5-9-23 Maui legislative wrap-up event, featuring Keli‘i Akina, Malia Hill and Ted Kefalas
Keliʻi Akina: Well, aloha everyone. How are you doing here on Maui?
Audience: Good.
Akina: That’s great. Maui nō ka ‘oi. Isn’t that always the case? So good to be back with all of you. Some familiar faces. And I want to thank you on behalf of the Grassroot Institute for joining us today.
Today’s a great day because we have one of our beloved staff who used to live in Hawaii and works for us on the mainland joining us today. And I’m going to introduce her in a moment. But Maui is the perfect place to bring old friends back together again. And I want to thank you on behalf of the Institute.
We have just finished one of the most intense times of the year for us. The Legislature here in the state of Hawaii just closed its doors for the year. And during that period of time, we saw the good, the bad and the ugly. And that’s what we’re going to talk a bit about today.
There’s some good things, definitely. There were some bad things, and then there were some that just we’re not clear exactly what they are. So they’re not that pretty, that’s the reason obviously why we say ugly — and it’s our nod to Clint Eastwood.
But I’d like you to meet our panelists joining today. For those of you who may be with us for the first time, I’m Keliʻi Akina, president of the Grassroot Institute.
It’s my privilege to be able to work with a tremendous staff team of about 10 full-time and nine part-time workers who are doing a superb job of really looking at the problems that face Hawaii and finding solutions to them, and then communicating both to the public and to government officials on how to do that. And that’s what we’ve done in this legislative session.
So I’m not going to delay any longer. And we’re going to jump right into talking about what took place during this session. With me, I have two representatives in our team who were very crucial in our work in the Legislature.
First is Ted Kefalas. Ted is our director of strategic campaigns. Ted, you want to say hi?
Ted Kefalas: Hey, everybody. Great to be here. I look forward to talking.
[applause]
Akina: Can you here him everybody?
Kefalas: I’ll be sure to use the microphone as we go through the presentation.
Akina: Ted is well-heard down at the Legislature. Ted is one of our registered lobbyists who fights for the cause of liberty. Grassroot Institute stands for three basic principles: individual liberty, economic freedom and limited accountable government.
We don’t have clients. We don’t get paid to do our work. We’re completely independent. We basically decide on our own what bills at the Legislature support individual liberty, economic freedom and limited, accountable government, which bills oppose them and we actually introduce legislation ourselves.
So that’s an important role that we play, to the extent that we can. We’re not a 501(c)(4) political organization. We are a 501(c)(3) nonprofit educational. So to the extent that we can do that, we’re engaged at the Legislature.
Ted leads our team down there, does a great job, and we’ll hear from him in a moment.
I’d like to also introduce Malia Hill. Malia is currently living away on the mainland, so she represents us in the Washington, D.C., area in our work with Congress there or at the federal level. But she’s actively involved in Hawaii legislative issues.
And she happens to be a senior team member in our first area of strength, our first weapon at the Grassroot Institute, which is intellectual capital.
And when you read something from the Grassroot Institute, it’s original. We have researched it, in many cases have taken it through the gauntlet with peer review. And this original research is the basis of what we do. We look at the causes of Hawaii’s problems, and we find a research basis for their solutions. And leading that team is Malia Hill. You want to say hi?
Malia Hill: Hi. Oh, hello. It’s really a pleasure to be here. I feel so happy to be in Maui. I’m so happy that the legislative session is over. It’s quite an experience going from it all.
Akina: Now, while I say that we’re relaxing a bit because the legislative session is over, I failed to mention that the team is actively engaged in county council issues here on Maui, on Kauai, on the Big Island and on Oahu, particularly. And so there’s really no rest for the weary workers, but they’re doing a great job.
In this legislative session, what we saw were 3,100 total bills introduced. That’s a lot of bills. And of them, only 270 actually passed. We ourselves introduced 15 model bills and we tracked hundreds of other bills. We also presented testimony 142 times on 82 different bills.
That’s a lot of activity, and we’re going to tell you a little bit about that, but one of the things that happened this past legislative session is that a very important goal of the Grassroot Institute was achieved.
We set out a couple of years ago to become the most influential voice in public policy.
While that goal is not yet fully achieved, we made some serious, serious headway. We were the group that had the most testimony on bills. We also had the most coverage in the media. Many weeks that we were all in the media every day, whether it was print media, television media, radio and so forth. And we really want to credit our team for that happening.
Well, without further ado, I’d like to let Malia make a few comments, if she would, about a very important aspect of the … excuse me, I’d like for Ted to make an important presentation on a bill that is near and dear to our hearts.
During the pandemic, it was made evident that Hawaii had a shortage of medical personnel. But one of the things that our research showed, and we relayed to the public and government officials, is that that shortage of medical personnel and facilities wasn’t caused by the pandemic. It existed beforehand. It’s just that the pandemic was a stress test that made it evident. And during that period of time, it became all the more evident. And you here on Maui know it more than anyone on Oahu that we simply don’t have residents in our population the medical personnel that we need, for a variety of reasons. Ted, let me hand it off to you.
Kefalas: Sure. Absolutely. I really appreciate it. You know, Dr. Akina mentioned the model bills that we introduced this year. One of those model bills was on the Interstate Medical Licensure Compact, which essentially means that we are now going to start recognizing out-of-state licenses for physicians to come from the mainland and practice here in Hawaii.
Now, that’s huge. We hear all too often that we have a doctor shortage of almost 800 workers, and, you know, how can we attract more workers to come to the islands?
And so we feel that this Interstate Medical Licensure Compact is the first step. It’s by no means a silver bullet, but it’s something that allows a doctor that’s licensed in Virginia, for example, or Arizona, to now move to Hawaii, open up their practice and not have to go through the three-months, six-month, even a year-long process of going through and getting a Hawaii-specific license.
