Maui wildfire recovery costs prompt state spending cuts

State budget officials are scraping together a big pile of cash previously budgeted for a wide range of uses to instead pay for mounting Maui wildfire recovery expenses.

Gov. Josh Green recently informed leaders of all state agencies that he is using his emergency power to redirect $173 million in appropriations for about two dozen projects and programs, including long-overdue repairs to a leaky Hawai‘i Convention Center roof, so that the state can cover near-term costs responding to the biggest disaster in recent Hawaii history.

The move could alter the fate or timing of affected projects and programs, though the governor plans to request that the Legislature next year re-appropriate all the money he has shifted.

“I recognize that these appropriations may be significant to your programs but ask for your utmost understanding and support of these efforts,” Green said in the executive memorandum dated Oct. 30. “As we navigate these uncharted waters, bear in mind that the recovery process will be long and costly.”

Luis Salaveria, director of the state Department of Budget and Finance, said in an interview that the state already faces around $100 million in accrued bills or known obligations related to the Aug. 8 wildfires and that it’s uncertain how much higher such expenses will grow and when they will be due.

“What we’re doing financially right now is making sure that we can meet the obligations for the response and recovery for the wildfire disaster, and to do that we need to be mindful of expenditures,” he said. “These (fire-related expenses) are expenditures that we did not anticipate four months ago.”

Funding is being redirected for 26 projects or programs, some of which are losing only partial funding while others are losing total funding.

The largest redirected appropriation is $64 million to fix the convention center’s leaky roof.

The smallest shift takes $5,000 from a $50,000 appropriation for a state Department of Business, Economic Development and Tourism strategic marketing and support pilot program called “Kamaaina Connect.”

Other pullbacks include $45 million out of $50 million for the Department of Education to produce teacher housing, $15 million out of $25 million for state park improvements, an entire $3.5 million DOE appropriation for Mililani softball field improvements and a $250,000 cut from a $2.5 million DBEDT appropriation for culinary arts master classes.

Salaveria said merit wasn’t a consideration for any of the affected projects or programs, and he noted that some may not have been ready to use appropriated funding.

The Hawaii Tourism Authority, which oversees operations of the convention center, has been doing repair design work using previously appropriated funding and expects to begin construction in 2025 after procuring a contract in June 2024.

“We understand the need to reallocate state resources in support of Maui’s recovery, and support Governor Green’s leadership in this regard,” Daniel Naho‘opi‘i, HTA interim president and CEO, said in a statement. “Our initial conversations with the Legislature have been positive, and we will be formally requesting bond funding for this important project in the upcoming Legislative session.”

Obtaining money from the Legislature to fix the convention center roof has previously been quite an ordeal.

Officials at the center unsuccessfully sought $27 million from lawmakers in 2017 to fix the roof based on an architecture engineering firm’s analysis, and a follow-up effort in 2021 also was rejected as the estimated cost for the repairs had ballooned to $64 million.

In 2022 the Legislature appropriated $15 million for short-term roof improvements while operators of the center were spending about $200,000 on average to repair damage inside the building after each rainstorm.

Then earlier this year, lawmakers approved $64 million for the roof repair job.

In 2024, competition for funding projects and programs could be extraordinarily high, depending on factors that include how the state economy is looking, how much tax revenue is coming in and how high the state’s estimated Maui fire recovery costs get.

House Speaker Scott Saiki (D, Ala Moana-Kakaako- Downtown) said it’s impossible to predict which defunded projects and programs may get re-funded by the Legislature in 2024, but he said the convention center roof repair had become a health and safety issue and that such issues tend to be prioritized.

Saiki also noted that in addition to Maui wildfire response costs, a lot of consideration to appropriate tax revenue for mitigating wildfire risk statewide is expected during the session.

The state has an estimated $1.3 billion in its emergency budget reserve fund, also known as the “rainy day” fund, after lawmakers and Green agreed to deposit $500 million into the account this fiscal year ending June 30.

Tapping this account, which requires legislative approval, could be something lawmakers consider as part of budget funding in 2024.

Another strategy that lawmakers could use to re-appropriate money in 2024 for some projects that just lost funding is to use long-term financing instead of cash.

Nearly half the projects that had funding redirected by Green — including the convention center roof repair, development of teacher housing and the Mililani softball field improvements — involve construction that more typically gets financed using bonds but in 2022 got funded with cash because lawmakers in early 2022 were working with a projected budget surplus.

By June, however, this projection took a negative turn that led Green to slash some spending using his line-item veto power on the budget bill. Some of those cuts in June were to projects where Green is now further removing funding, including a teacher housing appropriation that previously was cut to $50 million from $170 million, and money for state park improvements that was previously cut to $25 million from $50 million.

The degree of difficulty to fund competing high-cost priorities in 2024 will largely depend on revenue forecasts by the state Council on Revenues scheduled for January and March. By law the Legislature must base the state budget on these forecasts.

It’s likely that the picture of Maui fire recovery expenses for the state will be clearer by then. But currently, this picture is fuzzy.

The fire in Lahaina killed at least 100 people and destroyed nearly the whole town, including 3,500 homes and hundreds of businesses. As a result, close to 8,000 people displaced by the disaster have been living mainly in hotels. A separate fire in Upcountry Maui also burned down more than 20 homes.

To date, the state has already paid for things such as housing fire evacuees and activating the Hawaii National Guard.

For some costs, the state plans to seek reimbursement from the federal government. But the federal government also intends to seek reimbursement from the state in other instances.

An initial estimate to clean up fire debris is $1.5 billion, and the cost for this work led by the U.S. Army Corps of Engineers is to be shared by the state as well.

Salaveria said the state’s share for debris removal costs is 10% except for work done during a 180-day period where the federal government picks up 100% of the expense. The state gets to pick when this window opens, but it’s uncertain how much work will happen outside the window and thus how much the state’s cost share will be, Salaveria said.

If all debris removal work costs $1.5 billion and 25% of the work is done outside the 180-day window, the state’s 10% share would be $37.5 million.

One other currently uncertain cost for the state is a planned contribution to a fire victim compensation fund that Green announced Nov. 8.

The Maui Recovery Fund is to provide at least $150 million for distribution to people who lost family members or were seriously injured in the fire if they agree to forgo litigation claims against parties participating in the fund. Hawaiian Electric has committed to contribute up to $75 million. Other initial participants — the state, Maui County and Kamehameha Schools — have not settled on their respective shares.

Payments to victims are expected to begin between April and June, though Salaveria said it’s too early now to say where the state’s contribution to the fund will come from.

So far, $65 million of the $173 million in redirected funding has been allocated to the state Department of Defense. Where the rest of the money will go has yet to be decided, and will depend on how wildfire recovery costs evolve.

The Legislature begins its next session in mid-January, and sessions typically end in early May.