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Hanabusa speaks before Inouye’s appropriations committee

MEDIA RELEASE

Senate President Colleen Hanabusa testified Monday, Aug. 24 before the U.S. Senate Appropriations Committee on the Impact of the American Recovery and Reinvestment Act of 2009. U.S. Sen. Daniel Inouye called the meeting.

Here is Hanabusa’s testimony in full:

Aloha Chairman Inouye,

Thank you for allowing me this opportunity to testify on behalf of the Hawaii State Legislature on the impact of the American Recovery and Reinvestment Act of 2009 (ARRA) stimulus funds on our State Budget.

At the time the State Budget plan was finalized in May, the National Economic Outlook was uncertain and economic contraction was a severe reality in our islands. In February of 2009, the occupancy rate for Hawaii hotels was at its lowest rate since 1991, and total visitor expenditures fell 15.9 per cent, according to the Department of Business, Economic Development, and Tourism. Oahu experienced the smallest part of the occupancy rate decline, and the island of Hawaii experienced the largest.

Our island economy continues to be impacted by the loss of ATA and Aloha Airlines, two cruise ships, Hawaii Superferry, and the closure of Molokai Ranch. As of April of 2009, Hilo Hattie, a local clothing favorite, lost $4.6 million in its first five months in a Chapter 11 bankruptcy reorganization filed on October 2, 2008. Construction slowed dramatically in 2009, which resulted in additional job losses. The State’s unemployment rate is not expected to peak until the fourth quarter of 2009.

Oil prices, the housing market, and U.S. credit remain wild-card factors that could have long-lasting impacts on the Hawaii economy.

By statute, the Council on Revenues (COR) reports its latest tax revenue forecast to the Governor and the Legislature on June 1, September 10, January 10, and March 15 of each year. The revenues come primarily from the general excise tax and the state income tax. Since the March 2008 forecast, the COR has each time reduced its prediction of tax revenues for the coming fiscal years. From March 2008 to October 2008, the COR general fund tax revenue projection through the upcoming biennium dropped by $1.341 billion.

The Governor based her original Biennium Budget Request on the October 2008 COR projection. In early January 2009, soon after the Governor’s budget was finalized and submitted to the Legislature, the COR revised its forecast downward; the projection was reduced by $637 million through the coming biennium. Thus, from the COR March 2008 projection to the January 2009 projection, general fund revenues had declined by nearly $2 billion.

On March 12, 2009, the COR tax revenue outlook was again downgraded by $262 million over the biennium (down $92.8 million in the current year, $115.8 million in FY2010 and $53.4 million in FY2011).

Never before has the State of Hawaii faced a declining revenue picture approaching the magnitude faced by the 25th Legislature. In fact, the $2 billion shortfall through the biennium budget as projected at the start of this legislative session seemed to have left many in various states of denial. While considerable budget reductions are a necessary component of a balanced financial plan, they are just one factor in aligning the State’s expenditures and revenues.

In an effort to close the budget shortfall, the Governor attempted to reduce each department’s discretionary budget by 20 per cent. The factors that determined the amounts deemed discretionary are still not entirely clear, and many departments did not meet the target reduction. Nonetheless, reductions resulting from this exercise and other adjustments made by the Governor resulted in a net decrease of operating costs of $209 million for FY2010 and $186 million for FY2011. Accounting for previously authorized collective bargaining amounts and other fixed cost adjustments resulted in the Governor’s Fiscal Biennium 2009-2011 executive budget request of $5.361 billion for the first fiscal year, and $5.464 billion the second.

The Governor adjusted the biennium budget request to include reductions to account for the use of such funds as the Emergency and Budget Reserve Fund and ARRA stimulus funds. This, along with other adjustments, lowered the net executive budget request by $190 million and $69 million for FY2010 and FY2011, respectively.

Human Services

Especially in these times tough economic times, the 25th Legislature found it important to support the Department of Human Services in its effort to provide services to those most in need. The Governor imposed a number of adjustments on this department’s budget that would result in the loss of important services to the State’s most vulnerable citizens.

