than just a feeling. You can see it in the numbers.

Nearly 29,000 new jobs have been created in the last two years. Visitor expenditures reached an all-time high of $10.3 billion.

Investor confidence is also high, and the construction industry is booming.

This long-awaited and welcome prosperity understandably bolsters our confidence. It creates optimism. But it also brings challenges.

Cost of living up

We cannot let the sparkle of economic vitality blind us to the needs of thousands of our fellow citizens across the state. As the economy has heated up, so has the cost of living.

There are too many families in our state struggling to survive and too many families just a paycheck away from moving in with relatives or living on the beach. It is hard to be hopeful when you are focused on just getting by.

Finding ways to ease the impact of the increased cost of living should be one of the first orders of business during this session.

Cutting taxes

I want to use some of the revenues generated by our recent prosperity to pay for a modest, yet important, $63 million tax cut over the next two years for individuals and families with low to moderate incomes.

These tax cuts include increasing take-home pay for lower-income workers by raising the income tax standard deduction over the next three years to one-half of the federal standard deduction. Passage of this bill means 27,000 people will no longer have to file state tax returns, and 78,000 more will see their taxes reduced.

In addition, I am proposing a new food and medical tax credit that will benefit 515,000 people or 40 percent of the state's population. The credit can be claimed by individuals and families earning less than $40,000 a year.

I will also be increasing cash payments to low-income families who are currently receiving public assistance.

To reward work and encourage self-sufficiency, I will eliminate the current practice of reducing welfare benefits for parents who go to work to help support their families. This policy change will transfer as much as $58 million during the next two years from our Temporary Assistance for Needy Families reserves directly to an estimated 10,000 working parents, increasing their cash income by an additional $200 to $240 per month.

These three proposals should also be viewed as a way to prevent further homelessness and to help some that are currently homeless regain their dignity.

Affordable housing

One of the most basic needs for any human being is a decent, safe, affordable place to live.

Our robust real estate market and lack of adequate support services for the chronically homeless mean this basic need is not being met for too many of our fellow citizens.

This is a problem that requires collaboration between the state and counties and between the government and the private sector.

I am proposing a comprehensive plan that will help us create more affordable housing, preserve existing affordable rentals and provide additional services for the homeless while living within our means. The plan includes financial incentives for private developers, faster government approvals, an increased funding source for new affordable rentals, as well as new funding to repair existing public housing.

This new law, which so many others have helped to develop, is called the Affordable Homes Act of 2005. The act includes tax credits of up to $4,000 for each of the first 2,500 affordable units completed by Dec. 31, 2007.

In addition, the act streamlines the cumbersome government review process that has slowed the development of affordable housing and increased the costs of both for-sale and rental projects.

The act doubles the amount of the existing conveyance tax transferred to the Rental Housing Trust Fund without raising the tax. And it prohibits the future transfer of money from any of the state's housing funds.

Since 1995, more than $200 million has been transferred from eight state housing funds to the general fund. Those transfers have contributed to the housing shortfall we face today.

As you may have read, we have set the ambitious goal of adding 17,000 affordable units to our housing stock over the next six years. We can never, ever accept that this is a problem that will simply always be with us.

The Department of Hawaiian Home Lands last month broke ground for the largest affordable housing project in its 80-year history at the Villages of Kapolei. Already we have identified state lands that can be used for public-private partnerships to create affordable housing, and we are moving to develop these lands.

Affordable housing will be remembered as the issue that brought us together and that served as the catalyst for a renewed sense of community responsibility.

Investing in future

When I stood before you last year, I called for dramatic reform of our public education system. The debate that followed was good for our schools and ultimately good for our entire state. But the debate didn't place much focus on preparing children for success before they enter the formal education system.

Study after study has shown that early childhood education is a key to success later in life. State, federal and private funding for childcare and preschool programs in Hawai'i totals nearly $100 million a year, and yet many working families forgo quality childcare because they simply can't afford it.

Too many children are entering the school system without the basic skills they need to survive.

To provide more support for these children, their families and our existing preschools, I am launching the Early Childhood Education Initiative.

This initiative will enable 3,000 more children, ages 3 and 4, to attend high-quality, fully accredited preschools. It is a multipronged approach that provides financial assistance for "gap group" families, monetary incentives to preschools that adopt quality content standards, incentives for providers who attend training beyond existing licensing standards, and support for more adults to enter the early childhood education profession.

Charter schools

Charter schools deserve a lot more focus and attention this session.

After many hours of meetings and conversations between my staff, charter school officials, teachers and parents, we have crafted the Charter School Opportunity Act.

This comprehensive improvement in the treatment of charter schools will first and foremost assure them a fair share of the state's education funding. In addition, it lifts the cap on the number of charter schools, adds additional chartering authorities and sets strict oversight standards.

