With the economy crawling toward recovery, state lawmakers open a new session of the state Legislature on Wednesday hopeful that the worst budget cuts are behind them but unsure about how to contain the red ink that lingers.

Democrats who control the state House and Senate share a spirit of optimism with Gov. Neil Abercrombie, a fellow Democrat and a former legislator who has promised to be a partner after eight years of tension between lawmakers and Republican Gov. Linda Lingle.

"By no stretch of the imagination are we out of the woods yet. But hopefully we’ve turned a corner and at least we can start looking at some positive signs moving forward," said state Senate President Shan Tsutsui (D, Kahului).

There appears to be consensus between the new governor and lawmakers that the focus should be on job creation, education, alternative energy and health and human services. But there have been few specific policy proposals to fill that empty canvas.

Abercrombie also has yet to explain how he will close a deficit in excess of $700 million over the two-year budget cycle. In the state House, Democrats have been divided since the November elections over whether to keep House Speaker Calvin Say as their leader, a power struggle that has left leadership posts, committee chairmanships and advance planning with the Senate in limbo.

State House Majority Leader Blake Oshiro (D, Aiea-Halawa Valley-Aiea Heights) said he believes the House is ready despite the leadership uncertainty. "I think there are, of course, additional things that we probably would have liked to have worked on a bit harder when it comes to some of our policy proposals.

"But I think we have a solid idea of what the central issues are, what direction we need to head, and we also have a clearer communication with upstairs that really will help us in setting that direction," he said.

Abercrombie will ask for emergency money to cover higher welfare, Medicaid, public-worker health care and other expenses for the fiscal year that ends in June. His administration has said it could be as late as March before a complete deficit-reduction plan for the following two-year budget cycle is ready, which would push up against the traditional deadline for the House to finish its budget draft and send it to the Senate. 

Budget is still ‘900-pound gorilla’

While the governor has said he will restructure government to help balance the budget, lawmakers have heard from state department directors in briefings over the past few weeks about the impact of previous budget cuts and the need to restore state spending to maintain essential services.

Abercrombie has said he would not support raising the general excise tax, scooping the counties’ share of the hotel room tax or extending furloughs for state workers to close the deficit.

Without those options, lawmakers will likely have to turn to a combination of other revenue-generating ideas and spending cuts. The possibilities include targeted tax hikes, such as on alcohol, or creating a tax on soda, or lifting tax exemptions on business activities, an idea fought by lobbyists and interest groups last year.

"The 900-pound gorilla is still in the room, which is the budget," said state Senate Majority Leader Brickwood Galuteria (D, Waikiki-Ala Moana-Downtown).

Tsutsui — at 39, the youngest to lead the Senate since statehood — will preside over a new coalition between the factions of Democrats who hold a 24-to-1 dominance over Republicans. His coalition, and whatever emerges from the leadership fight in the House, could be tested early by how deftly a civil-unions bill is handled and by a potentially difficult policy debate over an appointed state school board.

House and Senate leaders prefer to move a civil-unions bill to Abercrombie early in the session so it does not become a distraction. The legislation being drafted would give same-sex and heterosexual couples the ability to enter into civil unions and receive the same rights, benefits and responsibilities as marriage under state law. It is similar to a bill vetoed by Lingle last year.

Abercrombie’s policy advisers have been working with lawmakers on the draft, and the governor is expected to sign the bill if it reaches his desk.

Lawmakers also want to move quickly on an appointed school board to fulfill a constitutional amendment approved by voters in November to change from an elected board.

State Sen. Jill Tokuda (D, Kailua-Kaneohe), chairwoman of the Senate Education Committee, will propose a bill that would give the governor the power to make school board appointments subject to the advice and consent of the Senate. Her bill would also create an 11-member school board, including a student member with voting rights. The existing board has 14 members, with one nonvoting student member.

Abercrombie wants authority over the appointments, which he believes will make the school board more accountable. But last year lawmakers — including Tokuda — favored a selection advisory council similar to the process for screening the governor’s appointments to the University of Hawaii Board of Regents. Lingle vetoed the bill creating the selection advisory council so, right now, there is no process to convert to an appointed board until lawmakers take action.

"Essentially the bill I drafted, I think, best represents the kind of accountability the people have asked for," Tokuda said. "They want a Board of Education that will be appointed by the governor and obviously, as well, will have a strong advise-and-consent component by the Senate."

State Rep. Roy Takumi (D, Pearl City-Momilani-Pacific Palisades), chairman of the House Education Committee, said he intends to again pursue the selection advisory council model. "I happen to think it’s a better policy," he said. "I happen to think it works for judges, it works for the regents, it ought to work for the Board of Ed, no matter who is the governor."

Republicans will push initiatives

Republicans plan to use their minority voices to oppose tax and fee increases, try to reduce the size and scope of government, and encourage an economic climate that helps businesses thrive and create jobs.

State Senate Minority Leader Sam Slom (R, Kahala-Hawaii Kai) said that while tourism has shown signs of a rebound, many businesses are still struggling from the recession. "All of the pundits that have been talking about the economy turning around — I talk to small-business people every day. As you know, it has not turned around for them, and it’s not turning around for them," he said.

Slom said he will ask for fiscal notes that detail the cost of new legislation, term limits for state lawmakers, reductions in state spending for nonprofits, and audits of the state Department of Education and the state Office of Hawaiian Affairs.

State House Minority Leader Gene Ward (R, Kalama Valley-Queen’s Gate-Hawaii Kai), who leads an eight-member Republican caucus in the 51-member House, said the emphasis will be on fiscal discipline. "We’ve got to hold our line on taxes," he said. "When you look at it that way, we don’t have a revenue problem, we have a spending problem."

Republicans will also work to create incentives for more homeowners to convert to alternative energy and pressure the Department of Education to direct a greater proportion of its spending to the classroom.

interest groups shift focus

Interest groups recognize that a projected deficit will prevent lawmakers from entertaining many new spending requests.

The Chamber of Commerce of Hawaii is interested in tax incentives for research and development, revisions to the state’s environmental review law to give businesses more certainty about timetables for projects, and a streamlined regulatory and permitting process.

"The emphasis of the message is to continue to create an environment that will support Hawaii’s economy and business in order to retain and create jobs," said Jim Tollefson, the chamber’s president.

Randy Perreira, executive director of the Hawaii Government Employees Association, said the state’s largest public-sector union wants to work with lawmakers to rein in rising and unsustainable health care costs for state workers. He said the union wants the right to bargain over health plan benefits, like private-sector unions do, instead of just negotiating over the cost-sharing split on premiums.

Perreira said the union has dropped its push for a GET increase to help with the deficit.

"We all know that money remains tight, that we’re anticipating certainly — of whatever magnitude — a budget shortfall over the next two years," he said. "And there are going to be continued efforts — and we hope to be at least part of the process and discussion — to address cost issues and see how we’re going to kind of stay afloat, if you will, as our economy improves."

Alex Santiago, executive director of PHOCUSED, a consortium of social service nonprofits, said he is hopeful lawmakers and Abercrombie will find a way to prioritize so spending on social services can be restored despite the deficit.

"In actuality, we are saying ‘restore,’" he said. "It’s not a matter of don’t cut us. It’s a matter of the safety net has been torn. We want to see the repairs put into place."