This is something that we’re glad the Legislature agreed with us on. It’s something that they supported unanimously and is now sitting on Gov. [Josh] Green’s desk. So we’re hopeful that, as a doctor himself, that he kind of recognizes the issues that we face and will sign the bill before it’s too late.
Akina: Thanks, Ted. Does that bill apply to all medical personnel, or to certain classes of medical …
Kefalas: So that bill just applies to physicians. There were a lot of other bills this year that would have related to nurses, EMTs, psychiatrists, a whole host of other medical care professionals. Unfortunately, all of those bills did not make it through this year. The physician compact is the only one that made it through.
But we’re hopeful that, you know, we’re starting to chip away at some of those regulations and processes that are in place. And we’re hopeful that next session, legislators are a little bit more amenable to some of these other professions that we talked about.
Akina: So we look at the success of this year as a stepping stone to broader success?
Kefalas: Absolutely.
Akina: Really meeting that crucial need here in Hawaii.
Now, Malia, this was a bonanza year in the eyes of legislators going into the session, who were just utterly giddy about the huge surplus and — whether or not surplus was really there, as we start thinking about the more we look into it —the surplus inspired some of the big dreams in terms of paying for all kinds of programs and all kinds of different things the government could do for the people.
So when it comes to actually doing a budget for all of this, and seeing whether costs and expenditures make sense, what did we learn this session?
Hill: I would say that we learned that a surplus only lasts as long as legislators realize that there’s a surplus, and then it disappears very quickly.
We’re seeing that the state budget this year went up by about 30%, although you wouldn’t know that how everyone talked about it because all the drama was, you know, “We’re very unhappy with this budget because it’s not as high as we wanted it to be.” Because there’s what the governor had proposed spending was a little higher than what they ended up passing. It was still higher than last year, about 10% higher. But, you know, that’s the Legislature for you — people being upset about how much money the Department of Education is getting, even though it’s getting more than it got last year. There’s also been talk about the $200 million slush fund that the governor got to spend.
Now this is not actually the first time this slush fund has existed. It has existed in the past — just not for Gov. [David] Ige; draw your own conclusions — but the slush fund is back and Gov. Green can use it as he wishes, pending various approvals and so on and so forth. The budget will violate the spending cap by about a billion dollars.
Hawaii does have a spending cap, but it is a spending cap that can be bypassed so long as the Legislature says that it’s important to bypass it, which they always do. So that’s one of the reasons that we advocate for a meaningful spending cap. It’s one thing to have a spending cap, but a spending cap that you can just violate by saying, “No, but we really, really need it,” is not much of a spending cap. And that’s what we’ve got going on this year.
The general fund budget is going up by 29.3% of our last year’s budget to $11.2 billion, which is up from $8.7 billion. So this is the one of the biggest increases in state spending that we’ve seen.
Attendee 1: Malia, would you speak up a little?
Hill: Oh, OK. Oh, let’s see. Can you hear me now?
Akina: Let’s see if we can adjust Malia’s microphone or why don’t you borrow Ted’s for a moment.
Hill: Better?
Attendee 1: Yes.
Hill: Or maybe I’m just too quiet. There we go.
- So last year they increased spending by 17.6%. This year the budget is increasing 29.3%. So this is probably going to eat away, according to our analysis, much of the future surplus. We’ve talked a lot about how the surplus should be about $10 billion over four years, but at the rate of spending, at the rate of the budget increase, that surplus is going to be gone before it ever develops.
Akina: You know, Malia, with respect to the budget cap, the rationale in our Constitution for having the budget cap is to make sure that the government doesn’t spend more when the general public is not experiencing income growth. So the only way we’re legally supposed to be able to allow the government to spend more is if income amongst the population, individuals and businesses is going up.
But that’s not the case, is it? We’ve learned in our own research that the cost of government in Hawaii is growing rapidly at a pace far beyond private and personal income.
Hill: Yes, ideally, you keep the budget low. Any increases are either tied to inflation or, you know, general income. But, as I mentioned earlier, we can go past the constitutionally mandated spending cap so long as the Legislature says it’s really important and good. And there’s no real way to measure it. They just have to say that they really want it and that’s pretty much will do it. So that’s the problem with a sort of … it’s not a spending cap, it’s like a spending speed bump.
Kefalas: It’s a spending suggestion, right?
Akina: There you go. And we were the ones who broke this to the news. And so I want to thank those of you who stand with the Grassroot Institute. You make that kind of news possible, although it’s not the most popular thing heard by our government.
Before I ask Malia another question, Ted, I just wanted you to give us a little insight into how we work as closely as we can with anyone and everyone in government. Malia was talking about the budget here, and there were things that we liked about the governor’s budget and things we didn’t like about the governor’s budget, and we were able to give some input at an early stage.
Kefalas: Yes, absolutely. So a lot of you guys heard about the Green Affordability Plan. This is Gov. Green’s kind of plan to cut taxes on individuals. It would’ve actually been the highest tax cut in the state’s history.
Unfortunately, that bill did not pass. But it was something that as we built up a relationship with the governor and some of his staff, he actually welcomed us to give input before he formally announced that plan.
And so we were able to talk with him amongst other economists throughout the state, and just have a seat at the table and understand exactly what he was proposing and trying to get it through.
Again, like we mentioned, the bill did not pass. Well, parts of it did not pass. And we’ll talk more about that a little bit later on, but it’s something that we really want to become a resource for legislators.
All too often, you’ll see legislators and they deal with so many different bills, so many different topics, and they only have but so many staff members to cover these things. So a lot of times, they’ll turn to us and ask us for specific research or data that can help back up their positions.
And so we’ve been happy to work with them on a lot of our reports and continuously are coordinating with them to try to better understand our reports and make sure that they are put to the best use possible in going forward.
