5-11-23 Legislative wrap-up event on Oahu, featuring Keli‘i Akina, Malia Hill and Ted Kefalas.
Keli’i Akina: Well, aloha, everyone and welcome back to Grassroot Institute. We’ve just finished the last day of the state Legislature in Hawaii in 2023. And some of you can sigh a bit of relief that the legislators are now going to be doing something else for a while.
But it wasn’t all that bad. This morning I was on the Perry show, Michael W. Perry, “Perry & the Posse” on KSSK. It’s the most listened-to morning drive talk show, and Michael Perry asked me, “What grade would you give the Legislature this term?”
And, I thought about that for a moment. I thought, “Well, if I’m in a charitable mood, I might assign a B-minus because that’s kind of bland.”
Nothing really terribly bad happened in terms of awful bills, I thought at first. And then, there were some good things that happened too.
But the more I thought about it, my mind went to our budget, and the pain that we feel every day as citizens and taxpayers in the state of Hawaii, and what businesses go through, and my grade kind of slid down a little bit.
Apology to any legislators who may eat lunch over here, but we ended up assigning a C or a D between Mike Perry and myself.
Well, I don’t know what your thoughts are about that, but there are a couple of experts with us today who are going to lead us through understanding, one from a point of view that focuses on individual liberty and our freedoms and what the Legislature did this year.
I’d like to introduce to you Malia Blom Hill, who has been a long-term staff member of the Grassroot Institute. She’s the director of policy, as well as our Washington [D.C.] correspondent.
She’s a local gal but preferred not to give up her husband and children, so she stays with them on the East Coast, reaching out for us in Washington, D.C., but she’s absolutely involved on a daily basis in our local legislative issues. I’m so glad she’s back for this week to work with us. Malia Blom Hill. Malia, say aloha.
Malia Hill: Aloha. Thank you, guys, for having me.
Akina: And I’m so glad that many of you will be able to meet Malia if you read her writing almost every week.
Next to Malia, we have Ted Kefalas who’s our director of strategic campaigns. During the legislative session, we reassembled our staffing and put in at command Ted, sort of as quarterback down at the Legislature.
He’s able to use our resources and intellectual capital, our researchers, our marketing people, our legislative aides and so forth, as he leads the charge to influence the state legislators. So welcome today, Ted Kefalas.
Ted Kefalas: Aloha everybody, happy to be here and excited to get into this here soon.
Akina: Today’s panelists have subtitled the presentation — if you go backward on the slideshow — “The Good, The Bad and The Ugly.” And that’s because they’re Clint Eastwood fans, I think. [laughter]
Interesting cartoon we have here from our cartoonist, David Swann: “Why are there so many bums outside the Capitol?” The answer? “Why are there so many bums inside the Capitol?” [laughter]
That’s actually another question. But during the session, 3,100 bills were introduced in the state Legislature. Of them, only 270 passed. [laughter]
Fifteen model bills were introduced by the Grassroot Institute as legislation that we wrote. We tracked hundreds of bills, we submitted testimony on 82 bills, 142 times, most of them live and in-person. And our work was covered in some cases, almost on a daily basis, in print, radio and television media.
Let me give you a sample of that from the last quarter during the legislative session, If Sean will go ahead and run the reel.
[Video is shown to the audience]
“Hawaii News Now” announcer: This is your source for breaking news, on “Hawaii News Now,” at 5.
News Anchor: While property taxes are going up on Oahu after huge increases in property values.
Reporter: But there is still pressure to do much more, like raising the million-dollar threshold that triggers higher rates on investment properties.
Kefalas: A lot of those costs for houses that pass that threshold, a lot of those costs are passed along to the renters, and so that just increases the cost of living …
Kauai County Council member: If you could state your name for the record, please.
Jonathan Helton: I’m Jonathan Helton, I’m with the Grassroot Institute. We’re based on Oahu, but we work throughout the state, and I’m policy researcher …
Akina on KITV4: One of the major reasons that it costs so much is because we have a high level of regulation that prevents building the supply of housing that we need, so there’s a huge shortage, unfortunately, that’s also caused by the hoops that developers have to jump through.
KHON2 Reporter: But opponents say the rate hike will burn investment.
Joe Kent: This bill will be devastating to savings and investment in our state. It would basically increase the capital gains tax rate. That’s a 50% tax hike, and that’s going to affect a lot of people who are trying to save in Hawaii.
Akina on PBS Hawaii: Purchases of homes by foreign mainland buyers is much smaller than you would think it is, and has much smaller impact than people …
Interviewer: I’ve seen your analysis.
Interviewer: But it is a factor.
Akina: It is a factor. But the reality is, even without outside purchases, we already have a huge demand. We’re 15,800 units short in Honolulu County alone. Research shows clearly that mainland buyers actually is a very small factor in the price and the scarcity of houses here.
And I think what’s more important is to look at the real causes. The real cause of the scarcity and the rising price of housing is all the regulation, both at the state and county level, that developers and individual homebuilders have to go through in order to renovate or in order to build.
KSSK radio host Michael Perry: You know, Grassroot Institute, which is a bunch of really smart people, is our only think tank. It may be the only thinking that actually happens in the state of Hawaii.
KITV4 reporter: Those wary of the bill say they’re also concerned that the current ambiguity of the proposal doesn’t consider long-term impacts on visitor spending.
