Council forecasts $260 million plunge in tax revenues

The Hawaii Council on Revenues’ mid-March forecast was even bleaker than previous predictions, projecting that the state will have another $260 million less to spend over the next three fiscal years. The lower forecast almost guarantees that the state budget, already out of whack by $650 million, will be cut again. The total budget shortfall is now predicted to be $910 million.

Legislators are looking at plans ranging from raising taxes and cutting services to laying off state workers. The budget crisis has also triggered a war of words between legislative leaders and Gov. Linda Lingle over whether Lingle's proposals balance the state budget and whether she is dealing fairly with the Legislature.

The seven-person council said collections would drop by 5 percent, or $90 million, for the remaining four months of this fiscal year. It also predicted that the tax revenue growth rate for the next fiscal year would be only 0.5 percent, not the 1 percent increase it predicted earlier. "It could have been worse," Kurt Kawafuchi, state tax director, told the Star-Bulletin.

Despite its lower forecast, legislative leaders said the council's prediction was too optimistic. "I am looking at calendar year 2010 to be a very dismal picture. I anticipate we will hit rock bottom in the fourth quarter of this year. We are on a spiral downward," House Speaker Calvin Say said.

Senate President Colleen Hanabusa called the council's predictions unrealistic. "I don't know what the council sees is going to be so miraculous to make up the difference from minus 5 percent to plus 0.5 percent," she said.

After previously saying she would consider all options, Gov. Linda Lingle said she would not raise taxes or cut workers. "Either of these actions would further weaken our economy," Lingle said in a written statement. Since then, she has proposed state worker pay and benefit cuts.

Those comments angered Rep. Marcus Oshiro, House Finance Committee chairman, who is recommending both layoffs and tax increases. He said Lingle had assured him she would not take any options off the table.