The death of longtime U.S. Sen. Daniel Inouye has created an economic cliff in Hawaii that’s far worse for the state than the federal fiscal cliff, Hawaii’s finance director said.
Kalbert Young told a joint committee hearing at the state Capitol that what he calls the “Inouye cliff” is immeasurable and could be seen over several years.
“It’s like trying to figure out which way the wind’s going to blow tomorrow,” Young said in an interview after the hearing before the Senate Ways and Means and House Finance committees.
Nearly one-fifth of state expenses, $2 billion, are paid for with federal funds. That does not include, Young said, federal money spent on nonprofits, vendors and other non-government entities in Hawaii.
It’s not clear, given a Senate moratorium on earmarks, how much Hawaii stands to lose in future federal funds simply because of Inouye’s absence. He was replaced last week by Brian Schatz, the state’s lieutenant governor. U.S. Sen. Mazie Hirono was sworn in today after winning an election in November to replace Daniel Akaka, who retired.
Inouye died Dec. 17 at age 88 after 50 years in the U.S. Senate.
Inouye was known as an economic pillar in his home state, using his influence in Washington to steer federal funds toward projects back to Hawaii.
Republican state Sen. Sam Slom was one of several lawmakers questioning what the loss of Inouye would mean to Hawaii as it considers its two-year budget.
Slom said the state already has to consider what cuts may be on the table from Congress even after it raised taxes on wealthy Americans this week to avoid wider tax increases for most of the rest of the nation.
“Some of us don’t believe that the fiscal cliff has even been approached. The loss of Sen. Inouye is a tremendous economic blow to this state and will be when some of the economic expenditures … run out,” Slom said.
Inouye’s absence and changes because of the federal fiscal cliff negotiations could be felt right away but probably will not be fully felt until fiscal year 2015, Young said.
“We want to prepare and step into it,” Young said. “I wouldn’t propose that we cut off everything immediately.”
The two-year budget proposed by Gov. Neil Abercrombie’s office anticipates as much as $45 million in federal spending could be lost as Congress considers how to deal with rising debt and costs.
The budget includes $11.8 billion in total spending for fiscal year 2014 and $12.1 billion for fiscal 2015.