The biennial budget passed by the 2023 Hawaii Legislature threatened to wipe out the state’s projected surplus by fiscal 2028.
However, Joe Kent, Grassroot Institute of Hawaii executive vice president, said now it appears that Gov. Josh Green will be trimming $1 billion from that budget before signing off on it — and “good for the governor for doing that. … That’s a really good thing.”
Appearing last week on the “Rick Hamada Program” on News Radio 830 KHVH, Kent said Gov. Josh Green told him that trimming the budget now will restore the budget surplus and also provide room for tax cuts in the future.
“So did I hear you correctly that he alluded to a future session of tax cuts?” Hamada asked.
“Oh, absolutely,” said Kent. “If you remember at the beginning of the year, he [Gov. Green[ offered the Green Affordability Plan, which was $300 million in annual tax cuts. And only $100 million of that went through this year; … that included a bunch of tax credits for low-income families.
“So that’s good. But there’s still $200 million of tax cuts that he proposed that are still on the table somewhere and that could go through. And not to mention general excise tax cuts on groceries or something like that.
“So, you know,” said Kent, “there’s more than enough room to cut taxes in Hawaii, and I’m glad the governor sees it that way.”
Kent said there is still room for more spending cuts — including from proposed spending on the Department of Budget and Economic Development and Tourism, which he called the “junk drawer of pet projects.”
In addition, he said, the governor has indicated he will not be giving up that $200 million the Legislature gave him to spend as he sees fit.
“We’ve never seen anything like this before,” Kent said. “And we actually went and looked at all the budgets. So, you know, from a checks-and-balances standpoint, this was questionable.”
Despite these missed opportunities, Kent said the governor “did what he needed to — and what the taxpayers needed too.”
To hear the entire interview, click on the image below. A complete transcript follows.
6-15-23 Joe Kent on Rick Hamada
Rick Hamada: Time reserved, of course, for the Grassroot Institute of Hawaii. And Joe Kent joins us today. And Joe, always a pleasure. Very good morning to you.
Joe Kent: Aloha, Rick. Good morning to you too. Thanks for having me.
Hamada: It is absolutely a pleasure. Joe, where are you calling us from today?
Kent: I’m calling you from Maui and the weather here is beautiful. It’s “Maui nō ka ‘oi,” as usual.
Hamada: Yeah, absolutely. So hey, before we jump in — there’s a lot to cover — do us a favor, once again, tell us about Grassroot Institute of Hawaii.
Kent: Yeah, sure. The Grassroot Institute of Hawaii is a watchdog, a government watchdog, basically. And we’re a nonprofit think tank that’s been around since 2001. And we try to offer solutions that involve less government and a less-government type of approach. So, lower taxes, lower regulations and everything. That’s our stance and viewpoint.
Hamada: So, common sense, is what it sounds like to me.
Hamada: Without a doubt. Joe, I want to jump into some of the topicality we’ve talked about in the past, but it’s been refreshed.
No. 1, you shared with us about the absolute carnival of the last day of [the legislative] session and bills not even read but still getting passed, and budget bills and dollar figures not really solidified, the level of spending in violation of constitutional precept — it was just a mess. Now, we have the governor holding a recent press conference announcing cuts.
Would you mind walking us through one, the compare and contrast from then to now, and what was ensconced in the governor’s press briefing?
Kent: Yeah, sure. You know, it’s so interesting how easy it is to cut. Look how easy it is. [chuckles] The governor just cut $1 billion from the budget. And, you know, which is kind of funny to us sometimes because people say, “Well, we can’t cut anything. The budget can’t be cut at all.”
But actually, good for the governor for doing that.
I mean, you know, I know that it can be very politically unpopular to cut popular programs, but he did what he needed to — and what the taxpayers needed too.
I asked him, actually, you know, about that. I said, you know, “Your budget’s blowing up. They’re spending so much that it’s spending into the red by billions of dollars in future years, and all the money’s gone, and yet you want to introduce tax cuts in the future. So how are you going to square that circle?” And he told me that, you know, the best way to do it is to cut right now so we can cut taxes later.
So we’re cutting the budget and cutting the spending, and that’s a really good thing.
Hamada: So did I hear you correctly that he alluded to a future session of tax cuts?
Kent: Oh, absolutely. Absolutely. If you remember at the beginning of the year, he offered the Green Affordability Plan, which was $300 million in annual tax cuts. And only $100 million of that went through this year —was passed — and that included a bunch of tax credits for low-income families.
So that’s good. But there’s still $200 million of tax cuts that he proposed that are still on the table somewhere and that could go through.
And not to mention general excise tax cuts on groceries or something like that.
So, you know, there’s more than enough room to cut taxes in Hawaii, and I’m glad the governor sees it that way.
Hamada: We’re together with Joe Kent, Grassroot Institute of Hawaii.
Sorry for my pause and hesitation there, but I know that, you know, going through decades of watching and witnessing what takes place in that big square building — including the fifth floor — I’d like to see what the net result is.
Now, the fact that there was a cutting and a slashing, that is, I will agree, absolutely a positive development. But what does that mean in regard to the previous two-plus billion-dollar budget surplus? Has that been restored? Are we back to zero? Because the amount of spending was constitutionally … it was in excess.
Kent: Yes. So that’s right. When you spend too much, then in future years, you have a deficit. That’s what the budget looked like. It looked red and redder and redder as you go into the future years. And by the time you get to fiscal 2028, it was a $2 billion deficit. You know, that’s huge.
But these cuts actually restore all of that, restores the budget because when you cut one year, you’re not just cutting one year. You’re actually, in a way, cutting every year going forward. Right? Because a lot of times the way they budget, they just, you know, add 5% to the next year and so on.
So these cuts are really important in that sense because it’s like an annual cut for the next few years, and that restores the surplus to nearly a billion dollars by fiscal 2028.
And keep in mind, we also have $1.5 billion in the rainy day fund too. And so we’ve got, you know, reserves enough to talk about tax cuts in the future.
Hamada: But what else could the governor have cut this time around?
Kent: Oh, yes. Well, he could have done a lot more cutting. So for us at Grassroot, we’re Edward Scissor hands [chuckels], so we can think of lots of things to cut.
Of course, you know, the Aloha Stadium is a lot of money that some people say could be cut. It’s around $300 million total for the project.
And then the HTA, Hawaii Tourism Authority, is going to get money this year too, and that could be cut.
Then you’ve got other ways to cut, too. I mean, one way to cut is to just chop the whole budget — give the whole budget a haircut. You know, if you just say, “I want to cut 1% of the whole budget,” you know, look at every department, it goes down by 1%. Well, that would save $100 million. And so there are lots of ways to cut.
And not to mention, look at DBEDT — the Department of Budget and Economic Development and Tourism — they’re kind of the junk drawer of random things that politicians want. It’s kind of like, you know, the junk drawer of pet projects. And this year there were over $500 million of random pet projects put into there. I think politicians could take a closer look at that too.
But anyways, the governor did cut a billion dollars and a lot of it was from, you know, too much infusion into the rainy day fund — that was $500 million.
I mean, just remember during the pandemic, we had a rainy day fund of like $300 million. So now it’s $1.5 billion, and then to put $500 million more into that just seems like too much. And so good on the governor for cutting that.
And he’s also cutting the “first responders emergency campus.” That was kind of a controversial thing. I mean, you know, HI-EMA [Hawaii Emergency Management Agency] — it’s in Diamond Head Crater. I don’t know if you’ve been there. It’s like, you know, underneath the Earth’s crust in the basement there and they wanted to move that. And there’s one at Punchbowl as well. They wanted to move it to Mililani and create this bigger campus for law enforcement, and feds and the state, and basically have this — I don’t want to call it a theme park — wonderland, maybe [chuckles], for a lot of emergency management and things.
But the thing with emergency preparedness is there are seemingly endless scenarios for what might happen and you can just dream up all day, you know, like, what do we need? So I think a lot of people saw that as wasteful as well. So that was $72 million that was cut, and that’s probably a good thing.
Hamada: Talking with Joe Kent.
I think some of that talking with Chad Blair a little bit earlier today and just hearkening back, that is [to] Donovan de La Cruz’s project. He was a big proponent. He was a big supporter and he is also at the center of the dreaded ever-popular, world-renowned slush fund and had an association.
What happened to those slush fund monies that we were getting our panties in a twist over earlier this session, Joe … at the end of session?
Kent: Well, the slush fund, unfortunately, has remained. That was not cut. And, you know, that was money that was given to Gov. Green, $200 million to do as he wishes. He does have to notify the Legislature, but that’s all.
And he had us kind of scratching our heads at Grassroots Institute. We’ve never seen anything like this before. And we actually went and looked at all the budgets. So, you know, from a checks-and-balances standpoint, this was questionable.
But it looks like, at least now, [the] governor is saying what he’ll spend it on, which is some for the HTA — which was defunded at the Legislature — and some for education, teacher housing and … or excuse me, just for education.
And so at least he’s saying what it’s gonna be used for, but still, big-ticket items like this should be deliberated at the Legislature, not just decided by one person.
Hamada: Well, that and also, I mean, we talk about the due process and we refer to the constitutional precept of the amount of overspending, but it’s not binding, it’s not statutory. It is ensconced in the [state] Constitution, but it has a provision that if you have a majority of lawmakers say, “Yeah, that’s okay. We can spend that much,” then you can, and it’s written. And it’s just nuts.
One other aspect of this, Joe, is that what is now our total debt as a state, and combine that with unfunded liabilities, we arrive at a dollar figure that may … if you’re driving right now folks, you may want to pull over to the side of the road. Joe Kent?
Kent: Well, that dollar figure, I’ve calculated to be around $132 billion. That is a number that you get to if you rack up all of the bonds at the state and county level, and the unfunded liabilities for the pension and health funds, and the deferred maintenance of infrastructure and, you know, things for the environment and maintenance.
If you rack up everything that we’re supposedly supposed to pay for over the next 30 years — that state reports have said that we need to pay for — it’s over $132 billion.
And you know, that doesn’t include even bigger ticket items that people are talking about like Red Hill, you know, which is a federal question.
But anyways, that’s a lot of money that if you just divide that by, let’s say a million adults in Hawaii, it’s $132,000 per person over the next 30 years. And, you know, I certainly can’t afford that.
Hamada: Not at all, unless you’re a City Council member.
Hamada: Anyway, one last thing to wrap up, we have just a few minutes. Hardly even that. I just wanna say one thing:
When we talked about the governor doing additional things, there’s an astounding increase in the amount of unemployment insurance tax that businesses — and that includes small businesses — are gonna have to pay because there’s a cessation of the withdrawals and it’s increasing.
And we have the opportunity … The governor could have assuaged all of that with an allocation to ramp up and replenish the unemployment fund for the state. There are pockets where actions could have been taken other than cutting. It could have been moving, replacing, et cetera.
Kent: Yeah, that’s right. The UI taxes, you know, which are taxes that businesses pay for their personnel — uou know, if you’ve got more employees, then you have to pay more UI taxes — unemployment insurance taxes. And those are going up by between $100 and $300 per employee this year. So that’s gonna hit $100 and $300 per employee, more than last year’s tax. That’s gonna hit business in Hawaii in a really big way.
Now, if the Legislature or the governor had deposited into the UI fund around $100 million, then that would’ve, you know, reduced that tax automatically. But unfortunately, now businesses will have to pay.
Hamada: Reduced, maybe eliminate at some point as well, for a period.
We got to run. Joe Kent is joining us from the Valley Isle and once again, Grassroot Institute of Hawaii.
A great report as always, Joe. I appreciate you very much and looking forward to the next time.
Kent: OK. Thanks for holding them accountable with us.
Hamada: Appreciate the time, Joe. Aloha to you.
Kent: Thanks. Bye.
Hamada: Bye now. That is Joe Kent with the Grassroot Institute of Hawaii.