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Editorial: Hawaii will need more federal help

Given the sudden drop in tax collections and the collapse of Hawaii’s tourism-fueled economic engine, it’s clear that the state cannot continue to spend at the rate it has been.

Earlier this month, Gov. David Ige broached the subject of reducing state payroll costs as an option to help make budgetary financial ends meet. Easing that pain hinges on whether the federal government will provide more COVID-19 relief funding, which buys the state more time to recover its economic health.

To that end, Congress is now back in session, negotiating its fifth package to help Americans get through the pandemic economy. Hashing out agreement will likely take weeks as the U.S. House, in mid-May, approved a $3 trillion relief proposal, while the Senate is eyeing a $1 trillion spending limit.

The House-approved HEROES Act, which stands for the Health and Economic Recovery Omnibus Emergency Solutions Act, died in the Senate as its leaders opted to instead hit the pause button, in apparent hopes that the coronavirus would be contained by early summer. With 40 states now seeing increases in cases, such hopes are dashed.

Hawaii’s congressional delegation must push hard to fold into the package key elements, such as hefty funding for state and local governments to help offset revenue losses; and a provision to extend the $600 extra weekly unemployment benefit, which is slated to expire here after this week.

Critics have argued that generous jobless benefits disincentivize people from going back to work. But outweighing that concern is evidence that the benefits are serving as an effective economic crutch. Without them, it’s a sure bet that Hawaii would be seeing more defaults on household bills and more homelessness.

A recent statewide survey by SMS Research & Marketing Service Inc. found that slightly more than 30% of respondents reported they were just managing to get by financially. Unless relief aid is extended, households in this bracket may soon be drawing down savings and running into debt. What’s more, much of their spending in the local economy will come to a sudden halt.

While public health here is faring well compared to that of many mainland states, Hawaii’s tourism industry is squarely in the nation’s hardest hit economic sector. Even if the state opens up more trans-Pacific travel to the islands with a Sept. 1 launch of the planned pre-travel testing program, industry observers rightly point out that a significant rebound may be several years down the road.

Meanwhile, Hawaii will be grappling with a plummet in tax collections. In June, the state collected $483 million in levies, down from $644 million in June 2019. And Ige pegs the state’s overall projected revenue loss over the next two fiscal years at $2.3 billion. In the absence of a steady flow of federal relief cash, state leaders will be forced to downsize government — as well as services to the public.

The CARES Act, passed in March, is credited with saving millions of jobs across the country through: stimulus checks, $600 weekly bonus unemployment benefits, Paycheck Protection Program forgivable loans to small businesses, eviction protection and foreclosure protection. With much of that aid now spent, more is needed.

In April, Hawaii, which 2-1/2 years ago had the lowest unemployment rate in the country at 2.2%, had the second-highest jobless rate in the U.S., trailing only Nevada, which was at 28.2%. Since then, our unemployment picture improved, dropping to slightly less than 14% last month. Still, given our heavy dependence on tourism, there’s little certainty in employment outlook.

For all states, the annual aim is for revenues to support the size of government and its array of public services, including safety-net programs. In Hawaii’s case, that’s shaping up as a daunting challenge.

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