Legislature set to open amid mild economic recovery

Steady revenue growth from Hawaii’s tourism-driven economic recovery may tempt state lawmakers this session to satisfy some of the pent-up demand for state spending since the recession, but lawmakers do not have enough confidence in the economy for much of an expansion.

The 60-day session of the Legislature opens Wednesday as the state enjoys a modest budget surplus, lower unemployment, and indications that the construction and housing sectors of the economy will rebound as tourism has.

While lawmakers have reason to be optimistic as they work with Gov. Neil Abercrombie on a two-year state budget, they are also apprehensive. The state will have to put aside money to cover new contracts with public-sector labor unions that expect raises now that the recession is over.

Federal spending cuts in a debt-reduction package Congress is likely to approve this spring could be trouble for a state so dependent on federal money. The death of U.S. Sen. Daniel Ino­uye, former chairman of the Senate Appropriations Committee, could also cause what the state’s budget director called the "Ino­uye cliff," the loss of federal dollars that the Hawaii Demo­crat had reliably brought home for the past half-century.

Both the House and Senate will have new leaders who will likely be tested at a state Capitol restless for change. Senate President Donna Mercado Kim replaces Shan Tsu­tsui, who became lieutenant governor after Brian Schatz was appointed by Abercrombie to succeed Ino­uye in Washington, D.C. Rep. Joseph Souki is expected to become House speaker through an unusual coalition of dissident Demo­crats and minority Republicans who pushed out House Speaker Calvin Say after a record 14 years in power.

Kim, who is known as a tough interrogator with little patience for excuses, said the state should ensure that core education and social service programs are solid before expanding.

"I want us to reassess what we have, what projects we have, what initiatives we have, and look at how we can do it better," said Kim (D, Kalihi Valley-Moana­lua-Halawa).

Souki, ousted as speaker by Say in 1998, may have to temper the expectations of dissident Demo­crats who have waited so long to remove Say and are eager for a more progressive agenda.

"There’s going to be a period of adjustment," said Souki (D, Wai­hee-Wai­ehu-Wai­luku). "But I think we’re just going to be doing what’s right for the state."

ABERCROMBIE’S budget draft — $11.7 billion for fiscal year 2014, $12 billion for fiscal year 2015 — includes spending for early childhood education, information technology and the unfunded liability in the public worker health care fund.

The Abercrombie administration and House and Senate leaders agree that the focus of the session should be on economic recovery and the incremental steps necessary to keep the state on course to eventually achieve greater food and energy security.

"We’re still trying to concentrate on stimulating the economy," said Senate Majority Leader Brickwood Galu­te­ria (D, Kakaako-McCully-Waikiki).

But several other policy questions could dominate:

» Early childhood education. The governor wants lawmakers to approve money to cover about 3,500 4-year-olds in fiscal year 2015 in state-funded preschool, a program that if successful could expand for a decade to serve all of the state’s 18,000 4-year-olds. But lawmakers have reservations about whether the state can ensure quality and accountability to justify the costs.

» Budget reserves. The administration wants to replenish the state’s hurricane relief fund and rainy-day fund and also begin to address the unfunded liability in the public worker health care fund with prepayments of more than $100 million a year. Lawmakers share similar goals but may be less aggressive in diverting such large amounts of money.

» Solar tax credits. Lawmakers will decide whether to undo or revise the administration’s limits on a renewable energy tax credit that environmentalists and the solar industry argue are too restrictive and potentially illegal. The solar tax credit could cost the state about $174 million for 2012, up from $35 million for 2010.

» Public Land Development Corp. Lawmakers could repeal or substantially reduce the powers of the PLDC, which was given broad exemptions from land use, planning and zoning laws to develop public land and generate new revenue for the state.

» Election reform. The delay in precinct openings in Hawaii County during the August primary and ballot shortages on Oahu during the November general election may prompt lawmakers to push for greater state oversight of elections. The governor has called for all-mail elections.

» University of Hawaii accountability. The university’s botched handling of a concert scam could lead lawmakers to reconsider the degree of UH autonomy and carefully scrutinize the university’s budget request.

Souki said he would like to do more to address social issues such as homelessness and access to mental health services. He would also like to see structural changes to the Hawaii Labor Relations Board, which he contends takes too long to resolve disputes such as the fight between the teachers union and the governor over a contract imposed in 2011.

BOTH Souki and Kim have supported legalized gambling in the past, but they said they would not try to use their new leadership authority to advance legislation unless it had broad support from lawmakers.

House and Senate leaders also said they doubted this would be the session to resolve contentious social issues such as same-sex marriage, physician-assisted suicide or gun control. Lawmakers may consider decriminalizing marijuana in small amounts or improving the state’s medical marijuana program so patients have greater access to the drug.

Rep. Scott Saiki (D, Downtown-Kakaako-McCully), who is expected to become House majority leader, said the House would not be afraid to debate difficult issues and would allow lawmakers to vote their consciences instead of dictating the outcome.

"The House is willing to look at the hard issues," he said. "I’m not saying that we’re going to pass anything, but we’re willing to air those issues."

Democrats hold massive majorities over Republicans — 44 to 7 in the House and 24 to 1 in the Senate — but the GOP could have more meaningful opportunities to participate this session.

House Minority Leader Aaron Ling Johanson (R, Fort Shafter-Moana­lua Gardens-Alia­manu) is expected to become a vice chairman of the powerful House Finance Committee, one of three vice chairmanships Republicans have been promised for their alliance with Souki and the dissidents.

Senate Minority Leader Sam Slom (R, Diamond Head-Kahala-Hawaii Kai) was invited to serve as vice chairman of the Senate Economic Development, Government Operations and Housing Committee.

Johanson said Republicans would oppose tax increases that disproportionately fall on the poor or the vulnerable, support lifting the tax burden on family-owned small businesses, and do more to help military veterans, particularly those suffering from post-traumatic stress disorder.

"I think, at the end of the day, what the people want are common-sense leaders who work to find common ground," he said.

Slom, too, will seek state incentives to support and expand business and limit new taxes. He has also been among the first lawmakers to publicly oppose Abercrombie’s state-funded preschool plan.

"The costs are tremendous. The benefits, I think, are at least debatable," he said. "We should be improving our existing educational system, which is one of the worst in the nation."

For Capitol insiders the most interesting dynamic could be the relationship between Kim and Souki as debates funnel into conference committee negotiations before the session ends in early May.

Kim and Souki both entered the House as freshmen in 1982 — a time of recession — and are considered more practical, and less ideological, than many of the colleagues they will lead.

Souki has to deliver on the progressive and transparent leadership that his coalition of dissident Demo­crats and Republicans has promised.

Democrats who served in the House when Souki was speaker in the 1990s, or who have crossed him on a vote when he was chairman of the House Transportation Committee, describe him as a clever autocrat with little tolerance for dissent.

Souki, aware of his reputation, said his leadership style has changed.

"There’s certainly not going to be no arm twisting," he said. "That day is gone for me."