Honolulu Advertiser Second Opinion column by Cliff Slater


April 2, 2001






(1) See table below.










(2) Comparison of 1984 and 1999 State Budgets in 1) unadjusted dollars, 2) with the 1984 budget in 1999 dollars, and 3) with the 1984 budget in 1999 dollars and also adjusted up to allow for the subsequent growth in population.



(3) State Department of Labor & Industrial Relations' Research & Statistics Office Historical Jobcount Series, 1980-2000

(4) State Data Book, 1999, Table 1.06.

(5) Estimate based on $50,000 per employee including all benefits. This may well be a low estimate.

(6) Fiscal Accountability Audit of the Department of Education: Analysis of Selected School Expenditures. Report No. 00-14. September 2000. The Auditor, State of Hawaii.


Our legislators’ dilemma


The Tax Foundation’s latest estimate of the Hawaii State budget situation (1) shows that our legislators face some unpleasant decisions in the next few weeks.

Even if our legislators were to grant no raises at all to our public workers (including teachers) the state budget will still be in deficit—forecast tax revenues will be less than forecast spending. Granting public workers the raises that have been negotiated and/or demanded on top of the basic spending would lead to deficits of around $200 million annually. Obviously, something has to give.

Legislators are faced with unpleasant choices. Either raise taxes, or cut basic spending, or do some of both.

In considering cutting spending, one useful way to look at state spending is to review prior years’ outlays and then allow for Hawaii’s inflation and population changes. In short, look at state spending in real dollars per capita over time. (See footnote 2).

When we do that and compare 1984 spending with that of 1999, we see state spending is up 40%, or $1.85 billion—even allowing for inflation and population changes. There is a hint here that there may be some fat in such an alarmingly high increase. After all, if we are looking for $200 million to balance the budget that is only around 10% of what real spending has increased over the past 15 years.

Relatively speaking, the Cayetano Administration has held spending in check. However, it followed the Waihee Administration, one with all the frugality of sailors on shore leave.

All this is borne out by the number of state employees we now have. When the Waihee Administration took office we had 46,500 state employees and that grew to 65,000 by the time he left. Under the Cayetano Administration, it has grown to 67,000. (3)

If we adjust the 46,500 state employees Waihee inherited upwards for the 15% Hawaii population growth during this time (4), then we could possibly justify 53,500 state jobs. We actually have 12,000 more than that. The cost of these extra state employees is around $600 million annually. (5)

There is even fat in education, for example. We spend $6,900 per student(6), or $170,000 per classroom of 25. One has to wonder where all that public school money goes. Allow say, one and a quarter teachers at $50,000 plus some miscellaneous books and help and it is tough to get past $80,000—less than half what we actually spend in total. Maybe this is the real “trickle down” economics; education funding evaporating on the way to the classroom.

So what is our way out of this mess? It’s simple—but unlikely.

Legislators could bite the bullet and commit to collective bargaining reform. This would take a little time to implement but, in the meantime, legislators could work out a plan with public workers so that pay increases would be implemented as state worker numbers decline.

Of course, taking this route means taking on the public worker union leaders and this clashes with legislators’ primary goal in life—getting reelected. Reelection in this state has always meant getting public worker union support. On the other hand, raising taxes will lose the support of voters.

Not a pretty picture for a legislator.

Cliff Slater is a regular columnist whose footnoted columns are at www.lava.net/cslater


State Budget Estimate in $millions

Fiscal Year                                          2001                2002             2003


Revenues                                            $3,432             $3,518          $3,681

Expenditures                                       $3,411             $3,580          $3,724

BALANCE                                            $21                $(62)             $(43)

Less Other costs:

Emergency Appropriations

and Collective Bargaining                       $229                $184             $285


Operating Surplus/(Deficit)              $(208)                $(246)          $(328)

Cumulative Balance                                 $64              $(182)           $(509)