The state Council on Revenues on Tuesday kept a 12 percent growth forecast for the fiscal year that ends June 30, but lowered the revenue projection for next fiscal year, which will prompt the Abercrombie administration to scale back state spending.
The council reduced the state’s tax collection forecast for fiscal year 2013 to 5.3 percent growth, down from 7.5 percent, for an estimated $110 million loss.
The state’s $11.2 billion supplemental budget that lawmakers passed earlier this month and is awaiting Gov. Neil Abercrombie’s signature was based on the council’s higher revenue forecast from March.
State budget director Kalbert Young said the administration will likely delay filling some vacant or new jobs, hold off release of money for some projects and not restore some of the money lawmakers have authorized for state programs reduced during the recession.
"I think right now the play that we’re going to employ is we’re going to hold on some modest positions and strategies — nothing drastic, at least for the next three months," Young said. "But it also means that you’re not going to see a whole lot of restorations coming back at the rate that we thought."
Economists on the council cited uncertainty surrounding tax exemptions and tax credits as reasons for the downgraded forecast.
The temporary suspension of general excise tax exemptions on several business activities, which the Legislature and Abercrombie approved last year to help close the state’s budget deficit, is not expected to produce nearly as much tax revenue as anticipated.
The Legislature’s inability to reach a compromise this year about how to contain a solar tax credit could cost the state millions as more consumers embrace solar and as large-scale commercial solar projects come online.
The Department of Taxation, which was waiting to see whether lawmakers would take action, is now reviewing whether to take administrative steps to rein in a tax credit many believe is too generous.
Despite these uncertainties, the council still sees an economy in recovery.
"The track right now seems to be generally positive in terms of both the national economy and the state economy," said Jack Suyderhoud, a University of Hawaii-Manoa business economics professor who serves on the council.
While the lower revenue forecast for the fiscal year that starts in July is a concern for the administration and lawmakers, the council will issue quarterly forecasts before Abercrombie releases his two-year budget draft in December and before the Legislature convenes again in January, so the outlook could change.
"We’ve always said ‘slow and steady,’" said state Rep. Marcus Oshiro (D, Wahiawa-Poamoho), chairman of the House Finance Committee. "We’re moving out of the Great Recession, but we’re still having to make the adjustments and there is uncertainty out there."
