A New Day in Hawai'i: The Lingle to Abercrombie Transition and the State Budget

Abstract

On Dec 5, 2010, the state of Hawai‘i ended eight years of divided government by inaugurating Neil Abercrombie as governor. Two-term Republican Governor Linda Lingle handed the reins of power to Neil Abercrombie, who promised a “New Day for Hawai‘i.” But can this former congressman and close friend of the Obama family deliver for the state? The deck is stacked against the new governor in many ways. The economic downturn that began in 2008 continues to create substantial budgetary headaches, culminating in a $1.3 billion shortfall. Former Governor Lingle’s budget, transmitted to the legislature just before Abercrombie’s inaugural, reflected vastly different priorities than those of the incoming governor. Abercrombie and his people scrambled to introduce an adjustment package shortly after the state legislature convened, but they could only do so much. Among the priorities for funding were capital improvement projects (CIPs), servicing of debt obligations, end the funding of human services programs, all left neglected in the outgoing Republican governor’s budget. Making the problem even more intractable is that the budget passing through the legislature is biennial. Abercrombie won’t get his first full crack at the budget for another two years. Many of his pet projects, including various stimulus measures, will have to wait until the middle of his term to see the light of day.As the budget bill has moved from the state House to the Senate, revenue projections have continued to slip. The anticipated rebound in tourism has not materialized to the degree expected. Moreover, the disaster resulting from the earthquake and tsunami in Japan has reduced the number of Japanese tourists visiting Hawai‘i, further postponing the economic recovery. Consequently, the Senate bill currently under consideration contains deeper cuts than the bill that was passed out of the House. This issue of raising the state’s General Excise Tax and removing exemptions has waned for now, but may be revisited when the bill moves to conference committee. Other major potential sources of revenue being explored include the hurricane relief fund and various other special funds. But for now, the legislature is dealing primarily with spending cuts to deal with the deficit.