Legislators note holes in budget proposal

Gov. David Ige’s proposed budget for next year got a frosty reception Monday from some leading state lawmakers who say they are worried about both how much the governor proposes to spend and about some upcoming expenses Ige didn’t include in his spending plan.

Ige’s new budget proposes the state spend $488 million more from the general treasury next year than it will collect in taxes or other revenues, and under the Ige plan, state government would spend $78.9 million more in general funds than it collects in revenue the following year.

The administration says it can cover those shortfalls because state government had a large cash surplus of $828 million at the end of the last fiscal year that can be tapped to help cover the cost of Ige’s proposed spending plan.

However, the Ige budget proposal is stirring concern with House Finance Chairwoman Sylvia Luke and Senate Ways and Means Chairwoman Jill Tokuda, who said they see some expenses looming ahead that Ige did not include in his budget.

For example, Luke and Tokuda said the public-worker unions will be seeking raises in the next fiscal year, and every percentage-point increase in pay for public workers adds about $92 million to the cost of state government over two years.

“That’s not even reflected in the current financial plan,” said Tokuda (D, Kailua-Kaneohe). Tokuda said Ige is also contemplating “some huge policy shifts that have a huge impact on the bottom line.”

Lawmakers raised those and other concerns about the Ige budget in a state Capitol briefing by state Director of Finance Wesley Machida for members of the two money committees Monday.

Luke said it would be “foolish” for lawmakers to believe that the public-worker unions will get no raises through arbitration or negotiations. The unions will surely get something, but the current Ige budget doesn’t account for that cost, she said.

Tokuda and Luke also said the state faces what may be an expensive adjustment as it terminates an unknown number of contracts with private companies. Work that has traditionally been done by unionized public workers cannot legally be contracted out and privatized, and a number of state contracts allegedly ran afoul of that requirement.

The state plans to hire public workers to handle tasks now being done under those contracts, but lawmakers say those extra costs haven’t been included in Ige’s budget.

The Ige budget also doesn’t include money for more than $28 million a year in payments that a Circuit Court judge ordered the state to make to the Department of Hawaiian Home Lands to cover the agency’s administrative and operating expenses. Ige has said that court ruling is still being reviewed by the state attorney general.

Ige has said that a sizable portion of the growth in his proposed budget is because he wants to accelerate payments on one of the state’s largest unfunded liabilities. Ige proposed setting aside $408 million next year to cover future health costs for retired public employees and their spouses. That would be in addition to $360 million the state has already budgeted to provide health insurance for public workers, their dependents and retirees next year.

Ige has said that prepaying that unfunded liability for health coverage will save the state more than $500 million over the next 20 years.

Ige also plans to propose a measure to bank $100 million in the state’s “rainy day” budget reserve fund to help balance the state budget during future economic downturns.

Luke (D, Punchbowl- Pauoa-Nuuanu) said she doesn’t disagree with those proposals, but “if you’re going to do big-ticket items, then it would be prudent for them to look at the base budget and propose similar reductions.”

“It is good policy for us to reduce unfunded liability and make investments to rainy day, but if that’s the choice that the administration is going to make, then we would expect that there’s going to be similar type of reduction from the current budget, and there is no significant reduction in the current budget to do a balance,” she said.