Cut state spending, says sponsor of Hawaii’s 1978 spending cap

“You can’t spend money you don’t have, so you will have to make cuts. And I don’t see any other way to do it. You will have to borrow up to the hilt. And that you must do. But eventually you will have to pay it back. The last thing I would like to see are taxes increases.”

Those were the words of former state Rep. Barbara Marumoto, speaking about Hawaii’s current financial calamity on the Jan. 4, 2021, episode of Keli’i Akina’s “Hawaii Together” program on ThinkTech Hawaii, which you can watch below. A legislator for 34 years, Marumoto also was a delegate to the 1978 Hawaii State Constitutional Convention, which adopted her proposal for a state spending cap, tied to personal income growth or decline.

“I think most people thought it (the spending cap) was a good idea, because it did pass, [though] not without a lot of trouble,” she said during the interview.

In recent times, the spending cap has been routinely overruled, and the state’s financial condition shows it. In her conversation with Akina, Marumoto discussed her motivation for introducing the spending cap measure, and how Hawaii might recover from its current historically devastating economic crisis, brought on not only by the coronavirus lockdown but also by years of overspending and the state’s generally unfriendly business climate.

Marumoto, a Republican, served in the state Legislature from 1978 to 2012. Upon her retirement, then-state Sen. Sam Slom hailed her support for “small business issues, safety for children, patriotism, health concerns, tax reduction and fiscal reforms.”

A complete transcript of the conversation is below.

Jan. 1, 2021

Barbara Marumoto with Keli‘i Akina on “Hawaii Together”

Keli’i Akina: Aloha and welcome to “Hawaii Together” on the ThinkTech Hawaii Broadcast Network, and Happy New Year. I’m Keli’i Akina, president of the Grassroot Institute. Today is January 4, 2021, and the Hawaii state Legislature is back in session. 

Just today, in testimony sent to the House Ways and Means Committee, Gov. Ige has proposed breaching the state’s spending cap in fiscal year 2021 by another $80 million. This won’t be the first time. Since 2012, as you know, we’ve reported Hawaii lawmakers have exceeded the state’s constitutional spending limit to the tune now of $1.4 billion.

Today, I’m delighted to have with me state legislator, or former state legislator, Barbara Marumoto. She was a delegate at the 1978 Constitutional Convention that established the spending ceiling. We’re going to talk with her and get her perspective on why it was established, and what the implications are. Our conversations will explore the dangers of Hawaii’s government spending and what should be done about it. Now, let me tell you a little bit about Barbara and then introduce her to you. Barbara Marumoto was elected several times to the Hawaii state House of Representatives starting in 1978. She represented Kaimuki, Waialae and Kahala.

Marumoto is a Republican, and she served as the House Minority Leader from 1984 to ’86 and again from ’98 to 2000. In a tribute written by then-state Sen. Sam Slom, Marumoto is described as a lawmaker “best known for supporting small businesses, children’s safety, tax reduction and fiscal reform.” That was Sen. Sam Slom. Well, Barbara, welcome to the program, and a Happy New Year to you. Thank you for joining us today.

Barbara Marumoto: Happy New Year, Keli’i. I’m glad to be with you.

Akina: I’m so delighted. Looking forward to learning from you. In 2012, you decided not to run again for another term and retired from the state Legislature. What changes have you seen in our state Legislature since the time when you were in office?

Marumoto: Since the time I first was in office, that was a long time ago, in 1978. I served for 34 years. So I’ve seen a lot of changes then, and since then. Right now, I’m glad I’m not in the Legislature. It’s a very tough year for the people who are dealing with the state finances.

Akina: Indeed. What about bipartisanship? You’ve seen a reduction in the number of Republicans, a significant one since you were in office. What does that portend for our state?

Marumoto: That’s a good question. The House is pretty partisan. It’s a larger body, so they tend to be more structured. The Senate being only 25 members, they tend to be more personal. The same with the City Council. 

Today, we see Andria Tupola, who is now a floor leader, so she isn’t serving in the leadership of the City Council. The House was pretty much partisan, so it was very difficult for Republicans to get bills heard and to get bills passed. I like to work collegially, but I think today is more polarized than ever. I think following the federal pattern, the state too is very much polarized between the two parties, and it’s a shame to see that.

Akina: Well, certainly, that makes it difficult for the minority party to get things done. Beyond that, whether it’s the Republicans or the Democrats who are the dominant party, what are some of the problems with there being a primarily one-party state?

Marumoto: I think you see certain special interests having stronger sway. I think what gets lost, especially with lack of Republicans and conservatives, is small business really doesn’t have a very strong voice in the Legislature. It’s very difficult for businesses to survive in the state with so much paperwork and high taxes, high land costs. I’m preaching to the choir, but you know what I mean, Keli’i.