Akina: Thank you, Ted. Now, Malia, one of the most confusing issues this year in the legislative session was the Hawaii Tourism Authority. We’ve been pretty clear about this for a long time, well before this legislative session, on a couple of these points.
No. 1, we have communicated to our leaders that it doesn’t make a lot of sense to have a government agency doing poorly what government is not able to do as well as the private sector. And so we’ve questioned funding this organization.
We’ve also had questions about the confusion over its purpose. Some have believed that the Hawaii Tourism Authority was to promote tourism. Others believe that the Hawaii Tourism Authority should be to limit tourism and just manage it. And so a lot of confusion ensued about this issue. Tell us a bit about that and what was accomplished. Or maybe it wasn’t an accomplishment.
Hill: If you wanted to get a real snapshot of how the legislature feels about HTA, you just watch the process of these two bills, HB1375 and SB1522. Very, very similar. They both abolish the HTA and replace it with an Office of Destination Management, which is pretty much the HTA, with a few extra things about destination management in it.
But you could tell that there’s a real frustration at the Legislature with the HTA. And you can see that through these bills. But our concern was, if you have a frustration with the HTA and then you just replace it with a new HTA, are you really solving any of the problems? That was really the thrust of our testimony on these.
In the end, I think the Legislature sort of saw that same point and neither bill passed.
What will happen is that the HTA has some money left over. It’s about $30 million that they can limp through on. But they didn’t get their own special allocation this year because of these destination management/repeal the HTA bills.
They also will probably get about $30 million from that slush fund, the Governor’s slush fund I mentioned earlier. And then next year, they’ll have to come back and ask for money again, and they will probably end up with another bill to replace them with another agency yet again.
Akina: Ted, while we had a lot of fun working on the HTA bills, we also were tracking some other bills that could have been tremendously damaging to Hawaii and Hawaii’s people if they were passed.
And a lot of times, our battle is not just trying to get good measures passed at the Legislature, but our real victory sometimes comes when we stop the worst measures from going forward. You want to tell us a bit about that in terms of tax proposals?
Kefalas: Sure, well, you know, like they say, defense wins championships, right? This year, it seems like almost every year we go to the Legislature, there are always going to be a pretty wide range of tax bills that come up. This year was no different.
So we had bills ranging from trying to increase the capital gains tax, trying to create a wealth asset tax. They also wanted to increase the conveyance tax, as well as trying to do something in terms of hiking up the carbon tax. All of these bills failed to pass the House and the Senate. So there will be no major tax hikes this year, which we were extremely excited about.
But it’s not just about killing these bad ideas. It’s also about trying to put forward some good ideas when it comes to the tax code.
So this year, there was actually a bill that would allow what’s called pass-through entities to, in a sense, exempt their state taxes from their federal taxes. So it’s something that is done at no cost to the state, but it allows businesses now to save a little bit of money when it comes to their tax bill.
The IRS said that this was OK for states to do. Thirty other states have some sort of similar pass-through entity regulation or law. So we’re glad to see that Hawaii is joining the mainstream in that regard and trying to find some sort of relief for a lot of our local businesses.
Akina: Thanks, Ted. Now, no idea is really worth pursuing, even if it apparently or seems to cost very little. And that’s what people thought about an idea called the “green fee.” I’m not referring to the name of our governor; I’m talking about the fee that would be charged, if some had their way, to every tourist who went to a visitor site and so forth.
There are lots of good ideas that were being pursued through this, but the real details matter in terms of whether or not something is workable, of value and whether it might have some negative consequences. I know that Malia had a lot of fun looking at this …
Hill: I did.
Akina: … contemplating each and every one of her return visits back home to Hawaii. It became a very personal issue to you. Tell us about the green fee.
Hill: It did. Actually, the green fee was an interesting one because if you want to know what it feels like to be all alone, the only people going, “Hey, you know, there’s some really big, big problems here for something that has really got a lot of popularity.” That was the green fee.
You know, it had a huge push behind it, not least from the governor: $50 license fee for any visitor. And, it was one of those things, where, “Well, what’s a visitor? How do you define a visitor?” Well, it defined a visitor as someone who had paid taxes in the last year or had a state ID, which means that, you know, your cousin who moved to Las Vegas two years ago, he’s a visitor.
You know, who knows what happens to the military under this? And, you know, Oprah’s not a visitor because she has a utility bill saying she’s local, but your cousin’s a tourist. So there was that.
How does it get enforced? There’s all these problems with it, and it sort of felt like we were the only ones pointing them out.
Fortunately, the Legislature, I suppose, heard them. I mean, they didn’t even really know what it would apply to. That’s how messy this bill was. So the Legislature realized the problems in this sort of 12th hour, and it did get stuck in conference committee.
Kefalas: So, to your point, Malia, and this is actually a funny moment, in the committee hearing, but they asked the head of DLNR [Department of Land and Natural Resources] who would be administering this fee, you know, what parks would this apply to? Who would have to pay it? And she had no answer. She said, “It’s something that we’re going to figure out later on.”
And so we’re glad that the Legislature at least said, “No, you need to figure this out now before we move forward and give you kind of the keys to the castle” kind of thing. So, again, we’re glad they came to their senses on this bill and were able to kill it before it was too late.
Akina: But the mechanics were quite simple. If you’re going to charge for stepping foot on Haleakala, just put a huge electric fence all the way around it with two or three openings with ticket booths, and then that actually [would] work out nicely.
Now, Malia, what about people who really are Hawaii residents at heart, who go away for college, or go away to get a job for a period of time, and so forth, and come back, let’s say, with their families for tutu’s anniversary or something like that?
Hill: I mean, that’s actually who I was thinking about the most. Because, you know, I have all these cousins who joined the military and they don’t have a Hawaii ID for whatever reason. They come home for, you know, Grandma’s birthday on the beach, and it’s $50 a person. So, you know, let’s pretend they only had two kids — which is totally not the case [laughs] — So it’s still, you know, $200 for them to come back and, you know, go to Grandma’s party. And it seems like that that really bothered me.
