The chairs of the state Senate Ways and Means and House Finance committees said Thursday night they believe they can balance the state budget that’s been hit hard by a lack of tourism during the coronavirus without having to reduce public employees’ pay in the months ahead.
“We have a short-term plan to cover the $1 billion gap,” in the state budget expected because of the pandemic, said state Sen. Donovan Dela Cruz (D, Wahiawa, Whitmore Village), who chairs the Senate Ways and Means Committee, during an interview on the program Insights on PBS Hawaii Thursday.
State lawmakers are going back into session on Monday, May 11, and Dela Cruz said he and state House Finance Chair Sylvia Luke (D, Makiki, Nuuanu, Pauoa) are negotiating a budget which they expect to reach an agreement about next week. Legislative leaders have resoundingly panned Gov. David Ige’s initial proposal to cut state employees' salaries by up to 20 percent, starting as soon as June 1.
“We’re looking at cost savings. We’re looking at vacancies. We’re looking at special funds that have money. If the pandemic continues and we don’t have tourism for a while, then we’re probably going to need the help of the federal government,” Dela Cruz said.
Luke said over the last seven years, the state significantly increased the tax dollars flowing into the Rainy Day Fund.
“Before I became Finance chair, in the Rainy Day Fund, we had an average of about $30 million. Right now, the balance in the Rainy Day Fund is close to $400 million, and the reason for that is because we learned our lessons the hard way from the 2009 recession. And after that, we made a commitment to never go back to Furlough Fridays, where we had to close down schools and lay off and do a significant amount of shutdown of government services,” Luke said.
“Once you spend that money, it’s gone. We’re pretty confident we can shore up the budget for 2021. Our concern will be for 2022 and beyond,” Luke added.
Dela Cruz said cutting the pay of state employees, including Hawaii’s nearly 14,000 public and charter school teachers, “is not a first-resort type of option. That would be our last resort.
“There are so many things that we can do to try to prevent that,” he added.
“If tourism does not get back to where it was within 18 months or 12 months, that (salary cuts) may have to be an option. But that’s not where we should go now, especially since we have other options with the Rainy Day Fund, vacancies, cost savings. There’s other things that we can do. We don’t want to have an additional negative effect on the economy that might make matters worse,” Dela Cruz said.
U.S. Sen. Brian Schatz (D, Hawaii) also appeared on the PBS Hawaii program.
Schatz said, “My own judgment is that really what we have to try to do is survive this extinction event. We’re in a 90-day period where small businesses, individuals, families, institutions are facing the brink of economic extinction, and we have to figure out a way to get through that intact. And dealing with the biennium (two-year state) budget is an important thing to do, but we’re not talking about a biennium budget. We’re talking about surviving the summer.
“It seems to me that the Legislature has found enough in the way of resources, to get us, at least to, say, July or August, at which time we will know whether there’s another COVID relief package that provides the kind of assistance that would prevent the more draconian cuts,” Schatz said. “But what I said to the governor, and he seemed to be in agreement with this, I said, ‘Why don’t we see a few more cards before we make that particular decision?’ And I think he has no particular desire to institute those cuts.”
Schatz said he doesn’t think pay cuts or furloughs would have to be enacted in the next couple of months.
“Lots of economists are saying that that would be counterproductive as we’re trying to ramp up the so-called kamaaina economy, to take away spending power from middle-class individuals is not just mean to them, it also undercuts our ability to get the economy moving, even if it’s just partially,” said Schatz.
Asked what the prospect is of the federal government’s next major coronavirus aid package helping to fill Hawaii’s budget shortfall, Schatz said, “U.S. House Speaker Nancy Pelosi is writing the first draft of the bill, and she has made her highest priority funding for state and county governments across the country. We are in good company. Red states and blue states, small counties and big counties. States from coast to coast are facing really really bad budget shortfalls, and so it’s a really, really high priority for Nancy Pelosi and Senate Democrats.
“It’s hard to imagine that we would pass a bill without additional funding, but I’m not totally in control of that, so I’ll just say we’re going to fight as hard as we can, and we’re somewhat hopeful. I just don’t know what the dollar amount will be,” Schatz added.