The Lingle administration continues to pay for a $44 million accounting error last year.
The mistake in general-fund revenue calculations left the state with a $36.8 million budget deficit at the end of last fiscal year. This year, even after spending restrictions, furloughs, layoffs and delayed tax refunds and Medicaid payments, the state was unable to erase the error from the books and had a $22.3 million deficit when the fiscal year closed in June.
Although the deficit is relatively small considering the state was chasing a potential $1 billion shortfall over the past few years, Georgina Kawamura, state budget director, had to answer for it yesterday at a briefing before the Senate Ways and Means Committee.
The state Constitution does not explicitly mention a balanced budget, but states that general-fund spending should not exceed general-fund revenues unless the governor declares that the public health, safety or welfare is threatened. The governor and state lawmakers, for practical purposes, have presumed that a balanced budget is required.
Sen. Donna Mercado Kim (D, Halawa-Moanalua-Kamehameha Heights), the committee’s chairwoman, said there are no sanctions in the Constitution for having a deficit. But she questioned how the administration allowed the deficit to occur, and asked Kawamura whether she would have done anything differently if there was a "concrete consequence."
Kawamura said she believes the administration managed through the budget crisis well. She said, however, that some state department directors may have relaxed spending restrictions near the end of the fiscal year after the state Council on Revenues upgraded the state’s revenue forecast.
"We don’t know this until we close the books," she said.
Kawamura defended Gov. Linda Lingle’s decision in May to release $125 million worth of tax refunds that had been withheld because of budget concerns. Lingle had planned to withhold $275 million in tax refunds until July to get through the fiscal year with a balanced budget on paper, but released a portion early because revenue collections had improved.
Kawamura also outlined for the committee how much the state projects to save from furloughs and layoffs of state workers. The state saved $119.5 million from furloughs last fiscal year and expects to save $73 million this fiscal year, for $192.5 million for the two-year budget cycle. The reduced savings this fiscal year from furloughs is due to the cancellation of teacher furloughs after public outcry. Lawmakers and the governor agreed to use a portion of the state’s hurricane relief fund to end teacher furloughs.
The state saved $17.9 million from layoffs last fiscal year and expects to save $34.5 million this fiscal year for $52.4 million overall. Layoffs started several months into last fiscal year, which explains why the savings are expected to be greater this fiscal year.
Kawamura also said the state hopes to receive extra Medicaid money approved last week by Congress, which could help with an expected $70 million shortfall in the state’s version of the federal health care program for the poor. Lingle, who was among the state governors who asked for the extra Medicaid money, released a statement last week critical of Congress for taking money from food stamps and highways to help cover the Medicaid extension.
Kawamura said the administration continues to believe that structural changes to Medicaid, such as reducing benefits for some recipients or streamlining service delivery, are necessary to contain growing costs.