Hill: If there’s a family of four, if they’re going to pay $200 out of their vacation, that will come from somewhere. You know, if that won’t necessarily come out of their hotel budget, it won’t necessarily come out of their transportation budget. But, you know, maybe they decide not to go to a local restaurant. Maybe they decide not to book a boat tour. Maybe they decide not to rent snorkel equipment.
And I think that the likely impact economically is going to be on the smaller businesses, and that’s still an impact. I don’t think we should ignore it just because those businesses don’t have the same voice when it comes to discussing tourism.
Kent on Rick Hamada radio show on KHVH: Also, for energy, we’ve got an initiative in the state to move to renewable energy, and that means we’re shutting down our coal plants at a time when oil is spiking. And, you know, that’s why our energy prices are going up across the state.
Lionel Richie on “American Idol” TV show: Why on earth would you leave Hawaii?
Contestant Iam Tongi: Priced out of paradise. That’s what it is. You know, priced out of paradise and …
Richie: I get it.
Tongi: … I moved to a cheaper state.
Luke Bryan: We’re fixing to get you priced back in Hawaii.
Tongi: Yeah. Any chance, I’ll move back.
Kent on “Hawaii Matters” video: You shouldn’t have to be a star to afford a home in Hawaii but that’s the way it’s looking for more and more Hawaii residents.
Video Speaker 1: If the government really wants more housing, they either have to make it more cost-effective or make it easier.
Video Speaker 2: I don’t think I could ever afford it to come back home and actually live there again, like looking at the rising costs of the way, and I don’t think I could find a job that I could afford to keep me and my family, you know, in Hawaii. You know, like $2 million houses. There’s no way I’d be able to afford that.
Kent: For more information on how you can be part of the solution to help make Hawaii a more affordable place to live, go to grassrootinstitute.org.
Akina: Well, thank you, everybody.
Akina: Some of you have seen our “Why we left Hawaii” series and that tells the stories of local people who decided to tap out and go to the mainland. It’s making a difference. That message is getting out there, all the way up to [“American Idol.”] And we need to bring that talent back to Hawaii, don’t you agree? And that’s part of the reason that we work so hard.
Before we dive into the nitty-gritty of actual legislation and battles that took place during the Legislature, I want to ask Malia if she’ll give us a little bit of an overview.
There were a variety of bills this session. In fact, so many that no one group or individual to have the expertise to address them unless they had been working full-time year-round for many years to really understand the complexities of our economy and society in Hawaii. What did you see when you went to the Legislature this year?
Hill: You know, we tracked a lot of legislation, hundreds and hundreds of bills. And, you know, we submitted 142 testimonies, 82 bills. We will get to the ones that are the really high-priority ones, but to give an idea of just the breadth of what we do, there was [an] asset forfeiture bill that was introduced and we testified on that I was really happy to see is everything we’ve been asking for in an asset forfeiture bill for years and years and years. And finally, it came to be, all the safeguards that you need. Alas, it didn’t pass, but it’s a real step in the right direction.
There was a bill about giving the county the ability to foreclose on a home to pay civil fines. And we testified our concerns about No. 1, the Supreme Court case that would affect it, and, No. 2, protecting home equity, and offered an amendment that would protect home equity — very, very strongly protect home equity — which was adopted, and then eventually, the Legislature saw the wisdom of maybe just waiting entirely until the court case was over.
We’ve testified on the GTE exemption for groceries, all the bills there; for motor vehicle inspection reform; for a — my favorite, this is the one that I feel the saddest about that it failed — but a one-year holiday from fuel taxes; that was pretty great.
And then the right to cross the street. Most people don’t even know this was a bill, but this was to all those jaywalking tickets that you get even though there’s no cars, this was going to be a bill that basically gave you the right to cross the street if there were no cars coming. And we testified on that as well.
Akina: Important work and we’re going to dive into some of that in a bit. By the way, later on, we want to invite you to ask your question. So we’ll have the microphones available.
One of the problems that impacts Hawaii severely is the lack of medical personnel, including doctors. We discovered this during the pandemic era, not because the pandemic era produced the greatest shortage, but because it was a stress test.
It revealed that we simply don’t have the medical personnel we need. And the reason for that is basically state government regulations plus the difficulty of living in this economy.
Now, if you go to another island, you’ll meet people who have to wait months to see a specialist and frequently have to fly to Oahu or go off to the mainland in order to see a specialist.
I recently talked to a nurse who was on her way to Kauai on vacation, and the last thing she said to me was, “Pray that we don’t have a medical emergency.”
Ted, we’ve got some really great news. We’ve worked really hard to get this good news. Why don’t you share it with the audience what is good about that?
Kefalas: Absolutely. I’d be happy to. So, one of our model bills — as Keli’i mentioned earlier, we put forward 15 model bills — but one of those model bills was on this Interstate Medical Licensure Compact, which really just means that we are gonna now allow doctors that practice in other states in the mainland to come to Hawaii and not have to go through the six-month or year-long process of getting a Hawaii-specific license.
So there are plenty of physicians that we feel want to make Hawaii home but have been held back by a lot of these government regulations in the past. And so we feel that this bill is a great tool for us to try to recruit some more physicians and doctors.
Now, by no means is this a one-shot to solve the healthcare crisis that we’re dealing with. There were multiple other compact bills this year that were introduced, one on nurses, others on physical therapists, APRNs and EMS technicians. And all of those unfortunately failed. But we will surely be back at work trying to pass similar compacts in the future and also want to look at future other sort of occupational licensing, not just in the healthcare space, but as a whole.
