According to the recently released Department of Taxation’s monthly tax collection reports, the general excise tax collections for the first quarter of 2014 are down 4.6% in comparison to last year. To make matters worse, the Federal Bureau of Economic Analysis recently downgraded its -1% estimate of real gross domestic product for the first quarter of 2014 to -2.9%, which is, by far, the worst quarter since the recovery began in mid-2009.
The Senate Minority is pleased that the Abercrombie Administration has finally taken a step to curb a portion of the government overspending in the recent decision to restrict 10 percent, or $14 million, of state discretionary spending, however, Senator Sam Slom points out that “this is clearly a reactionary step to the March tax collection reports and steps should have been taken much sooner. The Senate Minority has long cautioned that Hawaii’s economy has not turned a corner yet.” Senator Slom notes “when you talk to small business owners in various industries across the state, it becomes apparent that many businesses have not yet recovered from the recession.”
“While the legislature entered this year’s legislative session, with a Governor boasting of a record high surplus of $844M and a very optimistic outlook of the state’s economy while skirting the subject of our state’s unfunded liabilities (employee retirement and medical benefits) of over $22 billion dollars, it is becoming more and more apparent that the growth spurt in our economy was short lived. Based on these recently released tax collection reports, it is even more important we tighten our belts and identify sensible cuts for the long term to ride this slow recovery out.” says Senator Slom, Hawaii’s Senate Minority Leader.
Senator Slom’s more conservative outlook of the state’s economy was validated by the Council on Revenues, which downgraded the state revenue growth projections from 4.1% at the beginning of the year, to +3.3% shortly prior to the legislative session, then 0% on March 11th, and most recently on May 29th to -0.4% . According to Senator Slom, the recent -0.4% projection of state revenue is still overly optimistic. Slom notes that “if the general excise tax collections for the first quarter of 2014 as well as the recently released U.S. GDP statistics are taken into account, further downgrades of state revenues should be expected.”
Rather than waiting on the next Council on Revenues tax revenue projections, which will be released sometime in September, Senator Slom urges the Abercrombie Administration to take immediate action to avoid the current $450M biannual budget deficit from growing even larger.