State ends fiscal year with record $1 billion surplus
The state was holding a record-setting $1 billion general treasury cash surplus when it closed the books on last fiscal year, an extraordinary sum that likely will alter the course of contract negotiations as the state and counties begin a new round of bargaining with Hawaii’s public worker unions.
Wes Machida, director of the state Department of Budget and Finance, said the estimated $1 billion surplus for the year ending June 30 is the largest he can recall, and said the state was able to accumulate that large cash cushion by restricting state departments’ spending even as state tax collections exceeded the official projections.
“Actual revenue collections have been good, the Hawaii economy is good and we are making sure that we live within our means,” Machida said.
Gov. David Ige’s administration imposed budget restrictions on discretionary spending by state departments ranging from 5 to 10 percent each year thus far, although some of that funding was later released to departments that demonstrated they needed the money, Machida said.
The state Council on Revenues, a panel of economists and other experts tasked with developing the official projections of state tax collections, predicted tax collections would increase by 6.1 percent in fiscal year 2016. In fact, overall tax collections increased by 8 percent, Machida said.
While the exact amount of the fund balance at the end of fiscal 2016 might vary somewhat, Machida said the $1 billion total “should be in the ballpark.”
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The previous record state surplus was during Gov. Neil Abercrombie’s administration, when Abercrombie announced the state had accumulated a “historically unprecedented” $844 million cash balance at the end of fiscal year 2013.
The state in recent weeks opened a new round of contract negotiations with the public worker unions, and the $1 billion surplus will profoundly affect that bargaining, said Ted Hong, a Hilo lawyer who was chief negotiator for the state during former Gov. Linda Lingle’s administration.
All of the state public worker unions from the United Public Workers and the University of Hawaii Professional Assembly to the Hawaii Government Employees Association and the Hawaii State Teachers Association have contracts that expire June 30.
Prior administrations often pleaded poverty, saying they simply didn’t have enough money to fund significant pay increases for public workers, Hong said. However, with the state sitting on a $1 billion surplus, a significant pay increase for public workers “is a given,” he said. “Absolutely, that’s a given.”
“The first, fundamental issue is always whether there’s enough money to fund the proposed pay raises,” Hong said. “Now that issue here is going to be off the table.”
Hong suggested the state might use this opportunity to offer pay increases to the unions in exchange for changes in obsolete work rules or other contract provisions, essentially negotiating with the goal of making the public workforce more efficient.
In previous negotiations the state and county representatives often would tell the unions that they had little or no money for raises but said they still wanted to bargain for changes in the public workers’ contracts to provide for additional workplace flexibility.
“The unions’ response was always, understandably, ‘If you can’t give our members more money, why should we change anything in the contract?’” Hong said.
“Some people might look at this from a negative perspective, but actually it’s a positive (opportunity) because now they can take that issue of the money off the table and get down into changing some of the archaic language in the contract,” he said.
HSTA President Corey Rosenlee said Hawaii has a “teaching crisis” because Hawaii teachers are underpaid, which has led to vacancies. At the beginning of this month, the Department of Education reported it had 625 teaching vacancies, and the department was forced to use substitutes to fill the gap at the beginning of the new school year.
The budget surplus presents an opportunity to address that problem, Rosenlee said.
“As any parent can attest to, you’ve got to invest in your children’s future, and in Hawaii, when kids are going without a teacher in classrooms with the roof falling in, and our classes are crowded, this is the time that we need to start investing in our kids,” he said.
“To continually underpay your teachers to the point where we don’t have teachers is a tragedy for the state, and so because they have this surplus, they need to start investing in our schools,” he added.
The HSTA represents 13,500 teachers, and union representatives met with state officials for several hours last week in an early round of face-to-face negotiations.
While the large cash balance might look inviting to the state’s public worker unions, Machida said some of that money is already committed elsewhere.
For example, state lawmakers this year appropriated $200 million that is to be tucked away as cash reserves in the state’s “rainy day” or emergency budget reserve fund, a step that will better position the state to weather the next recession. Lawmakers also appropriated an extra $81 million to prepay future retirement health benefits for public workers.
“There’s a lot of commitments that are coming up besides the collective bargaining, and we have to maintain a certain … balance” in the general treasury, Machida said.
He also noted the state Constitution requires that if the general treasury ending balance exceeds 5 percent of general fund revenues for two consecutive years, the state must either transfer funds to the “rainy day” budget reserve fund or provide a refund to state taxpayers.
