Hawaii’s 2024 legislative session kicks off on Jan. 17, and the “big theme,” according to Institute Executive Vice President Joe Kent, will be “Lahaina, Lahaina, Lahaina.”
Joining radio host Rick Hamada last week on KHVH News Radio 830, Kent said the Lahaina fire aftermath will be “touching every aspect of the Legislature from the budget to housing proposals to short-term rentals to insurance.”
Kent said the state could be on the hook for anywhere between a couple hundred million dollars to over a billion dollars in Lahaina-related expenses. As a result, he said, he anticipates intense battles over the limited funds not directed toward Lahaina.
Kent was joined on the program by Ted Kefalas, Grassroot director of strategic campaigns, who warned about potential new fees and tax increases.
“Gov. [Josh] Green has already floated his ‘green fee,’ kind of 2.0, focused on wildfire mitigation now. So I’m sure there’s going to be a lot more proposals that are similar to that, that are looking to increase the revenue in order to pay for some of these things when it comes to Lahaina,” he said.
Kefalas said that in addition to Lahaina, lawmakers will be focused on this year’s election season — which he framed as an opportunity for voters to hold them accountable.
“All too often you’ll hear the politicians come out in the campaign trail and they’ll say, ‘Oh, I’m going to lower the cost of living. I’m going to do X, Y, Z.’ And then four years later, we’re in the same position, and they continue to get re-elected.
“As a citizenry, we need to make the decision on whether or not we’re OK with that. And if not, then we need different leadership,” he said.
Kefalas emphasized that voting is not merely a matter of “red or blue or Republican or Democrat,” but rather about electing “people that are going to follow through on their promises.”
To hear the entire 20-minute conversation click on the image below.
1-4-24 Joe Kent and Ted Kefalas with host Rick Hamada on KHVH News Radio 830
Rick Hamada: Delighted that we start 2024, Grassroot Institute of Hawaii and Joe Kent on board with us. Brother Joe, good morning to you.
Joe Kent: Good morning, Rick, and Happy New Year!
Hamada: Wow, believe it or not, my goodness. How did you usher it in?
Kent: Well, we — actually, we bought a new house. Not a house, actually, in Hawaii, a condo. We call a condo a house. [laughs]
Hamada: Believe me.
Kent: But I have a small condo, and we watched it from there. But I don’t know, it seemed like the wind wasn’t blowing through this year. It was so hazy, you could barely see anything. Looked like the Civil War out there, so.
Hamada: Oh wow.
Kent: But I was like, you know, all of the fireworks are a hymn to the people who don’t follow the rules. [laughs] Which I kind of appreciate actually, you know, so yeah, it’s fun.
Hamada: Yeah. Good stuff, congrats.
Kent: Thank you, thank you.
Hamada: On your home ownership. That’s great.
This handsome young man seated to your left has been a guest on previous programs. He joins us today. Would you mind doing the introductions, please?
Kent: Yeah, this is Ted Kefalas. He’s our director of government affairs and always up to speed on what’s going on in the Legislature.
Ted Kefalas: Yeah. It’s always good to spend time with you, Rick, and I’m glad Joe is here with me as well.
You know, I did not have quite the memorable New Year that Joe did, moving into a new place, but you know, still great. I was able to see family and catch up and everything. So, you know, just excited to start the new year here with you.
Hamada: What we’re going to do is get Joe’s home address and then we’re going to just break in his new home.
Kent: You’re all invited, come on down.
Hamada: We have a lot on the agenda because ‘23, goodbye, ‘24, we’re here. In 13 days it’s the opening day of the state legislative session. I’d like to start there with both of you.
Kent: Yeah, the big theme is Lahaina, Lahaina, Lahaina. It’s just touching every aspect of the Legislature from the budget to housing proposals to, you know, short-term rentals to insurance. I mean, the list goes on.
So, I think Lahaina will just kind of be a black hole, just sucking all of the issues into it at the Legislature. Maybe for good measure, by the way, there’s still a lot that needs to be done there.
But certainly, you know, we’re going to see some budget shifts. We’re going to see numbers shifting over from other — you know, like the Department of Education — back to Lahaina. So, there’s going to be a lot of budget battles, too.
