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The Honolulu Advertiser
Posted on: Sunday, January 17, 2010

Search for revenue looms as top mission

With the state trying to dig itself out of a dreadful economy, almost all the issues confronting lawmakers this session point back to the same thing: generating revenue to pay for the things the state needs to operate effectively. Definition: expect higher taxes of some sort.

And it's an election year. From an elected official's viewpoint, could there be a worse nightmare scenario?

Nonprofits, lobbyists and interest groups, many of which suffered cuts last year, will be back with hat in hand after the Legislature convenes on Wednesday. More cuts seem likely, but insufficient to deal with the shortfall of $1.2 billion in the budget biennium that ends in June 2011.

So, one way or another, the people of Hawai'i are certain to be asked to pick up more of the tab.

But as lawmakers tackle the politically distasteful imperative of restocking state coffers, they should remember that they are accountable to the taxpayers. They must achieve maximum efficiencies in spending and see that new sources of revenue are tapped with the minimum long-term impact on recession-weary individuals and businesses.

House Speaker Calvin Say has the right idea about one aspect: Retain and create jobs, and the state will also create tax revenue it desperately needs to pay for essential services.

That's why, he said, high on the agenda will be finding ways to finance infrastructure projects that will put people back to work quickly. And to ensure that such projects really do ramp up promptly, legislators will consider important changes to state laws that will enforce stricter deadlines on resolving disputes over development contracts.

This makes sense. Anything that can be done to keep projects from becoming bogged down in the slurry of bureaucracy means paychecks will be cut sooner, taxes will be paid, and an infusion of new money can pump life into a moribund economy. In general, partnerships with private companies can stretch limited public dollars and should be pursued.

But there are also more direct sources of revenue that are sure to be considered. Among them is a hike in the general excise tax, an already weighty assessment tacked on to every transaction, compounding costs from production to wholesale to retail cycles.

Increasing any broad-based assessment like the GET should only be considered with clear constraints. Exemptions on groceries and prescription drugs transactions are necessary to contain cost increases for items that take a large bite out of family budgets, especially for lower-income groups.

Lawmakers also should put a fairly brief term on any increase, having it come up for review a year or two down the road, when the economy should be recovering.

And taxpayers rightly will have little patience for any tax hike unless they can be solidly assured that all other efficiencies and cuts have been made.

There's sure to be pressure to open the Pandora's box of legalized gambling, most likely through the enactment of a state lottery. Too often, gambling revenues are seen as an escape hatch, but the experience in other states with lotteries where those extra revenues haven't staved off fiscal disaster say otherwise.

Typically, lotteries siphon off money from those who can least afford it, and they set off a cascade of social ills, further straining the governmental safety net. It's a bad bargain.

And bad bargains run counter to the state's sustainability efforts. State Sen. Russell Kokubun, who has chaired the panel that developed the state's sustainability plan, hopes to have it enacted in statute this session.

There's no money to implement it now, he acknowledged, but making policy statements can be important during lean years as commitments to and belief in a better future.

That notion shouldn't be forgotten. The economic downturn is a crushing problem, but elected officials need to approach it as a challenge that can be overcome with measured solutions.

A patchwork of ideas, combining limited revenue boosts with partnerships that benefit both private companies and the public, should be embraced as a means to soldier through difficult months, allowing the state to ramp up again when fortunes start to improve.