You’re Not Alone California — Check the Aloha State’s Budget

California is by no means alone in its fiscal calamity.

At least 48 states have addressed or still face shortfalls totaling $190 billion in their 2010 fiscal years, a figure representing 28 percent of all state budgets, according to a November 19 report by the Washington D.C. based Center on Budget Policies and Priorities.

The same report predicts holes in state budgets in 2011 could be more than $180 billion – at the same time federal economic stimulus dollars begin to stop flowing.

In early November, Gov. Arnold Schwarzenegger said California will end the current year $7 billion in the red and the Legislative Analyst has said that an additional $7 billion in expected savings in the current budget will not materialize. That leaves California with a projected $21 billion budget hole that must be filled over the next 18 months.

While the scale is not as epic by dollar-amount as California, Kansas, Maryland, Vermont, Rhode Island and Utah – as well as 29 other states – have seen new shortfalls open in their current year budgets. Those shortfalls, on a percentage basis of those states’ budgets, pose equally chilling policy choices as those faced by the Golden State.

Take Hawaii, as an example. The Aloha State has 1.3 million residents – some 38 million less than California. Unemployment in the islands was 7.2 percent in October. It was 12.5 percent in California during the same month.

Hawaii’s budget writers estimate a new hole of nearly $500 million in its current fiscal year, which began July 1 like California’s, and another $600 million for the next fiscal year that begins July 1, 2010.

That comes on top of another $2 billion hole lawmakers and Hawaii’s governor have already filled. Combined, that $3 billion gap between revenues and spending commitments represents nearly one-third of the state’s $10.9 billion two-year budget.

“We’re going to have to make very, very, very hard and difficult choices and decisions,” Rep. Marcus Oshiro, chair of the Hawaii House Finance Committee told the Honolulu Star Bulletin in a November 11 interview.

(Editor’s Note: Curious as to the distinction between the types of choices and decisions Oshiro says need to be made.)

Like California, Hawaii and its GOP governor, Linda Lingle, have closed much of its budget gap through spending reductions.

On November 5, the Honolulu Advertiser reported that the monthly cash benefit the state pays to 5,055 poor, temporarily disabled people will be reduced to $300 – a 33 percent reduction — so the general assistance program won’t run out of money before next June, the end of the fiscal year.

By year’s end, 650 state workers are scheduled to be laid off.

Lawmakers and the governor did increase the state’s taxes on cigarettes and other tobacco products as part of their budget solution, which whittled the state’s two-year shortfall from $3 billion to the remaining $1 billion.

And, like California, Hawaii has used furloughs to help reduce its labor costs. The difference is, on the islands it isn’t state workers forced to take unpaid days off, it’s teachers.

Hawaii is the only state in the nation with a single, unified school system. California, by contrast, has over 1,000 school districts.

As part of the contract the state negotiated with the Hawaii State Teachers Association this year, teachers will take a total of 34 furlough days in 2009 and 2010. Like California, Hawaiian stores and eateries have banners offering deals for teachers on “Furlough Fridays.” The next furlough day is scheduled for December 4.

On November 15, Lingle proposed to take $50 million from the state’s rainy day fund – another familiar term to California budget-writers – and let teachers swap planning days for furlough days to eliminate 27 future furlough days.

Leaders of the teacher unions have balked at surrendering the planning days which teachers are paid for despite not teaching in the classroom.

“The non-instructional days are critical to providing quality education,” Wil Okabe, the president of the Hawaii teachers association told the Honolulu Advertiser on November 28. “This is about quality, not just the number of days students spend at school.”

Another manifestation of the weakness of Hawaii’s economy is illustrated in the applicants for 300 temporary jobs to help the state legislature during its four-month session.

Normally, it’s retirees or recent college graduates who apply for the jobs.

But State House Chief Clerk Patricia Mau Shimizu told KITV in a November 24 interview that this year the demographics of the applicants are different.

“Now we are seeing age 35 to 45, the middle group,” Shimizu told the television station. “I think it is a sign of the poor economy and layoffs because we do offer health benefits.”

The applicants, who can earn between $4,400 to $1,500 each month plus health benefits, are coming primarily from real estate backgrounds and financial professions, Shimizu said.

So dire is Hawaii’s fiscal health that the Legislature has canceled its customary party for the third Wednesday in January when the 60-day session begins.

And, like California, Hawaii has a second, less-well-known budget deficit – its unemployment insurance fund.

The balance of Hawaii’s fund has dropped $241 million since December 2008. Last year, $17 million in monthly benefits were paid out. This year, monthly benefits have jumped to $31 million.

In 2008, Hawaii’s political leadership elected to reduce the maximum amount of salary subject to the tax from $35,300 to $13,000, dropping employer payments to $90 per worker in 2008 and 2009.

In 2004, California increased benefits to unemployed workers but did not increase employer contributions, a move that has contributed to the current insolvency of the state fund.

Hawaii’s Department of Labor and Industrial Relations proposes increasing the tax rate by 2.75 percent – boosting employer payments to more than $1,000 per employee in 2010 and increasing the rate the following year to 3.9 percent for a total of $1,520 per employee.

The department says that while rates must go up in order to replenish the fund, it is trying to find ways of making it less burdensome on businesses, which oppose the increase.

“Many small business are hanging on by their fingertips,” said Kauai Small Business Development Center Director John Latkiewicz in a November 28 e-mail to The Garden Island newspaper. “For those businesses, a tax increase is someone jumping up and down on their fingers.”

(Editor’s Note: Has a familiar ring, doesn’t it?)


Filed under: Budget and Economy

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