Abercrombie proposes new taxes, scaled back services

In his first State of the State speech before the Legislature Monday morning, Gov. Neil Abercrombie talked about a “weakened government” where everyone and everything — businesses, schools and public facilities — is suffering. He characterized the current state of the government as a “battered, under resourced and often dysfunctional democracy.”

Fiscally, Abercrombie said, the state is staring at an $844 million deficit during the next biennium. But more distressing, he said, is the severe “operational deficit in government.” He laid out an economic recovery and reinvestment plan that he said would improve government services, make education a top priority and increase job opportunities. Among the specific proposals outlined in his 46-minute speech:

• A hike in the alcohol tax and new taxes on soda and similar beverages. "We can no longer ignore the fact that consumption of these and other such products contribute to rising public health costs," Abercrombie said.
• A phased-in repeal of the state tax deduction on state taxes and a plan to treat pension income the same as all other income for tax purposes.
• A redistribution of funds from the Hawaii Tourism Authority to basic government services such as environmental protection, improvement of public facilities and advancement of culture and the arts. "We need to re-prioritize," he said.
• A "scale back" of social services for which there is no longer federal money, such as Temporary Assistance for Needy Families money that may no longer be coming to states.
• A cutback on benefits to Medicaid patients in order to sustain health coverage for needy individuals and families.

Abercrombie said he was open to ideas to deal with the budget deficit and his proposed cuts, but would not entertain any which sought to "shift responsibility to someone else or some future time."

Senate President Shan Tsutsui said the Legislature looked forward to working with the new Democratic governor, and a new spirit of collaboration while recognizing that the two sides will not always agree. House Speaker Calvin Say said all of Abercrombie's proposals would have to be considered as lawmakers confront the state's budget deficit.

"Some of them were controversial, but at the end of the day, we'll take them up," Say said.

On the opening day of the legislative session, Tsutsui said the worst of Hawaii's economic downturn has passed and predicting that better days are ahead. "While our state continues to suffer from a sagging real estate market and high unemployment rates, we also see signs that we may be on the slow and arduous path to recovery," Tsutsui said, "a journey in which we must concentrate all of our collective efforts to secure a better future, not just for us, but for our children and for future generations to come."

One indicator that the government is recovering: Kauai Mayor Bernard Carvalho Jr. on Jan. 27 signed a bill that canceled the rest of the county’s furlough days for fiscal year 2011 and restored funding to the various departments that were affected by furloughs. The furloughs had been implemented in July 2010 to cut costs. The County Council at a recent hearing approved the bill, which will cost the county about $2.4 million.