Furloughs for thousands of state employees scheduled to begin Jan. 1 could be postponed until July if a COVID-19 funding bill moving through Congress provides Hawaii with millions of dollars in COVID-19 aid, taking some pressure off of an already strained state budget.
A Monday draft of Congress’ stimulus bill does not cover direct funding for states, city and counties. But the pressure to begin furloughs with the new year could be pushed back six months if Hawaii receives “hundreds of millions” of federal dollars for COVID-19 relief, Gov. David Ige said in releasing a stripped-down budget that includes cuts to the state Department of Education and the University of Hawaii system.
Without a deal in Congress for COVID-19 relief, Ige had planned for the state to pay for further COVID-19 testing, expansion of the state’s contact tracing program, COVID-19 vaccines and vaccine distribution “because we didn’t know whether it would be funded by the federal government,” he said.
“If collectively we can recover several hundred million dollars in federal appropriations, then that would allow us to consider delaying or reducing the furloughs,” Ige said.
The length of furloughs varies, but Ige previously said that twice-a-month furloughs would save the state $300 million annually and reduce the possibility of layoffs of 4,000 state employees.
The furloughs are part of Ige’s effort to plug a projected $1.4 billion deficit in each of the next four years because of COVID-19’s hit on a Hawaii economy that had been setting records until the pandemic hit.
Hawaii went from having one of the lowest unemployment rates in the country to the highest and, at one point, also had the worst economy.
Federal aid likely will be a key part of how the Legislature responds when the new session begins next month.
“We’re looking forward to analyzing the governor’s budget proposal in light of the new federal appropriations,” House Speaker Scott Saiki told the Honolulu Star-Advertiser.
“It’s possible that we can use the federal funds to supplement state operating expenses, which could prevent the need for furloughs,” Saiki said. “It will be really important for the governor to appropriately manage any federal funds that we receive so that we can make that possible.”
U.S. Sen. Brian Schatz said Monday that the congressional package would include at least $1.7 billion to Hawaii for food, unemployment assistance, small-businesses aid, rent relief, vaccine distribution and to schools and hospitals.
The lack of revenue is so dire that Ige said the state issued $750 million in general obligation, short-term bonds to cover current operating expenses “for the first time ever. We’ve never had to borrow to fund current expenses.”
“Given the magnitude of the revenue shortfall, state government must reengineer the way we provide services,” he said. “The extent of the expected revenue loss means that permanent and ongoing changes must be made to state government. Understandably, these changes will be difficult.”
Ige’s budget for the 2021-2023 biennium calls for $276.4 million in reduced operating spending in fiscal year 2022 and $171.8 million less for the 2023 fiscal year. The total operating budgets would be $15.417 billion in fiscal year 2022 and $15.521 billion in fiscal year 2023.
Ige also will ask the Legislature for $7.686 billion in general funds for fiscal year 2022 and $7.798 billion in fiscal year 2023. The amounts represent a 4.5% reduction of $361.9 million from the current level appropriated for fiscal year 2021, and 3.1% — or $249.6 million — less for the next fiscal year.
State construction, known as capital improvement projects, would be budgeted at $1.236 billion in fiscal year 2022 and $1.116 billion in fiscal year 2023. The request for general obligation bond funds for the next biennium of $679.4 million and $512.1 million, respectively, is about $800 million less than the current biennium budget.
Other key provisions of Ige’s budget would:
>> Cut 70 Department of Education positions and $165.6 million in programs for both the 2022 and 2023 fiscal years. The DOE is the state’s second-largest department behind Budget and Finance and makes up 21% of the state budget.
>> Reduce the University of Hawaii’s budget for the 2022 and 2023 fiscal years by $70 million.
Exactly how the cuts will be implemented will be up to the state Board of Education and UH Board of Regents, Ige said.
He called the cuts “difficult” and said his administration has always made education a priority.
“I am unable to leave these programs untouched without decimating the rest of state government, especially when many of our health and social service programs are needed now more than ever,” he said. “To fund programs that assist citizens in need of food, shelter and jobs, and to ensure public safety, the education budget must be trimmed.”
Public schools, however, would receive $150 million in each of the next two fiscal years for backlogged maintenance, facilities and to comply with health and safety requirements.
And UH would get $165 million in fiscal year 2022 and $150 million in fiscal year 2023 “for modernization, maintenance, capital renewal/deferred maintenance and technology renovations across the state.”
>> The state Department of Public Safety would receive $12.1 million in the next two fiscal years to restore 237.5 vacant positions. Operating 24/7 facilities at current staffing levels would create more overtime and budget problems, Ige said.
Another $35 million would be used for a health care unit at Halawa Correctional Facility, which has been strained by COVID-19.
>> Increase Medicaid health care payments by $34.7 million in general funds and $216.3 million in federal funds in fiscal year 2022, and by $55 million in general funds and $148.5 million in federal funds in fiscal year 2023.
>> Increase general assistance payments, sometimes referred to as welfare, by $5.4 million over the next two fiscal years to meet projected increases resulting from the economic downturn.
>> Decrease state retirement benefits funding by $19.2 million over the two fiscal years.
>> Add $17 million in fiscal year 2022 and $19.4 million in fiscal year 2023 for interest payments on the $1 billion unemployment insurance loan that the state took out to provide benefits to people out of work because of COVID-19.
Asked about the spread of COVID-19 over Christmas and New Year, Ige encouraged everyone to use particular caution.
Even his own three adult children won’t be coming home.
“This Christmas will be very different,” Ige said. “It’s the first time ever in our life that we’ll not celebrate Christmas and New Year’s as we normally do.”
To reduce the spread of COVID-19, Ige urged everyone to celebrate only with people in their households.
“I know that’s a hard thing to do,” he said.