State projects unexpected budget windfall as Hawaii sees quick return of visitors

Published: May. 27, 2021 at 5:28 AM HST|Updated: May. 27, 2021 at 6:43 AM HST
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HONOLULU, Hawaii (HawaiiNewsNow) - The state Council on Revenues’ latest projection could result in a half-billion-dollar boost in the state budget surplus.

The seven-member council, which prepares revenue projections for state lawmakers, projected a 5% increase in tax revenues for this fiscal year.

The projection could result in a $635 million state budget surplus.

“What that basically means is its an additional $500 million in revenues that we did not plan for, and that opens up different kinds of possibilities,” said state Rep. Sylvia Luke, who chairs the House Budget Committee.

One big reason for the increase is the unexpectedly quick return of visitors.

“We’re seeing that North American tourists have come back far faster than anybody thought,” said Sumner LaCroix of the University of Hawaii Economic Research Organization. “And I think that this is partly because of the success of the U.S. vaccination program. I don’t think we really saw this fast vaccination.”

The council had originally predicted a 2.5% decrease in revenues.

“Usually the Council on Revenues is very conservative in its analysis. So we were very shocked,” said Luke.

The unexpected increase could be a shot in the arm for the Hawaii Tourism Authority, which saw its budget cut by 25%, or the University of Hawaii, which lost $80 million from its budget.

That could happen, since the state is in the first year of a two-year budget cycle.

“We provided funding for the HTA in the first year. We did not provide for HTA in the second year. So that’s one of the things we would have to do when we come back next year,” said Luke.

That means that any budget changes won’t happen right away.

Luke said there also are loans that were taken out when revenues plummeted due to the pandemic.

“We borrowed $750 million to basically balance the budget. That’s definitely something we have to pay back,” Luke said.

She added that the state Department of Labor also borrowed $700 million to pay for unemployment checks.

Gov. David Ige’s plan to furlough state workers was called off after Hawaii received nearly $2 billion from President Biden’s COVID relief bill in March.

But, there are still state positions that were lost to the budget axe during the pandemic.

“Hiring freezes, vacancy cuts,” said Luke. “And it is going to take a while for us to replenish some of those program cuts.”

Luke cautioned that the numbers are still just a projection. It won’t be known for sure until after the tax revenues are collected at the end of next month.

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