Hawaii Legislature faces economic issues - Hawaii News Now - KGMB and KHNL

Hawaii Legislature faces economic issues

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HONOLULU (HawaiiNewsNow) -

The Hawaii Legislature convened Wednesday in the bright glow of a recovering economy, offset by clouds of government debt.

For the first time since many of the lawmakers were elected, state tax revenue is rising instead of diminishing, the direct result of an improving economy. But the state still faces unfunded pension liabilities, exacerbated by the loss of some investment income in the 2008 market meltdown.

"We're concerned that lawmakers bear in mind that the nascent economic recovery is fragile," said Jim Tollefson, president of the Chamber of Commerce Hawaii, in Wednesday morning interview with HawaiiNewsNow in front of the Capitol. "We're concerned about new laws imposing expensive requirements on employers who ought to be spending money expanding and hiring new employees."

Tourism has driven Hawaii's economic recovery. Visitor spending in all four Hawaii operating counties is now measured in millions or tens of millions of dollar a day. For every dollar the state spends in tourism market, it makes 17 dollars back.

"We're still working hard to increase visitor spending," said Mike McCartney, CEO of the Hawaii Tourism Authority, "and to diversify our sources of visitors, so we're partially insulated against trouble in one particular economy."

State spending is affected not just by pension debt but also by federal debt. Significant state spending actually comes from federal funds that are in peril due to pressure in Washington D.C. to reduce the federal deficit. Uncertainty about saving those funds is greater because of the death of Dan Inouye and retirement of Daniel Akaka. No Hawaii member sits on either House or Senate Appropriations.

"We face not only the Fiscal Cliff but also the Inouye Cliff," said state Finance Director Kalbert Young. "We have to be careful because we don't know what level of funding we'll get." Gov. Abercrombie's budget proposes replenishment of both the Rainy Day and Hurricane Funds, socking away extra money just in case.

Federal funds are critical to scores of programs including a number that benefit Hawaii agriculture.

"We're especially vulnerable to that," said Dean Okimoto, president of the Hawaii Farm Bureau Federation and the owner of Nalo Greens in Waimanalo. "And this comes at a time when the state has been working to make farming more attractive as career choice."

Demonstrators at the Capitol raised concerns about a number of environmental issues, and one activist from Molokai said that was tied to the economy, too.

"We've seen this before," said Walter Ritte. "When the economy is weak, there is a big push to use up our resources to spur development."

The current state budget year began July 1, and the most recent report on state tax revenue, issued earlier this week shows tax revenues for the first half of the fiscal year running 12 percent ahead of the previous budget cycle, with general excise tax receipts up 11 percent, a proxy for overall economic growth since the excise tax attaches to almost all goods and services, wholesale and retail, provided in the state.

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