You know, also the fact that, you know, [the bill’s supporters were saying] “It won’t change spending, it won’t change tourist spending.” Well, I mean, it won’t change the hotel, and it won’t change the flight, but, you know, if you’re going to pay $200 to go to the beach, that money’s going to come from somewhere. So it’s also going to hurt, you know, local businesses, the smaller businesses too.
Kefalas: The other thing is they weren’t looking to use that revenue and cut taxes on locals. They were just wanting it as excess revenue, as extra money.
It’s one thing, you know — and I don’t know that we would’ve been supportive of it if they were planning to cut taxes on locals — but that’s a completely different argument than what they were trying to do and that they just needed more money.
Like we mentioned earlier, Malia said, you know, we were dealing with record surpluses here, and the continuous kind of money grab from legislators is always amazing to me.
Hill: Yeah, the money was the other thing, because I think people thought maybe this would be used to fix the roads or help beaches. No, it was all grants to environmental groups and to state agencies. So that would explain why the environmental groups were pushing very hard for it. But no, it was not going to be used to help infrastructure, which would again be a different conversation. It was going to be used as special grants.
Akina: Well, congratulations to you, Ted and team, for defeating that. That actually is a feather in your cap.
Now, in a few moments, I want to open up the floor and invite anyone to ask your questions. We’d love to hear them. I’m going to ask a few more questions though.
Ted, one of the reasons that medical practitioners find it hard to do business here, particularly on the neighbor islands, is that in addition to having fairly low reimbursement rates for Medicare and Medicaid, their services are taxed as GE tax, general excise. That is a huge problem. We hear about it all the time from medical personnel in private practice. What happened with regard to our efforts this session to get that pulled back?
Kefalas: So we actually led a campaign around this issue specifically looking to exempt the GET from medical services. We put forward two model bills.
One that was a broad-based exemption on general excise tax for medical services for pretty much any kind of operation or doctor visit that you go to.
Then we did another bill that we thought was kind of a failsafe, to be honest. It was a bill that would exempt Medicare, Medicaid and TRICARE from the general excise tax.
Now, that’s important because we’re currently the only state that taxes those three services. And a lot of times too, the federal government has actually come out and said that physicians cannot pass those costs along to those patients.
So the doctors have to eat those costs and you know, that a lot of times will force them to either not see Medicare/Medicaid patients or to end up leaving Hawaii as a whole.
And so we tried to put forward a couple of bills. Unfortunately, all the bills that would have exempted the GET on medical services died this year. You know, go figure. Legislators said again that they needed the money, that they didn’t have the funds to be able to cut that from the budget.
But it is something that we got it further than we ever did previously. We’ve gotten a lot of friends and partnerships in the healthcare community to come out in support of this. So we’re certainly not done trying to take this on as an issue, and we’re hopeful that we can get it across the finish line next year.
Akina: Thank you.
On the one hand, this year we were very grateful that we had a governor who wanted to pay attention to the high tax rates that people are paying, particularly those of the lower-income levels.
But on the other hand, the proposals that came from the executive office were a little bit hard to follow or understand, not only for analysts and legislators, but we feel were the very people that they’re designed to help.
What I’m talking about is the Green Affordability Plan, which is really the scheme of tax-related measures that is supposed to bring down the tax impact upon our population. Ted, what happened there?
Kefalas: So, we mentioned it earlier, Gov. Green had this proposal as the Green Affordability Plan, and it would have had the highest tax cuts in the state of Hawaii.
Unfortunately, it was sad watching during session, because legislators essentially took the one bill and broke it up into three separate bills. And then they kind of, throughout session, they almost played like a shell game with it. And so they were mixing it all around and you really couldn’t follow it along.
Well, when they finally passed the bill, we thought, “Oh, great, you know, we’re going to have all these tax exemptions and tax reforms that come from this plan.” And then they lifted up the shell and it turns out it was just a bunch of tax credits.
And, you know, now, I don’t want to talk ill about tax credits because they are helpful. But a lot of times, it’s difficult for people to remember to file them. It would have been much easier to just cut taxes all around for all the residents.
The good part of the bill, like I said, is that it doubles that earned income tax credit. It increases, I think it doubles the food tax credit, and it also doubles or triples that childcare tax credit.
So, again, those are the good parts, but it leaves out indexing the income tax to inflation. It leaves out any kind of standard deduction or increase in the personal exemption.
So, we feel that the Legislature could have gone a lot further. It’s something that Gov. Green’s original proposal would have returned $300 million back to the taxpayers. This new proposal returns about $125 million.
So, again, something’s better than nothing. But, we do feel that they could have taken a much bolder step.
Akina: Thank you, Ted. We had wins and we had losses. We mentioned earlier the Interstate [Medical] Licensure Compact. That’s a great win for Hawaii. We are moving forward by increasing regulation on a very important industry: medicine.
But we had some losses. And in particular, we have been very concerned about the transparency of government here in Hawaii.
Many people don’t even realize that during the pandemic emergency lockdowns coming from the governor’s decrees, we not only shut down a lot of processes, we had the strictest government records access laws in the nation.
So Civil Beat, Grassroot Institute, Honolulu Star-Advertiser, other organizations were simply not able to get records from the government.
Shortly after the pandemic, there was a report that one tiny organization was going to be charged $100,000 to see something that should simply be part of public records. This has troubled us greatly.
Malia, you’ve led our charge to have a more open and transparent government. What happened this legislative session?
Hill: You know, this one was a real disappointment because there has been a lot of talk about ethics and fighting government corruption, and really transparency is the heart of that. So I thought, “This is the year. This is the year we’re going to get something good out of those transparency bills.”
And instead what we got was defeat of a bill that would have prohibited the governor from outlawing electronic media communications in an emergency, something as simple as that got defeated.
