Twenty Years of Nickels

by Tom Yamachika, President, Tax Foundation Hawaii

Many times over the years, we have put pen to paper (in the virtual sense at least) writing about HI-5 beverage container deposits.  Our most recent article on the subject was in January, where we observed that the State Auditor had once again complained about the lack of basic internal controls around the special fund that holds these deposits.  At that point, the fund had swelled to over $50 million.

Why do internal controls matter?  The Department of Health is supposed to make sure that the program functions as it is supposed to.  Which means the right people get paid the right amount, and it’s tougher for crooks to game the system.

In 2015, the Auditor reported that Whole Foods underpaid the program for more than six years.  The Department settled with the retailer for about half of the amount underpaid.  (Maybe I can see that an honest mistake was made for one or two reporting periods, but six years is pushing it, especially when each bottle says “Hawaii 5 cents.”)

In 2019, the Auditor reported on two clear, documented cases of actual fraud on the fund.  The Department appears to have taken no action.

Recently, former Representative Beth Fukumoto, writing for Civil Beat, wrote about how the fund is now at $77 million and the Department “has failed for 20 years to properly account for all that money, according to state audits.”

In 2022, our lawmakers enacted Act 12 of 2022, which requires the Department of Health to develop a risk-based process to audit deposit beverage distributor and redemption reports.  The law went into effect on April 7, 2022, when Governor Ige signed it.  Yet three years have elapsed, and the process has not been developed yet.  It’s still in the works.  It’s like Donald J. Trump in the 2024 presidential debate telling us all that he had “concepts of a plan” when he was asked about his health care plan.  The Auditor wasn’t satisfied with that, and for good reason. 

If someone shows up at a hospital and is profusely bleeding, is it right for the medical staff to just sit there until they have more than concepts of a plan to stop the patient’s bleeding?  Is it a good excuse that the patient weighs 770 pounds, and thus should have a whole lot of blood in his body already so he won’t croak for a while?

That seems to be the prevailing mentality here.  The fund has a bunch of money and is steadily expanding, so who cares if a few million here and there is being lost to fraud or waste?

Guess what?  Taxpayers care. Because if lawmakers need money and that money is not available for use, guess how they are going to make up the shortfall?  Revenue raisers.  Meaning more fees, more taxes, and other schemes to make sure that a taxpayer and the taxpayer’s money are soon parted.

You think this won’t happen any time soon?  Lawmakers are already planning for a special session in October to deal with the fallout from current and anticipated future federal budget cuts.  It wasn’t too long ago that our State decided to shut off the flow of Transient Accommodations Tax money that was being shared with the counties.  Well, it seems that what goes around comes around, and the Trump Administration is poised to do the same thing to us.

And, lest we forget, the deposit beverage container special fund is just one of many special funds under the Department of Health.  All departments are supposed to report to the Legislature about their special funds every year, but Beth Fukumoto found that the Department of Health hasn’t produced any such report since 1995.  That’s 30 years of neglecting legal responsibilities in addition to the 20 years of inadequate management of the bottle fund.

Enough already!