Governor proposes $1.8B more for budget

Gov. Neil Abercrombie asked the state Legislature on Monday to expand the state’s construction budget to $2.6 billion next fiscal year, an aggressive $1.8 billion increase that would improve public infrastructure but also include money to preserve prime agricultural land in Central Oahu and conserve the unspoiled shoreline around Turtle Bay Resort on the North Shore.

Many economists contend state construction spending is often preferable to tax incentives as an economic stimulus. The governor’s public works expansion — a 218.9 percent increase over the $843.8 million already penciled in for next fiscal year — would also come at a time of resurgence in the private construction industry.

The state construction bond money would go toward irrigation, agriculture, watershed, energy, high-technology, education and housing projects. Some of the big-ticket items include $52.5 million for a modern Medicaid eligibility system, $33 million for the University of Hawaii at Hilo’s pharmacy college and $25 million for air conditioning at public schools.

The state would set aside $40 million in bond money for a conservation easement to protect Kawela Bay and Kahuku Point near Turtle Bay Resort from development. Another $40 million would be targeted at about 20,000 acres of prime agricultural land in the Central Oahu and North Shore region to help ensure it is kept for farming.

"It’s not just construction for construction’s sake," Abercrombie said at a news conference at the state Capitol where he announced his supplemental budget request for fiscal year 2015. "What it is is infrastructure investment."

After closing the last fiscal year with a record $844 million surplus, Abercrombie — who is up for re-election next year — has greater flexibility to suggest new spending. But the governor has indicated that he will not overreach, given the pain of the last recession, the state’s relatively meager emergency reserves, and substantial unfunded liabilities in the public-worker health care and retirement funds.

Abercrombie’s budget request, which covers the second year of the state’s two-year budget cycle, is $12.2 billion, a $283.8 million — or 2.4 percent — increase over what the governor and lawmakers had previously approved. The governor would also decrease state spending for this fiscal year to $11.7 billion, a $52.6 million — or 0.4 percent — drop.

Abercrombie would place $50 million each into the hurricane relief fund and the rainy day fund — the state’s emergency reserves — as part of a continuing replenishment strategy after the funds were tapped during the recession. If legislators agree, the state’s emergency reserves would be at $372 million, or 5.6 percent of projected general fund revenues.

Kalbert Young, the state’s budget director, said the state’s goal is to have the emergency reserves at 10 percent of general fund revenues, a mark that would further demonstrate the state’s sound fiscal management for credit rating agencies.

"In one word, it’s about sustainability — fiscal and financial sustainability," Young said of the budget request, which includes separate operating and state construction money.

Abercrombie proposed adding $14 million for the weighted student formula at public schools — which bases school finance on student need rather than enrollment — and $3.1 million for charter schools due to enrollment projections. Another $9 million would go to cover increased utility costs at public schools.

The governor would spend an additional $22 million on the Hawaii Health Systems Corp., the chronically cash-strapped network of public hospitals. He would spend $4.2 million to continue the Kupuna Care program for seniors.

Abercrombie will appeal to the Legislature to finance initiatives or expenses that lawmakers have been cool to in the past.

The governor wants $2.5 million to reduce family co-payments in Preschool Open Doors, the child-care program lawmakers have expanded instead of financing the governor’s broader preschool initiative. He asked for $4.5 million to establish pre-kindergarten classes at public schools, an idea that lawmakers have phased out. He wants $1 million for family engagement and learning programs aimed at 4-year-olds.

Lawmakers are likely to be apprehensive about new spending for preschool until voters decide a constitutional amendment next year on whether public money can be used for private preschool, a critical component of the governor’s preschool initiative.

Abercrombie has also asked for $19.5 million for UH faculty pay raises — and $14 million for salary restoration — expenses that lawmakers have balked at covering.

Rep. Sylvia Luke (D, Punchbowl-Pauoa-Nuu­anu), chairwoman of the House Finance Committee, said legislators would again take a cautious approach to new spending. She recalled that the state’s previous record surplus — $732 million after fiscal year 2006 — evaporated quickly when the state plunged into the last recession.

"I think what we need to be cognizant of is to learn the lessons from the past," she said.

Lawmakers will start budget briefings earlier than usual, with the first briefing scheduled for Wednesday afternoon before the House Finance Committee and the Senate Ways and Means Committee at the state Capitol auditorium.