However, state lawmakers at times have met that constitutional requirement by providing state taxpayers with nominal $1 refunds.
93 responses to “State ends fiscal year with record $1 billion surplus”
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Darn if there is a surplus and darn if there isn’t. Everyone will have their points when it comes to money, especially wanting their fair share.
Tax payers, employees, unions, special interest, etc. A billion is a lot but when there is a million or so who are citizens of the state, the pie is not as big as it appears to be. $1,000 per person if my math is correct.
And yet the governor wanted to raise taxes this past year but the gas tax didn’t pass legislation. (election year)
And roads are overall in a dismal state
It’s easy to have a $urplus when you don’t spend the money you were suppose to be spending to fix the roads, and the schools, and the……
The roads are criminal neglect, just like in “developing” countries because the population has shifted to “developing” people. They don’t care because here is still better than where they came from.
The Pali highway is one long series of potholes.
This is true. How come they stopped fixing the roads? How about using some of our tax payer dollars to pay down the $8.5 billion that is needed to cover the unfunded liabilities of the state retirement system? How come SA does not bring that little fact to the table?
And yet the retirement system remains under-funded. This is kicking the can down the road for future generations to worry about. Let’s spend all that money giving workers large pay raises, instead of paying towards the under-funded retirement system! Yay! And then, those raises increase each employee’s high-five or high-three retirement benefit, leaving the retirement system even MORE under-funded. Who cares? That’s your kids’ problem, not mine.
As we have seen over and over, anytime the state has a surplus, elected bureaucrats start raiding the funds as their special interest and union bosses direct them.
Expect all the government unions to whine they need a pay raise, increased benefits, bonus payments just to “Catch Up.” Really? Not true at all.
Expect this money to be gone in no time as elected bureaucrats work hard to fritter it away on non essential spending. It’s what they do.
Agree. There is NO surplus when you consider the REQUIRED mandates that must be paid like the under-funded retirement system.
Yep, no real surplus when you remove the smoke and mirrors. Creative accounting at it’s best. Just under funding where services are needed the most.
agree
Ryan – it’s but a matter of time before public worker retirement benefits are cut or phased out all together. Many cities are going bankrupt due to public worker retirement benefits they can no longer afford. Hawaii has at least a 6 billion unfunded liability now, who will pay for that? Can taxpayers afford to pay that? At some point the public sector work force needs to conform with the private sector. Why should taxpayers provide bennies for public retirees that are not available to the average citizen? It’s but a matter of time, the smart ones are already collecting their cut.
Pay it all to the unions and make sure you do not reduce our debt. Long live irresponsible politics.
IRT Bumby: actually $1 dollar tax refund. it probably cost more to print and mail this refund. lol
And yet the governor says there’s no money for highway improvement and wants to significantly raise vehicle registration fees?
If anyone has been to more than one rodeo in Hawaii, you’ll know that there’s always a “surplus” just before an election and the money mysteriously disappears just after the election is over. I’ve seen it many times in the past.
True that. Thanks for the REMINDER
They need to RETURN the money!!
Absolutely! Give it back to the taxpayers. Economic activity is always increased when the government allows people to keep more of they money they earn.
Agree totally. Give us tax payers a refund.
Give actual tax payers a refund. Not all residents, especially not the ones living on entitlements.
When you hand a cashier $20 for a $15 bill, you expect to get $5 back. It’s no different when a state receives an overpayment for services rendered. They don’t get to keep the change!
They do nowadays when tip jars are everywhere you look and workers expect a tip for doing their jobs.
The state is just taking that attitude on and paying it forward. So to speak.
Many republican on this board. Anyone works?
Are you saying that only Republicans are smart enough to understand the concept of only paying for what is due?
Hat’s off to Governor Ige and his administration! The proof is in the pudding. Good job!
Don’t celebrate yet, the do nothing government unions are salivating at the news that there is a billion dollar floating around for the next contract negotiations.
Agree. Great job, Governor Ige. Your legislative knowledge and experience in the nuts and bolts of government economcs is producing results. In tough times, you’ve spent our tax dollars wisely. As the article suggests, the amounts that aren’t earmarked for our rainy day fund could be used to raise teacher pay, especially at the entry level.
Not so fast. You haven’t got a clue. You have to look deeper to learn the real truth.
State is backlogged in core infrastructure maintenance, buildings leaking, water mains breaking, airport is 10th world at best, on and on and on. Standard for the state.
