‘A solid financial footing’

As I set about organizing my thoughts for today and reflected on the political atmosphere, I concluded what we confront today is a situation of political Jeopardy.

In the game of Jeopardy, everyone already has the answers; the challenge is to figure out and frame the right questions. …

We need look no further than the question of unfunded liabilities. How do we address recurring needs like paying for health care benefits and exploding pension deficits and the means to finance them on a recurring basis?

How do we make use of our resources and assets, both public and private, with continuing investment security in the future?

The Public Land Development Corp. is but one example of an attempt to answer the struggle to come out of the worst recession in memory. What we cannot do is allow controversy over the answer to this or any other challenge to pre-empt asking or facing up to the questions before us. …

Therefore, our primary and priority initiatives need to be aimed at preparing ourselves as we assess the demands of the 21st century. We need to look at state government and the budget; our energy goals, our economy, and our kupuna and our keiki.

First, the question of the state budget. Unlike some of the fiscal uncertainties and core fundamental economic issues facing our federal government, our state stands on a solid financial footing and has a stable financial outlook. …

As of July 1, 2013, the 5 percent pay reductions will end for state workers, and full pay will be restored. Good-faith collective bargaining negotiations are essential if we are to move toward a resolution that is fair to everyone. …

Tourism numbers and profits are on a steady rise, construction is vigorous and growing and unemployment is back down to the low rates that we enjoyed before the recession. …

The question is: Will we continue to invest in the economy via construction and repair/maintenance projects and public private ventures? Not only is this important to ensure that communities, schools and our residents continue to have much-needed infrastructure, buildings and improvements, but we can do so at historic low interest rates, saving the state millions of dollars in debt service. More importantly, these projects could mean that the state not only will be investing back into our economy, but through partnerships generate needed revenue not otherwise available. …

But, we must also deal with the question of the looming cloud of current liability obligations that have not been paid for and that will wreak havoc upon our state’s future fiscal stability. …

That is why I am asking the Legislature to start paying toward our Other Post-Employment Benefits. This is the "OPEB" debt. … I am therefore proposing to address this liability by budgeting $100 million starting this next fiscal year, with plans to continue to pursue payment in coming years. …

Next, the question of energy. When we consider long-term financial stability and talk about controlling our own destiny, energy is at the top of the list. …

I am establishing the Hawaii Refinery Task Force, a collaboration of government, energy industries and utilities — 27 interested stakeholders from various levels of government and private sector — to immediately work on short-term and long-term findings and recommendations prompted by Tesoro’s closure. …

But along the way, we are facing financing hurdles and policy obstacles that require us to look not only at renewable energies, but current alternative energy sources that are available now. … The data is clear; embarking on a path to LNG (liquefied natural gas) will result in long-term avoided costs — whether those costs are mandated improvements to utility facilities or imported low-sulfur fossil fuels at exponentially growing prices. …

Likewise, there is a false controversy over renewable energy tax credits, and the interim administrative rules that were adopted. Reasonable limitations and controls upon expenditures, including any tax credits, have been critical to financial/fiscal management and our stable financial outlook. …

I have asked my Department of Taxation to work with the Legislature to find the appropriate balance, and the proper amendments to the (solar) tax credit so that we can make the law fair for everyone, and maintain a sustainable incentive for the long-term. …

The Department of Business Economic Development and Tourism will propose a sensible and fiscally sound financing mechanism that will allow residents, businesses and organizations, to take advantage of renewable energy options.

By utilizing moneys deposited in a special fund to provide capitalization, we will provide a periodic payment system that can be assessed through a customer’s electric utility bill that will amortize the costs of the system over a sustained period, allowing more of us to take advantage of renewable energy in our homes, our businesses, our churches and our communities. No longer will a photovoltaic system be only available to those who can afford the significant initial investment. Instead, this program will allow users to take advantage now, and pay for it over the long run while deriving the immediate benefits. …

The Department of Land and Natural Resources Watershed Initiative remains a top priority. … I will be asking the Legislature to look at alternative methods of funding this critical initiative. One is an increase in the conveyance tax, but limited to high-end property transactions — properties valued at more than $2 million. The bill would generate an estimated $10 million for watershed protection. The other approach is to look at a 10-cent fee for single-use checkout bags to go into the natural area reserve fund. This could generate an estimated $15 million. …

I will be proposing the Hawaii Growth Initiative, a state investment program focused on building an innovation ecosystem that supports entrepreneurial high-growth businesses and creates high wage jobs for our people. We intend to provide $20 million of state investment capital that will focus on the critical building blocks of research commercialization, entrepreneur mentoring and the mobilization of startup investment capital.

