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Hawaii News

Tax refund delay raises state fund by 3.9 percent

Gov. Linda Lingle’s highly criticized move of delaying tax refund payments until after the start of the new fiscal calendar resulted in a higher general fund balance for the recently concluded fiscal year.

The "adjusted" general fund balance of $4.37 billion for the fiscal year that ended June 30 was 3.9 percent higher than a year ago, but it includes $187.4 million in corporate and individual tax refunds that were not returned to taxpayers.

When the withheld refunds are factored out, general fund deposits actually decreased by 0.5 percent, according to preliminary figures released this week by the state Tax Department.

The adjusted general fund balance is in line with the May forecast from the state Council on Revenues, which predicted an increase of 4 percent when factoring in the withheld tax payments. The Council noted that future forecasts would be affected depending on whether future administrations continued the practice of withholding refunds until after July 1.

When she released her budget in December, Lingle said the financial plan was balanced in part by withholding $275 million in tax refunds. As the economy improved and tax collections began to rebound, Lingle announced in May that the state would begin paying refunds to taxpayers who filed in January and February.

Lingle’s budgeting was criticized by lawmakers.

House Finance Chairman Marcus Oshiro (D, Wahiawa-Poamoho) said Lingle was kicking the can down the road for future administrations to handle, while Senate Ways and Means Chairwoman Donna Mercado Kim (D, Kalihi) described her budgeting at one point as a "shell game."

Both noted that unless future governors continued the practice of withholding refunds, the Legislature would have to find the money to plug the hole it would create in the budget.

It prompted the Legislature to pass a measure requiring the state to pay interest on tax refunds not released within 90 days of the filing deadline. Lingle signed the bill June 23.


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