Money must be allocated to reduce the maintenance backlog. Just saying there is a surplus when there are bills to pay proves Da Gov does not know how to budget. You only claim a surplus when all the bills are paid. Didn’t happen.
Teachers are not due any more money just because there is a supposed surplus. Pay raises, like respect, must be earned.
Clearly Da Gov didn’t major in financial management.
Exactly right. That is the point everyone is missing. Huge investments are needed in state infrastructure. For example, UH has been starved of maintenance funding by year after year of cuts to their share of general fund revenues. When money is sought for these purposes the Governor and Legislature plead poverty. Why? So that there’s a billion dollar cash surplus sitting on the books when it’s time for the next contract negotiation with the public worker unions who voted them into office. Just watch all that money disappear into the pockets of state employees instead of being spent where it’s most needed.
I’m wondering what happened to the backlog of maintenance work at UH. It seems the vendors were getting paid and the work was either slow or wasn’t going anywhere. Does anyone know the status of this issue??
Try half a billion dollars, $503 million dollars and growing maintenance backlog.
http://www.staradvertiser.com/editorial/chip-away-at-uh-repair-backlog/
Nope Gov Ige (and state legislature), poor job…why are you still pushing for vehicle registration weight fee and gas tax hikes for our super inefficient DOT? If you took too much or spent too little, one billion dollars is too much to bank. Give some of the surplus back to the taxpayers now. Is there not a law that requires this?
Prior administrations often pleaded poverty, saying they simply didn’t have enough money to fund significant pay increases for public workers, Hong said. However, with the state sitting on a $1 billion surplus, a significant pay increase for public workers “is a given,” he said. “Absolutely, that’s a given.”
“The first, fundamental issue is always whether there’s enough money to fund the proposed pay raises,” Hong said. “Now that issue here is going to be off the table.”
All right! I’m getting a raise!
Hey clowns at the circus tent on Beretania, how about giving that money back to THE REAL TAX PAYERS and not to the grabby hands of do nothing government unions and the social welfare w#ores.
They are required to by statute, but since the Clinton/Obama era, don’t hold your breath waiting for them to do what the law requires. That’s stuff is only for the the rest of the folks.
How about establishing a rainy day fund and repaving some of our shameful state highways?
I don’t know about another rainy day fund. Just look at what happened to the hurricane fund, the government raided it to balance the budget shortfall in part due to exorbitant unfunded liabilities the government had made with the greedy do nothing government unions.
“THE REAL TAX PAYERS” vs what? Fake tax payers?
Hawaii owes more than it owns and is labeled a Sinkhole State by Truth in Accounting, a nonpartisan, non-profit organization headquartered in Chicago, Illinois. It means that the state needs additional funds in order to pay all of its bills As of the latest comprehensive annual financial report (FY2015 CAFR) Hawaii had only $5.7 billion of assets available to pay bills totaling $19.3 billion. To fill the $13.6 financial hole each Hawaii taxpayer would have to send $28,500 to the state. It is interesting to note that the state’s financial report was released 183 days after its fiscal year end, which is considered untimely according to a maximum 180 day goal yet, less than two months after the end of FY 2016, Wes Machida, director of the state Department of Budget and Finance, said the state was holding a record-setting $1 billion general treasury cash surplus when it closed the books on the 2016 fiscal year. Now Wes, how about getting the rest of the FY 2016 CAFR published in a timely manner so the public can see the liabilities and how deep in debt the state remains through FY 2016.
Like many people, I can think of a few uses for the money: 1.) Put some $$$ in the under-funded ERS to make up for the hundreds of millions of $$$ the legislature drained from the fund before the state supreme court put a stop to that nonsense; 2.) Use some to address the teacher shortage by increasing teacher pay, providing College of Ed grants and scholarships, and improving our public school facilities;; and 3.) Address shameful condition of the UH campuses.
Good suggestions.
Give the teachers a pay raise. Government workers already make enough with 21 days vacation and 21 days sick leave.
Teachers are government workers.
Don’t teachers get much more than 21 days vacation? Teachers got more than an adequate raise the last negotiation. Just because there is a budget surplus doesn’t mean people should get raises – there are lots of things that have been neglected and need fixing first.
Teachers do not get 21 days vacation. Ever heard of pro-rated salary? Teachers get 5 personal days per academic year.