This comprehensive investment program represents a commitment to reinvigorate state efforts to fuel an innovation economy. …

Another group, just as important and affecting every one of our families, is our kupuna. … I will be asking the Legislature to increase the Kupuna Care budget by $4.2 million and make it permanent. Senior advocates should not have to come back year after year to secure their funding. …

Today, there still exists a hard-working sector of our society that deserves continued recognition. These are the working-class residents who earn the minimum wage. The minimum wage, currently at $7.25 per hour, has not increased for over six years. Nineteen other states plus the District of Columbia have higher minimum wage rates than Hawaii, with less to confront in terms of cost of living.

Therefore, I will be proposing a bill to increase the minimum wage by $1.50, to $8.75 starting in January 2014. Minimum wage earners provide immediate infusion of dollars into the economy. …

Last session, the Legislature granted my request to fund the Office of Information Management and Technology. It has completed and presented to you a comprehensive plan to improve business processes, and to update and consolidate all of our state technology including Healthcare Transformation.

This will allow us to bring our three-decades-old information technology infrastructure into the 21st century digital age.

To that end, we are requesting a significant, but much needed, investment of general funds and general obligation bonds. Any less in our funding commitments will adversely affect our ability to make this long overdue information transformation journey.

This is more than buying technology and hardware. We will be instituting an Enterprise Resource Planning initiative (ERP), a collaborative and cooperative inter-agency plan to integrate and provide consistency within our state’s finances, budget, payroll, human resources, acquisition, assets and grants. The ERP will also provide better accounting of our taxpayer dollars and allow state government to operate more transparently and efficiently. …

The 21st Century Schools initiative is a public-private partnership that allows the Department of Education to lease underutilized lands for the purpose of generating income to be used to upgrade existing schools or construct new schools. …

The program, based on successful models elsewhere, builds long-term value for local school communities, which benefit from better school facilities, multi-purpose community centers, workforce housing or other needs as determined by a cross-section of the community.

Success will require a community-based policy and planning approach. Any use of public lands must be compatible with and provide benefits to the surrounding community. Teachers, administrators, students, parents, community residents and other stakeholders will play a meaningful role in the planning, design and partnership between the school and its surrounding community. Over the next several months, we will be convening community meetings to solicit public input and feedback for this groundbreaking initiative. …

Within the next three years, we aim to provide each of our public school students with current curricular materials on a digital device, such as a tablet or laptop. …

Having students with curriculum materials on a digital device solves the problem of not having enough textbooks or obsolete textbooks. Common curriculum statewide is no easy task, which is why we are seeking dedicated funds for teacher training to empower them with current instructional innovations. …

When it comes to how our students learn or how we treat our keiki, we need serious affirmative action in order to nurture and promote their well-being and preparation. … An alarming number of our children are entering school without the basics needed to succeed in school including reading, math and socio-emotional skills.

Only 57 percent of the students who entered kindergarten this year had attended preschool. We know that the early years of a child’s development are crucial to set the groundwork for a child’s behavior and lifelong learning. …

Investing now in our children’s early years of life will pay off dividends down the road in the form of healthy and contributing adults, reduced crime and incarceration, crime costs and less dependency on social services.

These programs must be accessible, affordable and voluntary for families. The goal is to ensure all Hawaii’s 4-year-olds are healthy, socially developed, and cognitively prepared to learn and succeed on day one of kindergarten. …

So we return to the Jeopardy challenge. Answers abound. Our task is to formulate and frame the right questions and the changes we need to make.