The state Council on Revenues today lowered its forecast for this fiscal year, projecting a 1.6 percent decline in revenues, instead of the 0.5 percent growth that the council predicted earlier this month.
The new forecast expands the state’s budget deficit to about $200 million this fiscal year and to about $1.3 billion over the two-year budget cycle.
Gov. Neil Abercrombie asked the council to return for a special meeting to update its forecast after the Japan earthquake and tsunami, the unrest in Africa and the Middle East, and the anticipated loss of federal earmarks from Congress.
Economists on the council said it was too soon to measure the impact from the Japan tragedy on tourism, since there are only a few weeks’ worth of visitor data showing a 25 percent decline. The potential for rising oil prices because of the unrest in Africa and the Middle East was considered in the council’s last forecast. And the the potential loss of federal earmarks may not have an influence until next fiscal year and beyond.
Economists, however, learned of an unusual drop in February tax collections that motivated the council to lower its forecast. The February figures could be an anomaly, but could also mean that the economy is not recovering as fast as they believed.
Paul Brewbaker, an economist and the council’s chairman, cautioned that the forecast could be off by 1 or 2 percentage points. He also said that the reason the council does not meet frequently is to discourage economists from reacting to the "noise" of current events rather than the "signal" of longer term economic trends.
The Abercrombie administration believes revenues will decline by 2 percent for the fiscal year that ends in June, creating a $232 million deficit this fiscal year and a $1.3 billion gap over the two-year budget cycle.