That is Hawaii’s new state price range

Who wins and who loses in the legislature is usually set out in the state budget document, and it creates a picture of a spending plan that protects Hawaii’s shaky private employers while protecting the public sector workforce.

For public sector workers, the feared vacation days, wage cuts and layoffs discussed at the height of the pandemic never materialized despite Governor David Ige’s warnings last year that they would likely be necessary.

The state budget crisis that sparked talk of vacation was dulled by Congress and President Joe Biden when they passed the American Rescue Plan Act.

This federal bill will give the state government a more than $ 1.6 billion bailout, and Hawaiian lawmakers plan to spend almost all of that money over the next two years.

But the pandemic and shutdown of the state tourism industry have been brutal for Hawaiian companies. The state’s sky-high unemployment rate, which remained the nation’s highest in February, has made lawmakers urgent to ease the burden on the business community.

Shops at Daniel K. Inouye International Airport closed last year. House and Senate lawmakers plan to help employers next year by repaying $ 740 million federal loans for Hawaii’s businesses. Claire Caulfield / Civil Beat

The House and Senate’s most dramatic budget proposals would repay approximately $ 740 million in principal as well as interest on federal government loans that helped cover unemployment benefits for the unemployed.

The principal and interest on the $ 740 million loan is nearly half the money raised as part of the ARPA state bailout, and Ige now says he is also paying back the loan on behalf of Supported employers in Hawaii.

This is a huge win for the Hawaii Chamber of Commerce and the rest of the Hawaiian business community as it is the companies that are legally on the hook to repay that loan.

The unemployment system is designed to be funded through taxes levied by employers, with the proceeds held in a trust fund used to pay unemployment claims during difficult times. When the trust fund runs out – which happened in both the Great Recession and the pandemic – the state can borrow from the federal government to pay for workers’ unemployment claims.

During the Great Recession, the state borrowed modest amounts to keep Hawaii’s unemployment system going, and employers repaid that money. However, the board argues that the repayment would be too much of a burden on employers this time around.

Legislature is compassionate, notes that it was the state that stopped tourism to Hawaii last year in an attempt to slow the spread of COVID-19. Many employers had no choice but to impose layoffs.

Both the House and Senate are now proposing to repay the federal loan with interest on behalf of Hawaii employers, something the state has never done before.

In another victory for local business interests, a watered-down proposal to raise the state minimum wage to $ 12 an hour next year is almost certainly dead.

As recently as last month, Ige said he was against the idea of ​​repaying the unemployment loan because the revenue projections at the time indicated that the state did not have enough money.

However, the governor reversed course on Monday, saying, “We are now supporting the repayment of the loan. We believe this is the best way to help many employers across the state manage the cost of the unemployment system. “

Ige told reporters he was initially hesitant about the community’s many other needs, but said “significant” federal assistance has arrived or is on the way to help with housing, childcare, food bills, unemployment benefits and health insurance coverage.

In another victory for local business interests, a watered-down proposal to raise the state minimum wage to $ 12 an hour next year is almost certainly dead.

The attorneys had originally aimed for a hike to $ 15 or even $ 17 an hour, but the House refused to consider even $ 12 an hour. That means Hawaii – one of the nation’s most expensive places to live – will continue to operate on a minimum wage of $ 10.10 an hour.

To understand what an extraordinary coup this is for the local business community, consider that the minimum wage in Arizona, Colorado, Connecticut, Oregon, and Maine is already $ 12 an hour, and the minimum wage in California, Massachusetts, and Washington.

The chamber effectively accepted a proposal last year to raise the state minimum wage to $ 13 an hour by 2024, but now says the proposed increase to $ 12 next year “will undermine efforts to get Hawaii’s economy back in.” To bring momentum “.

Public workers will see funding restored

As for the public workforce, House lawmakers in their draft budget cut funding for hundreds of public sector vacancies, but House and Senate leaders already admit they plan on a large part to restore this funding.

