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The Honolulu Advertiser
Posted on: Friday, February 19, 2010

Too soon to give up on cutting costs

The easiest thing in the world to say is, let’s just raise taxes on the rich people.

The argument is an obvious one, that a couple making $350,000 a year wouldn’t even notice if their state income tax bill went up $1,400. By contrast, a $100 tax hit on a poor family making $30,000 a year would sting.
The argument ignores that fact that the wealthy couple is already paying $29,000 a year to the state of Hawai‘i, and they definitely notice. So does the poor family paying $1,500.
For both families, it’s a significant amount of money.
So let’s start with the premise that we don’t accept that raising taxes is the only sensible solution to Hawai‘i’s budget crisis.
It’s too soon to give up on the idea that $4.9 billion — the amount the state expects to collect this year in general fund revenue — isn’t sufficient to run government.
That’s just about the same amount collected in 2006, near the top of the boom.
Even acknowledging that everything costs more than it did four years ago, it still seems that we should be able to make $4.9 billion work.
As the Legislature began hearing testimony last week on several tax-increase measures, we remained unconvinced that the state’s leaders have finished the difficult and unpopular work of reducing the amount of money that the state spends.
People have been laid off and furloughed and programs have been killed. Bills haven’t been paid. Schools are closed.
It’s been tough, but we’re not done yet.
Gov. Linda Lingle’s proposed supplemental budget aims to close the $1.2 billion budget gap without the imposition of a broad tax increase, either in the general excise tax or the individual income tax.
But her plan relies too optimistically on "tightening up” tax collections to yield $80 million in new revenue.
Through the layoffs of about 1,200 state workers and furloughs of thousands more, the governor has managed to cut state spending by about $350 million.
Realistically, more cuts are probably going to be needed.
We believe less painful workforce reductions can be made through the accelerated retirements of state workers.
An estimated 10,000 members of the public employee retirement system, most of them state workers, are eligible to retire with full benefits, and another 4,000 could retire now with reduced benefits.
If only one out of every 10 of the fully eligible workers retired this year, it would save about $45 million.
While state and county workers are starting to retire at a quicker pace, their unions could do a lot to nudge more of them to enjoy the excellent retirement benefits they’ve accumulated.
Legislative leaders appropriately talk about keeping all of their options on the table.
But right now it seems as if the table is cluttered with dozens of options for raising taxes, with ideas for cutting costs already dropped on the floor.