The Council on Revenues’ latest projection for Hawaii’s total personal income for the year is scheduled to come out this afternoon amid a precarious economy, in which a $600 weekly federal lifeline for unemployed workers across the country is set to expire this week.
The report on personal income from the Council on Revenues will be just one part of Hawaii’s complicated and troubled economic puzzle, which already includes pressure to speed up — and simultaneously slow down — the reopening of Hawaii’s economy, affecting whether even more island workers will soon join the ranks of the unemployed.
Barring action in Congress, Hawaii unemployment beneficiaries will have seen their last federal $600 unemployment payment, likely to be paid this week, according to Bill Kunstman, spokesman for the state Department of Labor and Industrial Relations.
Some 172,221 people across the islands have been receiving unemployment payments, Kunstman said.
While several options for weekly federal unemployment payments were being reported out of Washington on Wednesday, Kunstman said the most seamless way for both DLIR and the recipients would be to continue the federal government’s weekly benefit of $600 per week.
Any different amount — including the possibility of sliding scales based on various incomes — would likely take at least a week or two to get into the hands of unemployment beneficiaries, Kunstman said.
In its general fund forecast in January, the Council on Revenues was cautiously bullish on Hawaii’s overall economy following another record year in 2019 of 10.4 million tourists, who spent nearly $18 billion across the islands.
By May, the Council on Revenues’ general fund forecast decidedly went south as the ramifications of COVID-19 became widespread.
The panel of experts who comprise the council then predicted that state tax collections will drop by 7% this fiscal year and another 12% next year, leaving Gov. David Ige’s administration with a whopping $2.3 billion budget hole.
The Council on Revenues is tasked with predicting how much the state will collect in taxes each year. It’s already said that the COVID-19 pandemic has no precedent in Hawaii history.
Among the many economic issues, House Speaker Scott Saiki — who co-chairs the House Select Committee on COVID-19 Economic and Financial Preparedness — said he’s particularly worried about the effect on Hawaii’s economy if Congress discontinues the $600 in weekly unemployment benefits.
“I hope that Congress will extend it,” Saiki said. “I’m really concerned that Congress’ failure to extend the benefit will create a jolt in Hawaii, as well as in other states. The bottom line is that all of the states require federal assistance. The states cannot survive this on their own.”
The members of Saiki’s committee represent the many competing interests in the era of COVID-19.
The ongoing surge of COVID-19 was predicted months ago and “was to be expected” after Memorial Day, Fourth of July and other summer activities saw large gatherings of people not wearing masks and not practicing social distancing, Saiki said.
He urged people to follow basic health and and safety guidelines such as wearing masks, practicing basic hygiene and not gathering in large crowds.
At the same time, Saiki sees the the connection — and economic ramifications — between travel, the re-opening of schools and the return of business to retail establishments and restaurants.
“All of these factors are tied together,” he said. “Parents need some form of child care (such as schools) in order to return to work.”
In general, Saiki likes the idea of opening Hawaii tourism to COVID-19 screened Japanese visitors “to establish a corridor (with) Japan.”
Saiki believes that mainland passenger travel initially will be limited — if passengers have to be screened before getting on an airplane, even if they do not have to undergo a 14-day quarantine upon arrival.
“People are still hesitant to travel long distances,” Saiki said.
Sen. Donovan Dela Cruz, who chairs the Senate’s special COVID-19 committee, suspects that Congress will settle on a weekly federal unemployment assistance program of somewhere around $200 per week, not at the current level of $600 per week.
For the overall island economy, Dela Cruz said, “My assumption is it’s going to affect spending. Some of the restaurants, some of the retail businesses may take a hit, and they’re already struggling. Everything has a domino effect.”
With the potential for personal income likely to fall, Dela Cruz also looks at the effect on Hawaii’s overall economy.
“We’re going to have to balance economic stability with public health and safety,” he said. “You need tax revenues and economic activity to pay for health and public safety. There is a direct tie.”