Another important piece of the budget puzzle is what to do with the state-required annual deposit into the Hawaii Employer-Union Health Benefits Trust Fund to help meet the cost of future health benefits for government employees and retirees.

Lei adorned Queen Liliuokalani's bronze hand on the Makai side of the Hawaii State Capitol.A lei in the hand of the statue of Queen Liliuokalani on the Makai side of the State Capitol building. Legislators are still weeks away from finalizing the state budget for the next two years. Cory Lum / Civil Beat

These payments are required under a state law passed by Ige in 2013 to provide enough cash to cover future healthcare costs for public sector employees. But the pandemic budget crisis prompted Ige to use his emergency powers to defer payments of $ 408 million in the fund last year.

Now the government is calling on lawmakers to postpone further payments of $ 1.4 billion to the EUTF over the four years beginning July 1.

According to Craig Hirai, director of the State Department of Budget and Finance, delaying these payments for the state and counties will “give the state and other public employers flexibility to address budget deficits while the economy recovers.”

Senate chairman Donovan Dela Cruz said in an interview Monday the Senate budget included money to make these EUTF payments for the next two years, which would total around $ 750 million.

House Finance Committee chair Sylvia Luke said last month she also included money for EUTF payments in the House’s draft budget but later said she was wrong.

Luke said the House decided not to fund the EUTF payments because they feared they might violate requirements for the federal ARPA bailout.

That means the House and Senate will have to decide in the final weeks of the session how much to budget for future healthcare costs.

Ways and Means Chairman Donovan M. Dela Cruz during the hearing on emergency funding funding in response to future health concerns from the COVID-19 coronavirus.Senator Donovan Dela Cruz at a meeting of the Senate Committee on Pathways and Means last year. Cory Lum / Civil Beat

Meanwhile, Dela Cruz is putting forward a package of tax increases that could help him raise extra cash to replenish the state’s emergency and budget reserve fund, also known as the “Rainy Day” fund. Ige used up most of that fund to cover state government costs during the pandemic.

“Whatever we can raise, let’s try to see if we can at least start building it up again,” said Dela Cruz of the Rainy Days Fund. “It may be slow, but if it’s possible we think we should.”

Some of these tax proposals are included in House Bill 58, which would expand the scope of Hawaii’s estate tax and increase state transportation tax on sales of real estate worth more than $ 4 million.

HB 58 would also temporarily suspend a number of tax exemptions that would raise an estimated $ 45-50 million a year for the next two years by applying excise tax to transactions that are now exempt.

The State Tax Department calculates that the proposed increase in inheritance tax in HB 58 would allow the state to collect about $ 25 million more per year, while the proposed move tax increase for the next two would be more than $ 40 million Dollars a year would bring in years.

The Senate Committee on Ways and Means has also given preliminary approval for a proposed increase in the tax on investment income for individuals and businesses. This move would earn the state an additional $ 55 to 60 million annually, according to estimates by the tax authority.

The House has also tabled bills to increase capital gains tax and expand the reach of state inheritance tax, suggesting these measures have a pretty good chance of being passed.

Senator Kurt Fevella AirBnB bill.GOP Senator Kurt Fevella in the Senate in 2019. Cory Lum / Civil Beat

If the legislature approves tax increases, there are often no elections in odd years. But the tax hikes this year don’t seem to be particularly arousing partisan passions.

State Senator Kurt Fevella, the only Republican in the Senate, has so far voted in favor of increasing capital gains tax as well as increasing inheritance and transport taxes.

In the State House, three of the four Republicans voted against the increase in inheritance tax, but only two of the four members of the GOP House voted against the increase in capital gains tax.

Val Okimoto, chairman of the Republican minority of the House of Representatives, was one of those who voted tentatively to increase capital gains but said she did so because she wanted to join the conference committee negotiations at the end of the session on the bill .

Legislators voting against a measure will not be appointed to the conference committee where the House and Senate work out the final details of this bill.

“Right now is not the time for a tax hike,” she said. “We have companies that are suffering.”


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