Hawaii Budget Shortfall Forecast Worsens

Frank — Fri, 25 Sep 2009 23:48:44 +0000

Hawaii Budget Shortfall Forecast to Increase Next Year

How low can you go?

At least 48 states have addressed or still face shortfalls in their budgets for fiscal year 2010 totaling $168 billion or 24 percent of state budgets.
An unusual number of these states are still struggling to balance their 2010 budgets two months after the start of the fiscal year. Three states — Arizona, Michigan, and Pennsylvania — have not yet adopted budgets for 2010. In addition, new shortfalls have opened up in at least 15 of the states that have adopted budgets — California, Colorado, Georgia, Hawaii, Kansas, Kentucky, Maryland, New Mexico, New York, Rhode Island, Utah, Vermont, Virginia, Washington, and Wyoming — plus the District of Columbia . These additional gaps — some of which have already been addressed— totaled $28 billion.
Source: Center on Budget and Policy Priorities

The real news is that if, as is widely expected, the economy does not begin to significantly recover until the some time in calendar year 2010 and unemployment remains high through 2010, state shortfalls are likely to be even larger in fiscal year 2011 (which begins in July 2010 in most states).

To make matters worse, the Hawaii State Government is trying to pass along tax increases, in the form of higher transient accommodation taxes, among other things.

TABLE 1: STATES WITH FY2010 BUDGET GAPS
	FY2010 before budget adoption	FY2010 mid year gap	FY2010 Total	FY2010 Total – % of General Fund Budget
Alabama	$1.2 billion	0	$1.2 billion	16.7%
Alaska	$1.3 billion	0	$1.3 billion	30.0%
Arizona	$4.0 billion	0	$4.0 billion	41.1%
Arkansas	$146 million	0	$146 million	3.2%
California*	$26.0 billion	$19.5 billion	$45.5 billion	49.3%
Colorado	$1.0 billion	$384 million	$1.4 billion	18.6%
Connecticut	$4.2 billion	0	$4.2 billion	23.9%
Delaware	$557 million	0	$557 million	17.6%
District of Columbia	$650 million	$150 million	$800 million	12.7%
Florida	$5.9 billion	0	$5.9 billion	22.8%
Georgia	$3.1 billion	$1.0 billion	$4.1 billion	23.8%
Hawaii	$682 million	$297 million	$978 million	19.1%
Idaho	$411 million	0	$411 million	16.4%
Illinois*	$13.2 billion	0	$13.2 billion	37.7%
Indiana	$1.1 billion	0	$1.1 billion	7.5%
Iowa	$779 million	0	$779 million	13.2%
Kansas	$1.4 billion	$183.2 billion	$1.6 billion	25.6%
Kentucky	0	$1.1 billion	$1.1 billion	11.3%
Louisiana	$1.8 billion	0	$1.8 billion	21.6%
Maine	$640 million	0	$640 million	21.4%
Maryland	$1.9 billion	$700 million	$2.6 billion	18.7%
Massachusetts	$5.0 billion	0	$5.0 billion	17.9%
Michigan	$2.8 billion	0	$2.8 billion	12.4%
Minnesota	$3.2 billion	0	$3.2 billion	21.0%
Mississippi	$480 million	0	$480 million	9.6%
Missouri	$923 million	0	$923 million	10.3%
Nebraska	$150 million	0	$150 million	4.3%
Nevada	$1.2 billion	0	$1.2 billion	37.8%
New Hampshire	$250 million	0	$250 million	16.2%
New Jersey	$8.8 billion	0	$8.8 billion	29.9%
New Mexico	$345 million	$432.6 million	$777.6 million	14.1%
New York	$17.9 billion	$2.1 billion	$20.0 billion	36.1%
North Carolina	$4.6 billion	0	$4.6 billion	21.9%
Ohio	$3.3 billion	0	$3.3 billion	12.3%
Oklahoma	$777 million	0	$777 million	13.6%
Oregon*	0	0	0	0.0%
Pennsylvania	$4.8 billion	0	$4.8 billion	18.0%
Rhode Island*	$590 million	$65 million	$655 million	21.3%
South Carolina	$725 million	0	$725 million	12.5%
South Dakota	$32 million	0	$32 million	2.9%
Tennessee	$1.0 billion	0	$1.0 billion	9.7%
Texas	$3.5 billion	0	$3.5 billion	9.5%
Utah	$721 million	$279 million	$1.0 billion	19.8%
Vermont	$278 million	$28 million	$306 million	27.3%
Virginia	$1.8 billion	$1.5 billion	$3.3 billion	20.1%
Washington	$3.4 billion	$195 million	$3.6 billion	23.3%
West Virginia	$184 million	0	$184 million	4.9%
Wisconsin	$3.2 billion	0	$3.2 billion	23.2%
Wyoming	0	$32 million	$32 million	1.7%
Total	$139.4 billion	$27.9billion	$167.6 billion	24.3%
Some or all of the pre-budget shortfalls have already been addressed. The mid-year shortfall shown for California* ($19.5 billion) differs from the often-cited $26.3 billion figure because it does not include the $5.8 billion of potential revenues affected by the May ballot measures to avoid double counting and does not include $1 billion to be deposited in reserve. At least $3.2 billion of the $13.2 billion gap in Illinois has not been closed. Oregon has a two-year budget. The size of the projected shortfall is shown in Table 2. Rhode Island’s mid-year shortfall of $65 million is a deficit carried over from FY2009.

Among other increases, legislators approved three additional income tax brackets on top of the current nine, taking the top income tax rate from 8.25 percent to a whopping 11 percent. Hawaii now has the highest state income tax rate in the country and more tax brackets than any other state.

Another tax increase targets the state’s most important, and already struggling, industry: tourism. With hotel occupancy at a record low, the legislature raised the “transient accommodations” tax on hotel rooms from 7.25 to 9.25 percent—a 28 percent increase.

Expenditure cuts and tax increases are problematic policies during an economic downturn because they reduce overall demand and can make the downturn deeper. So, Hawaii is closing schools, which in turn will raise less intelligent children, who will some day run the State legislatures and probably raise taxes even higher.

Honolulu Hawaii Homes Real Estate » taxes

Hawaii Budget Shortfall Forecast Worsens

Hawaii Budget Shortfall Forecast to Increase Next Year