Kefalas: Well, and don’t be surprised either if you see, you know, some potential tax increases, some potential fees. I know Gov. [Josh] Green has already floated his [Hawaii] green fee kind of 2.0, focused on wildfire mitigation now. So I’m sure there’s going to be a lot more proposals that are similar to that, that are looking to increase the revenue in order to pay for some of these things when it comes to Lahaina.
Hamada: Is there a possibility that an audit process can be initiated because of the sheer utter amounts of public and private funds under the name of Lahaina and wildfires? But the disbursement and actual receipt of those funds, can we determine by whom and how much?
Kent: That’s a great question. You’ve got $2 billion dollars, at least, from the feds that are being doled out in Lahaina. Not doled out, but spent; put it that way. The state is on the hook for about 10% of that.
But in the budget, they have an asterisk because they’re not really sure how much money they’re on the hook for. And so, they say they’re putting in a buffer of a hundred million or two hundred million.
Could be a billion. I mean, who knows? They don’t even know when they’re going to get the bill from FEMA.
And so, you know, trying to plan a budget with this billion or $2 billion expense looming over your head is really difficult right now. And so, they’re just putting asterisks in the budget.
Hamada: Wow. Ted, you mentioned something — tax increases. How in the world are we in a position to increase taxes in already one of the most heavily personal income-taxed states, when we had budget surpluses with a lot of zeros behind them? How in the world did this happen?
Kefalas: Yeah. Unfortunately, a lot of those budget surpluses went away. And, you know, I do want to make mention, Joe had talked about Lahaina being No. 1 in terms of legislators’ minds. But I think No. 1 really is the elections coming up in November.
And make no mistake about it. I mean, that’s usually what legislators top of mind is when it comes to getting re-elected and staying in position. So this year, this November, I think it’s going to be something over a hundred positions that are up for election, including Honolulu mayor. And I think even mayor of Big Island is coming up.
So, that’s kind of top of mind for them. You know, I think you see Gov. Green has reintroduced the green fee. I think there’s been a push to kind of focus on these visitors and focus on taxing outsiders heavily in order to pay for a lot of this.
But you know, you talk to some of the people in the hotels and whatnot, and you see that a lot of visitors are already starting to go other places because the fees are so high. They get their bill, and it’s, you know, tons of different percentages that are just tacked on in addition to the cost of the room.
And so, you know, these visitors have decided, “Well, I’m just going to go to, you know, you name it, another tropical place in the world and spend my money there.”
So, we do have to be careful when it comes to just saying, “Oh, well, we’re just going to tax all of our tourists and we’ll be OK.”
Hamada: Two destinations: the Caribbean and Mexico. And reading the trades, they are seeing substantial increases. Not simply and solely because of Hawaii per se, but because of the U.S. tourism market, it’s emulating a lot of what we’re doing. It is additional charge, additional charge. And in a hyper-competitive industry, you can price yourself out.
Kent: Well, we have among the highest — I think the highest — tourism taxes in the nation when you rack them all up. And, you know, a green fee would just make that higher.
And we thought that the tourists would never leave, the Japanese tourists. But oops, the Japanese economy, you know, the yen is now really weak. And tourists from there are looking at Hawaii and it’s really expensive to them. And so, the Japanese tourism market hasn’t fully recovered yet. I mean, there are some that are coming. But I think budget planners didn’t anticipate that the economy would be so weak that we would lose the surplus.
Basically, that’s what happened, is the surplus vanished. I think we had like 1% increase growth last year for our revenues, which is, you know, peanuts, basically. And so, our economy is now weak. Legislators need to focus on figuring out why is our economy now weak.
Maybe it’s because of those taxes I mentioned earlier. And loosening that, OK, it might hurt you the first year, but the second, third, and fourth and years going on, it would really help.
Hamada: Ted, I have to turn to you for a moment because top of mind with me is cost of living. Period.
And in all the conversation about taxation and disbursements and allocations and totaling into hundreds of millions of dollars, us regular guys are going to the store and are choking when we have to check out at the grocery store line. I did it yesterday, I’m surprised I’m still alive.
Hamada: What can we drive to ensure that our lawmakers do whatever possible to mitigate our C.O.L.? And what, in your mind, would be the key to accomplish that?
Kefalas: Well, I mean, I think No. 1, you know, you mentioned it is when it comes to all the taxes, right? I mean, you go to the grocery store, you get hit with GET [general excise tax]. You go pretty much anywhere, you’re getting hit with the GET, unfortunately. And so, we need to find ways to reduce that.
