Hawaii House Speaker Tired of ‘Band-Aid Approach’ to Fixing Deficit

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Hawaii House Speaker Calvin Say has reached wits end with the state’s budget crisis.

“In the short term, it’s been so frustrating the past four years. It’s deja vu every biennium,” Say told House Finance Committee members Tuesday. “This biennium, it’s another $1 billion. Truthfully, all we’re doing is a Band-Aid approach.”

Say’s comments followed a briefing by two representatives of the National Conference of State Legislatures on what other states are doing to address budget shortfalls. Say and members of the Finance Committee pressed them for innovative ideas and solutions for Hawaii, but were told the NCSL can only report what other states have done.

Say expressed frustration over Hawaii’s budget deficit, which ballooned to nearly $1 billion for the rest of this year, 2012 and 2013, following last week’s lowered revenue forecast by the Council on Revenues.

He said he’s “tired” of having to pass tough finance measures. Say also said he’s afraid of the impacts the Japanese disaster and rising oil prices will have on the state’s economy.

“The two economic pillars that we depend on are just crashing around this state: tourism and defense spending,” Say said. “What is going to make it up for the next decade? Because I’m tired of addressing the type of proposals that the members of this House went through this past week … The structural changes, that’s what I’d like to see where we can lead the nation, Hawaii.

“Because for me right now, it is very scary — very, very scary — knowing that that nuclear reactor in Fukushima will probably have to shut down and the Japanese visitors are not going to be visiting the state, which is 20 percent of our visitor count. And then the fossil fuels side — increase in jet fuel, increase in utility costs, increase in ocean freight transportation … All of this, I don’t know where to begin. That’s where my fears are coming from, honestly and sincerely.”

After Say’s outburst, he left the committee room, saying he had to meet with the Senate president. Then Finance Committee Chair Marcus Oshiro apologized to Corina Eckl, director of NCSL’s state services division, and Ron Snell, a senior fellow for the organization, for Say’s remarks.

Say was upset that the two didn’t have direct advice for Hawaii lawmakers, but just shared some examples of what other states are doing to address their budget shortfalls.

It turns out Hawaii already is doing most of what other states are doing, such as increasing how much state employees chip in toward their pensions, tapping rainy day and special funds, cutting Medicaid services.

Here are some highlights from their presentation.

Revenue Concerns

  • Sluggish recovery of state collections
  • Loss of one-time funds used in fiscal 2009 and 2010, such as federal stimulus and rainy day funds
  • Expiration of temporary taxes

Spending Concerns

  • Rising program costs (Medicaid, education, corrections)
  • Unfunded pension liabilities
  • Implications of past budget cuts
  • Every state program and service has been subject to reductions
  • Cuts have been heavily concentrated in Medicaid and other health care services
  • Recent cuts to K-12 education have been more severe than in fiscal 2010
  • Some states are changing prison sentencing policies to reduce rising prison costs (Aging, sick prisoners more expensive to care for)
  • Many states have cut aid to local government
  • Many states have relied significantly on rainy day funds and other one-time sources
  • Many states are looking for government efficiency and streamlining to save money

Snell, who specializes in public pensions, acknowledged what he called a crisis with unfunded liabilities across the nation, but then downplayed the situation saying it’s “serious, but not the type that requires dramatic action in the heat of the moment.”

“There’s almost nothing you can do to affect the funding level of your plan next year and the year after that. The numbers are a result of long-term development … I think everybody agrees that the recovery of the economy alone can’t bring the pension funds back to health. It makes sense to deal with both sides of equation: revenues — employer contributions — and expenditures — a few states last year cut COLAS. If you pressed me for a reccommendation, I’d say keep your eye on the long-term goal and think about pension issues in that context rather than what you can do to change things immediately. You have to nibble away at the problem over time.”

Those comments prompted Say to speak up in disagreement. He said he doesn’t believe Hawaii’s pension fund can survive without immediate attention.

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