Category Archives: Taxes

Hawaii’s Downward Spiral Of State Tax Collections Is Alarming

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According to the recently released Department of Taxation’s monthly tax collection reports[1], 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[2] 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.

Figures-2014-07-09

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.

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Last Year’s $844 Million Surplus is Borrowed from the Future

The State Council on Revenues significantly reduced the revenue growth projections that are used to determine the budget spending levels for the two upcoming fiscal years. Specifically, the Council lowered the revenue growth forecast for FY 2014 from 3.3% to 0% and for FY 2015 from 7.4% to 5.5%. This downward forecast is important because it will be used by the legislature in the current budget negotiations. At the present time, only the Governor and the House have formally introduced their respective drafts of the state operating budget. However, the House budget is expected to cross over to the Senate this week and the Senate is expected to release its version of the state operating budget in the following weeks.

Now, what are the implications of the current forecast with respect to the various budget drafts and the $844M carry-over surplus?

The downward forecast means that the state has now fewer projected revenues that could be used to fund some of the proposed spending initiatives. As Table 1 indicates, both the Governor and the House budget drafts are not in balance. Because of the imbalance, more than $500M of the current $844M carry-over surplus is projected to be swept away.

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In addition, what is largely excluded from the discussion in the media is the fact that the current budget doesn’t account for the required payments the state is obligated to make to pay down its unfunded liabilities for the EUTF. The EUTF is the health insurance trust fund for current and retired state and county employees. Last year, the governor signed into law ACT 268, which requires that the state in FY 2019 will have to pay 100% of the annual required contribution that is needed to pay down the current $13 billion unfunded liability for the EUTF. Under the current budget proposals, only $100M of the required $500M is included. In absolute terms, it really means that the projected carry-over balances in FY 2015 are not somewhere around +$300M but rather closer to -$100M.

Finally, what does the downward revenue forecast signal about the overall economy?

Last year’s $844M surplus has often been politicized and interpreted as a sign of an improved economy. Coming out of the recession, many states experienced significant budget surpluses similar to Hawaii’s. However, according to The Rockefeller Institute, “Any of the unexpected surges in state revenue growth in 2013 is (sic) at least in part borrowed from the future. It will be tempting to treat unexpected revenue growth as a sign of continuing economic improvement, when it could mean instead that future revenue will be lower.”[1] This week’s Council on Revenues confirms the notion that last year’s surplus is not based on an improving economy and that the legislature should be cautious with respect to spending decisions on new initiatives.

 

[1] State Budget Crisis Task Force: Final Report, page 4. (2013). http://www.statebudgetcrisis.org/wpcms/wp-content/images/SBCTF_FINALREPORT.pdf

by Paul Harleman, Senate Minority Budget Director

Follow the Money

Money tunnel

To the majority of taxpayers who are not accountants, the amount of money that government is currently spending in the esoteric categories of “tax exclusions,” “tax exemptions,” “tax deferrals,” “preferential tax rates,” and “tax credits”–though significant–essentially becomes invisible. 

Senator Slom is firmly committed to transparency in government, and has introduced SB2153 to require the Department of Taxation to provide an annual report on the estimated costs of all tax expenditures, as well as an analysis on whether or not the expenditures have achieved their intended purposes.  This way, state government is held accountable for the cost-effectiveness of every type of tax expenditure.

by Lisa Davidson, posted 2/6/14

A Better Day with Senator Slom & Lowell Kalapa

Senator Slom talks to Lowell Kalapa of the Tax Foundation of Hawaii.

Senator Sam Slom: Hawaii Legislature Aiming to Raise Taxes

State Senator Sam Slom talks about taxes, the economy, government, the legislature and more in this latest edition of HawaiiReporter.com‘s News Behind the News.

Floor Actions: Session Days 15, 16 & 17

State Senator Sam Slom

February 12: Senate Floor Session, Day 17: No floor votes. Several bills passed 2nd reading and moved on to the next committee.

February 11: Senate Floor Session, Day 16: The State Senate passed 4 bills on Third Reading to the House of Representatives. They are SB 328 “Relating to Animals” (landlord-tenant code, security deposit); SB 1116 “Relating to Definition of Public Housing Project”; SB 319 “Relating to thrill-craft” (use of thrill-craft in ocean clean-up); and SB 454 “Relating to Water Conservation” (gray water irrigation).

February 8: Senate Floor Session, Day 15: The State Senate passed 3 bills on Third Reading. This included HB 26 HD1 “Making appropriations to provide for the expenses of the Legislature, Auditor, the Legislative Reference Bureau, the Ombudsman and the Ethics Commission.” This is the first bill that crossed over from the house to be approved by the senate this year. The bill now awaits the approval of the Governor.

Reports from the Field

The House of Representatives committees on Water and Land (WAL) and Finance (FIN) committees passed HB 1133 to repeal the Public Land Development Corporation (PLDC) on February 11. In the Senate, the Economic Development, Government Operations & Housing committee (EGH) as well as the Water & Land (WTL) committee voted to pass an amended version of SB 707 out as an SD1 in which the PLDC is also repealed. Senator Slom supports legislation to repeal the PLDC.

New Tax on Sugary Beverages Pass: The Senate Health (HTH) committee passed SB 1085  which “imposes a fee on sugar-sweetened beverages. Establishes the Obesity Prevention Special Fund to support obesity prevention programs.” In a nutshell this is a new tax on every ounce of any sugary drink purchased by consumers. Senator Slom who opposes all new taxes and the creation of new special funds was the only Senator in the committee to vote against this new tax. The Senator will continue to oppose this bill and the tax as it moves to WAM and third reading votes.

In the Transportation Committee hearing yesterday (Feb. 11) Senator Slom also voted against the red light camera proposal (SB 693) that would allow a camera to take a picture of drivers and car license plates as they cross intersections against red lights. Senator Slom also voted against this bill 2 more times in the Public Safety (PSM) and Technology & Arts (TEC) committee since all 3 committees were at a combined hearing.

Top Photo: Senator Sam Slom commenting at the Senate TIA Hearing.

Bills Loom Large as Major Deadlines Approach

By State Senator Sam Slom from the Kuliouou NHB #2 Report

The $11.7 billion State Budget (HB 200) looms large on the horizon this year as the 2013 Legislature heads closer to the first major deadlines — first lateral on February 15 and First Crossover on March 7. Several bills have already passed out of their initial committees and now await approval from the “A bracket” committees (Ways & Means, Juidicary & Labor, Commerce & Consumer Protection) by the first crossover date.

The Senate passed its first bill to the House, SB 94 which adds an executive director to the Hawaii Public Housing Authority on February 1. Subsequently, 3 more bills passed third reading (SB 54 on aging; SB 44 on mental health; and SB 995 on irrigation water development) votes this week and are now in the House.

HB 26which crossed over from the House was voted in the Senate Ways & Means committee yesterday. This is the $28.5 million in general funds bill that pays for the operations of the State Legislature that includes the House, Senate and related agencies. The bill is slated for a Senate floor vote on Feb. 8.

On other issues.

University of Hawaii: Problems continue to dog the University of Hawaii system which were addressed through a series of informational briefings focused on salaries and tuition increases. I stated at the tuition briefing that the state’s only public institution of higher learning is pricing students out of school. My office has received several emails and phone calls from U.H. students confirming this fact. Bills addressing issues surrounding the university are being heard in the Senate Higher Education and Ways & Means Committees.

PLDC: The Senate Chair of the Water & Land Committee pulled SB1, a bill that would repeal chapter 171c in the HRS relating to the Public Land Development Corporation. The action has angered the public and several senators. I support the repeal of the PLDC and have introduced two bills this session to deal with that: SB 780 and SB 781.

Taxes: A number of tax bills will be decided in the Senate Ways & Means Committee on Feb. 12. They include SB 350 which amends the filing of GE Tax Returns; SB 653 tax rates on tobacco products including “premium cigars”; SB 948 “streamlined” taxation on internet purchases; SB 1187 - delinquent taxes; and SB 1190 imposition of “use tax” on imported contracting. Several other tax bills are advancing through other committees and in the House including those that will add new taxes to sugary beverages (SB 1085), a 10¢ per plastic bag fee (tax), increases to the conveyance, general excise, tobacco and transient accommodations tax. I oppose all new taxes and increases.

* – HB26 passed third reading in the Senate on 2-8-2013 and now goes to the Governor for his approval.


QUICK TAKES

Capitol TV with Noelani

Legislative aide Noelani Bonafacio comments on the soda tax bill during a taping of Capitol Commentary at Senator Slom’s office.

Energy & Judiciary Committee

Senator Slom heard testimony on SB 1135 which the State Board of Health wants to pass that expands the Electronic Device and Television Recycling program. If passed into law, the new regulations will impact the sales of not only consumer electronics but also to household appliances. There is a high fee (tax) structure connected to this that Senator Slom will oppose.


