Revenue council increases tax projection for state fund

Lawmakers will have about $40 million extra to work with as they craft a proposed budget after the state Council on Revenues on Thursday slightly increased its estimate of the amount of taxes the state will collect.

Council members cited continued growth in the visitor industry as well as a rebound in construction as signs that state tax collections will likely grow a bit faster than expected this year.

There is no sign of a major economic downturn on the horizon, and while it is possible the Hawaii economy could stumble because of unforeseen developments, “there’s also some things that really could go right,” said Carl Bonham, professor of economics at the University of Hawaii at Manoa.

As an example, council members cited the sharp decline in oil prices as an unexpected factor that has encouraged travel and likely contributed to the recent record visitor counts in Hawaii.

The council is a panel of economists and other experts tasked with forecasting state tax collections each year. Those projections then form the basis for each state budget.

The council last year predicted state general treasury tax collections would grow by 6 percent over last year’s level during the current fiscal year that began July 1. That meant the state general fund would receive nearly $6.08 billion in taxes.

Thursday the council increased that projection for the state general fund to 6.7 percent growth in tax collections for the current year, which will increase the overall general fund tax take to nearly $6.12 billion.

Even with the extra money, the state will still be spending about $22 million more this year than it collects in revenue. Under Gov. David Ige’s proposed budget for next year, the state would spend $443 million more than it collects in revenue, according to new estimates provided by the House Finance Committee.

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 which can be tapped to help cover the cost of Ige’s proposed spending plan. However, some lawmakers have expressed concern about the excess spending over revenues.

House Finance Chairwoman Sylvia Luke said the new projection by the Council on Revenues helps somewhat but will not have a major impact on lawmakers’ deliberations because the extra money amounts to a small slice of the overall state budget.

“It doesn’t really change what we are planning to do with the budget, and it doesn’t really change the budget picture,” said Luke (D, Punchbowl-Pauoa- Nuuanu).