Akina: That’s wonderful. In fact, that’s what we’re jumping up and down about. A real breakthrough for Hawaii as we begin to follow some of the best practices of other states. It lets us remind ourselves we are part of the United States of America [laughter] and doctors trained elsewhere can certainly practice here. That’s gonna be a great resource to add.
An area in which we’re not so thrilled was the management of this year’s budget proposals, dealing with how much the state is going to spend. At the last minute, when we added up all of the things that the state decided to spend on, it went well over the constitutional limit on spending, which is sort of like having a credit card and just overcharging because the banks and the stores haven’t counted everything up in time.
I’m gonna let Malia share a little bit about that. I don’t know if you know anything about overcharging a credit card.
Hill: Oh, no, not me.
Akina: But our state clearly didn’t [unintelligible 00:15:11] budget.
Hill: I wish my credit companies handled it the same way because if I overcharge my credit card, they’d just go, “Nope.” But what happens with the state spending cap is yes, you do have a state spending cap, but you can go past it if the Legislature basically says that they need it, “We really need it.”
And that’s pretty much it. You just have to say that this is important and we need it. And Capital One doesn’t go with that for me. So I tried. But we are going to exceed that spending cap by about a billion dollars or …
Akina: If I may interject that, as you said, there is a way to get around the spending limit, and that’s if 66.6% of the legislators say it’s OK. So we have a situation wherein we have a law in our Constitution that says you can’t exceed a certain amount, but if you do, if 66.6% of you agree to that, you can exceed it. That’s really great in any state that doesn’t have a one-party system.
Hill: Exactly. And, you know, it’s not so much a spending cap, it’s not a meaningful spending cap, it’s like a spending speed bump really [laughter] because, you know, I don’t know if there’s been ever a point when someone goes, “Oh, you know, no, never mind.”
So we are on track to exceed that spending cap. And in fact, the budget is going up about 30%, which you might not know because of the drama that has surrounded the budget in the last days of the Legislature.
In fact, you know, a lot of the legislators were talking about it, like somehow there were spending cuts. But that’s only because they spent less than they thought they would spend, even though they spent more than they did last year. [laughter] If you could follow that.
There were also objections to what’s being called the slush fund, the governor’s $200 million slush fund. That’s a bit of a misnomer. No. 1, it’s not a new thing. It has been around before. It’s just that the Legislature did not want to give it to Gov. [David] Ige — draw your own conclusions — but it is back.
And in order to spend from that fund, the governor does need approvals from, I believe, the [House] speaker, the president of the Senate, and then Ways and Means and Finance. So it’s not a blank check. It’s just a blankish check.
The general fund budget is going up to $11.2 billion from $8.7 billion last year. So that’s about 29.3%. In comparison, last year it went up 17.6%, which is not so good. What you’re looking for is something more like 5% or something more along the lines of inflation.
Well, there are a lot of problems, but one of the big problems is that this means we’re on track to eat up that surplus. And if you read our materials, you know that we’ve talked about how Hawaii’s projected to have a $10 billion surplus over four years.
Well, that assumes that you don’t hike the budget up year after year after year. So at this rate, we’re lucky if that surplus is only gonna be about $4 billion.
Akina: So what about that $2.8 billion that we were supposed to have surplus?
Hill: Well, you know, when you eat up all the surplus with extra spending, budget increases, and then yes, hypothetically you could get a tax rebate, a tax refund, but instead, that went to the rainy day fund. So …
Akina: Right. And not to mention, of course, that the state has downgraded its projections of future revenue.
Hill: And also, yes, the Council on Revenues has downgraded its revenue projections by a small amount.
Akina: Unfortunately, our leader of the policy group is ill today, Joe Kent. I think most of you know him. He’s been tracking what will happen with the so-called surplus that the Legislature has been spending and we expect that we could very well disappear by 2028 — unless we make some changes in the deficit situation with regard to that quote-unquote “surplus.”
Now, there’s another issue that got very confused in this legislative session. It was clear to us before the legislative session, and it had to deal with the Hawaii Tourism Authority. We believe that tourism is a great industry for Hawaii, but we’ve been telling the state for a very long time that the government is not good at running private sector industries like marketing. And that’s been the case with the HTA.
So we’ve been encouraging the government to get out of that business. And we point out that the private sector is good at that, and the private sector has a vested interest in being good at it because they make more money. And if the government got out of the way, we might have better marketing in Hawaii.
Well, that was a simple issue, but this legislative session, it really became confused because the very nature of what the Hawaii Tourism Authority is all about became contradictory.
Is Hawaii Tourism Authority in existence to promote Hawaii and bring more tourists to Hawaii? One might think of that. Or is it in existence to manage the tourists while they’re here and monitor their behavior?
And we have one agency tasked with these two contradictory directions. You get a lot of confusion. And to add to that confusion, you’ve got money in the picture as well. Malia, help clarify the confusion a bit. Tell us what went on.
Hill: Actually, these two bills are the story of that confusion. It’s almost as though the Legislature has had it with the HTA, but also isn’t entirely sure what they want to replace it with, and so you get HB1375 and SB1522. Both of those bills basically dissolve the HTA and replace it with an Office of Destination Management.
So as Keli’i pointed out, that kind of leans towards that destination management, but it’s still kept nearly everything that the HTA does — that promotion, and so on and so forth. So that contradiction is still there in those bills, and that’s what we testified about, which was basically you’re dissolving the HTA to enact the HTA with a little asterisk at the top.
