Hawaii’s New Budget Deficit: $1.3 Billion
The state’s top budget official has raised his estimate of the budget hole lawmakers will have to fill: The total shortfall is now $1.3 billion — more than one-third larger than previous estimates.
The new figure represents a 34 percent increase over the previous deficit estimate of $969 million and echoes the Senate Ways and Means Committee chairman’s outlook, which pegged the shortfall at $1.2 billion. Kalbert Young, director of the Department of Budget and Finance, told Civil Beat, that Gov. Neil Abercrombie’s administration is “being prudent” by assuming a negative 2 percent growth in tax revenues for the year ending June 30.
That differs from the Council on Revenues‘ March 10 forecast of positive 0.5 percent growth, which came out just hours before the devastating Japan earthquake and tsunami hit. At the council’s last meeting, chairman Paul Brewbaker noted that the projection assumes a range of +/- 2 percent.
Young’s new estimate creates sticky situation for lawmakers. By statute, legislators have to base their budget on the Council on Revenues’ projections. The council, which normally meets quarterly, will hold a March 29 to reconsider its forecast at the request of Gov. Neil Abercrombie.
“The $1.3 billion deficit is based on a revenue trajectory of (minus) 2.0 percent,” Young told Civil Beat via email on Thursday. “The administration is being prudent in examining what degrees of adaptation is necessary should the actual rate of revenue growth be somewhat less than the Council’s specific growth number.”
Based on the Abercrombie administration’s estimate of negative 2 percent growth in the current fiscal year, Young said the shortfall breaks down to:
| Fiscal Year | Shortfall |
|---|---|
| 2011 | $232 million |
| 2012 | $556 million |
| 2013 | $515 million |
| Total | $1.3 billion |
Young said he thinks the 0.5 percent growth estimate is too optimistic.
“In order to achieve a 0.5 percent rate of growth, the State would have to collect greater than approximately $405 million in each month of the last four months of this fiscal year,” Young said. “Looking back at the rate of collections for the last 15 years for the State, the State has not collected (more than) $400 million in more than two consecutive months. Furthermore, looking at the rate of revenue receipts for the last four months of the previous fiscal year (FY10) when the State withheld tax return payments, even then, the average monthly revenue rate in each of the last four months was only approximately $389 million.”
The Senate Ways and Means committee will hold its first on the state budget Monday, using as the starting point. That version calls for $10.98 billion in spending in fiscal 2012 and $10.97 billion in fiscal 2013.
Sen. David Ige, chair of Ways and Means, also has said he thinks the Council on Revenues’ forecast is too optimistic. Ige told Civil Beat last week he predicts the deficit will top $1.2 billion, triggering even more spending cuts and potentially bigger tax hikes.