There was a bill to put caps on how much could be charged for open records request, especially in the public interest, and even making those free, which is a pretty standard kind of thing that exists in plenty of other states.
Not only did that die, but at the very last minute, they stuck in something awful so that, you know, there’s nothing like having a bill that you’ve been rooting for the whole time all of a sudden grow this big, ugly, awful other head. And so now you don’t know what has happened to it.
And that’s what happened. They stuck in a “deliberative process” exemption into that open records fee-cap bill. You can see it was a separate bill which died.
And so the deliberative process exemption is basically allowed an exemption to the open records law if the agency can claim it’s part of their deliberative process.
What is the deliberative process? Exactly.
Like everything they do is deliberative. And in Hawaii agencies tend not to be super forthcoming. So we were very much opposed to giving them yet another way to avoid transparency.
So that ended up finding its way into the fee-caps bill, and then they all died. So this was just not a great year for transparency.
Akina: Some of you have followed our series called “Why We Left Hawaii,” which illustrates families and individuals who’ve gone to other islands and then ultimately outside of Hawaii just to survive. And the No. 1 reason they give us for leaving Hawaii is the cost of living, and the No. 1 component in the cost of living is the cost of, you guess, housing.
That’s a huge problem, and I don’t have to tell you here on the island of Maui, how the middle class is being squeezed out of it completely, not being able to buy and, definitely, and also, not being able to rent.
So we were looking for some progress this legislative session, and we’re pleased that there was some measure of progress, and Ted’s going to tell you about that in a minute. But we also may have stepped two steps backward as well. It’s not clear whether we’re on the right track to solving our housing problems through the government at this time. Ted?
Kefalas: Yeah, so if you remember back in November of last year, and even previously, all the legislators were talking about how important housing was and how they were going to bring affordable housing back to Hawaii, and how they were going to cut through all the red tape and regulations that hold back homebuilders. And really, this year, we didn’t see a lot of that.
To be honest, there was a bill that we were supportive of, that would’ve allowed government housing projects that were under 100 acres to essentially go and skip the Land Use Commission process.
For those of you that aren’t aware of what the Land Use Commission does, it’s kind of a duplicative process that the state has. So developers will have to go get Land Use Commission approval, and then also have to go and get county approval.
A lot of places on the mainland just have county approval, so it’s a lot easier for homebuilders to go through the process. They have much more certainty when it comes to building, it allows them easier access to financing and it just is an overall easier process. This is a bill that would’ve allowed that for county projects.
Unfortunately, there was a lot of back and forth and amendments at the last minute, and they stuck a few amendments in there right before the bill was going to pass, and they were actually, to be quite honest, they were good amendments. We thought that it was something that would’ve been helpful. But because of those amendments, it drew a lot of scrutiny from people, and so the bill died. So that is going to be something that we’re going to have to wait another year on.
Another bill that we constantly hear about is [Sen.] Stanley Chang’s ALOHA homes bill. For those of you that don’t know, this is a program that would have the state build 99-year leasehold projects for housing. And it sounds good, but as we’ve seen with a lot of government projects, whether it’s the rail on Oahu or Aloha Stadium, a lot of times those costs end up being a lot more than are advertised.
So this is something that we were able to talk them down to creating just a pilot project and just to test it out, see if this is actually viable, and hopefully, we will be able to use the data and show that it’s actually much easier to create fee-simple projects and just sell homes that way.
Akina: We’ve got an interesting cartoon by David Swann, our cartoonist. How many of you follow our cartoons that come out every week? I knew that. I know you don’t read our material for my column, you read it for the cartoons.
But in any case, this one says it has two lawmakers and they’re holding up a Bitcoin, and one of them is saying, “I don’t know what it is, but it needs my expert oversight.” [laughter]
And that kind of reflects a philosophy, which is, if we don’t understand it, let’s at least regulate it. And that really is what took place with a bill that could have some serious ramifications as to Hawaii’s future in technology and finance. Malia, you want to talk about that?
Hill: Yeah, both of these bills, to give you an idea, the first one was about 100 pages plus and the second one is about 85 pages. And I have a secret theory that no one wants to admit that they didn’t read it all and don’t really get it. And so they just vote “Yes” because they don’t want to admit that. I can’t say that’s true, but I wouldn’t be at all surprised.
There was the first bill, HB525. That’s amendments to the Uniform Commercial Code, and it kind of slipped through because it is just big and dense and it has a lot of legalese. But in the teeny tiny section of it, it basically excluded cryptocurrency from the definition of money, which is sort of a step backwards. It’s not really in keeping with where the economy’s going.
So we tried to bring that to the attention of the Legislature, but I honestly think it’s too dense, this bill.
Even worse is SB945. This is the crypto licensure bill. The crypto sandbox will be ending next year and the Department of Commerce and Consumer Affairs has really been pushing to create some sort of cryptocurrency licensure. Without that sandbox, there was so much regulation on crypto in Hawaii that it basically made it illegal or economically impractical.
And this is not a ton better. It is enormous, it is dense, it suffers from regulatory confusion. It gives the commissioner of the Division of Financial Institutions the ability to basically rewrite anything. It doesn’t really contemplate the fact that the federal government could also look to regulate crypto and how that might work. It’s a big old mess, is what I’ll say.
Akina: Well, thank you. Don’t hold your feelings back.
Hill: [laughs] I have more feelings.
Akina: Well, Ted, we are now in days following the legislative session, but a lot is going on, and a lot of behind-the-scenes politics is at work, in terms of trying to influence what the governor does with the bills. Tell us what to look for as we go forward in the next few weeks.
Kefalas: Right. So every bill that has passed so far and passed final reading is now sitting on the governor’s desk. If it’s not on the governor’s desk, then the bill is considered dead. But the governor has until July 11th to either sign or veto the bill.
