Richard Borreca: Heavy reliance on tourism dollars leaves Hawaii with tough options like pay cuts

A decade ago, Hawaii was emerging from almost a year of “Furlough Fridays.” To balance the budget, Hawaii government services were cut one day a week. For schools, it meant Hawaii had the fewest classroom instruction days in the nation.

A compromise was reached and the scars were fading. The state was saving money, starting to amp up a building program when this year’s COVID-19 crisis blew up Hawaii’s tourist-based economy.

The current rate of unemployment is 37%. Already 244,330 working men and women have filed unem- ployment claims. Last year tourist spending was $17.8 billion.

Last week Gov. David Ige started feeling around for solutions. He told the Hawaii State Teachers Association that he was considering 20% pay cuts for state employees starting in May, but later changed it from an imminent option to something he was thinking about, with no firm decisions.

“We are looking at an emergency situation and looking at different options. We are looking at the various expenditures in the state government to decide where we need to make budget cuts in order to be balanced. We anticipate having to cut $1.5 billion over the next 15 months, which is a significant portion of the state’s budget,” the governor said.

What is hoped is that Ige and his administration can get an understanding of the goal of getting Hawaii through what appears to be the wholesale collapse of the local economy.

Before his term is finished, Ige will be tested like no governor before. Our tax laws are designed to sweat as much as possible out of that nearly $18-billion-a-year industry.

We added taxes designed to have tourists pay for running the state, including a special grab for Honolulu’s rail transit system. Even Hawaii’s general excise tax is a fearsome revenue extraction tool, taking a nibble every time money changes hands: no matter if it is food, medicine or services, the state efficiently takes a share.

In a good economy, the trick is you have to be spending money before the state gets a taste.

In ideal times, a leader would be ahead of the crisis, gathering together supporters, forging a sense of purpose and inclusion, giving assurance that shared sacrifice would not be forgotten.

For Ige, more publicly comfortable with spreadsheets than folksy empathy, leading out of this economic disaster, will be a challenge.

During the Great Recession, Hawaii’s unemployment rate never went above 7.3%.

Hawaii Democrats back then could and did try to paint the Republican Gov. Linda Lingle into a corner, refusing to follow her economic recovery plans, although before the political confrontation ended, public worker unions had to take pay cuts.

Today, the starting position for state legislative leaders is to oppose pay cuts. The public worker unions point to federal stimulus programs, the state’s rainy day fund and other sources of revenue. Ige is saying: “I want to assure everyone that we will explore all options before making any decisions about salary reductions for government employees.”

Making Hawaii whole again, working and stable, is the goal. But for Ige, the first challenge will be to see the crisis in its entirety and then, with as much transparency as possible, communicate a way forward.

Richard Borreca writes on politics on Sundays. Reach him at 808onpolitics@gmail.com.