Wednesday, July 17, 2024
Hawai'i Free Press

Current Articles | Archives

Friday, January 10, 2020
State spending cap is useless
By Grassroot Institute @ 6:19 PM :: 2578 Views :: Hawaii State Government

State spending cap is useless

From Grassroot Institute, January 10, 2020

When you’ve dug an $88 billion hole, you need to stop digging.

That is the amount of unfunded liabilities that our state and county governments are projected to accrue in the next 30 years, as discussed in the January edition of Hawaii Business magazine, which interviewed me and other community leaders about the potential crisis.

The magazine article was based on a report produced for the Hawaii Executive Conference, “Troubled Waters,” that made it clear that action is needed to prevent the state from falling into a fiscal crisis.

But are Hawaii policymakers willing to do what it takes to control spending and reduce debt?

A substantial portion of that $88 billion reflects unfunded pension and healthcare liabilities. Yes, the state government is following a plan that should gradually pay them off, but we should also be looking at ways to make the system sustainable in the long term. 

In our 2019 Grassroot Institute report “How to resolve Hawaii’s public pension debt crisis,” we offered a wide array of policy options for Hawaii legislators to consider, including defined-contribution plans, hybrid plans, choice plans and changes to age, service and contribution requirements. For a long time, our leaders have balked at reforming the public employee pension system, but Hawaii residents and workers deserve a plan that will survive for decades without bankrupting the state.

In the Hawaii Business article, I pointed out that we also need to lower state taxes. Hawaii has the second-highest marginal income tax and highest estate taxes in the country, and our legislators continue to pile on tax hikes and surcharges. 

Why would I suggest reducing taxes in order to reduce state debt? Because our high level of taxation contributes to our high cost of living, chasing more residents to the mainland and reducing the overall tax base. A lower tax environment tells businesses and residents that this is a place to invest in and thrive. Making the state more attractive to businesses would expand economic opportunities in Hawaii and put more money in the local government tax coffers.

Of course, it’s impossible to talk about state debt without talking about government spending. And that’s where we may need the strongest dose of corrective medicine.

Technically, the state has legal barriers that should prevent overspending. The state Constitution limits general fund expenditures based on the estimated growth of the state economy. This is calculated using average real personal income growth over the previous three fiscal years. That means that for fiscal 2020, the spending cap is $8.1 billion and for 2021, it’s $8.5 billion.

However, if the cap is supposed to be a spending stop sign, then it’s sitting at an intersection with no police cars or cameras. All it takes to plow right past it is an explanation from the governor as to why he wants the additional money being requested, along with a two-thirds vote by both houses of the Legislature. That’s not much of a hurdle in a one-party state. It’s barely a speed bump. 

That’s why, just weeks after this report about our looming $88 billion debt was released, Gov. David Ige was able to submit a budget update that goes $67.4 million over the spending limit for fiscal years 2020-21. 

Sure, the money requested is for worthy causes such as education, paying down the unfunded public pension and health plan liabilities, and pay raises for government workers. But that's why it's even more important to budget properly, instead of putting forth proposals that will further dip into the state’s dwindling surplus. 

It’s time for our leaders to get serious about state spending. Let’s start practicing fiscal accountability now so we don’t saddle our children and grandchildren with our liabilities in the future.

E hana kakou! (Let's work together!)

Keli'i Akina, Ph.D.


Related: Hawaiʻi’s Future Liabilities are Expected to Cost $88 Billion


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


Aloha Pregnancy Care Center


Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii


Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii Military History

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Together


Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

July 4 in Hawaii

Land and Power in Hawaii

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

National Parents Org Hawaii

NFIB Hawaii News

NRA-ILA Hawaii


OHA Lies

Opt Out Today

Patients Rights Council Hawaii

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

Rental by Owner Awareness Assn

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

School Choice in Hawaii

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii