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Grassroot Institute CEO denounces House budget plan as ‘irresponsible’

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The following is a news release issued by the Grassroot Institute of Hawaii on March 24, 2021, regarding the state House voting unanimously to approve HB200, HD1.
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Institute President Keli’i Akina says House members should have aimed
to pay off more debt instead of go on a record-breaking spending spree

HONOLULU, March 24, 2021 >> Hawaii lawmakers were bestowed this month with a $1.6 billion bailout from the federal government to help them cope with state’s budgetary shortfall caused by the coronavirus lockdowns, but instead of using the money responsibly, state House members decided today to increase state spending to record-high levels.

The federal money is part of $6.1 billion being showered on Hawaii by the federal American Rescue Plan Act, with the balance to be spent on a grab bag of other Hawaii concerns.[1]

Knowing that the federal money would be available, the House voted unanimously to approve a record-high $16.8 billion budget for fiscal 2022, an increase of 7.7% over fiscal 2021.[2]

That includes general fund spending of a record high $8.2 billion, an increase of 6.5% over fiscal 2021.[3]

Assuming the measure is approved by the Senate and governor, much of the spending will be used to avoid state employee furloughs and other government spending cutbacks.[4]

Keli‘i Akina, president and CEO of the Grassroot Institute of Hawaii, called the budget measure irresponsible, especially at a time when Hawaii’s economy is in desperate need of fundamental reforms to help it get back on the road to prosperity.

“It’s true that the House members directed more than half of the $1.6 billion ARPA funds to pay off debt, such as $740 million to the unemployment insurance debt and $314 million for debt service,” Akina said.[5] “But they should have aimed to pay off more.”

For example, he said, Gov. David Ige in December 2020 borrowed $750 million to cover “current operating expenses,”[6] aka payroll costs,[7] and that debt, too, could be completely wiped out with the federal bailout money.

Other debts that still hang over the heads of Hawaii taxpayers, he said, include the unfunded liabilities of the Hawaii Employer-Union Health Benefits Trust Fund (EUTF), about $11.5 billion;[8] and the state Employee Retirement System, roughly $14.6 billion.[9]

Akina noted that, despite the windfall from Washington, House members still plan to skip $413 million worth of previously mandated annual payments to the underfunded EUTF for fiscal 2022,[10] and so far have decided not to use ARPA funds or any other money to fill that hole.

“Worse,” he said, “they plan to skip those prefunded payments for the next five years, which will save about $2 billion in the short term but cost about $8 billion over the long term.”[11]

Akina said, “These windfall federal dollars could be used to wipe out a bigger chunk of Hawaii’s state debt. Instead, our lawmakers want to go on a spending spree, leaving us with debt that will drag down the economy for years to come.”

Akina said the best way to revive Hawaii’s economy is for the state to reduce its spending, lower taxes, and remove barriers to commerce and labor opportunities.

“Let Hawai work,” Akina said. “A prosperous economy would do more to generate taxes than any tax or spending increases our lawmakers might have in store for us.”
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[1] William Cole, “Hawaii to receive over $6.1 billion in federal funds,” Honolulu Star-Advertiser, March 9, 2021.

[2] “Grassroot Institute analysis of Hawaii State Budget FY 2022-2023,” Grassroot Institute of Hawaii, March 23, 2021.

[3] Ibid.

[4] Audrey McAvoy, Hawaii governor: No furloughs thanks to new virus relief,” The Associated Press, March 11, 2021. See also Audrey McAvoy, “Virus relief money plugs hole in Hawaii budget,”  The Associated Press, published in The Telegraph, March 23, 2021.

[5] Grassroot Institute analysis of Hawaii State Budget FY 2022-2023,” Grassroot Institute of Hawaii, March 23, 2021, ARPA tab, Program ID LBR902.

[6] “NEWS RELEASE: GOVERNOR IGE’S BIENNIUM BUDGET 2021-23 REFLECTS SUDDEN, SHARP REDUCTIONS,” Hawaii Governor’s Office, Dec. 21, 2020.

[7] “GOVERNOR DAVID IGE’S 2021 STATE OF THE STATE ADDRESS,” Hawaii Governor’s Office, Jan. 25, 2021.

[8] Hawaii Employer-Union Health Benefits Trust Fund Retiree Health Care Plan Actuarial Valuation Report as of July 1, 2020,” Gabriel, Roeder, Smith & Company, January 22, 2021, p. 2.

[9] Employees’ Retirement System of the State of Hawaii, Report to Board of Trustees on the 95th Annual Actuarial Valuation for year ending June 30, 2020,” Gabriel, Roeder, Smith & Company, January 29, 2021, p. 1.

[10]State of Hawaii Retiree Health Care Plan Actuarial Valuation Report as of July 1, 2020,” Gabriel, Roeder, Smith & Company, Jan. 21, 2021, p 18.

[11]  Delaying EUTF payments will add $8 billion to Hawaii taxpayer debt,” Grassroot Institute of Hawaii, Jan. 12, 2021.

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