Governor David Ige said on Thursday the State may have a $1.5 Billion budget shortfall because of COVID-19. He said the state’s economy is at a standstill.
Carl Bonham, executive director of the University of Hawaii Economic Research Organization estimated that in the year ahead, state tax collections may decline by an unprecedented 10% to 25%. With virtually no visitors coming, and tourism being the state’s primary industry, the Transient Accommodations Tax (TAT, the hotel tax) will drop. With several hundred thousand people not working, income taxes will be down. Gov. Ige said so far, 225,000 residents have filed for unemployment, draining the unemployment insurance trust fund.
Ige said there are many options under discussion. On Tuesday, sources reported that Ige was proposing cutting the salaries of state workers by 20%. The news was not received well by employees, union officials, or legislators. State Senate President Ron Kouchi and State House Speaker Scott Saiki issued a joint statement:
“Although Governor Ige has the unilateral authority to impose furloughs and salary cuts, we do not agree with such action. We urge the Governor to obtain better data and analysis before he makes this decision. We also urge him to act on all alternatives, just as the National Governors Association did when it called on Congress four days ago to provide an additional $500 billion to the 50 states to stabilize state budgets due to tax revenue shortfalls.
Although we disagree with Governor Ige’s proposal, the Legislature will work with him to assess and pursue all options.”
On Thursday, Governor David Ige said all options are on the table. He said state government will no longer look the same going forward, and difficult decisions will have to be made. He said salary cuts or furloughs are the last thing he wants to see, but personnel costs are the biggest part of the state budget. He said “If there are salary cuts to be made, they will start with me, and my cabinet members.”
Gov. Ige noted he’s tasked Hawaiian Electric’s former President, Alan Oshima, with developing an economic recovery plan. He said he will be working with all experts to determine the best course of action to be able to balance the budget. He expects to have a clearer picture in May.