Tuesday, July 16, 2019
Hawai'i Free Press

Current Articles | Archives

Thursday, December 08, 2011
Former State Administrators: Abercrombie’s Bond Sale Like setting up savings account by charging credit card
By Selected News Articles @ 2:03 PM :: 4147 Views :: Energy, Environment

by Georgina Kawamura, Barry Fukunaga, and Russ Saito

As reported by the media statewide, the state’s recent $1.3 billion in new borrowing through a bond issuance was noteworthy for its size, and Governor Abercrombie called it the singular success of his administration to date.

However, taking a victory lap due to the success of this new borrowing is misleading if the underlying factors that made it possible are not considered.

First, the success of the bond issuance was due in large part to tax increases that occurred in Hawaii. Rating agencies (Standard & Poor’s, Moody’s, Fitch) and bond investors welcome a borrower that has strengthened its revenues. Increasing revenue for a business usually means earnings growth resulting from efficiency, price competitiveness or a better product. But for government, without the efficiency of service delivery or judicious spending, it usually means more taxes on the public.

To achieve the revenue improvement to support the recent bond offering, the Abercrombie Administration and the Legislature raised taxes in the 2011 Session to the tune of $600 million. This no doubt pleased the rating agencies, but it is important to note that the additional $600 million in new taxes will come out of the pockets of Hawaii’s residents and visitors.

In contrast, the Lingle Administration issued bonds while achieving higher credit ratings and it did so without raising taxes.

The second reason the victory lap is misleading is the Abercrombie Administration’s plan to repay the state's Hurricane Relief and the Rainy Day funds from monies borrowed by this bond sale. Maybe the administration wants our residents to forget that the raid on these reserve funds broke a promise to Hawaii’s taxpayers that these taxpayer monies were set aside for use in emergencies such as hurricanes.

Beyond that broken promise, public finance experts agree that general obligation bond issuance should be invested in capital construction projects. In other words, money borrowed should be invested in buildings, roads and other capital improvements that increase economic activity, thereby enabling governments to collect more taxes to repay the money borrowed. It is unwise to use borrowed money to pay for salaries and other operating costs, because the state will pay interest on those borrowed funds.

In this case, the Abercrombie Administration will put the borrowed money in an account only to pay interest on it – interest that is ultimately paid for by taxpayers. It’s like a household setting up a savings account by charging a credit card. When it comes due, there will be more debt to repay. That is nothing to celebrate.

Again, in contrast, the Lingle Administration balanced its budgets without raiding these reserve funds.

Finally, the celebration is misleading because the success of the bond issuance was also based in large part on the 2010 Comprehensive Annual Financial Report (CAFR) for the fiscal year July 1, 2009 to June 30, 2010. This CAFR is a report card on financial management during the Lingle Administration.

Gov. Abercrombie, who has criticized the financial management of the Lingle Administration, cannot claim credit for the CAFR results while simultaneously accusing the previous administration of not prudently governing in the last two years of its term. It's like running a victory lap on the back of another runner.

---30---

Georgina Kawamura is the former Budget and Finance Director, Russ Saito is the former comptroller and Barry Fukunaga is the former chief of staff for Gov. Linda Lingle (2002 to 2010)

Related: Lucky Hawaii: Bond Sale Benefits as Investors Flee Europe, Abercrombie Refusing to Accept Responsibility for his own Wreckage, Fiscal and Otherwise

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

Affordable Hawaii Coalition

ALEC

Alliance Defending Freedom

Aloha Conservative Alliance

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

Conservative Forum for Hawaii

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop 

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

I Vote Hawaii

If Hawaii News

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Salvage The Rail

Save the Plastic Bag

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT