Without furloughs, Lingle said she would have to lay off up to 10,000 employees to get the equivalent amount of savings.

At a speech today, Lingle said, "This is the most difficult decision I have had to make since becoming governor. It is not something I want to do, but it is something I have to do."

Lingle has no authority to order employees of the University of Hawaii, state Department of Education or Hawaii Health Systems Corp. So she will plan to reduce their spending by an amount equal to the three-day-per-month furloughs. The furloughs would amount to about a 13.8 percent pay cut.

She is also asking the judiciary, Legislature and Office of Hawaiian Affairs take similar furloughs or restrict their budgets by an equivalent amount.

Lingle also plans to delay - by a "few days" - paying into the state employee health and retirement funds and delaying reimbursements to managed-care health plans for Medicaid expenditures.

"No pensions or health benefits will be jeopardized in any way," she said. The state will save $130 million and its payment will "only (be) a few days late in July."

View transcript of Governor Linda Lingle's address here (pdf document)
Honolulu Advertiser post date 06/01/09 4:34 PM

Governor's plans to close the budget shortfall
June 1: See broadcast schedule below for Governor's live address.

1:00 - 1:30 p.m. GOVERNOR'S LIVE ADDRESS Today 06/01/09

Lingle to address state budget.
The address will be carried live on television, radio, and the Internet:

• Governor's website: www.hawaii.gov/gov
• KSSK 590 AM
• KHON-TV - Channel 2
• KHNL-TV - Channel 8
• KITV website: www.kitv.com
• KGMB website: www.kgmb9.com
• Honolulu Advertiser website: www.honoluluadvertiser.com

NOTE: KGMB-9 will rebroadcast the address at 6:30 p.m.

HONOLULU (KHNL) - Governor Lingle was working hard this weekend to come up with $185 million to get the State out of the red for this fiscal year. That has those who are already suffering from the first round of budget cuts on edge.

Last Thursday, the Council on Revenues projected a steeper budget deficit than previously expected - a 9% drop in revenue for this fiscal year.

That's up from the original forecast of 5%. And right now, it's a wait and see game as to where the cuts, if any, will be made.

First, Governor Lingle instructed all State departments to cut spending by 6%, then, another 2%, and now, the Governor says it's still not enough to fill the budget gap.

Perreira says there are other ways to reduce the deficit.

"We're going to have to look at additional revenue. We long advocated to raise the general excise tax in the short or long term," he said.

One of the hardest hit by the shortfall is education.

Jen Shibuya is a special education teacher. She works two other jobs to make ends meet.

"I am always trying to keep up to date on jobs or income that are out there besides teaching," she said.

A few months ago, she and her boyfriend bought a home. While owning a home may mean having security -

"The understanding, even with my parents generation, was that if you work for the state you have a secure job. You have a secure line of work and today, with what's going on, I don't see that. I wonder how much emphasis there is on children's education, so that makes me wonder if I will have a job," said Shibuya.

Board of Education Chair Garrett Toguchi says all of the State's educational programs may now be in jeopardy if the Governor decides to go after them.

"There's no time to furloughs. There's no supply money to be cut at this time. School is ending in about a week. So we are hoping she takes the money from the Hurricane Relief Fund or other sources of revenue that she has access to," Toguchi said.

"The Governor is not looking at this to address the economic situation. She's looking at this in the short term and she is a short termer, she's looking at this in the short term to fix the budget," said Perreira

As the State scrambles to find additional funds, very few want to suffer more cutbacks.

"I am sure that I will find a way to make ends meet. It's just that the children have not had the experience or the education to help get through times like this, and they will lose out," said Shibuya.

Governor Lingle met with her staff throughout the weekend to come up with a plan.

She will address the State on Monday at 1 p.m., which will be broadcast live on KHNL.

By Loren Moreno
Advertiser Education Writer

Education officials fear that the projected drop in state tax revenues could have a "dramatic impact" on the public school system, both in the current school year that ends in just over a week and the upcoming school year.

Gov. Linda Lingle today is expected to discuss how she intends to close a projected $185 million budget gap by the end of this month. And with the state Department of Education accounting for more than 40 percent of the state's budget, education officials say it's likely the public school system will be targeted.

"When you're talking about a potential shortfall of the magnitude that the (state) is projecting, it's hard for schools not to be part of the cuts, unfortunately," said James Brese, chief financial officer for the DOE.

Russell Pang, spokesman for the governor, on Friday said no decision had been made on cuts to the public school budget.

"It ($185 million) has to come from somewhere. And that's not to say it's all coming from the DOE. ... We're not exactly sure," Pang said.

So far in the current fiscal year, which ends June 30, the state Department of Education has cut or restricted its spending by some $40 million, including cuts to non-school hour programs, the A-Plus after-school program and vacant positions across the public school system. Superintendent Patricia Hamamoto has instituted spending restrictions on interisland travel, overtime and workshop attendance.

Few options

The governor must close the current budget shortfall by June 30, but education officials point out that the current school year ends June 9. The state Board of Education had previously discussed various options for cutting the state DOE's budget, including trimming the school year by four to six days or increasing class sizes by one or two students.

"There aren't too many options left for us right now. The school year is practically over," said Garrett Toguchi, chairman of the state Board of Education.

Education officials are suggesting the governor tap the state's Rainy Day fund or the Hurricane Relief fund to minimize impact on the public schools. The governor also has furloughs of state workers as a possible option, they say.

"We've cut so much already, it's going to be extremely difficult to find the additional funds with it being so late in the game," Brese said.

Education officials also say the newest forecast by the Council of Revenues doesn't bode well for the 2009-2010 biennium budget that was passed by the state Legislature.

State lawmakers used the council's previous forecast from March to draft the state's two-year budget. They built a cushion into that budget but the newest tax revenue forecast exceeds the cushion.

Under the budget passed by the state Legislature, the DOE is preparing for $166 million in cuts over the next two years, Toguchi said. If additional cuts have to be made, expect them to "dramatically impact" school operations, he said.

'everything on table'

BOE members may have to again explore the possibility of cutting the school year or increasing class sizes, he said.

Back in November, Hamamoto presented the board with a plan to close schools for four to six days a year to save up to $25 million.

The board also considered a plan to increase the average class size by one student to 27. The plan would require the state to hire fewer teachers and could amount to a savings of $10 million.

"It's fair to say that everything is on the table," Toguchi said. "Increasing class sizes by one to two students can save $10 (million) to $20 million. But I don't think that'll be enough," he said.

Other cost-saving options include fewer supplies, new textbooks and computers, fewer opportunities for tutoring for students and fewer professional development options for educators, Toguchi said.

Stimulus funds

One undetermined variable is the federal stimulus money meant for education that the governor has yet to apply for.

The state should receive an estimated $192 million in state fiscal stabilization funds from the economic stimulus package approved by Congress and President Obama. Most of this federal money — $157 million — is meant to help kindergarten-through-12th-grade public schools and the University of Hawai'i.

The governor originally said she intends to allocate $90.9 million in the current fiscal year and $22.3 million in fiscal year 2010 from the stimulus money to education. That money would leave the DOE with no net gain because the governor planned to cut state funding to the department by the same amount.

Pang said the governor has not yet submitted the state's application for federal State Fiscal Stabilization Funds. He said the governor was waiting for the Council on Revenues, the agency charged with forecasting state income, to make its May projection before finalizing the stimulus application. The council projected the $185 million shortfall Thursday. The federal deadline for state stimulus fund applications is July 1.

"Part of the application requires we include expenditures for (fiscal year 2009). We couldn't realistically do that knowing the Council of Revenues would come in and do what they did," Pang said.

Pang could not say whether the governor's plan for stabilization funds has changed in light of the most recent tax revenue projections.

"Depending on where a teacher is on the pay scale, Gov. Linda Lingle’s cuts could translate into a pay cut of up to $13,873 over the next two years. In addition, these very same teachers would also be facing an 18 percent increase in health care premiums.

"I am a state employee, a public school teacher as a matter of fact. It has been suggested that state employees from all bargaining units, for example HGEA, UPA and HSTA, may experience a significant pay cut, possible furloughs and a hefty increase in the employee contribution to our healthcare plans. Now I am not going to whine. I realize many people feel we make too much money as it is. The economy is bad and I suppose we all have to make sacrifices.

There are thousands of state employees who spend locally. When our pay gets cut, you will be without customers. I hope you survive."

About the Council on Revenues
The Council on Revenues is attached to the Department of Taxation for Administrative Purposes.

The Council on Revenues, established under section 37-111, Hawaii Revised Statutes, prepares revenue estimates of the state government for each fiscal year of the six-year state program and financial plan.

The Council reports its latest revenue forecast to the governor and the legislature on June 1, September 10, January 10, and March 15 of each year. In addition, the Council prepares estimates of the state total personal income for such calendar years as are necessary for establishing the state expenditure ceiling.

Forecasts of total personal income are reported to the director of finance, the governor, the chief justice, and the legislature each August 5 and November 5. Estimates prepared by the Council are considered by the governor in preparing the state budget, recommending appropriations, and controlling expenditures; they are considered by the legislature in appropriating funds and enacting revenue measures.

The Council consists of seven members, three of whom are appointed by the Governor for four-year terms and two each of whom are appointed by the President of the Senate and the Speaker of the House of Representatives for two-year terms. The Council is not required to comply with the law on open meetings for public agencies when confidential tax information is discussed, but all estimates submitted to the Governor and Legislature by the Council are public.

ttp://www.state.hi.us/tax/a9_1cor.htm

New forecast calls for courageous leadership
May 29, 2009
HONOLULU ADVERTISER

“We need to ensure Hawai’i is best positioned to receive as much of the stimulus dollars as we can get. We need to work together — the state, the counties and the private sector — we need check the egos at the door and leave our political differences at the door,” says Jennifer Sabas, spokeswoman for Sen. Inouye.

It’s official. The state Council on Revenues once again significantly lowered its revenue forecast for this fiscal year. Revenues would decline, the council says, by 9 percent, down from the 5 percent drop forecast in March. That’s a $180 million loss for the state. It’s hardly a surprise. Rising unemployment, stalled growth and business closures across the nation have been the order of the day for months now. And the latest figures now show nearly 12 percent of U.S. homeowners are behind in their mortgage payments, with a growing percentage affecting traditional mortgage holders, creeping beyond the subprime loan debacle.

Still, news reports out of Washington show stimulus money has been slow to reach some of the hardest-hit states. So it’s all the more important that Hawai’i be well-positioned to bring the cash flow into our struggling economy.

That’s certainly the case in Washington. We have a Hawai’i-born president in the White House who has an affinity for the islands and an understanding of our complexities, and U.S. Sen. Daniel Inouye is now chairman of the powerful Senate Appropriations Committee.

What happens here at home is equally important. It’s imperative that state and county leaders work closely with private industry to effectively funnel precious federal funds to local projects, creating jobs to fuel our economy.

It’s time to kick the partisan politics to the curb. In the budget battle over how to spend federal education stabilization funds, while Democrat lawmakers managed to override the governor’s veto, education officials are still waiting for the governor to apply for those funds. And the clock is ticking.

“We need to ensure Hawai’i is best positioned to receive as much of the stimulus dollars as we can get. We need to work together — the state, the counties and the private sector — we need check the egos at the door and leave our political differences at the door,” says Jennifer Sabas, spokeswoman for Sen. Inouye.

She’s right.

Cooperation is key, particularly when it comes to those competitive dollars, such as funds for renewable energy and broadband efforts. The state, to its credit, has been aggressively working on both those fronts.

Encouraging progress has also been made in other key areas, including transportation,where the state and the counties worked closely to identify $246 million in projects for federal funding and move them forward. And there’s more to come.

It’s important that economic recovery come in ways that transcend dollars and cents. It must include the restoration of hope and confidence in our economy.