Akina: Absolutely. Before you were a state legislator, you were a delegate to the Constitutional Convention of 1978. When I think back to that, and I was not really involved much in adult politics at the time, I was still finishing high school. It was a historic event.

There were some long-term changes that were put into motion, not the least of which was the formation of the Office of Hawaiian Affairs. People talk about that a lot, but there was much more than that, that impacted our state. It must have been very exciting when I think back to that time. For you, you were not yet in politics, you were not yet a legislator. What motivated you to get involved in the Constitutional Convention, and what was it like back then?

Marumoto: When I first had children, people were telling me, “You’ve got to have your child go to a private school, not a public school. Private schools are better.” I have gone to school in California, and I had attended public schools. I went to the University of California. I thought public schools should be as good as private schools. I thought that we could improve the public education system here in Hawaii. We had a one-party state, so I thought I really should get involved in the Legislature. I was a volunteer during the legislative session. I got hired by Sen. Fred Rohlfing for several sessions.

Then I was hired full-time during the session by Sen. John Carroll. After that, I was hired into the Senate minority research office by Sen. Pat Saiki at the time. I really cut my teeth in the Legislature. I could see several problems with a heavily one-party state, heavy expenditures on the state part, heavy taxation, not enough attention to small business. That’s why I got involved. That’s why I ran for Con-Con.

Akina: Do you think it’s time for us to have another Con-Con? People are bringing that topic up all the time. We didn’t go for the opportunity most recently, but it’ll come up again. What would you say are the pros and cons to another Con-Con?

Marumoto: I think there could be another Con-Con. I introduced a proposal, which actually passed in 1978, which says we should put the question up on the ballot every 10 years: Shall we have a constitutional convention? The first two times that it was proposed, given to the electorate, the electorate voted it down. The people apparently didn’t see a big need for a con-con. If you have one today, it’s hard to say what would happen. There’s still a heavily one-party state, so I think the outcome might be more liberal rather than business-oriented, conservative.

Akina: Back in 1978 at the Con-Con, you proposed the measure that would work its way into our state Constitution. It basically limits the spending that the Legislature can do. Can you talk a little bit about that proposal and what motivated you to introduce it back then?

Marumoto: Excuse me if I get into the weeds a little bit. In ’73, we were showing deficits. Revenues were down, but our spending was still up. We have a very strong governor system in Hawaii, whereby the governor can restrict bills that have been passed. He doesn’t have to release the money to expand, authorize some of the bills. Gov. Ariyoshi at that time-restricted a lot of money. Actually, it was a conservative thing to do. There were some repercussions.

Again, we started picking up spending as the ’70s progressed, and I thought there should be some check on how much we could spend. I ran for the Constitutional Convention. When I got in, I had the first proposal in to change the Constitution, to reflect a general fund spending ceiling. I think most people thought it was a good idea since it did pass, not without a lot of trouble.

It was based on changes in total personal income, which is a national figure put out by the Department of Labor statistics. If you take an average of the past three years, the increases or decreases in total personal income, then our budget should reflect that. We were able to go up a little higher, or you have to lower expenditures. This is the way it passed, and it was later flushed out by the Legislature.

It makes sense to have an expenditure ceiling, but when you go over it, the Legislature determined, you have to say which bills of these are taken over the expenditure ceiling for the general fund. Well, the Legislature apparently did not want to do that. The powers that be put that language into every bill, or it became boilerplate language. Every single expenditure bill said, “This measure will take us over the expenditure ceiling.”

That’s OK as long as the Legislature passes it by two-thirds vote, but everybody votes for the budget. It’s like you’re afraid to vote against it, because somebody will say, “Oh, you voted against this children’s bill or this one that affects senior citizens.” Most people vote for the budget, and there might be one or two Republicans that decided to vote against it. We have been exceeding the spending ceiling every budget session. The good thing is that you’re able to know what the ceiling is and how much you’re going over it. That’s a good exercise.

Akina: Since 2012, our research shows, we have been exceeding the ceiling by a total of $1.4 billion, which is quite a bit. The rate of state spending per capita has gone up significantly since the time you were in the Con-Con. What was the difference back then? Were the delegates and were state legislators more to overspending than they are today? Has the mood changed on the part of the public and-or the part of the Legislature?

Marumoto: I really can’t say too much, give you a definitive answer on that. We had good leadership from the Tax Foundation headed at that time by Fred Bennion, and working for him was Lowell Kalapa. You may recall that he was an excellent resource for legislators. They were advising us that spending was climbing too fast and we must put some checks on it. A lot of people agreed with us, and so this is why we were able to enact a spending ceiling.