It also creates a non-contiguous school district which charter schools on all islands can be part of. Becoming their own district will enable charter schools to compete directly and receive federal funds that currently must pass through the Department of Education.

University of Hawai'i

The university is poised to make steady and significant progress as a center of excellence in the coming years under the leadership of the Board of Regents and its new president, Dr. David McClain.

My proposed biennium budget earmarks $20 million in new scholarship funds for the university to ensure that all who can meet the standards and want a higher education can get one. I have also budgeted an additional $25 million for ongoing operations in order to meet what the university believes are its highest priorities. This $45 million infusion of additional funding is the largest in university history.

Also, I have set aside $80 million to rebuild and replace deteriorated buildings to ensure that our campuses are safe and well maintained. And I've included $20 million to build the long-promised Hawaiian Language Building at UH-Hilo.

Beyond this, I am proposing tax credits that promote partnerships between the university and business in order to foster world-class research that creates commercial spinoffs and the opportunity for higher paying jobs.

Economic development

In the wake of 9/11, the state received millions of dollars in federal funds to support employment-related programs. I am requesting that the Legislature authorize us to spend $20 million of that money on the Workforce Development Act, which will improve access to job training for workers across the state so businesses have the workforce needed to take full advantage of our growing economy.

In addition to providing training and educational opportunities for our residents, we must continue building a business environment in which they can succeed.

Our Department of Commerce and Consumer Affairs has cut fees and assessments that will total $10 million by the end of this fiscal year, and I want to give them the flexibility to make more cuts in the years ahead.

But there are more fundamental business issues we need to address this year.

First, I want to stem the outflow of successful start-up companies by increasing investment capital. I am asking you this year to implement the State Private Investment Fund that you passed in outline form last year. This novel investment approach will provide financing to take promising companies beyond the start-up stage.

And, in response to the business community's plea for reform of the workers'-compensation system, I am again introducing a balanced, common-sense package of changes that will bring costs under control while ensuring that workers receive the benefits they need.

Additionally, I will propose $196 million in tax savings for businesses by lowering the unemployment insurance tax wage base. This action will provide more money for Hawai'i's businesses to increase employee wages, expand benefits and create additional jobs in the private sector.

Traffic

Traffic, has become a significant drain on the economy as well as on the quality of our personal and family lives. There is no single, easy answer to this daily frustration.

Our Department of Transportation has taken steps to reduce and manage traffic through various projects, but it is not enough and we know it. The department will carry out a combination of new programs, such as the Freeway Patrol Service that will begin by late summer, as well as major highway improvement and expansion projects on all islands.

I am honored that we are joined today by the state's mayors, including Honolulu's new mayor, Mufi Hannemann. Both Mayor Hannemann and I have been supporters of mass transit on O'ahu, and his election offers us an opportunity to look at that issue again.

The final point I will make on traffic is to inform you of my decision not to use money from the state highway fund in order to balance the general fund budget even though you authorized the transfer last year.

The Department of Transportation is working hard to keep Hawai'i on the move, but we need to use this highway money for repair, maintenance and construction of our roads and highways, and for no other purpose.

We are committed to investing $40 million to be repaid over time by the proposed Superferry that will provide a new interisland passenger, cargo and vehicle transportation alternative.

Long-term care

We face a growing problem as more of us reach the age when we may require long-term care. Today, 127,000 of our residents are 70 years or older. By 2025, the number will be 209,000, a 64 percent increase. We ignore this fact at our peril. Time will not stop while we search for the perfect solution.

I am proposing that we give incentives to individuals who take personal responsibility for their later years by purchasing insurance. I am suggesting a tax credit of up to $1,000 per year for persons who purchase long-term-care insurance, and I want to provide tax incentives for employers who purchase such insurance for their employees.

Crime

The Law Enforcement Coalition of Hawai'i, under the able leadership of Attorney General Mark Bennett, has proposed measures to protect our kupuna, keiki and communities from sex offenders, drug dealers and career criminals. I pray the Legislature will take action this year to support our law enforcement personnel in their efforts to keep Hawai'i safe.

Support for troops

I don't want to end without mentioning our fellow citizens who are serving in the regular military, reserve and National Guard, especially those serving in combat zones.

Both the administration and the Legislature will offer specific bills this session to help the military and their families.

These tax relief and other measures to help military families are important gestures for us to make. But I believe there is something far more significant we can do to honor the sacrifice they are making for us, our state and our nation.

We can honor their service by minimizing the politics this session and by keeping our focus on their families and families across our state.

Opportunities

Not many expected that the first year or two with a new governor would go very smoothly, and the public has been patient with us. The people have given us a couple years to get to know each other and now they want results. They want leaders who compromise to achieve common goals.

This is our time — yours and mine. Let's not squander these opportunities.