He also has to — and this is kind of unique to Hawaii — but he has to come out with a list of bills that he intends to veto, and he has to come out with that list at the end of June, June 26th.
Now the bills on that list, he doesn’t necessarily have to veto. A lot of times you’ll see him include multiple bills just because he’s still mulling it over. But it is required that he creates some sort of intend-to-veto list.
It’s also important to note if he doesn’t sign or veto the legislation, it’ll still become law after that July 11th deadline. And if there is something that we’ve talked about today or something in particular that you’re super passionate about, we have a website, and on that website it allows you to go … it’s grassrootinstitute.org/action/, and you can actually write to Gov. Green on a particular set of issues.
The website actually looks similar to this and you can click — right now we have a couple of topics on there right now. One is asking him to sign the physician compact. Another is asking to veto new crypto bills. We’re going to be adding new topics throughout until July 11th, and just to continue to allow our supporters’ voices to be heard.
So if you haven’t gone on our website, I would suggest you take a look at it. It’s a great tool. It’s something that really takes probably two minutes to fill out your information and submit a letter to him. So again, if you are feeling passionate about something, we do encourage you to take a look at that site.
Attendee 2: Sometimes it helps if you write the letter for us.
Kefalas: Oh, yes. So the letter that’s a perfect point. That’s something that actually — I previously worked in Congress and you know, I saw what happens to a lot of form letters, and to be honest, they get kind of grouped together and thrown in the trash.
So this program, what we do is, we create multiple sample paragraphs and messages, and the program will cycle through those messages.
So you know, if you [points to one audience member] write a letter it’ll be different than if you [points to another audience member] write a letter, and it really gives legislators thinking that these letters are coming from an individualized person.
It’s something, we use artificial intelligence. I’m sure you guys have read all about ChatGPT and all the AI that’s out there now. We’re using that on this program to again differentiate the letters and make it as simple as we can, so that you can get involved. And if you want to add on to that, you have the ability. You can quite literally just add on and write whatever you’d like to add. But if you don’t, then you can just fill out your contact information, hit “Submit” and a pre-populated letter will be sent.
Akina: It’s a very powerful tool. We call it Voter Voice. And what it really does is it allows you as a citizen to take advantage of our research, and it will automatically send something that comes from you, not us, but your email is unique and distinct from every other letter. It’s not a form letter and that’s what Ted was referring to in terms of using artificial intelligence so that these letters are different from one another.
Ted, how impactful has this been since we introduced Voter Voice?
Kefalas: Oh, it’s been I would say a game changer when it comes to interacting with the legislators.
I can talk until I’m blue in the face and legislators, you know, will respond positively. But if I can get a voter, a constituent, in front of them, talking about that same issue, it really means the world.
And especially during an election year, that’s something that legislators, their top priority, to be quite honest, is getting reelected and staying in office.
So whenever we can get local voters in front of them and saying,”This is an important issue to make,” you’d be surprised, a lot of legislators don’t have many constituents reaching out to them. So to be able to get 20, 30, 40 people to write in on an issue can really move the needle on some of these things.
Akina: Thank you. We’re ready to go into our question-and-answer session. And so if you’d get ready for that, we’re going to bring a microphone to you.
But before we do that I just want to mention, we’re so glad for all of you who are part of the Grassroot Institute team. We’re so glad for those of you who read our weekly research and reports and my column. Stay with us. We need you because you are the voices that influence the government. And if you are not signed up for our free weekly publications, please fill out one of these cards as well as indicate any question you have also.
We also appreciate tremendously your financial support. Those of you who are contributors, you make a difference. You make it possible to have Voter Voice and so forth and these fantastic staff. If you’d like to join that community of contributors, you can indicate so on this card, and Sean will be passing them around to the tables and you can turn it in.
Now, we’d love to have your questions for Ted or for Malia. Sean, shall we go around or call people up? OK, go ahead and then I take over on that table.
Attendee 3: I have a research question, totally statistics.
Akina: Are we on the microphone here?
Sean: Can you hear me speaking? Sorry, can you speak here?
Attendee 3: Can you hear me?
Akina: Yes. Put it close to your mouth.
Sean: Try to use this one.
Attendee 3: It’s such a small question. This is just a research question. Can you hear me? It’s online now. Is that it?
Sean: Sounds good.
Attendee 3: Research question. What is the dollar amount that the GET represents in the budget and what is the dollar amount that the medical segment represents?
Hill: OK, shoot. I’m really missing, right here [indicates empty chair next to her] is the person who remembers numbers like that really well, in this missing space right here, Joe [Kent].
The GET is actually a significant portion of the budget. I’d actually have to look up to give you the exact dollar amount. I can tell you that medical services is roughly $200 million, which is not particularly substantial relative to the budget as a whole.
Kefalas: And of that, when you talk about Medicare, Medicaid and TRICARE, it’s even less. And so, it’s something that again, we thought that that bill had a much better opportunity there, because, you see, probably over 50% of our patients here in Hawaii are using one of those three services.
Attendee 3: Thank you.
Akina: In general about 50% of the state budget, which is really shocking news to most people, comes from the general excise tax. And that’s why government leaders don’t want to touch it, don’t want to get rid of it. The GET is the tax that keeps on giving.
Attendee 4: This is completely different. Everybody in Hawaii is prohibited from getting lithium-ion batteries shipped to the state, and everything we use now, they want us to go green, we buy electric chainsaws, we buy electric drills, we buy cordless this and cordless that, and when you call Amazon, say “Ship me this thing,” and [they say] “We cannot ship to your area.” And they’ve solved the problem with lithium-ion batteries, they don’t catch fire anymore, so what’s being done to solve that so we aren’t stifled anymore in the lithium-ion generation?
Kefalas: Yeah. I don’t know if there was a bill. I know exactly what you’re talking about, and it’s something that can be extremely frustrating when trying to buy anything online, anything with a battery or any kind of electronic.
