State House and Senate leaders said Tuesday they are confident they have the money for a robust two-year state budget, but they are increasingly tentative about spending on tax incentives and new state programs because of the financial uncertainty in future years.
Lawmakers have positioned the budget and dozens of other bills for conference committee negotiations over the next few weeks, including Gov. Neil Abercrombie’s early-childhood education initiative, an increase in the minimum wage, a loan program that would help consumers finance solar improvements, and the restructuring of solar tax credits.
The Legislature is also on track to address the multibillion-dollar unfunded liability in the public worker health care fund and to replenish the state’s hurricane relief and rainy day funds, which had been tapped during the recession.
But lawmakers are less sure about income tax relief, expanding film production tax credits or providing incentives for entrepreneurs. The House and Senate have also staked out competing ground over whether to extend a temporary increase in the hotel room tax beyond 2015, money the state budget director insists he needs for the state’s six-year financial plan.
Lawmakers also do not know whether they will have to immediately account for new contracts with public-sector labor unions beyond the tentative agreement between the state and the Hawaii State Teachers Association. Other unions are still in negotiations with the state, and any agreement reached after the session ends in early May would likely not come before lawmakers until next year.
With the state finally on more stable financial footing, lawmakers see danger in committing to new spending now only to have to search for revenue next year because of collective bargaining or other pressures.
"I believe that we’re in very good shape," House Speaker Joseph Souki (D, Waihee-Waiehu-Wailuku) said of the budget.
But Souki said some proposals to stimulate the economy, such as income tax relief, might have to be adjusted or phased in over time given the financial uncertainty in future years. He also suggested that expanding film production tax credits might have fallen as a priority.
Senate President Donna Mercado Kim (D, Kalihi Valley-Moanalua-Halawa) said conference committee negotiations on bills that involve new spending would be influenced by whether other contract agreements are reached with unions.
"We’d like to continue to assist the economy in whatever ways we can — which would be tax credits — but then in the out years, when those tax credits have to be paid, that’s when some of the collective-bargaining items will also come due," she said.
Kim warned that the financial challenges facing the state over its six-year financial plan could be grave. "If we’re going to adopt new programs, can we continue to fund them into the future?" she asked.
The House and Senate cast votes Tuesday on dozens of bills to prepare for second crossover Thursday, the deadline to exchange legislation between the chambers before conference committee negotiations.
Senators, without comment, voted unanimously for a bill that would dissolve the Public Land Development Corp., the agency created two years ago to partner with the private sector to develop projects on underused state land. The PLDC, which was granted broad exemptions from land use regulations, never developed a single project after public backlash over its mission.
The House is expected to accept the Senate’s changes to the bill Thursday and send the measure to Abercrombie.
The Senate preserved a bill, unpopular among some House leaders, that would create a new Public-Private Partnership Authority that could oversee the development of a new film production studio on Maui, a redevelopment project in Wahiawa, and one county-initiated project.
The House and Senate have also advanced bills, backed by Abercrombie, that would allow a handful of private development projects on underused public school land that could generate revenue to modernize schools.
In the House, lawmakers unexpectedly killed a bill — opposed by the teachers union — that would have expanded the definition of student instructional hours at public schools to include time spent outside the classroom on learning-based activities, such as project-based learning assignments, study projects and assessment tests. The vote was 30-21.
"The objection basically was whether or not instructional hours should be mandated by the Legislature or whether it should be a subject of collective bargaining," said House Majority Leader Scott Saiki (D, Downtown-Kakaako-McCully).
But Rep. Roy Takumi (D, Pearl City-Waipio-Pearl Harbor), chairman of the House Education Committee, said the defeat surprised him. "I believe learning occurs not just in a classroom," he said. "It can occur playing football. It can occur being on the newsletter committee. It can occur on the prom planning committee."
Leadership divisions among House Democrats also surfaced. Rep. Calvin Say — who was ousted as speaker in January by Souki and a coalition of dissident Democrats and Republicans — and his allies sought to depict the Souki coalition as financially irresponsible.
Say (D, Palolo-St. Louis Heights-Kaimuki) called a House bill to end a temporary increase in the hotel room tax by July, rather than in 2015 as scheduled, "corporate welfare" that would undermine the state’s six-year financial plan. Senators — and the Abercrombie administration — would make the higher tax rate permanent, a proposal that some in the hotel industry have accepted for fear of even higher taxes.
House leaders have said privately that the House’s approach is a negotiating tactic for conference with the Senate that might decrease the chances that the hotel room tax might be raised higher. Abercrombie had suggested a hotel room tax increase earlier this session.
