Hawaii government might collect an additional $74M in taxes

A panel of experts tasked with projecting how much the state will collect in taxes has boosted its projection for next year by 1 percentage point, which means lawmakers should have an extra $74 million to spend.

The state Council on Revenues met Thursday to discuss the latest trends in the Hawaii economy, and opted to increase its estimate of how much state tax collections will grow in the year that begins July 1 to 4% from 3%.

That might not sound like much, but it works out to significant money because the total take from Hawaii excise taxes, income taxes, hotel room taxes and other taxes is expected to amount to about $7.43 billion this year.

The state budget that lawmakers will develop for the year ahead will be based on the council’s tax collection projections. That means the Legislature suddenly has more money available than Gov. David Ige expected last year when he developed the administration’s proposed budget for the year ahead.

House Finance Committee Chairwoman Sylvia Luke said that extra $74 million will help fund a package of initiatives on “critical issues” that she and Ways and Means Chairman Donovan Dela Cruz have been assembling with input from other lawmakers and the Ige administration.

“It’s a big jump,” she said of the council’s new projection. “This actually helps with what we were trying to do, because we had some aggressive initiatives, and the pieces to accomplish some of the initiatives would have taken a significant amount of funds.”

She declined to give specifics on the package because House and Senate leaders won’t roll out the proposals until shortly before the Legislature opens next week, but said they will focus in part on education and affordable housing.

Dela Cruz said in a written comment that “members are working on housing, education and quality-of-life issues that need to be addressed and will take up some amount of budget.” But he added a word of caution, noting that the Council on Revenues “has been known to change its projections before we close the budget” near the end of the legislative session.

Carl Bonham, a member of the council and executive director of the University of Hawaii Economic Research Organization (UHERO), said the economy slowed somewhat in 2019, but he expects an uptick in activity this year that would increase tax collections.

Bonham said the number of airline seats headed to Hawaii will abruptly increase to “crazy high” numbers early this year.

“It’s early, but we could be very well looking at another record year for arrivals,” he said. Visitor arrivals to the islands were expected to top 10 million for the first time last year, although the total count has not yet been finalized.

Meanwhile, city efforts to crack down on illegal transient vacation rentals do not appear to have had much of an impact yet on the supply of rentals for tourists.

Visitor spending is expected to be relatively flat, but Bonham said UHERO expects construction to pick up the pace this year from the level of construction Hawaii saw in 2019.

Ige has proposed a large public works construction budget of $2.6 billion for the year that begins July 1, and “from talking with contractors, developers … architects, you name it, they’re all extremely busy in the preparations for work, for projects that are in the development stages,” Bonham said.