I’m not sure that there was any kind of bill at the Legislature this year that would’ve dealt with that. I think, to be quite honest, that may be more of an issue in dealing with, like, UPS and FedEx. That may be one of their internal policies. But I’m not sure that any kind of state legislation would be able to coerce them to ship those things.
Hill: That’s probably federal regulations as well. Transportation of hazardous goods and special rules on that. There are a lot of regulations and those come out of DC often.
Akina: Very good. Any other questions? Yes, please.
Attendee 5: This is just a really general question. I’ve lived in Hawaii for three years and I can’t figure the answer to this out. I thought I was moving to a progressive state but, as we can see from the taxes, Hawaii is very regressive when it comes to taxes.
I cannot figure out why they tax people that are struggling so much more than people that could pay taxes without even thinking about it. So can you explain to me why we have so many regressive legislators?
Kefalas: Yeah, and quite honestly it’s more … and I agree with you because you see all too often these legislators will say, “Oh, I’m progressive. I’m this or I’m that.” And then when it comes to these taxes, they don’t do anything.
And it’s the response that I keep getting from these guys is that they don’t want to lose the money. That they see it as, even if it ends up being $100 million — which again, is nothing in the grand scheme of things; we were talking about billions of dollars in the budget — a hundred million dollars is pennies.
But at the end of the day, they don’t want to give up that kind of money. It’s almost always a money grab, and talking with some of the legislators, they’ve said in the past, in the off-season, they are tasked with finding ways to introduce bills that will bring more revenue to the state.
Now keep in mind they’re never tasked with trying to put more revenue in the pockets of taxpayers. It’s always putting more money in the state’s coffers. So I think that’s probably the main explanation for that.
Hill: Yeah. I’ll add that when you’re trying to advocate on tax reform, there’s very little interest in helping anyone over about the SNAP [Supplemental Nutrition Assistance Program] level.
So if you are interested in helping people who just come above this food stamp income, they’re just not really … there’s not a lot of motivation, and I can’t really put my finger on it. You try to explain that this is not the wealthy or whatever, but if you propose a tax reform that just helps everyone, oh my gosh, that’s almost like a dangerous thing to say.
Kefalas: Yeah. Now keep in mind the GET, for example, on groceries, it’s not charged on food stamps. So the poorest of the poor are not paying GET and they use that as kind of their justification for it.
But a lot of times, like Malia mentioned, it’s the people that are kind of on those fringes and maybe right above that level. And those people that are still working two, three jobs just to get by, but they don’t necessarily fall into what everybody’s calling the ALICE family — asset limited, income constrained [and employed] — and so those people that are kind of on that outside are usually left in the dust, to be quite honest.
Akina: Another factor in all of this is a communication problem, or I could say maybe even an education problem. GET. The rate sounds very low here in Hawaii. I’ve heard visitors say, and I understand what they mean when they say, “You mean you only pay 4.5%?”
But it’s not just visitors I hear say that. I hear legislators say that. I’ve heard journalists say that, and what that does is it masks the fact that it really is a regressive tax and has a cumulative effect of up to 13% to 15% on low-income people. And nobody looks at that.
We have another instance of this: the property taxes in Hawaii. I’ve heard legislators say this, and I was recently on a PBS program with some very well-known leaders in our state, and they were claiming, “We have the lowest property taxes in the nation, so what’s the problem?”
It sounds low. But the rates may be low, but because of the assessment of our property values, the actual amount we pay is a lot higher than people think.
And so, this is part of the illusion that happens when there’s not a group like Grassroot Institute out there trying to bust these myths and dispel these illusions. And so it’s very important for us to continue to keep getting the right information out there. Any other questions?
Kefalas: Just to build on your answer real quick, we recently came out with a county tax report distributed to all the county council members. Oahu, Kauai, Maui and Big Island, and some of the responses I got particularly from Maui legislators was exactly what you said, was, we already have the lowest property tax rates, you know, anywhere, so I don’t need to read this report.
And you know, you just remember thinking, well, anything you’re doing can be done better.
And the fact that a lot of legislators simply just said, “Well, we’re already at a low rate. We don’t need to look at this anymore. Thanks, but no thanks,” just kind of, it was pretty surprising to me, and it wasn’t just one, it was a few of them.
Now that being said, there were others here on Maui and everywhere else that responded positively to those reports and said, “Yes, let’s work together. Let’s figure out a way that we can lower rates on locals.”
So it was really kind of an interesting dichotomy of answers there.
Attendee 6: Yeah. So, can you hear me? Thank you. Can you hear me now? OK. Yeah, I have a few questions. I’ll do it one by one. What was the cost of the surplus? I never understood that. And is it based on the GET, is it based on property taxes? What is the cost of that?
Akina: Good question. What is the source of this year’s so-called surplus?
Hill: There’s a couple causes. One of them was actually inflation. Inflation is terrible for us, but it’s good for tax revenues. And so that contributes to the surplus.
Another element is that during the pandemic, the state freaked out about the possibility of not getting enough tax revenues and took all the transient accommodation tax revenues for itself. So it gets all the TAT money, and then the counties get to enact their own TAT to make up for that. So that helped contribute to the surplus.
Kefalas: Yeah. Hey, funny enough, when they took the TAT from the counties back during the pandemic, they claimed, “Oh, we need this money, we need this money.” And then they came back that they were going to have a massive surplus, but you didn’t see them going to give that TAT back to the counties at all. They said, “Well, we’re just going to keep this now. This is our money.”
And so that kind of policymaking a lot of times will end up leading to those types of surpluses.
Akina: Additionally, during the pandemic, so much money was coming from the federal government that our state government couldn’t spend it fast enough. But all of those funds, some of which were counted into the surplus, actually are short-term or terminated already.