And I think that, you know, fundamentally, the failure of these bills is a recognition that it’s not quite there yet. We don’t quite know what we want to do about the HTA and that led to what is essentially the defunding of the HTA — sort of, because the HTA does have some funds to keep going with and it is believed that they’re going to get an allocation from that slush fund I mentioned, the governor slush fund.
They’re already going ahead at about $70 million in visiting marketing and management contracts, about $38 million to market North America, $28 million for destination stewardship. Yeah, I don’t know either [laughter]. $2.4 million for Canadian marketing. So you know, HTA is still kind of going on doing its HTA thing, as contradictory as that continues to be.
Akina: There’s an old adage about tax increases that goes like this. I got some good news for you and I got some bad news for you. The good news is that the tax increase is only going to affect the wealthy. The bad news is now you’re wealthy. [laughter]
That might apply to one of the proposals for tax increases if it hadn’t been passed and if, year after year, the threshold as who’s wealthy was decreased.
But I have to tell you, I’m very proud of our team who worked tirelessly to prevent unnecessary tax increases this legislative session, and they were quite successful in their work of doing that. Ted.
Kefalas: Sure, it seems like every year, almost, we have a ton of tax bills that get proposed — it’s either new taxes or tax increases — and this year was no different. In fact, I had a few legislators come up to me before the session saying, “Oh, you guys are going to have your work cut out for you,” and we did.
There were a few tax increases which we see every year — things on capital gains, looking to hike that tax. They wanted to introduce a wealth asset tax on individuals that were over a certain amount of wealth. There was also a conveyance tax on real estate/ They wanted to increase that rate. In addition to that, as if this wasn’t enough, they wanted to introduce a carbon tax on energy.
So it seemed like nothing was safe from taxes. But fortunately, we were there and were able to testify against a lot of these bills and talk with legislators behind the scenes to let them know, you know, that this really was not a great idea.
And to be quite honest, it’s sold itself a lot of times when you can point to a lot of the evidence that higher taxes actually disincentivize things like businesses.
But it wasn’t all negative in that sense. We also were able to pass legislation that lowered taxes for certain businesses. This legislation would work on pass-through entities. And essentially, what that is, is it allows for partnerships, S corporations, LLCs, to now deduct their state income taxes from their federal filings.
So it’s something that lowers taxes and lowers the tax filings for companies, but it allows the state to really not lose any money from it. So it was kind of a win-win. And something we’re glad that legislators came to their senses on and passed.
Akina: Ted, you know, before I move on, I was wondering if you could give us a little bit of insight into how we bring these results about. We pointed out earlier that we had a success with regard to medical combat licensure. We were able to defeat these tax bills. How does that happen? You just knock on the door of a legislator and say, “Pretty please?”
Kefalas: Well, sometimes it works like that. But oftentimes, we are active working on the ground, trying to get our supporters engaged.
We’ll talk a little bit later on today about a program that we have on our website that allows people to write in to their legislators using a customized message. It’s not a form letter or anything like that.
But we also utilize multimedia, social media, things like Instagram, YouTube, to try to break down an issue as simple as possible in four-, five-minute snippets, if you will, and just try to explain things and break it down so that the public as well as legislators — you know, you have to keep in mind that legislators are just like you and me and a lot of times when there are 3,100 bills flying around, it’s hard to be an expert in all of those things.
So we try to just have them understand it, kind of spoonfeed it to them if you will, and try to understand it from the side of the regular people.
And in order to highlight that really, we have a series on our website — Keli’i, you mentioned it earlier — but it’s called “Why we left Hawaii.” And all too often, we hear it’s the high cost of living and the high taxes. And it’s funny to me that legislators constantly say, “We want to lower the cost of living,” but then every session, they look to increase taxes.
Akina: Malia, you often remind me of a phrase: The road to hell is paved with good intentions. And you’re very good at identifying good intentions when they come out in legislation. I think one area that absolutely is the case, is with respect to the “green fee,” — and not in any reference to our governor’s name — but the environmental merits of the bill are represented there. Tell us why is this green fee really is intentions gone awry.
Hill: Yeah, if you wanted a textbook example of the difference between, “Hey, I got an idea,” and “This is a good law,” you have the green fee, which the governor did campaign on, you know, “$50, every visitor will pay it. We’ll use it to help the environment.”
OK, that’s an idea. Now, how do you make it a law? And that’s where it all falls apart.
And it was kind of a lonely place being against the green fee because it had a huge amount of support from environmental groups and that sector. But if you really looked at what this law laid out, it showed so many problems.
Like how do you define who is a visitor and who’s a resident? The law that they came up with and, you know, the Legislature did its best. I’m not going to hit the Legislature. I think it’s a problem between an idea and a statute.
So they came up with, “Well, a resident is someone who has a Hawaii ID, or paid taxes in the last year, or has something like a utility bill that can prove that they’re from here.”
Well, the problem with that is Oprah’s a resident, Mark Zuckerberg’s a resident, they have utility bills. I’m not a resident. Your cousin who went to Las Vegas two years ago, and he and his family, they’re not residents. So they’re all paying this fee.
Then you get to, you know, where does the fee apply? Even DLNR didn’t really know that. “I don’t know.” What happens if you take a boat into that, you know, into an area where it applies? “Well, I don’t know.”
So you don’t know how you’re going to do it, you don’t know how it’s going to be administered, how are you going to enforce it? Because it’s meaningless if you don’t enforce it. Are we going to have police wandering around on beaches going, “Let me see your license for your visitor fee.” [laughter]
Are they going to ask you, you know, “Hey, prove you’re a resident so you don’t have to pay the visitor fee”?
