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Wednesday, November 26, 2014         

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Isles face own fiscal cliff as many expect sizable drop-off in federal funds

By Rob Perez

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When University of Hawaii engineering professor Panos Pre­ve­douros as­ked his students to examine the impact of various potential disasters on Oahu, two groups looked at a major tsunami, two focused on a severe hurricane, one dealt with the shutdown of the island's power grid from a massive electromagnetic pulse and another analyzed the shock from soaring oil prices.

Prevedouros gave a seventh group a different calamity to evaluate: the economic fallout from the possible retirement of U.S. Sen. Daniel Ino­uye.

That the late senator's departure from the nation's Capitol would be considered a disaster for the purposes of the UH class assignment reflects what many people in academic, government, business and other circles around the state contend:

Hawaii stands to lose a lot economically from Ino­uye's death this week.

As appropriations chairman for the Senate, the 88-year-old World War II veteran helped steer billions of dollars of federal money into Hawaii's economy. His seniority as the longest-serving member of the Senate also added to his influence in funding Hawaii projects and programs, helping create thousands of jobs over the years.

At a time when Congress is focusing on how to cut federal spending, losing a senator with such heft and replacing him with a new member lacking his clout and stature will result in lean years ahead, analysts and others say. One likened it to Hawaii's version of a fiscal cliff.

The outlook is exacerbated, they added, because Hawaii is losing many years of seniority with the imminent retirement of U.S. Sen. Daniel Akaka, leaving two rookie senators to look after Hawaii's interests in that body, even as senators from the 49 other states push for their own favored projects.

But it's the absence of Ino­uye, given his powerful position as the Senate's money chairman and his understated way of getting things done, that will have the most effect on the federal spending flow to the islands, according to local and Washington, D.C., observers.

"His shoes will be very tough to fill," said Steve Ellis, vice president of Taxpayers for Common Sense, a Washington-based government watchdog group. "Certainly, he casts a very long shadow."

"I'm sad to say that we're going to feel (the impact) in the years ahead," said Walter Dods, former First Hawaiian Bank chief executive officer and a longtime friend of Ino­uye. "Time will show us just how important Dan Ino­uye was to Hawaii."

INOUYE'S ABILITY to bring home the federal bacon — sometimes applauded, sometimes criticized — often was noted by his top rankings in recent years for securing earmarks, or pork, for Hawaii programs.

In fiscal year 2010, the last year Congress used earmarks, Hawaii received the most on a per-capita basis, and most if not all of that was due to Ino­uye, according to Ellis' group.

But once Congress stopped using earmarks, Ino­uye's ability to secure appropriations relative to other members of Congress actually may have increased, according to Jock Friedly, president and founder of Legi­Storm, another Washington-based watchdog group.

Earmarks essentially went underground, and projects sought by congressional members were funded by persuading the executive branch to include money in its budget proposals to Congress, Friedly said.

Inouye's requests likely received priority.

"You always listen to the appropriations chairman," Friedly said. "Anybody in Washington had to take his phone call."

Getting a phone call from a new Hawaii senator without a powerful chairmanship won't have the same effect, the analysts said.

"It's possible that agencies will feel less need to send money Hawaii's way," Friedly said.

"It's not like the federal government is going to forget about Hawaii entirely," added Ellis, who was born at Tripler Army Medical Center and spent a few years on Oahu, where his Navy father was stationed. "But it will be more on the margins, where (Hawaii) probably won't do quite as well."

Inouye is credited with helping steer funding to programs and projects in virtually every sector of Hawaii's economy, from the military and agriculture to education and health care.

The funding did not come just from earmarks. Millions more were included in budget items that have become integral parts of federal agency operations.

Dods said Inouye knew the day would come when he was no longer in Washington and worked hard to establish programs with long-lasting impact that would survive even after he was gone.

In 1995, for instance, Ino­uye helped establish the Waikiki-based Asia-Pacific Center for Security Studies, a Department of Defense institute that focuses on building cooperation between nations in the Pacific on security issues.

The institute employs about 130 faculty and support staff and has an annual budget of roughly $16 million, according to Mary Mar­ko­vi­no­vic, chief of public affairs for the organization.

Inouye, as one of the organization's founding fathers, was at the Waikiki campus in August for the ribbon-cutting marking the opening of a new 10,000-square-foot wing of classroom space.

Unlike some agencies that were funded through earmarks, the center gets its operating money through the regular DOD budget and expects to continue getting funding in the years ahead, remaining part of Ino­uye's legacy, Mar­­ko­vi­no­vic said.

"We're very much an established institute," she said.

Agencies and organizations that relied on Ino­uye's patronage for regular funding might not be in the same position because it likely will be harder to direct money to Hawaii, analysts said.

"In the overall jockeying for federal spending, particularly in this tough budget climate we're in, Hawaii will not be as well positioned to do that," Ellis said.

The six graduate students who worked on the two-month Ino­uye project for Pre­ve­douros' cl­ass focused on the senator's ability to secure earmarks and described him as a key economic player for the state.

They concluded that losing Ino­uye as a senator would equate to a loss of up to $450 million annually, or akin to losing the revenue and jobs of a company the size of Hawaiian Airlines, according to their November analysis and Pre­ve­dou­ros.

He said the students received an A- for their assignment.






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