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Hawaii may drain hurricane funds

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Hawaii is running out of time to find an estimated $232 million needed to balance the budget over the next three months, leading Gov. Neil Abercrombie’s administration to consider emptying the state’s hurricane relief fund, The Associated Press has learned.

Budget Director Kalbert Young told AP that the entire $117 million hurricane relief fund may be drained after the state’s finances reached critical levels since a tsunami hit and revenue forecasts plunged this month.

But without the fund, Hawaii’s government would be leaving residents and businesses at risk of not being able to get insurance coverage if insurance companies stop issuing policies after a major hurricane, similar to what happened following Hurricane Iniki in 1992.

"It’s the most attractive of the sources right now," Young said. "I don’t want to say that we’re going to take it all, but the likelihood is that we’ll have to utilize all or a substantial portion of it."

The hurricane fund went dormant in 2002, after insurance companies returned to the Hawaii market.

Since then, the money has sat unused, saved in case it’s needed to jump-start insurance service following a future hurricane. Regardless of whether legislators and the governor raid the hurricane fund, it isn’t designed to be spent on disaster relief efforts, meaning it couldn’t provide immediate help in the event of a hurricane.

"It’s dead. They’re going to take as much money from it as possible," predicted Sen. Sam Slom, R-Diamond Head-Hawaii Kai. "We should be worried after the tsunami. We know a hurricane is going to hit us. It’s just a question of when, not if."

Abercrombie, a Democrat, has acknowledged that he may have to spend the hurricane money, comparing the state’s budget troubles to the kind of devastating storm the fund was created for.

"If this isn’t a rainy day, I don’t know what is. If this isn’t a hurricane in the sense of a natural disaster, I don’t know what is. That’s what it’s for," Abercrombie said March 14, three days after tsunami waves damaged Hawaii’s shores.

Defenders of the hurricane fund argue the money should be saved for its designated purpose, but they acknowledge lawmakers will likely take at least a big chunk.

"We don’t think they should take any of it because we’d like to keep that money for the restart" of the insurance market, said Lloyd Lim, acting executive director for the Hawaii Hurricane Relief Fund board.

If the fund were depleted, it would take months, if not years, to revive the insurance market, Lim said.

Besides hurricane money, $46 million in rainy day money may be exhausted and $36 million in other savings accounts tapped, Young said. Spending restrictions of 10 percent from departmental operating costs would save another $15 million.

Abercrombie hasn’t specified his plans for balancing the budget before the end of the fiscal year June 30.

He called on the state’s financial seers, the Council on Revenues, to revise their forecast Tuesday. Then the governor will know more exact deficit figures, and he’ll announce his intentions in the following days, Young said.

House Republicans want faster action, and they sent Abercrombie a letter this week urging him to follow in the steps of former Republican Gov. Linda Lingle, when she suspended state travel, stopped nonessential government purchases and froze filling positions in 2009.

Legislative approval would be needed to scoop hurricane and rainy day fund money, but Abercrombie already has the authority to restrict spending and take money from some other special funds.

Last year, the Legislature appropriated and Abercrombie spent $67 million from the hurricane fund to pay for a deal ending 17 days of planned school closures, as well as $24 million in rainy day funds to support services for the needy.

These actions would balance the state’s budget in the short term, but the government still faces an estimated shortfall approaching $1 billion over the next two fiscal years. Young has said the deficit may reach $1.3 billion after the Council of Revenues updates its projection.




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