CoR: Tsunami effect smallish, February tax receipts are major factor
HONOLULU (AP) — A loss of Japanese tourists and declining tax collections have sunk Hawaii's budget hole Tuesday to the depths of a $1.3 billion shortfall over the next two years, leaving lawmakers searching for ways raise money and cut spending.
The Council on Revenues voted to revise its projection following the March 11 earthquake and tsunami, which resulted in a 25 percent drop in Japanese visitors since then.
The decline in Japanese vacations to Hawaii shrinks the amount of their money spent and taxes collected in the state. State legislators are considering how to make up for the loss by raising taxes and reducing government services.
The council's new estimates add $312 million to its previous prediction of a nearly $1 billion shortfall through June 2013. The council released its last forecast just hours before the tsunami altered the state's economic and political landscape.
Besides the tsunami, lower-than-expected tax income during February also contributed to the worsening outlook.
The effect of the tsunami "turns out is kind of smallish in its consequences," said Paul Brewbaker, an economist who chairs the Council on Revenues. "The biggest factor at the end of the discussion was the surprisingly low February collections."
(Obvious question: How did the Abercrombie administration stage that? Did they leave a bunch of checks in the box ‘til March 1? Anyone want to lay bets on March coming in as “surprisingly high" when CoR meets next time?)
Statement By Governor Abercrombie on Council On Revenues
Honolulu – Governor Neil Abercrombie released the following statement regarding the updated Council on Revenues projections:
“Our administration has put forward a plan that will get us out of the immediate fiscal shortfall while moving Hawaii toward a New Day. We understand the challenges facing the state and we are being conservative as we work with the State Legislature to pass a budget that will get the job done.
“To meet the immediate shortfall over the next three months, we will enforce a 10 percent spending reduction for all departments. We will also use the Rainy Day, Hurricane Relief and special funds.
“For future years, the plan we put forward in February still stands. Our plan will add $1.3 billion to Hawaii's economy--creating jobs and building critical infrastructure like schools, clean energy projects, and public facilities. Our plan restores critical government functions to help local businesses and invest in education. The plan balances the budget by making changes to the tax code, labor savings, and spending cuts.
“The people will not tolerate the status quo. They want jobs, better schools, energy and food produced here.”