Lonely And Frustrated: The Worst Jobs In Politics

Hawaii State Senate Opening Day

Senator Sam Slom was featured on National Public Radio (npr.org), February 5 in an article written by commentator Alan Greenblat. The article titled “Lonely And Frustrated: These May Be The Worst Jobs In Politics” focused on those legislators and politicians across the country whose jobs “appear from the outside to be so hopeless that you wonder why anyone agreed to take them on.” Senator Slom being the lone Republican in the 25-member Hawaii State Senate was one of the subjects of the article which covered minority representation in the states of Wyoming, Rhode Island, Oklahoma and Hawaii.

Firearms, Sugary Drinks Tax, Property Acquisition, Floor Actions and More.

Discussion on Second Amendment Rights

Senator Slom met with Max Cooper and Dan Reid to discuss Second Amendment issues and legislation that may impact firearm owners this session. This year several bills are on the docket that will limit second amendment rights if they should become law. Among them are SB 69, SB 219, SB 932, SB 628, SB 2and SB 36. There are dozens more. Senator Slom is a staunch supporter of the Second Amendment and is a trustee of the Second Amendment Foundation.


Floor Actions

Floor Session, Day 12: More bills passed 2nd reading.

Floor Session, Day 13: SB 995 passed third reading; 25-0

Floor Session, Day 14: The Senate passed SB 54 on third reading, which “allows the policy advisory board for elder affairs to recommend to the governor to honor non ex officio members by lifetime membership, which includes all the rights and privileges of a non ex officio member, upon approval by all regular members of the board. ” While the bill passed with a vote of 23 – 0, Senators Slom and Solomon both voted WR or “with reservations”. The Senate also passed SB 44 on third reading with a 23 – 0 vote.


FROM THE FIELD: Hearing Summaries

At the Health Committee Hearing

Senate Health Committee (HTH): SB 1085: Imposes a fee on sugar-sweetened beverages. Establishes the Obesity Prevention Special Fund to support obesity prevention programs.

Testimony from members of the Obseity Task Force and the medical community were largely in favor of the bill. Retailers, restauranteurs and beverage firms are against the bill and see it as a new tax.

Victor Lim of McDonalds’ Hawaii testified that it would be difficult to figure out what is included in “sugary beverage”. He also expressed concerns about new business owners having trouble with the paperwork associated with the tax. Representatives from a Hawaii company who makes cans also expressed concerns about the impact the tax would have on more than 1300 jobs. The Governor was not present at the hearing. - Noelani Bonafacio

Photo above: Senator Slom had some questions for Loretta Fuddy concerning the tax on sugary drinks and the findings linking obesity to them. Like all other new tax bills that have come before, Senator Slom will be voting “no” on this bill.

Photo below: The Heatlh committee hearing was packed on the sugary drinks tax bill.

Health Committee Hearing


Senate Water & Land Committee (WLT): SB 894 – Land Acquisition – Turtle Bay Hilton Hotel properties: Of the testimony submitted, 243 were in Support and 23 were in Opposition. However many of those who attended the hearing were in opposition. Although I did notice that many were employees. They expressed that Turtle Bay has given North Shore residents jobs and recreational opportunities. The opponents of the bill stated that they’ve been deceived before and that the development plan was misleading, in terms of traffic and the size of their development. Senator Solomon was concerned that the disagreement between Turtle Bay and Defend O’ahu Coalition was not the State Senate’s issue to resolve, but the City and County’s. However, the chair of the WTL committee allowed the bill to move forward to allow continued discussion. (Passed with amendments 4 – 0; 3 excused; Senator Slom voted in the affirmative). – NB

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Agenda & Platform of the Senate Minority for 2013

Dawn of a Brand New Day

State Senate Minority (SSM) leader Sam Slom (R-9 O’ahu) released the agenda and platform of the Senate Minority for 2013:

“So that there is no mistake, or confusion, and our position is clear and apart from both the Executive and Majority Legislative branches, I am addressing several special initiatives for this session,” Slom said.

“The Senate Minority continues to believe, based on our independent professional analysis, that Hawaii’s economy has not ‘turned the corner,’ ‘rebounded,’ or improved across the board, with the exception of Hawaii’s visitor industry which has posted record gains. However, construction has not rebounded, and retailing, wholesaling and manufacturing, remain flat. Future major federal assistance is in doubt with the death of Senator Daniel Inouye. Real personal income and our residents’ ability to pay more has not kept pace with rising consumer prices. Therefore, the Senate Minority absolutely and unapologetically opposes any tax, spending or debt increase.” Selected SSM Positions (for a complete listing go to http://www.capitol.hawaii.gov or senateminority.wordpress.com.)

