President's message:

State budget woes still spell
trouble for Hawaii nonprofits

When last month's HANO newsletter went out, the Senate Economic Development and Technology and Consumer Protection committees were to hold hearings on HB 2877, which would levy a 1 percent tax on nonprofit gross receipts from conferences, conventions, trade exhibits and displays. Committee Chairs Carol Fukunaga and Rosalyn Baker, however, opted to replace the language of the bill and instead propose a temporary increase to the general excise tax from 4.5 to 5.5 percent on Oahu and from 4 to 5 percent on neighbor islands from October 2010 to September 2012. To offset the regressive aspects of the excise tax the revised bill includes a refundable state earned income tax credit equivalent to 20 percent of the federal earned income tax credit.

As a legislative insider put it, there are three roads leading the Legislature to balance the state budget: One is what HB 2877 proposes in its current form -- a temporary tax increase we will all pay; the second is to raid funds, such as the Hurricane Relief and Rainy Day funds; and the third is to repeal tax exemptions and credits various industries enjoy. All are still on the table as we head to the legislative session's last month. Only an April Fool would assume this issue is dead for Hawaii nonprofits.

Meanwhile, the National Council of Nonprofits, HANO's national organization, has documented challenges to the compact between government and nonprofits nationwide in a special report, "State Budget Crises: Ripping the Safety Net Held by Nonprofits." It explores how governments are slashing funds for programs they expect nonprofits to administer, withholding contract payments for services nonprofits have already delivered and taking operating money from nonprofits through new fees and taxes. Hawaii figures prominently in this piece with delayed Medicaid reimbursements and nonprofit tax exemption threats. Take a look.

Hawaii nonprofits must stand ready to provide testimony on what a repeal of the GET exemption would mean for them and the clients they serve. Many major state budget decisions will be made in the closing hours of session; so, be alert and please enjoy the April newsletter.

Mahalo,

Lisa Maruyama
HANO President & CEO