Of particular note is the Governor’s elimination of Adult Dental Services for Medicaid eligible adults. The program provides for those that could not otherwise afford services such as exams, cleanings, and benefits for dentures. With the help of federal ARRA funds, the legislature was able to appropriate $2.6 million in FY2010 and $3.1 million in FY2011 to restore the Adult Dental Program, which was cut by the Governor. In addition, the legislature partially restored funding for Immigrant Health Services, also cut by the Governor. In total, the legislature appropriated $211 million in FY2010 and $105 million in FY2011 in ARRA funds for Department of Human Services programs.

Additionally, the legislature was able to appropriate ARRA money and other federal funds for the following TANF-related purposes: $20 million in FY2010 and $5 million in FY2011 of TANF contingency funds; $25 million in FY2010 and $6.25 million in FY2011 of TANF emergency funds; $5.4 million each fiscal year, of TANF assistance for non-IV E foster children; and $3.5 million in FY2010 and $900,000 in FY2011 for other assistance to non-IV E children.

Health

Within the Department of Health, the legislature was able to designate ARRA stimulus funds in the amount of $87,759,247 for FY2010 and $15,240,740 for FY2011, providing significant impact on the following programs and services:

• Enhanced FMAP reimbursements will reduce the need of the following general fund expenditures:

Developmental Disabilities: $14,473,221 in FY2010 and $4,975,266 in FY2011;

Adult Mental Health: $2,531,764 in FY2010 and $870,310 in FY2011;

Child and Adolescent Mental Health: $3,042,537 in FY2010 and $1,045,893 in FY2011.

• Early Intervention to ensure compliance with the federal Individuals with Disabilities Education Act, Part C: $2,139,843 in FY2011.

• Emergency Medical Services to improve communication between ambulances and hospitals; and to implement a statewide telecommunication system for critical patient information: $11 million in FY2010 and $7,865,000 in FY2011.

• Environmental Management to provide grants for drinking water and wastewater infrastructure improvements, diesel emissions reductions for school buses, regulatory oversight of underground storage tanks, and technical expertise for water quality standards: $53,505,883 in FY2010.

Public Education

The 25th Legislature recognizes the importance of providing a quality education to our children, to ensure their ability to thrive in the global society of today and tomorrow. Hawaii is fortunate to be receiving federal stimulus dollars to support education and other state programs in the upcoming biennium. The Legislature appropriated stimulus dollars for the following educational programs: $19.8 million for Title I and Educational Technology in FY2010; $20 million for IDEA Part B & IDEA Part B Preschool funds in FY2010; and $116,000 for the McKinney Vento Homeless Assistance Program in FY2010.

In the interest of insulating the school system from much of the impact of the budget shortfall, the legislature appropriated $56.6 million in stimulus dollars for education in each year of the biennium. These funds are to be distributed between public schools and charter schools based on the latest enrollment projections. The Governor and the Department of Education are currently working on a memorandum of agreement on how the federal assurances will be met.

The receipt of federal stimulus dollars also provided this legislature with an opportunity to make to provide a degree of funding stability to the charter schools’ FY2010 and FY2011 budget with an appropriation of $2.8 million in federal stabilization funds.

Conclusion

In appearing before this distinguished committee, I have tried to explain the extent to which the Federal ARRA Stimulus monies have helped the State of Hawaii with our budget shortfall. As with just about every other State, Hawaii found itself in deep need of assistance, and found the Federal ARRA Stimulus funds to be the stabilizing force in helping us to close our session submitting a balanced budget to the Governor.

Unfortunately as our economy continues to backside the revenue stream that supports State services has continued to deteriorate. Since the end of the last regular session of the legislature the latest projection by the Council on Revenues showing a decline of $650.3 million through the current biennium 2009-11 ($206.7 million for the fiscal year just completed, $228.7 million for fiscal year 2010, and $214.9 million for fiscal year 2011). The Governor, public employees, and Legislature will need to make substantial and undoubtedly difficult adjustments to public services that our citizens rely on. Charting a course that does not further contribute to economic decline and result in higher costs in the long term is the tremendous challenge we face.

Sincerely,

Senator Colleen Hanabusa

President of the Senate

One Response to “Hanabusa speaks before Inouye’s appropriations committee”

  1. Nahiku says:

    Good Night Loretta…

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