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The Honolulu Advertiser
Posted on: Friday, April 23, 2010

Hawaii lawmakers agree on $10.2 billion budget

By Derrick DePledge
Advertiser Government Writer

State House and Senate leaders reached agreement last night on a $10.2 billion state budget, but they will not decide until today whether they need to take hotel room tax revenue from the counties to close the deficit and balance the state's six-year financial plan.

Budget negotiators last night were still calculating the savings from spending cuts to state programs and new revenue generated by several tax-related bills. If lawmakers determine they still have a hole, they could scoop some of the roughly $100 million in hotel room tax revenue that goes to counties each year.

County mayors have asked lawmakers to avoid taking the revenue, warning that it could result in higher property taxes and cuts to county programs.

"It's still slightly up in the air right now," said state Sen. Donna Mercado Kim, D-14th (Hālawa, Moanalua, Kamehameha Heights), the lead Senate budget negotiator.

"We're cranking the final numbers on the revenues we have in play right now,"said state Rep. Marcus Oshiro, D-39th (Wahiawā), the lead House budget negotiator. "We're also walking through some of the other bills still out there for consideration, so we just want to keep it there."

The supplemental budget, which will go before the full House and Senate for final approval, is $10.2 billion for the fiscal year that begins in July. The general-fund portion of the budget, over which lawmakers have the most control, is $4.9 billion.

The budget draft is $75.6 million higher overall than Gov. Linda Lingle's recommendation in December, but $40 million less in general-fund spending. The actual difference in general-fund spending, however, is minimal depending how Medicaid adjustments are counted.

The budget depends on separate tax- and fee-related bills to help close the state's $1.2 billion deficit through June 2011 and balance the six-year financial plan. Several tax and fee increases have already been approved and sent to Lingle including an increase in the barrel tax and negotiators presume that the Senate will follow through next week and vote to restrict high-technology investment tax credits and itemized tax deductions on the wealthy.

Today, along with the hotel room tax, lawmakers will also consider how much money to divert from special funds and a tax conformity proposal to help with the deficit.

Midnight is the deadline to have bills ready for final approval before lawmakers adjourn next week, so several other decisions, such as how much money from the state's hurricane relief fund should be reserved to reduce teacher furloughs, will also likely be made.

Lawmakers spared the state Department of Education from deeper spending cuts than Lingle recommended but took more money from the University of Hawai'i. The budget draft would cut an additional $7.5 million from the university on top of the $56 million reduction the governor proposed.

Lawmakers added $3.4 mil-lion for an updated per-pupil spending formula for charter schools, along with $1.9 million for facilities costs.

Lawmakers also restored $3 million the governor had proposed cutting from public libraries.

Budget negotiators added $1.3 million for specialty courts and service contracts in the Judiciary. Lawmakers also restored state positions for agriculture inspectors, child protective services and welfare case managers.

Budget negotiators also reached agreement on a $1.7 billion capital improvement projects budget, which includes $48 million for the development of the University of Hawai'i-West O'ahu.

House and Senate leaders avoided a broad-based tax increase to balance the budget, and both Kim and Oshiro dismissed talk from a handful of senators and Democratic activists of a late move to adopt a general-excise tax increase.

"There is no general-excise tax that is part of this budget," Kim said. "And I'm happy about that. ..."

Undeterred, several senators have circulated a proposal to increase the GET by 1 percentage point but offer tax credits to shield the poor and middle class.

State Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui), said the idea could be adopted if lawmakers discover in the next few days that the budget hole is larger than anticipated.

"I think at some point, sooner rather than later, we're going to need additional revenue," she said.