And it just was on and on, just one thing after another, demonstrating, you know, the problems with this and you know, as they pointed out with the media reel earlier.
And then, you know, how does it affect the small businesses, local industry? And so many issues with this fee, which I think fortunately the Legislature sort of saw the innate problems with it, and it did die in conference.
Akina: There were a lot of measures that really are not good for Hawaii, and there were measures that were good for Hawaii that failed.
One of them had to do with a means by which we could help bring down the cost of doctors doing business, and would allow them to be able to carry on their businesses on neighbor islands and other places for private practice. Very important.
What I’m talking about is removing from their expenses the need to pay general excise tax on top of medical services that they provide.
But Ted, tell us how that turned out. It’s something we have been promoting for quite a while, but we’re going to have to wait.
Kefalas: Right. We did a pretty massive campaign this year on the GET. We created a petition. We were able to get 7,500 signatures on that petition. I mentioned our letter-writing software earlier. We actually submitted more letters to legislators on this GET medical services issue than we did on all of our issues combined last year.
So we met with lots of legislators. We put forward two model bills, one to exempt general medical services, but then another that we thought was kind of a failsafe that would exempt Medicare, Medicaid and TRICARE services, because right now we are currently the only state in the country that taxes those services.
And it’s actually, the federal government has come out and said that doctors cannot pass those costs onto their patients. So a lot of doctors will either have to eat those costs or have decided that they’re not going to see Medicare or Medicaid or TRICARE patients.
And that’s a big problem because probably more than 50% of patients here in Hawaii fall into one of those three categories. So it really restricts medical access.
And we really, this year, we were disappointed that the Legislature did not pass a bill to exempt any of these. They did not pass the general medical services bill. They did not pass this Medicaid, Medicare, TRICARE exemption, so we will be back at this again next year.
It’s something that we have spoken with Gov. [Josh] Green about and have his support and we look forward to trying to coordinate with some of the other legislators, specifically the Finance chair and Ways and Means chairs, to try to get this bill or some version of it passed in the future.
Akina: Thanks, Ted. And also, thanks for mentioning our work with Gov. Green. When the session opened up and people were guessing at what the governor’s budget plan would be, we were asked where do we stand: Are we for it, or against it?
It’s not that simple. There were a lot of great ideas included in the governor’s act, the Green Affordability Plan. But there were also some ideas that needed refinement and some ideas that probably would not work well for Hawaii. It was our position to work as closely as we can with the governor and his staff.
So we were pleased that we were invited by the governor and his team to review his plan before it was made public and to provide our input at that level. And we continue to provide our input. And, in fact, many of you were here when we brought the governor’s own budget expert to talk about the plan at the Grassroot Institute. That’s very much a part of the way we are committed to work.
We say, “E hana kakou, that’s working good.” So in the end, we got a lot of good things passed in the governor’s plan, but some things that are good weren’t passed and others that were passed may not be so good.
Tell us a bit about it. In fact, Ted, and forgive me, audience, I may have made it sound complicated. It is complicated, this GAP, Green Affordability Plan.
Kefalas: Exactly. Well, and you hit the nail on the head. We were very fortunate to have been invited by Gov. Green before he announced his GAP plan to work with him and some of his economists and other economists from around the state to vet this proposal and try to find the best path forward. As you mentioned, there were some good parts. The good parts are really the tax credits.
It doubles the earned income tax credit, the food tax credit and the childcare tax credit, but at the grand scheme of things, those are kind of small-scale manini-type things.
We really were hoping that they were going to index the income tax to inflation, because nowadays, as inflation continues to rise, people find themselves in higher and higher income tax brackets and are having to pay higher and higher taxes.
So it no longer indexes inflation, it also doesn’t index, or increase, the standard deduction or personal exemption.
And it was kind of weird this year, the governor introduced this bill and legislators split it up into three different bills. And then they kind of did it, we were laughing, it was kind of an eggshell game where they mixed it around and then at the end of conference committee, they lifted it up and said, “Oh, we passed it,” and we kind of celebrated, and then they lifted up the egg and it wasn’t exactly what we wanted. It was a lot of these tax credits.
So, you know, that being said, something is better than nothing. This proposal now that it passed is going to return about $125 million back to the taxpayers. Gov. Green’s proposal would have returned $300 million.
So, you know, it kind of pales in comparison, but we are glad that we have a governor right now that is proposing these kinds of things and willing to work with us on these important issues.
So we will be sure to continue down this road and hopefully, we can get more expansive tax reform passed in the future.
Akina: Thanks, Ted. You know, one of the areas that is dear to us at Grassroot Institute is government accountability and transparency. And it’s so dear to us that we make sure we are working with a broad base of organizations in order to advance transparency, including the Civil Beat Law Center, the ACLU and other groups like that. And we were pretty much of the same mind with many of the leaders of this movement to bring greater transparency to government, especially with a package of bills for this legislative session.
One of the problems that we experienced during the pandemic is that through emergency powers, Gov. Ige also put a limit on the extent to which citizens can get information from the government. He suspended the open records law. No other state did that.
We have still to find out why it was necessary in order to prevent pandemic damage to have that done. But one of the reasons we couldn’t do it during the pandemic is because the records simply were not available.
Most citizens did not even know that took place. We tried to shout it from the rooftops. But for some reason here in Hawaii, we’re not as attuned into the protection of our individual liberties, and that’s why we exist.