Attendee 6: So did that … hotel tax, did they change that back so that the counties would get it back again?
Kefalas: No. So what they did is they took that pot of money and they kept it, and they told the counties, “Well, you can enact your own TAT and charge it.” So what most counties, I think all of them took advantage of that and created their own 3% TAT [surcharge]. So essentially it was a 3% raise on that transient accommodations tax.
But, yeah, they just decided, “Oh, we need this money because of the pandemic.” The money actually came back higher than normal and they said, “Well, we still need the money.”
Attendee 6: So the property tax, that goes to the county, right? Not to the state.
Kefalas: Correct.
Attendee 6: Now our property values are declining, so we’re going to be having, you know, a budget crunch in the counties unless they …
Kefalas: Well, the numbers, keep in mind, are still higher than what they were previously and so they are able to not … it’s not necessarily that the budget revenues are going to be falling back.
The other thing is in Maui, specifically, more than 50% of the revenue is made up from either TAT or visitor spending in general. It’s not necessarily through property taxes.
So yes, they constitute a chunk of the county’s revenue, but Maui in particular has done a really good job of trying to lower the burden on local residents and trying to kind of fill that gap with some tourist spending.
Attendee 6: I have another question. What is the governor’s slush fund? What is that?
Kefalas: Yeah, so that’s a good question, and I don’t even know that the governor knows quite yet what it is. But it’s essentially, what the legislators did is they put aside $200 million for the governor and, like Malia said, it’s been done for previous governors.
They didn’t do it towards the end of Gov. Ige’s administration — and you can kind of realize why they didn’t give him that big pot of money — but it’s something that now, as the governor wants to spend that 200 million, he has to get approval from, I believe, the House Speaker, the Senate President, as well as the chairs and vice chairs of the money committees. So the House Finance Committee and the Senate Ways and Means Committee. It’s not just $200 million that Gov. Green can kind of spend on whatever he wants. He has to justify it and it has to get approved by the Legislature.
Attendee 6: Is that something new? Did they always have that?
Kefalas: No, they’ve had it for other governors in the past, but again, they haven’t done it for Gov. Ige the past few years. And so it feels new, but it’s something that they’ve done just to allow the governor to have some sort of flexibility when it comes to any crisis spending needed.
For example, like the HTA — and obviously, that’s not something that we would like for the governor to spend his slush fund on — but because they weren’t able to come to an agreement, he can use part of that $200 million, if approved by the Legislature, he can use part of that to help fund HTA operations.
Attendee 6: I’m winding down here. Are any of you attorneys?
Hill: I am, but I don’t practice in Hawaii.
Attendee 6: Oh, OK because I’m wondering, and also when you’re testifying, do you usually do it in person on the floor?
Kefalas: Yes. So we do a mix of both. The other thing we try to do is meet with legislators individually before committee hearings, just because a lot of times you will have a testimony, you have one to two minutes, maybe, to make your point. Whereas meeting with them individually, we can have 15, 30 minutes, sometimes even an hour to really go through some of the concerns of the bill.
The other thing is a lot of times legislators will have kind of an idea of how they will vote on the bill before it actually gets heard, which is extremely wrong. But understanding that, we try to have a lot of those meetings beforehand, so that they can put forward at least the right suggestion, or at least understand what they’re voting on.
Attendee 6: I’m impressed by the job you guys are doing.
Akina: Thank you. Thanks for your questions. We have in the back the lady at the table there and she had her hand up.
Attendee 7: I was only going to comment that the county-served tax charge on hotel rooms has been mysteriously noted by everyone, including investors, people who pay it, and the hotels when you call in and ask for your room rate. That 3% bump was huge in a lot of people’s eyes. They’re kidding themselves if they think it wasn’t noticed.
Akina: Thank you. Couple more questions before we close up today over here in these two tables. Then Ted and Malia will be around.
Attendee 4: Is there any progress made on eliminating the automobile safety checks in Hawaii?
Hill: Actually, yes. There was a bill to outright do it. That, alas, failed, but a resolution was passed to basically study doing it, which is, you know, we’ll call it a 50% victory.
Akina: Very good.
Attendee 7: What’s the current Legislature’s justification for the state Land Use [Commission]?
Kefalas: Well, people have a hard time …
Attendee 8: [crosstalk] when they enacted it because I’m old enough. What is it right now because conditions have so changed?
Akina: That’s a great question. The state Land Use Commission basically is an entity that many people believe we don’t need and should get rid of.
Ted, this is a philosophical question: Why does it still exist?
Kefalas: All too often, to be quite honest, legislators have mentioned to me that said the LUC is needed to stop development and to make sure we don’t build too much.
But when you look at our housing situation, you know, all too often we talk about it’s simply a supply-and-demand issue. We clearly do not have the supply to keep up with the demand.
So having an agency around to stop development is not exactly, you know, what it was created for and what it was intended to do.
So legislators have constantly had a hesitation to do anything with the LUC because of that fear of the developer boogeyman that’s going to come in and turn Hawaii into, you know, just a parking lot, in a sense. And so there’s always been that environmental need and want to protect the land.
But again, the LUC is a duplicative process. It’s something that environmental reviews and whatnot that go through the LUC have to go through city councils as well.
So it’s something that we’re at least hoping to do a new report in the off-season on, that really studies this issue and can get to the root of it.
We’re going to be working with a few members of the LUC, actually, to try to find out what is palatable and where we can come to some sort of compromise on that issue. Because we do feel that they are holding back a lot of development, and whatever we can do to kind of get their sticky paws out of the situation will make it better.
Akina: Thank you very much. Well, please stay around and pose any further questions you have to Ted or Malia, but give them a big hand. Thank you.
[applause]
Akina: And thanks to all of you for being here at the Grassroot Institute. Please remember to turn in the white card to Sean Mitsui. That’s him over there. And until we see you again, aloha.