Deceptive answer at best. How many paid holidays to Teachers enjoy? 5? Yea, right. They enjoy more paid time off than any other profession in state government. I still think they’re underpaid, particularly at entry level but truth be told, many Teachers don’t actually teach in a classroom anymore. 11,600 teachers on the payroll but how many actually teach a class? HSTA doesn’t want anyone to know, the DOE is where all the state fat is located,Why? because their budget comprises 50% of the state’s total budget.
Rather spend the money on school infrastructure, give the kids and TEACHERS an environment conducive to learning. If we give the kids and teachers the necessary tools to succeed you would think that would be a better investment than giving teachers excessive pay raises and still leave them without the tools to educate in an hot and desolate environment(dilapidated buildings, under powered classrooms, no equipment etc.). The starting pay seems reasonable, just don’t want to throw money into a “black hole” where getting the benefit of doing so would be hard to interpret and see the results. Just don’t see where substantially increasing the pay will get you the best and brightest, still believe educating kids is a calling, you either want to do it or not.
Teachers still need to prove they’re worth a raise.
Pay back the ERS!
You mean “pay you” right? No doubt you’re living off the taxpayer dole nowadays huh. Enjoy it while it lasts. Like social security and medicare, drastic changes will be coming to the ERS in the future. it’s simply not sustainable
Everybody is coming out with their hand out. The unions, homeless, etc. Do the right thing and give the hard working taxpayers a refund. It’s their money that made the surplus not leadership.
$500/ per would go a long way.
How about a tax rebate for those of us who have paid our share?
Pay down some of the huge “unfunded ERS liability” and resist the political impulse to spend the surplus while leaving the ERS debt to future generations. For teachers pay, perhaps signing bonuses and retention bonuses for new and top rated teachers respectively. Large across the board teacher raises don’t necessarily make our public education system better.
1st off, I believe that 1B surplus is total BS!If they claim it is then let’s get it back to the tax payers, eh?
So I guess that is why the roads are still in such TERRIBLE shape ? Or the schools are falling apart ? This state is crazy. Why give more raise’s ? How about saving and CUTTING taxes !
State highways or City roads?
Isn’t there a law that requires the State to refund at least $1 to all tax payers? Yet all that is talked about are pay raises for government union workers.
Pave the roads!
There isn’t a surplus. The state’s retirement system is currently underfunded by over 8 billion dollars. This would make it unfunded by 7 billion. Stop talking wishful thinking math.
Not so fast. You also forgot the hundreds of millions of backlogged maintenance for our core infrastructure. Roads, water and sewer lines, state buildings leaking water, airport is 10th world at best, on and on.
Priority should go first to upgrading/repairing our core infrastructure where it is used every day. Add to retirement as we can, not priority #1.
They need to start paying back the money to the ERS. Doesn’t have to be the whole Billion, but something.
Ok, here is $1. Invest it wisely.
Go ahead, rub more salt into our wounds.
I want my money back.
Economic principle subscribed to by Trump and Clinton is you spend and run a deficit to stimulate the growth of the economy– build infrastructure and start projects to hire– you do not cut to shrink the deficit– spend and/or cut taxes for huge deficits now for growth later. This comes from many studies with the latest from Europe– deficit spending Leads to growth while austerity can permanently depress a country. Trump’s economic advisers subscribe to this as well as Clinton’s– both will run huge deficits to spur growth and jobs.
Hard to believe, the State of Hawaii has always been broke, they must owe a lot of money to somebody.
Wow, bet Joe Souki and the rest of our political elite and their cronies can hardly wait for the legislative session to begin
so they can all wet their beaks in this treasure trove and had out the goodies.
Maybe instead of making up ways to spend the money (like Rail), they should deposit it directly into the accounts of the unions. It’s a win-win situation. The unions get their money, them dems get some of it back via union donation, and we don’t get stuck in traffic for a make-work project.
I wonder how much of that billion is the 10% of the GET increase that Oahu only tax payers contributed to?
They may call it a surplus, however, I see it as an outrageous over-taxing of the State’s population. I’ll bet that the Legislature can’t wait for the January opening to get their share of the booty for their pet projects.
HO — dere da money for TheTrain.
Pay down our debt!
Please don’t spend the surplus on government workers’ salary increases. The State has other higher priority issues that need money – roads, UH and other State building needing repairs (including the State Capitol building), schools (a/c, lunch program, repairs), etc..