And I always say number one is to get involved. All too often I hear folks that say, “Oh —” complaining about taxes or complaining about housing. But they’re not actually contacting their legislators. And so, how can you expect your legislator to know how you feel if you’re not actually getting involved?
I think, you know, one of the top things, too, when it comes to cost of living is our housing situation. We are in, everybody knows, a massive housing crunch right now. And the No. 1 thing that people spend their money on is housing.
So, you know, this year we’re hopeful that the Legislature will take up a few proposals when it comes to allowing things like starter homes. That means smaller homes for locals.
People that want to, either they are new professionals and are trying to build their family, we’re talking about kupuna that want to just downsize; it’s folks that want to stay here and are not just these investors that everybody is so irrationally afraid of.
So, we’re hopeful that some of those housing proposals get passed because if people can start spending less when it comes to their mortgages or their rent, well that leads to a lot more money in your pocket.
The other thing when we talk about, taxation — and Joe kind of touched on this earlier — but trying to make Hawaii a more business-friendly environment.
We are consistently one of the lowest ranked states when it comes to, you know, ranked for business. CNBC comes out with this ranking every year, and you’ll see Hawaii is probably, you know, bottom five, if not the last.
And so, how can we encourage more businesses to open up here? How can we encourage more local residents to open up a business and to be able to be their own boss?
So, we need to look to find ways that we can do that and encourage people, rather than trying to keep them from doing things and restricting them.
Hamada: So, how do we invigorate the general public? As we have confronted the lowest voter turnout percentages around the country, how do we turn that around? What is the key? Because as Ted alluded to, to get involved, but many people go, “Why?”
Kent: Well, and, you know, I care more about who people are voting for, too. Whether it’s a low turnout or a high turnout, if they’re voting in a smart way for the right policies — or people who support the right policies — then, you know, job done. And so, I care really about not so much who the person is, but what policies they support.
And I think we can do a lot of good with, you know, just educating. Which is what we do, actually. We talk a lot too. We talk to every single legislator, we try to get to all the councils, and we’ve got a whole slate. If you go to our website, grassrootinstitute.org, you’ll see all kinds of reports.
We’ve written about this for more than 20 years! And so, we have all of the ideas to help make Hawaii a better place. We just need to get them in the right places.
Kefalas: And it’s about holding people accountable too, right? I mean, all too often you’ll hear the politicians come out in the campaign trail and they’ll say, “Oh, I’m going to lower the cost of living. I’m going to do X, Y, Z.” And then four years later, we’re in the same position, and they continue to get re-elected.
And so, you know, as a citizenry, we need to make the decision on whether or not we’re OK with that. And if not, then we need different leadership.
And so, not saying, you know, red or blue or Republican or Democrat, but people that are going to follow through on their promises. And, you know, again, we need to make sure that we’re holding them accountable.
Hamada: Well, there has been a dereliction of that duty for so many years.
In the late 1990s, the Democratic party had identified themselves a party of heart. It was during that period of time where they retracted the GET deductions for food, shelter, medical. With a promise that once the budget was restored, it would be returned to the people.
That’s almost 30 years ago, and that promise has not been kept. And one of the most onerous taxes, ever, is the Hawaii GET.
And so, you’re right. But the mobilization of folks is key as well. And I’m hopeful that that is going to take place, I would say in about 13 days and two hours and three minutes, I believe, if that’s it.
We need to take a very short break in the time remaining. Both Joe and Ted of Grassroot Institute with us this morning. More topicality in a moment.
* * *
With time remaining, let’s resume once again with Joe and Ted of Grassroot Institute of Hawaii.
A lot of monies floating around with the DOE [state Department of Education]. Joe?
Kent: That’s right. [The Department of] Education has about $465 million that was unspent. Whoops! I don’t know if they forgot to spend it or what, but the money lapsed. That means it’s going to go back into the general fund. And then it has to be reappropriated again.
Now imagine you’re a politician and you, you know, lobbied hard and got this bill passed to build a new gym in your district or a new classroom or fix the roof of your school or something. They passed the bill, they appropriated the money, but oops, they didn’t spend it and now it has to go back. And now you, again, have to advocate with a new bill to try to do that again? Um, that’s a mystery.
