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The Honolulu Advertiser
Posted on: Sunday, May 2, 2010

Budget ugly, rickety, but at least it balances

In this desperate budget year, the 2010 Legislature's most notable accomplishment was something it did not do raise the general excise tax to balance the budget.

To their credit, lawmakers took the harder road, using a combination of targeted tax increases, spending cuts, deferred payments and special fund monies to clear a $1.2 billion shortfall. This approach was better than a wholesale grab on what little is left in taxpayers' nearly empty wallets.

For the most part, the Legislature produced what its leaders promised in January: a deliberate, cautious short-term solution to the fiscal crisis that spreads the pain as thinly as possible while preserving core services.

To be sure, there are plenty of people and interests that lost big. High-tech companies will be unfairly hurt by the deferring of Act 221 tax credits.State tax refunds worth $275 million will be delayed. Raising the barrel tax from 5 cents to $1.05 will raise costs on anything related to oil consumption which is just about everything in Hawai'i with only 30 percent of the money going to clean energy initiatives.

Certainly those affected by targeted "revenue enhancers," mainly businesses, will feel some pain. The Lingle administration estimates the tax measures will tap about $312 million from taxpayers and visitors this year, on top of $521 million last year.

Nonetheless, the Legislature's approach to the fiscal crisis softens the blow by preserving some vital social services, like Kūpuna Care and Healthy Start, and some economic ones as well, such as agricultural inspectors. Lawmakers recognized the real need to let the counties keep their share of the transient accommodations tax. And there's $67 million drained from the Hurricane Relief Fund to end furlough Fridays.

The biggest loser politically was the Lingle administration. As governors are wont to do, Lingle tried to look beyond the immediate fiscal crisis to propose a foundation for future prosperity. In her State of the State address in January, she outlined some ways to build it tax incentives for job creation, tourism construction and alternative energy. She also offered other worthy proposals, such as bonds for clean energy loans.

All of those initiatives failed.

It's regrettable that the political gulf between the Legislature and the governor's office which has grown steadily wider over the past 7 1/4 years has precluded real collaboration on planning for the future. Instead, we got a rash of vetoes, 11 of them overridden, including several that shouldn't have been, including the barrel tax and that unenforceable briar patch that requires government contractors to maintain a workforce of 80 percent Hawai'i residents.

In the end, the Legislature produced a budget that is neither bold nor visionary. It's held together with tape and paper clips. It does not make government more efficient. It is, plain and simple, a product of the possible.

And that's OK. Next year, with new leadership and recovery well under way, we should demand better.