State’s budget surplus could evaporate quickly

How good is the good news from the state’s Council on Revenues?

The seven-person, semi-autonomous group is supposed to figure out future tax collections. Then the governor and the Legislature use that prediction to announce if we are on a beer or champagne budget.

For instance, the collection for fiscal year 2016 came in higher than forecast: it was 8 percent instead of the 6.1 percent estimate. Missing your target on the plus side is theoretically a good thing.

Add the newly found money with the new forecast increase for fiscal 2017 from 5 percent to 5.5 percent and we appear to be swimming in good news.

“The level of the new forecast for FY 2017 is 2.3 percent higher, or roughly $145 million more than that reported from our meeting of May 24,” the Council said in its Sept. 9 report.

While there are those of us with the immediate inclination to spend the money before someone does the math again, the Legislature does have some adults in the room.

Even the Council on Revenues said in its report that there is “uncertainty about the future.”

“The economy may have reached the end of its current expansionary cycle,” said the Council report, also warning that “the construction cycle may have peaked.”

State Rep. Sylvia Luke, the Finance Committee chairwoman and one of those aforementioned adults, agreed that previous “doom and gloom economic reports” may not have included Hawaii’s economy in the bad news.

“Especially now, we are not impacted,” Luke said in an interview.

What is happening, Luke said, is that everyone keeps referring back to the Gov. David Ige administration announcement that the state was packing a $1 billion surplus.

“This is what the previous administration also bragged about and it is something that existed on Day One of June 2016,” Luke said.

Since then, the Liliha Democrat said, much of the surplus has already been spoken for. In other words, plans to spend cash instead of bonds for state construction projects and plans to increase the payout for unfunded liabilities are already gnawing away at that surplus.

“It gives a very false sense of where the economy and state are. We don’t want to give the impression that there is all this money,” Luke said.

If there is money to be spent, Luke said it should go for one-time purchases such as attacking the $500 million repair bill at the University of Hawaii and should not go to launch new programs.

“When we get into session, I want to dispel the notion that we have $1 billion,” she said.

To help with that, the Council on Revenues’ latest report also notes that a series of tax credits and law changes from the last legislative session will add up to a loss of at least $19 million next year and much more in the future.

Finally, waiting in the wings are the still-unknown collective bargaining costs: the amount of money needed for the expected public worker pay increases.

Luke said it is expected that Ige will be agreeable to some increase, describing it as something “that is not likely to break the bank.”

All in all, for legislators watching the state’s good budget news, there is still more caution than glee.

Richard Borreca writes on politics on Sundays, Tuesdays and Fridays. Reach him at rborreca@staradvertiser.com.