Akina: We’re going to take a quick break, Barbara, and come back and finish up our chat about the state spending cap and get a little more insight into that. My guest today is Barbara Marumoto, former state legislator. We’ll be right back on ThinkTech Hawaii’s “Hawaii Together.” Don’t go away.


Akina: Welcome back to our conversation with former state legislator Barbara Marumoto. We’re talking about the spending cap that was enacted back in the 1978 Constitutional Convention, or at least proposed then, and then went on to become state law. We’ve seen since then the state Legislature spent far more than it actually brings in. That’s put us into a very difficult situation with a lot of debt. As I returned to Barbara now, Barbara, now it may not be an easy thing to talk about spending caps, especially in line with the impact of the coronavirus and the massive impact that it has had on the economy.

It looks as though a lot of legislators and our governor are looking to, in some ways, spend far more than we bring in out of the necessity for dealing with the coronavirus impact. What are your thoughts about that kind of spending?

Marumoto: We’re really in big trouble these days. I think it’s nice to have spending caps and control our spending, but in this pandemic atmosphere, all the rules go out the window. I think last session, the Legislature actually used bond money for expenses. Correct me if I’m wrong, but did they use it for the health fund, which is a pay-as-you-go insurance for our retirees?

Akina: Well, unfortunately, the governor has proposed and enacted a plan to stop paying down the unfunded liability portion of our UTF health plan, and so, we’re going to go further into debt on that. There seemed to be, basically, two mechanisms that our government is looking at to deal with the exorbitant cost that we have today. One is to borrow more money, and another one potentially to tax people. What you said is true. It’s a tough time to talk about the spending limits, but we have to think ahead in terms of the long-term impact. What do you think the long-term impact is of continuing to exceed our spending limits?

Marumoto: Well, I think we will go into debt, and I think furloughs will have to be enacted in one form or another, although I hate to see that enacted on teachers. Because what happens is, our children suffer from lack of education. But everything’s out the door. I don’t know what’s going to happen. We’ll have to borrow and unfortunately, un like the federal government, Hawaii is not able to print its own money. You tell me how they are going to solve this problem. They’re going to have to slash and cut and burn, and it’s going to be quite painful for many people.

Akina: As you know, at the Grassroot Institute, we’ve tried to study this problem as best we can to look for best practices across the country. We’ve come up with a “Road map to prosperity,” which is 23 proposals as to what could be done. We believe, and I don’t really want to use today’s show to talk so much about it, but we believe that there are alternatives to taking on massive debt and increasing our taxation of our people. As you mentioned before, there’s some pain involved.

You talked about furloughs. I’m just thinking, there’s no easy way in this environment now to cope with the drop in revenues for the state. We hope that the state can enact processes to encourage the business climate, and that would result in more tax revenues, but we’re talking about a lot of time. If you were in the Legislature today, how would you handle that conflict between the pain that we have to go through now, and the pain we may suffer later on in the future? It’s a real tough call to make, isn’t it?

Marumoto: I would have no idea on how to handle it. You can’t spend money you don’t have, so you will have to make cuts. I don’t see any other way to do it. You will borrow up to the hilt, and that you must do, but eventually, we’ll have to pay it back. The last thing I would like to see are tax increases.

Akina: The governor recently presented his budget adjustment with a billion dollars of “other revenues.” We did a little research on that and asked his office about it, and they referred us to an interview in which he had said that those other revenues are likely to be tax increases. Where do you think another billion dollars in taxes, or how do you think another billion dollars of taxation is going to impact our business climate in Hawaii?

Marumoto: Well, I think it’s really going to hurt, and I notice what legislators tend to do. Rather than pass tax increases, they do away with tax credits. I’m afraid some tax credits will be disappearing. I don’t know how many you could get rid of to realize enough funds to keep us existing. It’s really terrible. But I’d like to see our businesses come back. I would like to see the vaccine take hold so that our small businesses can open up again, or small restaurants. We’re just dying on the vine here if we don’t do a little business, let our tourists come back. I know it’s dangerous, but the vaccine is on its way.

Akina: Cutting costs is something that is truly painful. One of the ways the state might consider cutting costs would be to privatize some of the businesses that the state operates. For example, as you know, over the last five years we’ve been able to see some of the state hospital systems transition from the public sector to the private sector, especially Maui Memorial Hospital, which is now run by Kaiser. It’s on a pretty good track to being something profitable.

There are other proposals that have been out there, like privatizing the management of the airport and so forth, or even what the judiciary does. It’s allowed to hire its janitorial staff from the private sector, and they save at least 25%. Do you think this is a direction that could be fruitful in saving some money for the state?

