A decade has passed since the last economic downturn that forced smaller paychecks on workers, public and private, assuming they were still getting one at all.
At the outset of the current COVID-19 pandemic crisis in March, some economists saw prospects for a quick recovery with a rosy glow — as soon as a limited shutdown was lifted, consumer activity could resume quickly.
Of course, that isn’t how it played out. Hawaii’s dependence on tourism led inevitably to crippling job losses and plummeting tax revenues along with them.
Gov. David Ige has indicated for months that labor savings would be needed as part of a comprehensive rebalancing of the state budget. Now, with Ige due to submit a budget to the Legislature Dec. 21, he announced that limited furloughs of public employees would be part of the fiscal plan.
There is much confusion about how each department will implement this, and some lawmakers aren’t even sure Ige’s proposal will do the trick. But it does make sense that the state at least should move ahead on furloughs to keep the gaping revenue hole from deepening further. Ige’s projections at this point are that Hawaii faces a budget deficit of $1.4 billion annually for four years.
On Wednesday the governor unveiled the plan to furlough more than 10,000 state employees for two days each month, starting Jan. 1; one year of this is projected to save the state $300 million.
This drew an expected and unified protest from the public labor force, including the Hawaii Government Employees Association. HGEA and other unions issued a joint statement in response, asserting that “wage cuts will likely spin us into a recession, making our already weak economy fall off a fiscal cliff.”
There is, of course, a concern about reducing spending capacity for a sector of the population as large as state employees. Some reflection back on the Furlough Fridays of 2010 do not entirely cast this strategy in a very good light.
Carl Bonham, executive director of the University of Hawaii Economic Research Organization (UHERO), explained that the administration of then-Gov. Linda Lingle implemented her furlough plan after the Great Recession had caused state revenues to falter. The economy was beginning to recover, Bonham said, when the furloughs went into effect.
“The cuts in state spending had an enormous impact on how slow the recovery from the Great Recession was,” he added, speaking Friday on the Honolulu Star-Advertiser’s “Spotlight Hawaii” webcast. “If we repeat that, we’re going to get the same kind of results.”
But as Bonham also acknowledged, “this is not the Great Recession — it’s very, very different.” There is even more uncertainty now surrounding forecasts for Hawaii’s recovery than there was in 2009. Taking at least modest steps to curb spending appears to be the prudent course.
Further, the last fiscal crisis demonstrated that getting this issue resolved at the bargaining table would be more productive than engaging in the protracted legal battle that ensued that time. Lingle’s initial proposal was for 72 unpaid days off over two years, or three days per workweek.
HGEA sued, and although the state ultimately came to terms on fewer furlough days, the state Supreme Court later found that the union should have settled this through the Hawaii Labor Relations Board.
Better still: The unions should work through their grievances with the governor and move on. Getting through the current fiscal crisis has meant sacrifice by thousands of private-sector workers, and the public sector needs to step up as well.
There is some reason for hope that the state’s tax revenues can rebound and that Ige can, as he noted, rescind the furloughs should they prove unnecessary. Bonham pointed to some encouraging figures on visitor arrivals suggesting the potential for gradual improvement in employment and state income.
But the UHERO figures don’t yet reflect the effect of Kauai’s retrenchment on the pre-travel testing program and the lower visitor traffic there, or the fact that Maui has shut down its bars for at least two weeks. On the whole Hawaii has managed the spread of COVID-19 well, including over the Thanksgiving holiday.
Still, Christmas lies around the corner, so whether Hawaii has staved off additional restrictions on social and commercial interactions is yet another murky part of the landscape.
Vaccines do offer a route toward a return to more normal levels of economic activity for the second half of 2021, according to the UHERO annual forecast, issued Friday, “but making it to the point when the virus is no longer a threat will be painful and costly.”
Next year visitor arrivals are expected to rise sharply, sustaining through 2022 before moderating in 2023, according to the report.
But those are projections. Hawaii has seen through the rollercoaster of 2020 how unpredictable a pandemic can be, and it’s likely to continue that way. Getting past the crisis will remain a heavy lift, with everyone — including the public employee unions — helping to shoulder the burden.