And so, what is going to happen with that money? Well, a lot of it is going to go to Lahaina, actually. It’s all being redirected.
And, but what about the schools though? Well, the governor took out some more debt and tried to put some of that towards the schools. But legislators aren’t happy.
They grilled the Department of Education. I think the person that was in charge got canned; which was the assistant, I think, assistant superintendent anyways.
Hamada: One of 78.
Kent: Yeah, that’s right. [Laughter] But anyways, so legislators are not happy about this. They kept asking, “Why? Why?” And the department said, “It’s because we don’t have enough money.”
Hamada: Oh, dear Lord. Kazu Hayashida, the former director of the department of transportation of the state under Ben’s [Cayetano] administration, lost millions of dollars of federal assistance money for infrastructure projects because the paperwork was submitted late.
Kent: Oh, wow.
Hamada: And so, to hear these consistent stories of encumbered funds that are not being utilized — which is in dire need with DOE, not to teachers —it was primarily for capital projects, and so it’s frustrating.
Ted, I’d like to get your take on not only this story, but also what’s top of mind with you as we enter into the session.
Kefalas: Well, I think it’s just so sad when you think about those folks that are in the schools. Like you said, the teachers, the students and a lot of times these facilities are kind of crumbling in on themselves. And yet, we can’t figure out how to spend the money. So, that’s so unfortunate.
But you know, one of the things, and I mentioned it earlier, was housing. And I think that we’re really hopeful that the Legislature can take on some of these housing proposals.
We’ve been working with a few legislators already on the starter homes proposal that I mentioned. The big thing behind that is really reducing minimum lot sizes.
So, right now, here in Honolulu, the minimum lot size is about 3,500 square feet. But on Maui, it’s 6,000 square feet. That means in order to build just a single-family home, you have to have 6,000 square feet on Maui. If you want to build a duplex, it’s 12,000 square feet. So, who in their right mind is going to build a duplex versus two single-family homes? It’s not going to happen.
And unfortunately, if we keep going this way, we’re going to start eating into our land. We’re going to start eating into our environment, and I don’t think that’s what people really want.
So, in order to really house, you know, local residents, we’re going to have to build up rather than building out. And so, rather than putting in a bunch of high-rise apartment complexes and condominiums, you know, one way that we can do that is by creating smaller single-family homes. So allowing smaller homes on a smaller lot.
The other thing, just to highlight, is about two-thirds of a housing cost is tied up in the land. So, by reducing the land, you’ll be able to reduce costs, theoretically. So that’s one of our top of mind things.
But in addition to that, we’re looking at another housing initiative that’s called “Yes in God’s backyard.” And that would allow nonprofit organizations, churches, religious institutions, schools as well as healthcare facilities to build workforce housing on property that they already own.
Something that I think is pretty, you know, innocent and not anything that’s gonna really change too much of our communities. But surprisingly, there’s always the “not in my backyard” folks that will come out in droves.
So, if you’re for housing, we really need your help this year when it comes to letting your legislators know.
Hamada: Is there any specificity, if you will — just about a minute left — in the most recent UHERO [Economic Research Organization at the University of Hawai‘i] report that identified that the cost of regulation can total up to and exceed 20% of a home’s cost.
Has Grassroot been able to identify specifically what those regulations may be? And is there a way that we can circumvent? Because the governor and his housing emergency proclamation determined that bypassing a great deal of that can be done, but are they willing to?
Kent: Well, they basically did identify all of the regulations with the governor’s housing emergency proclamation. But it was so contentious that they basically kicked the stools, the legs out from underneath that stool and watered it down.
Hamada: Oh, wow.
Kent: So, oh well. C’est la vie.
Hamada: C’est la vie, monsieur. Bonjour, tout le monde. Je voudrais une …
Hamada: Let’s talk about drinking. I want to thank you both so, so very much. I can’t wait for this session to start and I can’t wait to learn more from the Grassroot Institute of Hawaii.
And in the remaining seconds, how do we reach out to Grassroot Institute?
Kent: Grassrootinstitute.org, and you can help us get activated.
Kefalas: We’re also on Instagram and YouTube, so make sure you follow us there as well if you’re looking for any up-to-date information.
Hamada: And we shall, we shall. Thank you so very much, Joe, Ted. We’ll see you very soon.
Kefalas: Thanks, Rick.