Gov. Neil Abercrombie will likely use his State of the State address on Monday to reassure the public that Hawaii has turned the corner financially but needs to make investments in infrastructure, technology and alternative energy to help guide the economic recovery.
The address will be more optimistic than his first one, in which the Democrat likened the state’s economy to a canoe that was at risk of capsizing, foreshadowing a budget deficit that grew to $1.2 billion.
Budget analysts say the two-year budget adopted last year will require only minor adjustments to remain in balance, but have warned that because of a decline in projected revenue growth, more significant changes are necessary to close deficits in the six-year financial plan.
"There were a lot of difficult decisions that needed to be made in the last year after two years before of more cuts and tax increases, and now we’re turning the corner," said Blake Oshiro, the governor’s deputy chief of staff. "And so it’s important to start demonstrating that slow, steady movement that people can start putting confidence in."
Abercrombie’s message is in harmony with state House and Senate leaders who opened the legislative session last week with promises to avoid new taxes and major spending increases on state programs and focus on ideas to sustain the recovery.
The governor and lawmakers appear committed to a substantial new investment in bond-financed state construction to repair the state’s aging infrastructure and spur job growth.
But lawmakers have suggested they might not adopt all of the governor’s requests for new state spending — $188 million, which would take the budget to $11.1 billion next fiscal year — or agree to his timetable for replenishing the state’s rainy-day and hurricane relief funds, which were tapped to close the deficit last year.
While the goal is a steady, workmanlike session, Abercrombie will likely use his speech to talk about a few potential breakthroughs and the importance of laying the foundation for initiatives that could be fully financed later when the economy improves.
The governor wants lawmakers to seriously consider a potential $200 million settlement with the state Office of Hawaiian Affairs over former crown lands. The settlement involves the transfer of state lands along the waterfront at Kakaako that Hawaiians may redevelop.
Abercrombie might also discuss the undersea cable project to link wind-driven energy from Molokai and Lanai to Oahu, the expansion of broadband access, the transfer of telecommunications oversight from the Public Utilities Commission to the state Department of Commerce and Consumer Affairs, and his watershed protection plan.
The governor is also expected to promote investments in information technology to prepare for an extensive technology upgrade that the state’s new chief information officer is scheduled to unveil this summer.
Abercrombie’s advisers say they do not believe the governor will call for a soda tax to help finance childhood health and education initiatives or an increase in the barrel tax to pay for environmental improvements. While those ideas remain policy options, tax increases — for any purpose — are unlikely to advance in an election year unless there is an immediate budget shortfall.
The governor also declared in December that his supplemental budget balances without tax increases, so it would be difficult to explain how a soda tax or a barrel tax — even if the proceeds are reserved for specific programs — would square with that assurance.
A largely unspoken, yet important, question for this session is whether Abercrombie and the majority Democrats who control the Legislature can have a more productive relationship. Many political observers say Abercrombie, a veteran legislator, fell short of expectations during his first year as chief executive, when lawmakers rejected most of his tax and policy recommendations to balance the budget.
"We need to hear a strategy on how we’re going to move the economy forward," said state Sen. Donovan Dela Cruz (D,Kaena- Wahiawa-Pupukea). "The governor has talked about quick fixes in regards to CIP (capital improvement projects) and construction, so we need to make sure that there is a process to achieve that. And I think the Senate has already put forward a position that we’re going to support a lot of money and projects. There is already a number of Senate vehicles looking at how we can expedite streamlining so we can get those projects on line."
Dela Cruz said Hawaii has to position itself to become more economically competitive in the Pacific and more globally relevant so the state is not as vulnerable to short-term swings in the economy. "We really need to be at the point where we’re not reacting to things," he said, "that we’re going to be positioning the state for the future."
State Sen. Glenn Wakai (D, Kalihi-Aiea) said Abercrombie and House and Senate leaders are right to focus on the economy. He cautioned against the temptation to spend all of what he described as a small pot of money generated by the recovery and the tax adjustments made to close the deficit.
"The sun has finally broken through this year. I think the community feels a little bit better," he said. "We feel a lot more energized that we can actually provide services that enhance our community, rather than the past two years where we were just furloughing people, firing people and taking our community in the wrong direction.
"But I always would like to see us cautious about how we take advantage of our increase in tourism and the benefits of more taxes at our disposal."
Rep. George Fontaine (R, Makena-Kihei) said he is concerned about the potential for tax increases because of the projected budget deficits in future years and the unfunded liabilities in the public employee health care and retirement systems. He said Abercrombie needs to keep his word on taxes.
"That’s the big one for me. I want to make sure that we’re not going to raise taxes this year," he said. "And I would really like to hear some — not promises — but actually hear some action steps of what he has in mind in terms of turning this around with the budget and making sure that we’re not severely in the hole in another two or three years.
"We’re being told that everything is OK this year. But then it seems it gets exponentially worse as we get further out, and I just would love to hear him come up with some clear, concrete plans, not political rhetoric, but real actual concrete plans."
