State’s tax take expected to increase as Council on Revenues revises general fund forecast

Published On: Jan 03 2013 06:37:00 PM HST

The state is expected to generate $172.6 million more in tax revenue over the next 18 months if a revised general fund forecast by the Council on Revenues holds true.

In its meeting Thursday, the council increased its forecast for current fiscal year 2013 by 0.2 percent, to 5.1 percent, which translates into another $10.3 million for state coffers.

However, it's fiscal year 2014 where growth really takes off. The council expects tax revenue to increase by 6.8 percent, which is 2.9 percent better than what was forecasted on Sept. 6 of last year.

A large portion of Hawaii's economic growth is attributed to tourism. Through the first 11 months of the year, Hawaii welcomed 7,265,107 visitors. The Hawaii Tourism Authority expects the final number to top eight million once December visitor arrivals are tallied. Meanwhile, other sectors of the economy, like construction and real estate, continue to rebound.

"What I was arguing really is that the rest of the economy is actually going to start growing, not just tourism," said Carl Bonham, a Council on Revenues member.  "When you put all those together, that's what we think will generate some more tax revenue."

In revising its forecast, the council also considered the impact of a solar energy tax credit, which was scaled back through new administrative rules issued by the Hawaii Department of Taxation.

Before new rules took effect Jan. 1, the renewable energy credit was expected to cost the state as much as $240 million in 2013. But with the new rules now in place, the credit is now projected to cost $174 million. Still, there's a lot of uncertainty as to how residents hoping to lower their electric bills will respond to a limit of one tax credit per household.

"It could have been $240 (million)," Council on Revenues Chairman Richard Kahle, said about the tax credit, "but we're basically chopping it in the middle of the possible range."

The revised general fund forecast also provides ammunition to Gov. Neil Abercrombie as he looks to pass his biennium budget through the state House and Senate. Abercrombie's spending plan calls for the state to spend $6.1 billion in fiscal year 2014, and $6.3 billion in fiscal year 2015, an increase of 7.8 percent and 11 percent respectively compared to the current fiscal year budget.

"I am pleased the Council of Revenues is taking a long-term view of our economic future, which coincides with our financial plan – working responsibly toward a stable fiscal growth," Abercrombie said in a written statement. "The budget proposal that we submitted to the Legislature is mindful of the revisions of the Council. The rate of revenue growth that they continue to forecast in the current year makes sense and is still very strong."

The governor's budget calls for several new initiatives, for example increased spending on early childhood learning and health. But, Ways and Means Chairman Sen. David Ige is taking a more cautious approach.

"After having to struggle with billion-dollar reductions for three straight budget cycles, we don't want to get in that situation again," said Ige. "We don't believe that we should be starting brand new programs, or having the state take on new responsibilities that we don't currently have."

Ige also believes the latest economic forecast doesn't provide ammunition to public worker unions hoping for a pay raise.

"I don't see it," said Ige. "I mean there isn't a whole lot of fat in the budget."

The governor's budget calls for the restoration of a 5-percent pay cut that was accepted by a majority of state worker unions during the height of the Great Recession.

However, Abercrombie notes more than two-thirds of the expenditures in his biennium budget are dedicated to non-discretionary spending. These are items such as post-employment benefits, debt service, Medicaid, pensions, risk management and workers' compensation, which amounts to 63 percent ($278.5 million) for fiscal year 2014 and 70 percent ($437.1 million) for fiscal year 2015.

The Council on Revenues current forecast is as follows:

  • 2013   -           5.1 percent
  • 2014   -           6.8 percent
  • 2015   -           6.2 percent
  • 2016   -           1.4 percent
  • 2017   -           4.2 percent
  • 2018   -           5.0 percent
  • 2019   -           4.7 percent


The views expressed are not those of this site, this station or its affiliated companies. By posting your comments you agree to accept our terms of use.
blog comments powered by Disqus