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Editorial | Island Voices

Don’t let Legislature keep budget surplus; keep refunds instead

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One of the questions voters will face on the Nov. 2 general election ballot is whether lawmakers should be allowed to deposit future budget surpluses into a rainy day fund instead of refunding them to taxpayers, as is currently required by the state Constitution.

While putting money away for unforeseen emergencies may sound prudent, voters need to take a closer look at the possible consequences of removing this provision and the reason why the mandatory refund provision was adopted. A careful reading of the proposal provides that it is an "either-or" proposition, not both.

Voters should understand that the 1978 Constitutional Convention added the mandatory refund provision in conjunction with the limit on state general fund expenditures. The latter provision was viewed as an even-handed means of dealing with the spiraling cost of state government, and was an alternative to the popular limit on tax revenues known in California as Proposition 13.

Constitutional Convention delegates reasoned that state general fund spending should be allowed to grow at the same pace as the economy that is called upon to support that level of government.

They also reasoned that since Hawaii was already known for being among the states with the highest per capita tax burden, sooner or later the growth in tax revenues would outpace the limits of the state spending ceiling.

Thus, the refund provision was adopted to mandate that whenever the state’s general fund balance or surplus exceeds 5 percent of the revenues taken in during the previous fiscal year for two consecutive years, the next Legislature must pass a tax refund or a tax credit.

How much and the form it took was left up to the Legislature. It was more important that a red flag was waved, telling taxpayers they were contributing more in taxes than was needed to operate state government. As taxpayers have seen over the years, lawmakers really don’t want to give the money back — or, for that matter, reduce the burden of taxes as they complied with the refund mandate by doling out a token dollar as the refund.

Given the Legislature’s track record, the proposed amendment would sanitize what it has been doing for years: tucking your hard-earned tax dollars away in special funds or raising taxes that were formerly general fund receipts and earmarking them for special funds in order to get around the general fund spending ceiling.

In fact, when one thinks about it, why hasn’t the Legislature been putting surplus dollars away in a rainy day fund during all those years when there was a surplus? What did it do with the rest of the surplus dollars when it did provide for a $1 tax refund credit?

As the proposal reads, the Legislature would be allowed to put the surplus money into a rainy day fund instead of making a refund of those surplus funds.

If the Legislature is truly sincere about putting money away for unforeseen circumstances, it does not need a constitutional amendment. All that it would take is fiscal discipline — something that the Legislature has failed to prove that it has.

Further, as we taxpayers have seen, these special funds — including the current rainy day fund — have become nothing more than targets for legislative raids to shore up programs and services that probably should never have been created in the first place.

Continuing to impose a heavy burden of taxes and then not returning surplus funds means taxpayers will have less in their pocketbooks; there will be fewer dollars in the economy to create the jobs and new industries that our families need. Without the mandatory refund provision — even if it were only a dollar — the fact that state government is taking too much from taxpayers would fly under the taxpayers’ radar screen.

This constitutional amendment would legitimize the fiscal hanky panky that has become the practice for state government.

Vote "no" on this amendment.

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