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Budget plan delayed

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The Abercrombie administration might not send the Legislature its plan for closing the state’s budget deficit until as late as March, the interim state budget director said yesterday, acknowledging that the timetable is later than normal and asking state lawmakers for patience.

Kalbert Young, interim budget director, told the state Senate Ways and Means and House Finance committees at an informational briefing that the administration will likely make emergency spending requests to get through the fiscal year that ends in June within the next several weeks.

The emergency requests will include money to cover welfare and Medicaid costs, finance a new short-term agreement with public-sector labor unions on health care expenses, fund the offices of the governor and the lieutenant governor, and establish a reapportionment commission to set new legislative boundaries after the census.

But Young told lawmakers it could be as late as March before the administration details how it will reduce a deficit in the following two-year budget cycle. Gov. Neil Abercrombie, when he announced his budget draft in December, said the state was facing a $71.6 million deficit this fiscal year and a $771.9 million shortfall over the following two years.

The state Council on Revenues upgraded the state’s revenue forecast last week, so those deficit estimates will likely be lowered. But the state is still projecting a substantial budget gap.

"I recognize that you are probably expecting answers to questions about the state budget and financial plan," Young told lawmakers. "However, at this point in time, I’m asking for your patience and continued indulgence as the Abercrombie administration works through the process of developing a revised budget and balanced financial plan, which will require information gathering, analysis, dialogue and open communications among all affected parties."


State tax collections are down 5.5 percent through the first five months of the fiscal year, the state Department of Taxation reported yesterday, mostly due to the Lingle administration’s decision last year to delay state income tax refunds to help with the budget deficit.

Without the impact of the refund delay, revenues would be up 5.3 percent through November.

General excise and use taxes, the state’s largest category of tax revenue, are up 4.4 percent over the same period last fiscal year.

The state Council on Revenues has predicted that the state will finish the fiscal year in June with 3 percent growth.

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House and Senate leaders are inclined to give Abercrombie and his new administration leeway, since his budget draft is based largely on Lingle administration figures. But lawmakers are starting to ask some pointed questions.

The House usually prepares a review of the governor’s budget by mid-March and moves a draft over to the Senate, which then completes a review and a draft. Lawmakers meet in conference committee before sending the budget back to the governor for approval.

State Rep. Isaac Choy (D, Manoa), who serves on the House Finance Committee, said the mid-March timetable "really scares me."

State Sen. Donna Mercado Kim (D, Halawa-Moanalua-Kamehameha Heights), who serves on the Senate Ways and Means Committee, said Abercrombie has already taken several revenue-generating options off the table. The governor has said he would not support increasing the state’s general excise tax or scooping the counties’ share of hotel-room tax revenues to help with the deficit.

Abercrombie has also said he would not seek to extend furloughs or order layoffs for state workers. The governor said he would look at other revenue options — such as reducing tax credits and pursuing federal money — and would retool and re-prioritize state programs to reduce costs.

"When the governor says he’s going to retool and re-prioritize, the question is where, because a lot of that was already done," Kim told Young, explaining that lawmakers reconfigured state programs to reduce costs during the recession.

"So I’m not sure when he says retool. Can you tell us where that is? Or is that coming in March as well, the retooling?"

Young acknowledged that the layoffs, severe cuts and attrition policy over the past few years has already taken a heavy toll on the state’s ability to deliver core services. He said the state would likely have to selectively restore spending on some of the programs that were cut to address what he described as critical deficiencies.

He said about $50 million will also likely be set aside for the Abercrombie administration’s high-priority programs and initiatives.

State Rep. Marcus Oshiro (D, Wahiawa), chairman of the Finance Committee, said afterward that he appreciated Young’s candor.

"I think they’re coming to grips with the reality that they have a shortfall," Oshiro said. "All the low-hanging fruit? That’s already been picked and eaten. It’s gone. It’s gone already.

"So now it’s the hard choices."

Oshiro welcomed what he saw as Young’s willingness to address some of the longer-term budget challenges, such as an underfunded Employees’ Retirement System and rising state worker health care costs.

The state agreed in late December to cover a larger share of public worker health care costs during the last four months of the fiscal year that ends in June — the same 60-40 percent split offered by the counties. The agreement will cost the state an additional $18 million this fiscal year, Young said, and $54 million in both fiscal year 2012 and fiscal year 2013 if the policy is extended.

Abercrombie said his administration is committed to working collaboratively with lawmakers on the budget. He said he and his department directors are just getting under way but are approaching the task with an "optimistic spirit."

"I think you see an atmospheric change here already," the governor said. "I’m certain that you notice that the atmosphere, the exchange between the legislators and the administration, is one of much more compatibility, much more in the way of cooperation. This atmosphere and this attitude is what we’re going to put together as we apply it to the challenges."

Abercrombie said he recognizes lawmakers have questions at this stage in the budget process.

"Everybody’s got to take deep breaths and face up to the realities," he said.


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