Yes, need to bring our Honolulu Airport up to speed and fix our terrible roads, maybe hire private mainland contractors who can do it correctly so they last more than a few months before we need to repair them again and again. Although we pay an exorbitant amount on gasoline taxes it makes one wonder where the money goes?
Thanks “islandboy”. Our airport is a dump compared to some mainland airports and some around the world. We are ashamed when friends and relatives visit. An airport should welcome folks and ours doesn’t. Why doesn’t it say HAWAII the minute you get off the plane. Sorry for getting off topic buy this is a sore spot to many of us who care about our island home and how we compare to other places around the world.
$1.00 refunds……
pay off debt ..budget for less next year that is working for the people….
Use some of that money and send the homeless back to the mainland.
Constitution of the State of Hawaii – article VII §6 Disposition of Excess Revenues
Whenever the state general fund balance at the close of each of two successive fiscal years exceeds five percent of general fund revenues for each of the two fiscal years, the legislature in the next regular session shall provide for a tax refund or tax credit to the taxpayers of the State, or make a deposit into one or more funds, as provided by law, which shall serve as temporary supplemental sources of funding for the State in times of an emergency, economic downturn, or unforeseen reduction in revenue, as provided by law.
(They can return it to us or follow Gov. Lingle’s precedent and return $1 or stick it in the “Rainy Day Fund or put it in another fund for contract negotiations. Up to the legislature.)
The state should stop skimming 10% from the rail general excise tax surcharge. That’s a big chunk of money that should be going to build the rail line. Really, it takes 10% of the revenue to “administer” this tax?
Having worked in the state for 20+ years, I can tell you that a record surplus is not necessarily a great thing, however it appears to the public.
1) It means that they collected a lot of money from us in taxes. And, you only get back $1.
2) It means that money wasn’t spent on projects that it was intended for.
3) It means that the state probably failed to fill important personnel vacancies, maybe for those for invasive species control, vector control (think mosquitoes), plant inspection (think invasive species), school staff and teachers, conservation enforcement officers to protect our resources and beaches, health inspectors to make sure our food is safe (think hepatitis A), epidemiologists (to track Zika and Hep A infections), etc…
4) Failed to buy essential equipment (Eg., the Medical Marijuana Dispensary program didn’t have offices, furniture, etc. They even had to duct tape rubbish cans back together.)
5) Failed to update outdated IT programs and hardware.
6) Failed to install AC in classrooms.
7) Failed to fix failing UH infrastructure.
8) Failed to fix or improve state highways.
9) Failed to address the shortfall in state retirement funds.
Etc., etc., etc.
Restricting spending sounds great to the public, but it means that money wasn’t spent where it was needed, could do some good, or benefit local businesses. It’s great when they can save money by increasing efficiency, but that in no way accounts for $1 billion.
If the state has a billion dollar surplus then why is the Pali Highway in such pathetic condition? Why can’t the windward side’s useless legislators – the Thielens and Chris Lee – get some of that money for a simple repaving project? At the very least, let’s use the extra cash to buy Chris Lee a hiking shirt so we don’t have to see any more topless photos of him in the newspaper.
This surplus should not be viewed as belonging to the State employees. Union leaders have long staked claims that it is there to distribute to its members. That money belongs to the taxpayers and should be returned in the form of tax credits to each tax filer or in the form of reduction in tax rates. If the schools need immediate repairs, some of it should be used for such purposes.
Go to any State department and you will find during the budget planning period that the incumbents will be stating their case that they need more pay to attract and retain good employees as well as the need for additional employees to keep up with the workload. Never will you find any of them looking for waste of finding ways to live within their means. Public employees need to earn the respect of their real employers if they hope to gain their support.
Absolutely the dumbest thing from two perspectives: 1. financial management of the taxpayers’ money on a continuing basis, and 2. telling anybody how poorly the state government has managed the taxpayers’ money.
There’s hardly anyone here who’s talked about putting air conditioning in the classrooms. Surely the governor knows that all his budget cuts were helping to grow the surplus – which is a good thing to show during re-election years. Then why not direct more of these funds immediately to the cooling of classrooms? He put some money up, but not enough and not soon enough. Why wait till a re-election year!
To be honest there are far more important areas needing funding than school classrooms.
Increase credits for low income. Renters, low income, etc.
You do understand those credits must be offset dollar for dollar with tax dollars right?
Didn’t think so.
funny how every time HSTA’s contract is up, “we’re in a teaching crisis.”
HSTA has whined the sky is falling so many times no one even listens. We know it is all shibai.