Gov. David Ige offered up a cautious State of the State address to lawmakers Monday that underscored his achievements during his first two years as governor, and warned that a slowing state economy will require “adjustments” to his proposed two-year $28.5 billion budget.
Ige did not specifically describe those budget adjustments, but reminded members of the state House and Senate that his proposed budget assumed tax collections would grow by 5.5 percent this fiscal year, while actual tax revenue has grown by just 0.6 percent in the first six months of the year.
“The economic assumptions on which the budget was based have changed, and we will have to make adjustments,” Ige said.
In his third State of the State address at the state Capitol, Ige also said he will propose a series of increases in state payments into the public employees pension fund.
The Employees Retirement System, which provides benefits to more than 120,000 employees and retirees, earlier this month announced that its unfunded pension liability for state and county employees and retirees was $3.67 billion more than had been previously calculated.
To help cope with that extra cost, Ige said, he will phase in a series of increased payments “to ensure that we keep our promises to our retirees in a responsible way.”
Ige said he intends to expand the Early College Program, which helps high school students obtain college credits, saying that “studies show that this may be one of the most powerful tools to advance college enrollment and success among our public high school graduates — especially for lower-income and first-generation college students,” Ige said.
Ige also said he will purchase more electric cars for the state using money from up to $10 million in payments to the state under a legal settlement with Volkswagen for alleged emissions fraud.
Ige did not specifically mention his plans to increase the state’s gasoline tax, weight tax and registration fees, but said he wants to work with lawmakers to “find the funding to make significant upgrades to increase safety and reliability” in the state’s highway network.
House lawmakers last year rejected Ige’s plan to increase those taxes to fund highway improvements, and Ige has promised to reintroduce those tax increase proposals this year.
House Speaker Joseph Souki said Monday that among House Democrats “the gas tax is not very popular,” adding, “That’s the best that I can say.”
House Republican Minority Leader Beth Fukumoto said after Ige’s speech that a gas tax increase “is one of the worst things we can do to fix our budget. … We do need to fix our roads, but increasing the gas tax is not the way to go.”
Honolulu Mayor Kirk Caldwell may have introduced yet another complicating factor into the gas tax equation Monday by announcing at a hearing that the city also plans to increase its gasoline taxes, vehicle weight taxes, parking fees and bus fares to help cover the cost of operating the rail and city bus service.
Caldwell’s plans could make state lawmakers particularly reluctant to increase the state gas and weight taxes, because increasing both city and state levies would be a double hit for Oahu residents.
The city also plans to ask lawmakers this year to extend the half-percent excise tax surcharge on Oahu to provide more money for the city’s rail project, and Ige said he intends to work with the city and the Legislature to find enough money to complete the rail system.
“This will give us a more comprehensive approach to traffic congestion on Oahu for the long term,” he said.
Ige’s speech mostly steered clear of dramatic new initiatives such as “Cool the Schools,” which he unveiled in his State of the State speech last year. That plan to install air conditioning or other equipment to cool 1,000 classrooms by the end of 2016 turned out to be a failure for the administration.
Ige persuaded lawmakers last year to appropriate $100 million for the plan, but unexpectedly costly bids by contractors contributed to delays. Shortly before Jan. 1, Ige reported that work had been completed in only 164 classrooms, with bids having been awarded for another 207.
However, Ige said his new budget includes $61.7 million to continue the “Cool the Schools” effort, adding that “we haven’t lowered our sights.”
Ige also said he will propose a new “invasive species authority” to oversee efforts to protect the Hawaii environment from invasive species, but provided few details. He said his budget includes $18.4 million to protect watersheds, forests and oceans from invasive species.
Ige said his administration helped to reduce homelessness in Kakaako, and said his new budget proposes to spend $20.9 million per year for rent subsidies, supportive services, outreach services and enforcement to cope with homelessness.
State funding for homeless prevention allowed 4,200 to stay in their homes and avoid homelessness, and helped to spur a 25 percent reduction in evictions, Ige said.
Ige also praised his administration’s efforts to speed renovations in public housing units so they can become available for occupancy more quickly. He said his proposed budget includes $59 million for additional public housing improvements, and said his budget proposes to invest $123.4 million in new housing starts.
Ige also pitched his administration’s efforts to steer Hawaii into the “innovation” sector.
The governor has included $5 million per year for each of the next two years to support the work of the Cancer Center of Hawaii, and praised the state’s HI Growth program to encourage high-tech entrepreneurs. He said that program has helped to fuel 145 startups with $10 million in state funds, and those startups attracted $250 million total investment.
“Together we must pursue our own self-made opportunities through education, innovation and entrepreneurship,” Ige said. “We must tap our greatest resource, our people, to find our way to the next great economic transformation: the development of an innovation sector.”
Senate leaders said in a media briefing following the governor’s speech that the governor had laid out principles that they largely agreed with, but suggested Ige didn’t break much new ground.
Both Senate President Ron Kouchi and Sen. Rosalyn Baker also said that they were disappointed that Ige didn’t talk about health matters.
“It was disappointing he didn’t talk about long-term care, he didn’t talk about mental health issues, he didn’t talk about any of the health issues,” said Baker (West Maui-South Maui).
Ige said later that his administration has made health care issues a priority but that he left the topic out of his speech so that it wouldn’t go on too long.
Senate Ways and Means Chairwoman Jill Tokuda (D, Kailua-Kaneohe) suggested that the Ige administration could be faster when it comes to building affordable housing, noting that the Legislature passed a bill last year that sets out a state goal of making 22,500 affordable rental units available by the end of 2025.
“We heard the governor today talk about additional units that have come aboard this year, which I think is great, more units that are queued up. But again, it has to start coming out quicker and quicker,” she said.
Star-Advertiser reporter Sophie Cocke contributed to this report.
