Maui policymakers should consider a spending cap

Viewpoint

Maui County’s budget growth in recent years has been far outpacing its average wages, suggesting that perhaps now is the time for the county to impose a spending cap to bring its spending more in line with what its taxpayers can afford.

The county’s budget overall increased by over 16 percent between 2008 and 2016, compared with only a 2.5 percent increase in average Maui wages.

Some county entities, such as the Office of the Mayor and the Personnel Services and Planning departments, experienced decreases in their annual operating and capital improvement budgets, but for the most part county expenditures ballooned.

Most notable among the overall increases were 85 percent for the Management Department, 50 percent for the Public Works Department, 50 percent for the Office of the County Clerk, 32 percent for the Department of the Prosecuting Attorney, 30 percent for the Department of Transportation and 27 percent for the County Council.

One way to stem this growth would be through a spending cap, which would ensure government growth at a reasonable rate while preventing excessive expenditures.

Spending caps generally are praised for two reasons: They reduce deficits and spur economic growth.

Different forms of spending caps have been implemented in most states, including Hawaii, and by nations with vastly different approaches to government, from Hong Kong to Switzerland.

In Hawaii, the state’s constitution mandates that the state’s spending shall not exceed its current general fund revenues and unencumbered cash balances, except in cases in which “the public health, safety or welfare is threatened.”

Similarly, Maui County government spending is only limited by the county’s revenues and appropriations, according section 9-3 of the Maui County Charter. However, as county revenues have increased, spending has kept pace.

Economist Dan Mitchell, author of “Global Tax Revolution: The Rise of Tax Competition and the Battle to Defend It,” has recommended setting spending caps at a level below the rate of economic growth.

Interviewed by phone from his home in Washington, D.C., Mitchell said that, “So long as you set the cap so that it doesn’t allow government to grow faster than the private sector — and ideally you want it to grow slower than the private sector — you wind up creating some very positive long-run economic effects. Economic growth is more likely to happen if there is a greater share of resources allocated to the private sector than to the government.”

Partly this is because spending caps signal stability to investors and businesses. Mitchell said clearly defined limits on government spending create “a greater sense of confidence among homeowners, investors and business owners that this is a place where we can make long-run investments without worrying about the political system giving us crazy outcomes.”

The slower growth of Maui’s gross domestic product between 2008 and 2016 compared with the rest of the nation supports Mitchell’s viewpoint. The county’s GDP increased by only 17 percent during that period, versus 21 percent nationwide, according to the U.S. Bureau of Economic Analysis.

The fact is, Maui County’s spending is spiraling out of control at the same time its taxpayers have their backs against the wall, suggesting it is time its policymakers consider imposing a county government spending cap.

* Aaron Lief is a researcher with the Honolulu-based Grassroot Institute of Hawaii, a “nonprofit public policy think tank that seeks to educate people about the values of individual liberty, economic freedom and accountable government,” according to its website.

COMMENTS