In her last State of the State address before she faces voters again, Gov. Linda Lingle seemed receptive to collaborating with the Legislature to find common ground on such issues as tax relief, affordable housing and health and dental insurance for the needy.

Her four-pronged tax relief package would put $258.1 million back into the hands of taxpayers through a combination of a credit, a refund, raising the standard deduction and expanding tax brackets. By her calculation, a family of four earning less than $50,000 would see $1,568 in savings.

"This is enough to pay a year's tuition at a community college with money left over for books, enough for a family to pay its electrical bills for a year, or enough to pay off the mounting credit-card debt that many are carrying," she said.

With the state anticipating a $574 million surplus, elected officials face a unique opportunity to spend money, rather than focus on where to cut. The Legislature unveiled its priorities last week, and yesterday was the governor's turn to report to lawmakers on the State of the State and the direction she thinks Hawai'i should be heading.

"I view it as a chance to literally have it all," Lingle said. "Perhaps not in the exact form and amounts that each of us wants, but surely we can manage to compromise now that the treasury is full."

After the speech, Democratic House leaders said they would hold public hearings for all of Lingle's bills and look for places to compromise.

"I enjoyed it," House Speaker Calvin Say said. "She was really trying to reach out to all of us."

However, Say had concerns about the "permanency" of some of Lingle's tax relief proposals because they would lead to a recurring loss for the general fund. He was more receptive to the idea of a one-time $150 refund. "I think that is something the Legislature should consider," he said.

The refund — which taxpayers would receive early next year — would not fulfill a constitutional requirement to provide a refund if the general fund has a surplus of more than 5 percent again next year. The state is required to return some money to taxpayers after two years of surplus, which would mean that taxpayers could be due a second refund after July 1, 2007.

However, the governor's office said that if the refund and other tax proposals are adopted, the surplus may not exceed 5 percent.

Lingle stuck to earlier statements that much of the surplus should be returned to Hawai'i residents.

"Now is the perfect time to share the results of this success with the people who made it possible — taxpayers who are struggling with the high cost of living, including skyrocketing housing prices and property taxes," she said before lawmakers assembled in the House chambers.

"It is also the time to address many unmet needs ... from dilapidated school buildings ... to a lack of access to healthcare ... to deteriorating public housing and a growing homeless population ... to overburdened transportation systems."

TAX BRACKETS

Lingle's first proposal, however, was to double the state's rainy day fund to $110 million to help pay for future unexpected events.

But the biggest proposal was to use about half the surplus for tax relief. "The bottom line is we are collecting income taxes from people who simply can't afford to pay them," she said.

Lingle agreed with Senate President Robert Bunda's proposals to expand tax brackets, and along with her proposal to raise the standard deduction to 75 percent of the federal level, she said it would save a family of four with an income of $50,000 about $568 a year.

"This proposal alone, however, is not enough to make a real difference for families coping with higher housing costs, higher property taxes, higher car registration taxes, higher gasoline bills, higher electricity rates, higher water and sewer bills, higher medical bills and higher food prices," she said.

She proposed a $100-per-person tax credit for families making less than $50,000 a year for food, medical services and non-prescription drugs, and a one-time tax refund of $150 per exemption for all but the highest-income residents.

Lingle also proposed ways to make homeownership possible for a greater number of residents in a state that ranks 48th in home ownership.

The governor wants to raise the qualifying income threshold for affordable homes to $94,850 and increase the rent subsidy from $160 a month, as well as raise the income limits to qualify for the assistance.

She also wants to increase state funds for affordable housing projects, modernize some existing public housing units and invest $20 million to help the homeless.

EDUCATION

In outlining her proposals for education, Lingle brought up a discrepancy between how much the Department of Education says it needs for construction and how much her Department of Budget and Finance says the public schools already have at their disposal. She proposes adding $90 million for school construction and repairs and maintenance, less than what the Legislature proposed last week.

However, while the governor and the schools differ on how much funding is needed for construction, the Board of Education issued a statement after the speech that noted one of its highest priorities — teacher recruitment — is one of Lingle's priorities, as well.

She also detailed a plan to address the teacher shortage, which includes creating a master teacher program to encourage national board-certified teachers to teach in underperforming schools for three years and an emergency certified teacher program to allow anyone holding a bachelor's degree to teach in their specialty as long as they complete the substitute teacher training program or a similar course.

In addition, she asked the Legislature to give charter schools their own district so they can compete for federal funds, as well as raise the cap on the number of charter schools to create seven schools that would use environmental education as their foundation.

NO SURPRISES

John Hart, assistant dean of communication at Hawai'i Pacific University, said the governor hit on all the issues he expected her to: economy, education, housing and sustainability.

"I thought it was a safe speech. I didn't see any surprises in it," he said.

He said the governor was correct in her assessment that the state of the state is relatively better, and he thought her proposals were to be expected from a Hawai'i Republican.

"It's a very moderate Republican response to say, 'Let's save some, let's cut taxes, let's have limited social programs with accountability,' " Hart said.

If he had any criticism of the speech, it would be in the lack of details on certain proposals. For example, he said, while she talked about the difficulties in renting and buying a home, "most of the tangible proposals deal with homelessness, which is related, but different."

Hart also noticed that the governor seemed to reach out to the Democrats in the Legislature. "She reached out to try to find common ground," he said. "That is smart."

Reach Treena Shapiro at tshapiro@honoluluadvertiser.com.