Yesterday's opening session of the Hawai'i Legislature showed remarkable common ground between Democrats and Republicans in an election year on the most important issues before the state. But it also revealed fundamental philosophical differences over whether some of the state's $574 million budget surplus should be used for tax relief.

In their speeches in chambers filled with flowers and song, House and Senate leaders talked of a rare opportunity to use the money to invest in Hawai'i's future, from public schools and affordable housing to research and development and alternative energy.

Over the 60-day session, Democrats who control the Legislature will have to decide whether they can politically afford to ignore demands from Gov. Linda Lingle, and from some within their own party, that people deserve tax relief. The Republican governor, in her State of the State speech on Monday, will again call for $300 million from the surplus to be used to reduce taxes.

Democrats said there may not be another chance for a long time to make substantial infrastructure improvements. Knowing that many worthy interests will want more state money this session given the surplus, they asked lawmakers to choose wisely.

House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise), called it the "$600 million question."

"Cutting taxes is an easy thing to do and maybe that's what we'll decide to do at the end of the day," Say said. "Three hundred million dollars is a lot of money, but when you add up your share of the refund, what do you get? Enough extra to buy another loco-moco or plate lunch every week? You add it up, you may."

On the other side of the state Capitol, Senate President Robert Bunda, D-22nd (North Shore, Wahiawa), said the tax burden has become untenable.

"I advocated tax reform last session. The current budget surplus makes an even stronger case for reform," he said. "In the past, we've resisted implementing any changes to our tax structure because of a lack of revenues to support them. What we need is not just a one-time rebate, but significant and permanent tax reform."

In what many observers thought was an impressive speech, new House Minority Leader Lynn Finnegan, her mother and father sitting behind her in the chamber, spoke of how people in Hawai'i are generous and willing to sacrifice. She said her father, an immigrant from the Philippines who served in the Navy, worked in construction and now is a janitor, would probably want to help the homeless or public education before getting a tax break.

"Sure, you have heard this mantra before from Republicans. However, it could not have more relevance than it does today," said Finnegan, R-32nd ('Aliamanu, Airport, Mapunapuna). "The hard-working citizens of Hawai'i have shouldered the crippling load in our high-tax, high- cost-of-living state and they definitely deserve a break."

Lingle, talking to reporters afterward, immediately seized on the wedge between Say and Bunda on tax relief. Bunda, whose leadership has been challenged by other Democrats in the Senate, had seemed to reach out to the governor and other Democrats who want tax reform by saying, "we should not restrict our choices because some of them don't come with the right political label."

The governor said she was disappointed House Democrats did not make tax relief a goal for the session. "I think it showed an insensitivity to what thousands of families across the state are facing who are living paycheck to paycheck," Lingle said.

SAME PRIORITY

Other than tax relief, where there are obvious differences, there is consensus that the state should address repairs at public schools, encourage more affordable housing and reduce its dependence on imported oil.

Democrats have described school repair and maintenance as a priority, and while Lingle and Republicans agree money should be spent to improve schools, they are starting to look more critically at the state Department of Education's claim of a $525 million backlog.

Millions of dollars for repairs and maintenance approved over the past few years have not been spent by the department, leading the administration to ask whether the department should use existing money first. The governor has proposed spending an extra $63 million for school repairs and Democrats have recommended $150 million more for a combination of repairs and emergency shelter improvements at schools.

"We just need to use it, period," said Lingle, adding the department has enough money to ensure that no school restroom in the state should be broken.

'WE CAN HANDLE IT'

The department has asked for millions more than what the governor and Democrats are proposing and has defended the request as necessary to reduce the repair backlog. DOE officials say the money that already has been approved but not spent has been designated for specific school projects and note the administration has yet to release a substantial amount of the money.

The DOE, which took full control over repair and maintenance last year, also says that projects can get hung up in design and contracting, which can drag out the time it takes to put the money to work.

"We can handle it," said Pat Hamamoto, state schools superintendent, of new repair money.

U.S. Rep. Ed Case, D-Hawai'i, who attended the opening-day events, said he has cautioned state and county officials not to assume adequate levels of federal money when drafting their budgets. He said the surplus is an opportunity for state lawmakers to address long-term needs. "But I think the temptation is going to be on the short term," Case said.

U.S. Rep. Neil Abercrombie, D-Hawai'i, who also attended, said the state should continue to try to partner with the federal government in areas such as developing ethanol as an alternative fuel and on improving the rental housing stock. As for the surplus, he said, the choice was not difficult.

"You've got to do the infrastructure improvements," Abercrombie said.

In the hallways of the Capitol, as people dropped by lawmakers' offices to talk story, present flowers, or sample the buffet, other ideas for the session were mentioned. Healthcare. Preschools. Mental health. Charter schools.

Marian Turney, development officer for the School of Social Work at the University of Hawai'i-Manoa, said public schools should get the bulk of the surplus. "I think to give it back on taxes is ridiculous," she said.

Kalani Kalima, a teacher at Halau Lokahi, a charter school, said he would like more equity in state spending between charter schools and traditional public schools. He said he hoped lawmakers would listen to the needs of all of the people of the Islands.

"Just listen to the needs of the people because the needs and wants may not be the same thing," Kalima said.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.