It’s in tough times such as these that political leadership and courage are most needed. It’s up to our elected leaders to show taxpayers that they are indeed up to that task.

Council on Revenues forecasts $185M loss for Hawaii in fiscal year 2009
May 28, 2009
HONOLULU ADVERTISER

The state Council on Revenues, chasing a slumping economy, today substantially lowered the state’s revenue forecast for the fiscal year that ends in June.

The council estimated that revenues would decline by 9 percent, down from the 5 percent drop predicted in March, a $185 million loss for the state.

The council projected there would be zero revenue growth in fiscal year 2010, down from 0.5 percent growth, an additional $22.5 million loss for the state.

Economists on the council acknowledged that their forecasts over the pastyear have missed the extent of the economic decline.

“We keep chasing this down,” said Paul Brewbaker, the council’s chairman. “We never seem to get ahead of it.”

The new forecast will likely trigger substantial new state spending cuts. Gov. Linda Lingle already ordered an additional 2 percent spending cut to state departments last week in anticipation of the lower forecast, but may now have to go deeper.

State lawmakers had used the council’s March forecast to draft their two-year budget. Although they built in a cushion in case the council was off, the new forecast exceeds the cushion and leaves the budget out of balance.

Council on Revenues says state’s tax collections to fall 9 percent

The larger-than-expected decline means $180 million less in state coffers

By Richard Borreca
POSTED: 03:55 p.m. HST, May 28, 2009

The state Council on Revenues forecast an additional $180 million drop in state tax revenues for the current fiscal year, double what some lawmakers expected going into today’s projection.

Furthermore, the panel said, the recession is expected to mean $612 million less for state coffers for fiscal 2009, 2010 and 2011.

The projections by the panel of economists are used to calculate how much money the state will collect in taxes, which determines how much it can spend.

The council projected today that the state would take in 9 percent less in fiscal 2009 than a year ago, substantially worse than the 5 percent decline the council predicted in March. The state’s fiscal year ends June 30.

Lawmakers said yesterday that they expected to hear the projection lowered to 7 percent, for a revenue decrease of about $90 million.

Some of the declining revenues are already reflected in state budget cuts. The Department of Education, for instance, said it has cut $39 million from its budget.

“The effect of the biennium cuts on services and programs will be apparent once the 2009-2010 school year begins,” said Sandy Goya, Department of Education communications director.

Rep. Marcus Oshiro, House Finance Committee chairman, predicted yesterday that Gov. Linda Lingle will have to further reduce the budget for both public schools and colleges.

“She should be OK, but there will have to be further budget cuts,” Oshiro said. “The pressure will be on her.”

Public employee union leaders also are bracing for expected cuts.

Randy Perreira, Hawaii Government Employees Association executive director, criticized Lingle for continuing to cut the budget, saying the state would be better off accepting tax increases as a way to get more revenue.

Council on Revenues nearly doubles negative outlook
Reported by: Gina Mangieri
Last Update: 5/28 9:13 pm

The Council on Revenues issued a severe downgrade on its economic forecast—and the state now must scramble to cut or tax another $600 million over the next few years.

Lawmakers and the governor already had struggled to close a $2.1 billion gap through the year 2011. The latest Council on Revenues projections pile on to that.

The Council on Revenues expects the tax take will be down 9 percent by the end of the fiscal year ending June 30th. That’s a big change from the negative 5 percent they last forecast just months ago.

“At the end of the day it seems like we should have put way more weight on the low forecast than on the high forecasts,” said council member Paul Brewbaker.

“What signs do they use to come up with these numbers?” Sen. Donna Mercado Kim, Senate Ways and Means Committee chairwoman, said after the forecast revision, “and why were they so optimistic back at the end of the year in early January and then again in March?”

Actual taxes are bearing out a deep economic slump. The tax department told the council that tax collections so far for May are down about 37 percent day to day compared to last year.

That debate will have to come later. The governor has a much more pressing problem—how to cut about $180 million more from state spending over the next 30-some days—that’s just under half of what it costs to run the state per month in the first place.