Malia, I know this is dear to your heart, and you take the lead with us. You wrote our seminal study on the Emergency Powers Act and its problems during the pandemic, which is available on our website, but tell us what your take is on the transparency measures during the past legislative session.
Hill: Yeah, this one was a real disappointment, especially given how much there’s been talk about corruption and cleaning up the government in Hawaii, and transparency is really Step 1 when it comes to doing so.
So, you know, there was an emergency powers bill, but it wasn’t to restrain emergency powers on a broad level, it was just to prevent the governor or mayors from suspending electronic media communications in an emergency, something that seems like a slam dunk. That’s like a First Amendment thing, right? That one didn’t go through.
One that was really important was HB719, which is an open-records fee cap. This is something that the FOIA [Freedom of Information Act] already has, that a lot of states already have. It’s essentially, it caps the fees that agencies can charge or request for an open records request. And if it’s a request in the public interest it can waive them.
This is important because there are all sorts of things that agencies can do to get around a records request. And Hawaii agencies are really good at this one where they don’t turn it down, they just tell you it will be so expensive that there’s just no way you can move forward.
Like when we requested communications from [Gov.] Ige regarding the COVID-19 decisions, and we got back a six-figure charge, you know, “It will cost you six figures to get those records.” That’s not duplication. Duplication that often doesn’t even exist because it can be electronic. That’s put down as a search-and-segregation charge, how many hours it will take them.
So as best I can figure, our request meant that the governor’s office was going to have to hire two full-time people to spend a year looking up our request. This is how you sort of put a chill on transparency without doing anything that violates a transparency law.
So this was a great bill and it got almost to the end, and then it grew this ugly second head in the form of an amendment that added the “deliberative process” exception, which had started as a separate bill. That bill died and then found its way into my beloved fee-cap bill.
And the exception, the deliberative process exception, is basically an exemption that lets an agency say, “No, we don’t have to release records if they’re deliberative or pre-decisional in nature.”
That seems vague because it is vague. It’s so vague you could just drive a truck through it, and since, you know, our experience is that some agencies — not all — but some agencies are very willing to do that, we were very opposed to this exception.
As it turns out, the whole bill once it got this, you know, once the fee caps got the exception, the whole bill died.
It’s sort of a this is a bittersweet thing. We would’ve liked to see the fee caps go through. On the other hand, it is good to see that deliberative process exception die.
Akina: Thank you, Malia. Housing is such an important issue in Hawaii. The cost of living is the No. 1 reason we have people moving away. The No. 1 cost in that cost of living is the cost of housing. We had a tremendous victory in terms of our campaign to knock down every regulation that stands in the way of being able to build housing.
And Ted is going to tell you a bit about that, as well as a little bit more problematic development that we have helped to cast in a better light. But give us some highlights on the housing.
Kefalas: Sure. A lot of legislators — and if you think back to November, right? and even before then — everybody was talking about affordable housing. And even now we still talk about it. But legislators, kind of, this session, to be honest, forgot about it a little bit.
They passed some things in the budget to go to affordable housing. But the big-ticket items and things that, if you remember, [Gov.] Josh Green ran on cutting through a lot of the red tape with housing development and homebuilding, that really, we didn’t see a lot of that.
There was a bill that we worked with Rep. Troy Hashimoto closely on that would have reformed the Land Use Commission — something that we’ve really preached for a while. We have a report on our website, I believe dating back to 2019 even, that tries to look at reforming the Land Use Commission. And so this year we were very glad to see this bill make it right up to the finish line. Unfortunately, this bill was one that was changed, kind of, at the last minute to make a few adjustments.
Now, these were adjustments that we were happy with. It would’ve actually increased the acreage that you can skip the LUC, it increased that up to 100. I believe, previously, it was less than 50. So it would’ve actually created more flexibility for developers and homebuilders as well as the counties to create these affordable housing projects.
But unfortunately because of all those changes, the bills were killed at the last minute. And hopefully, we’ll get another crack at ‘em this next session.
But the other big one was [Sen.] Stanley Chang’s ALOHA homes bill. That’s something that he has been pushing for a really long time. And if you remember, it is a 99-year lease project that is owned by the state.
We have a lot of hesitancy when talking about that kind of stuff, because you look at things like the rail, you look at things like Aloha Stadium, government projects almost always tend to be more expensive than what they were budgeted for.
So we have extreme concerns about this project and we were able to knock it down to just a pilot program. They’re going to do it with just one property to see if it works. So you know, we’re hopeful that we can kind of use that as an example to steer the conversation away from this 99-year leasehold to more of just a regular fee-simple home ownership model.
Akina: Thank you, Ted. What we’re going to do now is open the floor to questions that you may have for Ted and Malia. But first, give them a hand, they’ve worked hard. [applause]
If you’d like to ask questions, raise your hand. We have a microphone coming around to you. Bruce over here. Sean.
Bruce (Attendee 1): Has there been any progress on reducing the state’s unfunded pension liabilities.
Akina: Well, that’s a staple issue at the Grassroot Institute. We have a big concern about both the ERS, the Employee Retirement System and the EUTF [Hawaii Employer-Union Health Benefits Trust Fund] plan for our retired [government] workers. Ted, do you want to, or Malia, do you want to comment on?
Kefalas: Yeah. I think they just made the normal payments, to be quite honest. And they stashed the billion dollars away into that rainy day fund. But they didn’t make an outsized effort to pay down a lot of those unfunded liabilities.