Marumoto: I would support privatization of more functions, but you will get a big fight on the part of certain unions. It’s going to be an interesting battle, but I think the Legislature must consider some functions that should be privatized.

Akina: That brings up the broader issue of statesmanship, when it comes to bringing all parties together. Just as you mentioned earlier, furloughs would be difficult for teachers; we definitely know that that’s a sore point for the teacher union. Any thoughts on how we can bring disparate parties, such as unions that defend the rights of their union members, and others all together so that we can somehow reach a happy medium, at least something that allows our institutions like the schools and other institutions to survive and to do well despite the cuts that have to take place? How do we bring people together at a time like this?

Marumoto: Over the collective bargaining table. It will take some tough negotiations. There’s a lot of bad choices, really, but something has to be ironed out just so that we could go forward. I think it can be done, but it’s the art of the deal. I hope that there’s some good negotiators out there.

Akina: We’ve been through so much in 2020. It was an unprecedented year in many, many ways. What are your thoughts about 2021? What prospects do you think we have in Hawaii moving forward?

Marumoto: As I said, I’m hoping that vaccine will take hold and we will be able to reopen our ports and our airports, and we don’t have [interstate] highways here. It’d be great to be able to get back to normal, and it’s going to take a while, but we could do it, and it will happen. It’s just, a lot of people will be suffering meanwhile, who lost jobs and a lot of people who are going to suffer from COVID, but we will come through this. We eventually, I can’t say exactly two years, three years, but it’s going to take a while, and I’m looking forward to things being normal again. It’d be wonderful.

Akina: That’s right. They definitely will be a very new normal. 

Going back to the Constitutional Convention in ’78, the ’70s were a booming time for our tourist industry. What I recall is “Hawaii Five-0” and how it brought people from across the planet to beautiful Hawaii, and those images of our islands, and the Ilikai Hotel and so forth. We were so prominently marketed across the world.

At the same time, I know Gov. Ariyoshi and other government leaders were saying, “We’ve got to diversify our economy because tourism cannot be the only industry, although it will always be a dominant industry.” I think that’s one of the things we’ve seen in 2020, the ramifications of not having diversified our economy. What are your thoughts about that discussion, diversifying Hawaii’s economy beyond tourism?

Marumoto: A very good idea. I think the state could assist in that. I’d like to see the Department of Economic Development and Tourism come up with some proposals and really support new businesses. People opening up their lands for development — not necessarily a casino. I always wanted to see more schools in Hawaii, and I thought the state could offer inexpensive land or tax exemptions. We could build schools from different Asian countries. We could attract students from all over Asia.

I’m looking forward to new ideas like that, and new industries, more high-tech. I think we could do it. A lot of people are working from Hawaii now because they’re just using their laptops and going to work. We should encourage that and come up with some bright ideas. We need some new young people, fresh ideas, and we could do it.

Akina: That’s exciting to hear. Earlier, you alluded to the fact that the two-party system, a more robust balance and competition between the parties would help business. It would help the business climate, and that certainly could help diversification of the economy. 

As a senior statesperson in the Republican party, any thoughts on the current condition of the party in Hawaii and directions it might take in the next few years?

Marumoto: Well, I would certainly like to see some new exciting leadership emerge from the Republican caucus. I haven’t been too close to them, but you know what? I supported Lauren Cheape Matsumoto when she first ran, or Gene Ward is an old friend. Val Okimoto is an interesting young person. I have really not met her, but I’ve supported her. I’m expecting to see  —- oh, Bob McDermott, yeah, he’s always been great. I’m very sad to see Cynthia Thielen retire. She was a cohort in the House with me. We’ve got to encourage them to speak out and come up with some good ideas for us to survive.

Akina: Thank you for spending the time with me today at the beginning of the New Year. I appreciate your insight into some of our history and the development of our law here in Hawaii. I want to thank you for your service, your many years of public service, which has continued even after your years in office. Thanks, Barbara.

Marumoto: Well, 34 years was plenty. But I do appreciate what the Grassroot Institute is doing for our state. You’re a lone voice in the wilderness. Thanks, Keli’i.

Akina: Thanks very much, Barbara. My guest today has been former legislator Barbara Marumoto. I hope you’ve enjoyed our time together. I’m Keli’i Akina on “Hawaii Together” on the ThinkTech Hawaii Broadcast Network. Until next time, aloha.


Subscribe to our free newsletter!

Get updates on what we're doing to make Hawaii affordable for everyone.
Want more?

Get content like this delivered straight to your inbox. We’ll also send updates on what we’re doing to make Hawaii affordable for everyone.

Recent Posts