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$1B shortfall to resolve

Legislature reopens; $66M in CARES Act funds likely for Maui County

The state House was called back into session Monday while practicing social distancing. Members wore masks and some sat in the upper gallery to create spacing. Hawaii House Democrats photo

With a billion-dollar shortfall looming, state lawmakers returned to the Capitol on Monday to begin talks on budget cuts and emergency funding for the counties.

Back in session for the first time since mid-March, the Legislature is now considering a series of bills that would help offset the expected decline in tax revenue during the coronavirus pandemic.

“We’re looking at absolutely everything and how we can keep the health and safety of our people at the front of everything and at the same time meet the constitutional mandate of only spending what we actually have,” said Senate Majority Leader J. Kalani English, whose district includes East Maui, Molokai, Lanai and Kahoolawe.

Last month, Gov. David Ige said the state anticipated a $1.5 billion budget shortfall due to “a drastic decrease in tax collections.” The administration floated the possibility of furloughs and pay cuts for state workers, but House leadership said Monday that the administration has backed off after discovering a mistake in its calculations. House Finance Committee Chairwoman Sylvia Luke said they have not received a new number yet but that the shortfall is expected to be closer to $1 billion.

During the shortened session, legislators will be looking for cuts to help balance the budget and approving funds for the counties. English said that one of the earlier, more difficult decisions that had to be made was cutting monies for grant-in-aid, which is “really a big part of funding that goes to Maui County.” Lawmakers don’t yet know exactly which programs and projects could get the ax.

Senate Majority Leader J. Kalani English, who represents East Maui, Molokai, Lanai and Kahoolawe, discusses potential budget cuts and funding for the counties during a news conference on Zoom Monday afternoon. The Legislature reconvened on Monday to begin talks on balancing the budget in the face of a $1 billion shortfall. The Maui News / COLLEEN UECHI photo

“We’re debating that in the next couple of days,” English said during a news conference over Zoom. “But the County of Maui is receiving a lot of federal monies.”

Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, Hawaii is receiving $1.25 billion for public health emergency costs. The City and County of Honolulu already has been allocated $387 million because it met the 500,000 population threshold, Luke explained Monday. However, each of the Neighbor Island counties also will get a share — $80 million to Hawaii County, $66.6 million to Maui County and $28.7 million to Kauai County.

The funds can only be spent on coronavirus-related programs, such as buying food from distressed farmers and distributing them to needy families, which Maui County already has been doing, English pointed out.

Maui County Mayor Michael Victorino said during a news conference Monday afternoon that the county is putting together a plan to send to the state. If approved, it will be presented to the Maui County Council. Victorino said the funding could go toward things like law enforcement, homelessness and rental subsidies, “programs that we really need to help people right now.”

Central Maui Rep. Troy Hashimoto, who sits on the House Finance Committee, said the committee expects to approve the appropriations on Wednesday, and that the money has to be spent by the end of the year.

“There is very little time to spend the funds, so both the state and county must act quickly to identify programs to help the community,” Hashimoto said. “At this point, the funds more than cover the cost for COVID response, but we also must be preparing for a possible second wave. There is also a hope more flexibility will be given by the federal government in their next round of CARES to allow for a broader use of the funds, such as helping to balance our budget now or in future years.”

Hashimoto added that the changes the Legislature will be making this week will at least provide a “road map” moving forward. Lawmakers may have to adjust the budget after the Council on Revenues meets at the end of May and releases its projections.

“I believe the current plan laid out by the Finance and Ways and Means chairs to balance the budget makes sense and is very reasonable,” Hashimoto said. “It includes $1 billion in reductions, which the Legislature believes is the shortfall, by using money out of the ‘rainy day’ fund along with eliminating vacancies, and moving large projects from cash projects to bonds.”

Maui County’s lawmakers, meanwhile, are looking for cuts that won’t lead to furloughs or decreases in pay. South Maui Rep. Tina Wildberger, who’s also on the Finance Committee, said she has been working with a group of community advocates on alternatives that won’t impact state employees.

“The House has shown great leadership in offering an initial budget shortfall package that doesn’t impact our teachers and first responders,” Wildberger said. “I support sensible cuts in areas that don’t harm our working class, but I would prefer to implement previously overlooked sources of revenue, such as legalizing and taxing cannabis, taxing REITS (real estate investment trusts), taxing pesticide use, taxing short-term rentals regardless of whether or not they’re legal, and initiating a reasonable per-visitor fee.”

Central Maui Sen. Gil Keith-Agaran, vice-chairman of the Ways and Means Committee, said that “the goal of the session is to maintain the safety net programs of the state.”

Lawmakers are looking to remove funding for “longtime vacant state permanent positions” and use bond-funding instead of general tax revenues to pay for some public works projects.

“We likely will tap much of the rainy day fund,” he added.

As for capital improvement projects, lawmakers will likely focus on funding ones that are critical or “shovel ready.” Keith-Agaran, who oversees CIPs in the Senate, said that the Maui delegation’s priorities include public school facility improvements; capital improvement funding for Maui Health System; planning, design and permitting of the new jail; acquisition of Na Wai Eha watershed; harbor and pier improvements; and roadwork that includes the widening of Puunene Avenue, the Lahaina bypass’ next phase and the Paia bypass follow-up.

“All projects are being reviewed, but we understand providing public works projects is one of the only ways that government can help bridge the expected long period of reopening of the economy,” he said.

As the Legislature works to shore up the budget, there’s also the possibility of borrowing from the federal government. Wildberger explained that Municipal Liquidity Facility funding from the U.S. Treasury could provide $2.1 billion to Hawaii and help keep it afloat while the state develops a recovery plan.

“We can use that funding for Green New Deal-style projects that would simultaneously improve our environment and diversify our economy,” she said. “This pandemic could be a turning point for us, where we could bring our state out of the dark ages and become a global leader in sustainability and self-sufficiency.”

Keith-Agaran, however, cautioned that borrowing from the federal government “should be a last resort and the governor does need legislative authority to do so, if needed.”

* Colleen Uechi can be reached at cuechi@mauinews.com.

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