Akina: We have a question over here.
Attendee 2: Thank you for this. A brief question on the general [unintelligible 00:45:58] What I mean is when I have my discussions with my family [unintelligible 00:46:04] the size of Hawaii governments in government, do you guys have any kind of metrics that compare our size of government [unintelligible 00:46:13] to other states and how we compare that bill? My internal feeling is they have a big state government [unintelligible 00:46:24]
Hill: We definitely have a lot of state and county employees relative to other states, and that is sort of an indicator. We, in terms of, you know, bills passed, length of session, that kind of thing, it’s average-ish, a little on the high end but not absurdly so. However, we are a small state, so you could sort of weigh it against that.
Akina: We have a question from Ken Schoolland, one of our Grassroot Scholars.
Ken Schoolland (Attendee 3): I know that some states like Alaska and Guam and the territory of Puerto Rico there’s vocal statements about their protest about the Jones Act and the impact on their economies. Is there anybody in this state Legislature who is willing to risk life and limb to say something in protest about the impact of the Jones Act here in Hawaii?
Akina: Thanks for the question. And I’ll let Ted respond.
Kefalas: Yeah. To be quite honest, I think we were working with [U.S. Rep.] Ed Case obviously on that issue, but a lot of the state legislators have not really shown a huge want to get involved right now. They conveniently blame it on it being a federal issue.
You know, it kind of is similar to when the governor was continuing to call these emergency proclamations and they said, “Oh, well that’s not our responsibility. That’s on the governor.”
So a lot of times these legislators — and I’m sorry for any that are here — but a lot of times they like to pass off the blame, and not really end up doing anything on some of these issues.
David (Attendee 4): Affordable housing, I think is one of our big, big problems. Because we create an artificial secondary market where the only way to really solve our housing crisis, I believe, is to have at least a fair open market for all housing, and then we got the Land Use Commission who’s holding up everything.
Akina: David, did you have a question in that for you?
David: The affordable housing, to what extent is it blocking our problem with affordable and just getting housing?
Akina: Thanks for the question. When we hear affordable housing, we have the first instinct to think that it means affordable housing. [laughter] But the problem is that many of the affordable housing schemes that are sponsored by government are not affordable to the developers. And consequently, they’re either turned down or are simply skirted around. Because affordable housing, when mandated by the government, means fundamentally that a developer makes less money on a project in order to make it affordable.
And so take the island of Maui, for example. There’s been a huge hiatus on development of most affordable housing over the last decade. There’s a little bit that’s taking place right now, but it is simply because this is a government scheme.
Now, David, you’re talking about an ideal solution, when you say, shall we just let the private market free enterprise?
David: Well, single tier. Right now we have a two-tier market. One’s artificial. Why don’t we just set up a regular market like most places have, and then subsidize lower incomes?
Akina: That could be one of many solutions, but I think that we have to work our way toward more economically free solution, and we have on our website a series of solutions that we use to guide our advocacy in the legislature.
Audience Member 5: Aloha and thank you for this session. I wanted to know if there are any plans in the future to reintroduce the certificate-of-need bill. It died last year, the last year’s session. Actually, it didn’t even make it to a hearing. It was killed before it was even heard. And then during the session, I didn’t see anything with regards to that.
And for those of you who, you know, don’t know what a certificate of need is, it has to deal with healthcare and access to healthcare. And one large glaring example of that is on Maul; we have one hospital there. And I’m quite concerned about what the future holds with holding back on the certificate of need.
Akina: Thank you for your question. And that’s an important issue for us at the Grassroot Institute. We didn’t see progress in our state in regard to that this year, but we’re continuing to work on that. We believe that it’s important to remove this barrier.
Through certificate of needs, what basically happens is the competition for when a new hospital wants to be established, or when a hospital wants to expand a wing, or when a hospital wants to do something as little as establish a dialysis unit, it has to go before a board on which sit its competition.
Now think about this: If you wanted to start a hamburger restaurant and you had to go to before a board where McDonald’s and Burger King sat, it’s unlikely that they’re going to endorse your proposal.
That’s exactly what happens here in the state of Hawaii. Most states, however, are moving away from that, and we’re continuing to urge the Legislature to look at legislation to go that direction.
Audience Member 6: Thank you very much. I was wondering if you can comment a little bit on or if you have any thoughts on the incentives that legislators face, particularly for the bills that passed. So we were able to pass the medical licensure compact but we couldn’t do anything about exempting Medicare and TRICARE and Medicaid taxation. What are the different incentives that they have?
Kefalas: I think the biggest thing when it comes to that GET issue was the loss of revenue. And It’s funny to me, because Malia mentioned earlier that we were running such a large surplus, and I had legislators telling me, “Oh, well, we can’t afford $200 million in lost revenue from the GET.” And it actually ends up being less revenue when you talk just Medicare, Medicaid and TRICARE. So instead, they decided to spend it on a lot of kind of pet projects and whatnot.
The medical licensure one, there was not an appropriation for. The appropriation I believe was actually zero at the end of the day. So it was something that they could stomach a little bit more when it comes to spending.
But that being said, the GET issue is also … this is something that the new [House] Finance [Committee] chair, Kyle Yamashita, is very adamant against any kind of GET exemptions. So really, he is kind of the key linchpin in holding that bill back.
So we tried to campaign this year — he’s based on Maui, we tried running a bunch of op-eds editorials, sent in actually a few hundred letters from his constituents on Maui — and unfortunately, he chose not to hear the bill this year.