“We have our work cut out for us,” said Rep. Marcus Oshiro, chairman of the House Finance Committee. “The governor needs to immediately impose further restrictions…maybe imposing some plan of furlough and or pay reductions”

The Council on Revenues does not see any growth next year (a revision from a 0.5 percent growth last forecast in March). But they do see a rebound in 2011 of 5 percent (unchanged from their last forecast. The cumulative impact of the 2009 thru 2011 outlook revisions is another $612 million gap over the next few years.

Lawmakers say something’s got to give, like union contracts under negotiation.

“We believe that she has to step up her approach in working with the various public employee unions to reach an amicable settlement.”

Lawmakers penciled in about $1 billion worth of spending cuts and another $1 billion in tax hikes to make the budget balance through fiscal year 2011.

They say more of each will be needed, including a possible general excise tax hike.

“The G.E. tax is something that’s always been talked about,” Kim said, “and we said—I know I said—it’s a last resort. I know Rep. Oshiro said the same thing, so we may be near the last resort.”

The governor’s office has not yet responded to calls for comment.

At some point we kind of have to embrace the pain and put a number out there,” said Paul Brewbaker, chair of the Council on Revenues. The COR did put out a number Thursday, predicting a 9% drop in revenues for the fiscal year ending june 30. It is much higher than lawmakers anticipated.

“I was expecting more like 7%,’ said Sen. Donna Mercado Kim, Chair of the Senate Ways and Means Committe, “but hard to argue with 9%.”

If the experts’ prediction holds true, then Hawaii faces a shortfall of $180 million. Lawmakers say they have a cushion of $80 million, but that still leaves a $100 million gap the governor needs to fill by the end of June.

“I think she’ll have to make hard choices, starting off with restricting expenditures,” said Rep. Marcus Oshiro, chair of the House Finance Committe, “ and then maybe imposing some kind of furlough or pay reductions.”

The COR also predicted 0% growth next fiscal year and then a rebound in 2011.

Last week, the governor ordered all state departments to cut spending by another two percent. That’s on top of cuts she’s already ordered.

Education leaders are worried she’ll ask them to slash more from their budget, a move they say would drastically impact schools.

“There’s a lot of casual hires in the schools, those working less than 20 hours,” said Garrett Toguchi of the Board of Education, “so the tutoring, the extra PE positions, those are the kind of things that may go by the wayside.”

Money could come from the state’s Hurricane Relief Fund which has about $180 million or the Rainy Day fund which has $44 million. But tapping into the Rainy Day Fund would need legislative approval first and lawmakers have previously denied the governor’s request.

State union leaders say Gov. Linda Lingle has switched from calling for furloughs to demanding that state workers take pay cuts.

Leaders of the Hawaii Government Employees Association and the University of Hawaii Professional Assembly declined to say how much of a pay cut the state was seeking, but they said the total was more than would have resulted from the proposed furloughs of 16 to 18 days a year.

The four public employee unions—United Public Workers and the Hawaii State Teachers Association, along with HGEA and UHPA—have had one meeting with Marie Laderta, state director of human resource development, who is handling negotiations for Lingle, according to the unions.

The meeting was unproductive, the unions said.

“The state continues to maintain that the only way to balance the budget is through severe cuts to the employees, either through their wages or medical benefits,” said Randy Perreira, HGEA executive director.

On May 12, the unions sent Lingle a letter saying they were seeking “a universal solution to the financial issues resulting from the current economic recession.”

The letter came a week after Lingle told reporters that unions that settled early with the state would get a better deal.

“Those who come in and help on the front end will get a preferred package compared to those who either challenge us down the road ... or simply hold out for more,” Lingle said on May 5.

Perreira and J.N. Musto, UHPA executive director, dismissed Lingle’s offer.

“The attempts at offering an incentive were weak at best,” Perreira said. Musto added that the change in terms by the state, from furloughs to a pay cut, had not been explained to the unions. “Quite frankly, the state’s position seems to change frequently,” Musto said.

The governor’s office did not respond to calls for comment.