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Abercrombie’s new budget and taxes questioned

Hawaii lawmakers confronted Gov. Neil Abercrombie on Tuesday over his new budget proposal to expand government and raise taxes while the state is recovering from an economic downturn.

A panel of two dozen legislators asked the Democratic governor to justify hundreds of millions in new spending, adding 236 positions to the government payroll and hiking taxes as the state faces a projected $700 million two-year general fund deficit.

Several took aim at Abercrombie’s ideas to tax pension income and soft drinks while ending Medicare Part B reimbursements for government worker retirees. His pension proposal would raise $112 million by taxing retiree incomes over $37,500 for individuals or $75,000 for couples.

“It’s almost cruel,” said Rep. Barbara Marumoto, R-Kalani Valley-Diamond Head. “It’s a big hit, and the seniors are absorbing a big part of this.”

Abercrombie countered that residents expect more from their government than they’re currently receiving due to public employee furloughs, layoffs and loss of services. He said his taxation and spending plans would help repair the state government.

“The plain fact of the matter is that we all have to contribute,” Abercrombie said. “If we’re going to survive with the system that we have, then we’re going to have to pay for it.”

Abercrombie’s contentious proposals on retiree benefits and soda taxes have met broad opposition during public testimony at the Hawaii Capitol, but he urged legislators to reconsider them for the sake of the state’s long-term financial health.

House Finance Committee Chairman Marcus Oshiro said if lawmakers don’t approve Abercrombie’s initiatives, they’ll have to find money elsewhere by reducing tax exemptions, loopholes and deductions.

“If we don’t want it, then we reject it. It’s always upon us to find alternatives, other means of finding savings,” said Oshiro, D-Wahiawa. “We’ll do all right.”

Lawmakers had been waiting for Abercrombie’s budget since December, when he unveiled an initial plan with figures largely based on former Republican Gov. Linda Lingle’s assumptions. Abercrombie’s administration said at the time the full budget may not be ready until mid-March, but he completed it earlier than expected and unveiled it Monday.

The budget seeks an additional $491 million for operating expenses next fiscal year and another $238 million the following year, increasing the total operating budget to $11.4 billion and $11.3 billion, respectively. General fund spending would rise nearly $300 million over the next two years to $5.9 billion.

The money would pay for increases in the state’s share of public employee health premiums, welfare, Medicaid benefits for Pacific island migrants, dam safety, agricultural inspections, student athletics transportation, deputy sheriffs, emergency management, a new government technology chief and other services.

“We would not characterize any of these items as ‘expansion’ of government,” said Budget Director Kalbert Young. “Rather, these are for items that the administration considers to be critical and core functioning services to return state-level service to a level the public expects of state government.”

House Minority Leader Gene Ward criticized the budget for adding new spending when the state already has shortfalls to address.

“Families are struggling to make ends meet,” said Ward, R-Kalama Valley-Hawaii Kai. “He proposes these tax increase at the worst possible time when our economic recovery is still fragile.”

The governor’s plan will be considered by lawmakers as they craft the state’s two-year budget between now and the end of this year’s legislative session May 5.

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