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Thursday, August 21, 2014         

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Gov pushes budget fix

Abercrombie's revised draft restores funds to meet legal requirements and aid "neglected" programs

By Derrick DePledge

POSTED:


Gov. Neil Abercrombie released a new two-year budget draft yesterday that increases spending to repair what he described as structural problems with state government and the "wreckage" left by the Lingle administration.

The new draft recommends $11.4 billion in spending for fiscal year 2012, a $490.8 million increase from the governor's initial budget submittal in December, and $11.3 billion in spending in fiscal year 2013, a $237.8 million increase from December. The spending plan is 5 percent higher in fiscal year 2012 and 2 percent more in fiscal year 2013.

Abercrombie, who took office in early December, based his initial budget on figures left by former Gov. Linda Lingle. The new governor at first sought to avoid blaming Lingle for the state's budget challenge but has increasingly spoken more harshly about her choices, particularly her decision to delay state tax refunds last year to reduce the deficit on paper.

"If you look at what the previous administration did, I mean, that's hopeless. That wasn't a budget. That was a fiction," Abercrombie told reporters at a briefing at the state Capitol.

State House Minority Leader Gene Ward (R, Kalama Valley-Hawaii Kai) said it is unfair for Abercrombie to blame Lingle, who guided the state through the worst of the recession. "They were not structural wreckages. They were structural adjustments to a global financial meltdown," he said.

IN THE BUDGET

Gov. Abercrombie has called for new or restored spending on state programs he believes were neglected. Here are the highlights:
$24.3 MILLION for student transportation, nursing services, charter schools and an Early Learning Council
$20 MILLION for community colleges and the University of Hawaii at Hilo
$17.1 MILLION for the Preschool Open Doors program and a new computer-based Medicaid eligibility system at the state Department of Human Services
$9.2 MILLION for the restoration of the Office of Juvenile Justice and Delinquent Prevention, maintenance costs and emergency management support at the state Department of Defense
$4.8 MILLION for the Hawaii Film Office, restoration of the community assistance branch and small-business research grants at the state Department of Business, Economic Development and Tourism

Abercrombie's new budget draft reflects legal requirements to provide Medicaid to migrants from Micronesia, the Marshall Islands and Palau, higher welfare expenses, a deferred contribution to the Employees' Retirement System and the state's agreement to cover 60 percent of public-worker health care premiums.

The draft also contains the governor's initiatives — $41.8 million worth in fiscal year 2012, $56.5 million in 2013 — for state programs he believes have been neglected.

The recommendations include $24.3 million for student transportation, nursing services, charter schools and an Early Learning Council; $20 million for community colleges and the University of Hawaii at Hilo; and $17.1 million for the Preschool Open Doors program and a new computer-based Medicaid eligibility system.

The general-fund portion of the budget draft, over which Abercrombie and state lawmakers have the most control, is $5.7 billion for fiscal year 2012, a $133.8 million increase from December, and $5.9 billion in 2013, a $160.3 million increase. The general-fund spending increase is 2 percent higher in fiscal year 2012 and 3 percent more in 2013.

Abercrombie also proposed significant new spending on bond-financed capital improvement projects, $1.2 billion more in fiscal year 2012 and $503 million more in fiscal year 2013. The new construction budget includes $90 million for maintenance and health and safety improvements at state facilities and Aloha Stadium; $196 million for the state Department of Education, including a new Ewa Makai Middle School and a new Keaau Middle School classroom building; and $80 million for capital renewal in the UH system.

"We owed the people of the state a clear, comprehensive examination of where we are, where we need to go and how we need to get there," Abercrombie said of the budget update. "We need to make structural change in order to survive, if we do not want to end up mimicking what's going on on the mainland right now with dramatic confrontations of one kind or another, leaving the average person feeling as if they're totally left out of what's going on and that they are utterly victims of economic and social forces beyond their capacity to deal with."

The budget draft presumes the state Legislature will accept some of the governor's tax revision and spending cut proposals to close a projected two-year deficit of $700 million.

The governor hopes state lawmakers will agree to repeal a state income tax deduction, impose a tax on pension income, raise the alcohol tax, establish a soda tax and hike taxes on time-share properties. He also wants to reduce welfare and Medicaid services, eliminate state Medicare Part B reimbursements for retired public workers and achieve 5 percent labor savings in contract talks with public-sector unions.

Several of these proposals have not been embraced by lawmakers and appear unlikely to pass as submitted by the governor. Kalbert Young, the state's budget director, said the budget draft includes a cushion because it does not take into account the state Council on Revenues' December forecast — which reduced the projected deficit by nearly $150 million, to $700 million — or the potential use of state's rainy day fund or hurricane relief fund as options.

Abercrombie and Young will brief the state House Finance Committee and the state Senate Ways and Means Committee this morning on the updated budget draft.

State House Speaker Calvin Say (D, St. Louis Heights-Wilhelmina Rise-Palolo Valley) questioned whether Abercrombie's target of 5 percent labor savings is enough. A 5 percent cut is equivalent to one furlough day a month.

House and Senate leaders were reluctant to trust Lingle in 2009 when she set a target for labor savings in contract talks. The labor savings Abercrombie is proposing — $88.2 million a year — are among the largest of his spending cuts, yet negotiations with unions might not be finished by the time lawmakers typically approve the state budget before adjourning in early May.

"I think they might play a waiting game," Say said of the unions.

State House lawmakers are looking at other revenue-generating options, such as eliminating general excise tax exemptions and reducing tax credits, to help with the deficit if Abercrombie's ideas falter. Say said a general excise tax increase, the broadest of all tax options, is not being considered.

Abercrombie, who said he would not raise the GET during his campaign last year, also dismissed the GET option yesterday. He said raising the GET — by 1 percentage point, for example — would not be enough alone to close the deficit and would likely postpone the structural changes he believes are necessary to repair the state's finances.

The governor described a GET increase as the worst option because it is regressive and could undermine business expansion. "I think that if we rely on the GET tax as some kind of solution, we will avoid ever coming to grips with the structural changes that we need to make," he said.






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