  • SSM SUPPORTS “A Better Day” For Isle Residents: SSM believes we should enhance local residents’ standard of living by reducing government, lowering taxes, improving the small business climate and offering consumers more competitive choices in the market place.
  • SSM SUPPORTS an Alternative, Slimmed Down, Balanced State Budget Based on Realistic Economic Outlooks: Instead of showing increases of 8% and 11% in budget growth over the next two fiscal years, and adding back social welfare programs and 3,000 more public employees, the SSM budget, which will shortly be on-line, will show programs and activities that should be cut out of the budget in order to balance the budget and make it affordable to Hawaii’s taxpayers. Needed services will be prioritized and not cut while underperforming and wasteful programs will be eliminated.
  • SSM OPPOSES the Governor’s increase in the state minimum wage by $1.50 to $8.75 an hour. The minimum wage is an entry, training wage, and not tied to productivity. Only a small percentage of Hawaii’s total workforce receive the minimum wage. It takes choice away from employers and penalizes good workers. A higher wage actually destroys jobs for those seeking a start because an employer pays additional mandates tied to the wage including, matched social security, medicare, unemployment, TDI, workers’ compensation and training. Smart Business Hawaii (SBH) estimates these costs add another 30-35% to the basic wage.
  • SSM SUPPORTS Repayment Into the Hurricane Relief and Rainy Day Funds, and the Pay Down of Unfunded ERS & EUTF Liabilities. SSM Supports the Administration’s fiscal promise to fully repay these funds and reduce our crippling worst-in-the-Nation unfunded liabilities.
  • SSM OPPOSES the “Sugary Beverage Tax” The Governor and State Department of Health continue to pursue a tax on beverages containing sugar. Interesting that Hawaii once had a thriving sugar cane industry. The proposal is to add 1¢ per ounce for all beverages with sugar in order to stem childhood obesity. SSM believes it is the parents’ responsibility to take care of their own children, to regulate intake of all foods and beverages, encourage physical activity and limit use of cell phones and electronic equipment. Money collected would be on top of existing General Excise and Beverage Deposit taxes in Hawaii and further penalize lower income consumers, hurt business and their employees, and grab the extra money for the General Fund, unrelated to obesity.
  • SSM OPPOSES the Governor’s Early Education initiative. This is the latest version of previously state-subsidized pre-Kindergarten schemes that all failed. The proposal does not add more facilities or resources, just shifts the estimated $32 million (to start) funding from individuals who should be responsible for their own children, to all taxpayers. The State has a terrible record of educating K-12 government school students and should concentrate on improvement there before introducing any new subsidy programs.
  • SSM SUPPORTS Real Government Transparency, Including Initiative, Referendum, Recall and Term Limits SSM continues to support and encourage maximum citizen input (IR&R)
  • SSM OPPOSES the Public Land Development Corporation (PLDC): SSM believes the PLDC is fatally flawed, denies citizen input, exempts the state from its own environmental laws, takes prime agricultural land and forces people into Transit Oriented Development (TOD) high density units.
  • SSM SUPPORTS Major Reforms in the University of Hawaii: SSM believes that the 2012 Senate hearings uncovered several major management and financial flaws within the sprawling University of Hawaii System and supports all 18 Senate Committee recommendations, more transparency, and changes in the UH Administration governance, Board of Regents, and compensation and benefit packages.
  • SSM OPPOSES the Undersea Cable and N.I. Wind Turbines: SSM supports voluntary, incentive driven alternative energy sources but opposes a $2 billion undersea electric cable and expensive wind turbines on Lanai and Molokai, in opposition to the views of residents, to help power O’ahu at an increased cost to HECO ratepayers.

Governor Advocates for More Taxes and Spending

Governor's State of the State Speech

Senator Slom attended a joint session of the State Legislature on January 22 to listen to Governor Abercrombie’s “State of the State” address. The Governor proposed more spending on several state programs and proposed to increase or add several taxes including the conveyance, taxing sugary drinks (soda, juices), and plastic bags. He also proposed to increase the minimum wage, which is not meant to be a living wage, but merely an “entry level wage” which will add increased financial burden on business and help reduce the number of jobs in the marketplace. Senator Slom’s comments on the Governor’s speech can be found in his online weekly column at SBH with further commentary and the speech itself at HawaiiReporter.com.

Photo: Governor Abercrombie at the podium before the joint session of the Legislature with Senator’s seated in the front rows (foreground).