But we are hopeful that we can continue to make progress, and I think next year being, you know, more of an election year, we’ll hold his feet to the fire when he gets some more of these constituent voter letters.
Akina: And the general excise tax is very dear to our state lawmakers. As Ted pointed out earlier, it is the largest source of revenue, some say it making up about the 50% of all the revenue in the state’s budget, something very hard to let go. Any other questions before we conclude today? On this table over here.
Audience Member 7: So I actually wasn’t aware that there was talk about wealth tax being a proposal. So I don’t really have much knowledge about it, but I guess a two-part question, on one how popular was the idea of the wealth tax being passed, and that also to what extent were they planning on calculating your wealth, because obviously, you know, business owners, for example, they don’t have much … their business itself as far as their practices, their brands are very valuable, but obviously it doesn’t have any tangible assets, no dollar amounts. So I was just wondering, like, to what extent, you know, was the wealth tax going to be on wealth.
Kefalas: Yep. Yeah. Bingo. Yeah. You’re exactly right, and I think a lot of the most far-left side of the house wanted to propose that bill and look at sort of a wealth asset tax on individuals whose wealth, I believe, exceeded $20 million, you know, but it’s increasingly difficult to figure out somebody’s assets, especially if you haven’t sold them.
Like you said, a lot of business owners would end up having to pay this tax, and quite honestly, the people that it would affect the most, and those people that they wanted to target, kind of the uber-rich, those people a lot of times have houses outside of Hawaii too and have the kind of accountants that can move that money elsewhere, so that Hawaii doesn’t necessarily find it or tax them for it.
So we’re glad that they at least came to their senses, but it’s something that I predict we’re probably going to be facing in future years.
You know, there was another bill this year that was proposed that would’ve taxed your winnings from Las Vegas. And same kind of thing, it’s like how do you determine how much somebody won from Vegas? But yet they were trying to do that.
So again, it almost seemed like no industry was safe from taxation this year, but luckily, none of those new taxes or tax increases were passed.
Akina: On that note, we’ll close with a couple of comments from Ted and from Malia on what to look at going forward.
First, from Malia, if we pull the slide back up regarding cryptocurrency. Cryptocurrency and blockchain are about thinking of the future financially, and life, and Hawaii, and the nation and the world.
But the approach of our state Legislature seems to be about thinking in terms of the past. It looks like this new technology and finance measure is not that well understood. So our state decided to take the grand measure of regulating it more.
Hill: Yeah, I read a lot of bills. And, you know, a bill is usually maybe three or four pages, maybe a long bill is maybe like eight or nine. HB525 was more than 100 pages. It’s amendments to the Uniform Commercial Code, but buried in the middle of that, in this one little section, it excludes cryptocurrency for the definition of money, without even going into it, without even, you know, if you searched, you wouldn’t know.
And right there you have an example of just kind of being out of step with where the modern economy is going. And then SB945 was north of 80 pages, and it is just a nightmare web of regulation.
It’s intended to create a license system for cryptocurrency companies to operate in Hawaii without some sort of legislation. Once the sandbox ends, cryptocurrency would basically be dead in Hawaii.
So without action, Hawaii is possibly the worst state in the country for cryptocurrency. If this bill passes, I don’t know, may 49, 48, something like that. It’s that heavy-handed, it’s that open for regulation and it gives enormous amounts of power to the Division of Financial Institutions to write regulations related to cryptocurrency.
Akina: Well, now Malia, I don’t want to end there, [laughs] so I’m going to hand over to Ted. And tell us, Ted, what’s next?
Kefalas: Sure. So there’s a lot of bills that we mentioned that are sitting on Gov. Green’s desk right now. He has until July 11th to either sign or veto those bills. If he signs a bill, it’ll become law. If he vetoes it, it gets kicked back to the Legislature, in which it requires a two-thirds vote from both houses.
There’s actually been one bill that was already overridden by the Legislature from the governor.
Now, if the governor wants to veto a bill, Hawaii is kind of a weird state in that the governor has to declare his intent to veto. And so he has to come out with a list of all the bills he wants to veto by June 26th. And then the bills on that list don’t necessarily have to be vetoed by the governor, but it’s more of just this is the process and kind of a warning that he may be vetoing those in the future.
And like I said, we’ve talked about a lot of bills today, but if there’s something that you feel passionate about, in support or opposition, you can use our website, we kind of talked a little bit about it earlier, but it’s if you go to grassrootinstitute.org/action and that allows you to write a letter to your legislator in as little as two minutes.
All you really have to do is fill out your name and your email address and your home address. But if you’d like, it also allows you to customize your letter. So when you go to the website, it’ll take you to a page like this where you can click on one of those topics that you like. We’re going to be adding new topics constantly to this, allowing people to write on different topics.
One — I think it’s in the works — is on this pass-through entity law that we were talking about. So if you all keep just staying up to date and checking out our website, we’ll also be sending out alerts, as we update this, so that you all can continue to stay engaged and active with your legislators.
Akina: Well, thank you, Ted. And our work goes on with the county councils as well on all the islands. So we will be reporting to you on that within months.
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I believe that with the talented team that Grassroot has, our board, our friends, you, our supporters, we can make a difference here in Hawaii. We can change the political climate, we can see the cost of living come down. We can see the needs of people met, needs of businesses to thrive. It will be a great future as we put our resources together and imua — move forward. Much aloha. Thank you.