Hawaii Lowers Revenue Forecast to -1.6 Percent

Hawaii's budget picture grew even worse Tuesday as the state's Council on Revenues downgraded its tax revenue forecast for this year to -1.6 percent.

But the downgrade doesn't affect the deficit the Hawaii Senate faces, because the state's Budget director had already decided to work with a -2.0 percent figure for the budget year ending June 30.

The council, which normally meets quarterly, held a special meeting at Gov. Neil Abercrombie's request to reconsider its forecast for the current fiscal year in light of the catastrophes in Japan. Its previous forecast came out just hours before the devastating Japan earthquake and tsunami hit.

Paul Brewbaker, the council's chair, said it's still too early to measure the impact of Japan's disasters from a revenue standpoint. He said the reason for the downgrade was that actual February tax collections came in "surprisingly low." The total was $315 million, compared with $392 in January.

"We have no good explanation for it," Brewbaker said of the change. But if you take the number at face value, it indicates the recovery isn't as strong as previously projected.

Under the council's previous March 10 forecast of positive 0.5 percent revenue growth, the state was facing an estimated $969 million shortfall through 2013.

Kalbert Young, director of the Department of Budget and Finance, said the administration was "being prudent" by instead assuming a negative 2 percent growth in revenues for the year ending June 30. That would put the state's deficit at about $1.3 billion, including a $232 million shortfall for the remaining three months of the fiscal year. If the council is correct, the shortfall would be closer to $200 million.

On Monday, Sen. David Ige, chair of the Ways and Means Committee, said lawmakers likely wouldn't be able to incorporate a lowered projection into its budget proposal.

"At this point in time, because it takes so long to crank out the budget, we've kind of got to make decisions and start rolling it, and then we'll see what happens in conference," Ige told reporters Monday. "So we won't have sufficient time from the council taking action tomorrow to really reflect significant changes in terms of the path that we're kind of steering the budget to — at least until conference."

Ige said that if the council had maintained its projection for 0.5 percent growth in tax revenues for the current year, he felt the Senate was in good shape to address the budget shortfall.

"If the council doesn't make a change, I think the course we're planning, we're kind of in the ball park," Ige said Monday, noting that the Senate has advanced bills for a liquor tax, a "streamlined" sales tax, eliminating state income tax deductions and itemizations, and that it's scheduled to hear testimony on a proposed pension tax.

Because tax hikes wouldn't be able to generate revenues quick enough, Ige said Hawaii lawmakers have just two options to balance this year's budget: raid special funds or "completely shut down spending."


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