Vetoes from Hawaii’s governor cut some bond spending

Hawaii Gov. David Ige described his lame-duck session as governor as cooperative even as he released a record number of vetoes.

Ige, who terms out in December after eight years in office, vetoed 26 measures entirely and line-item vetoed two items in the state’s supplemental budget for fiscal 2021-23.

The legislative session demonstrated “that we can do great things when we work together,” Ige said during a press briefing, adding that the bills passed “will help improve the quality of life for Hawaii residents” and “protect public health, revive the state’s economy, and strengthen our communities.”

House Speaker Scott Saiki didn’t return a request for comment, but told Honolulu Civil Beat that he and Senate President Ron Kouchi had agreed there would be no veto overrides this year. Saiki said they may revive some bills next year and fix technical flaws identified by Ige, who had said many of the bills he vetoed had “legal, procedural and compliance issues.”

In Hawaii, political disagreements are usually intraparty fights; Ige is a Democrat, as are 71 of the 76 members of the state legislature.

Like most states, this year’s budget process benefitted from a quick reversal of fiscal fortune with higher-than-anticipated revenues combined with the infusion of cash from federal coronavirus relief funds and stark measures implemented early in the COVID-19 pandemic.

The Hawaii Council on Revenues reported on May 26 that revenues for fiscal 2022 were expected to be 28% higher than the prior year for a total of $9.2 billion.

Tourism, the lifeblood of the state economy, is recovering strongly from the pandemic. In April, 818,268 visitors came to the Hawaiian Islands, representing a 96.3% percent recovery compared to April 2019, according to the Department of Business, Economic Development and Tourism. In April 2020, amid strict pandemic quarantine restrictions, only 4,564 visitors entered Hawaii.

Anticipating several years of shortfalls, in 2020 the Legislature had authorized general fund to general obligation bond swaps, special fund transfers, a $345 million transfer from the Emergency and Budget Reserve Fund, which increased the general fund by $648 million, according to the governor’s message in the fiscal 2021-23 supplemental budget.

Hawaii’s fiscal year 2020 general fund balance ballooned to $1 billion, but Ige wrote in his January budget message that was needed to support operations at the beginning of fiscal 2021.

This year’s session was focused on replenishing resources to programs slashed under the threat of the pandemic.

Ige employed a line-item veto to strike out all appropriations of the Coronavirus State and Local Relief funds allocated through the American Rescue Plan Act, ticking off three reasons, including that the legislature over-appropriated the funds by more than $104 million.

Hawaii received a total of $1.6 billion in federal relief funds over the two-year biennium and lawmakers had appropriated $400 million in the supplemental budget, Ige said.

Like last year, Ige said, part of the issue was making sure the allocations fit federal guidelines for the use of the money.

Ige line-item vetoed CARES Act funding last year, saying Hawaii lawmakers had designated federal relief funds toward paying down bond debt and replenishing reserves, which the U.S. Treasury disallowed after Hawaii lawmakers had approved the budget.

This year, Ige said the Legislature did not comply with the requirement that funds be proportionally allocated to the University of Hawaii and the Department of Education to fund elementary and secondary schools. To meet the so-called “maintenance of effort” requirements, funds needed to be allocated to UH and DOE to increase their proportional levels of funding, according to the governor.

His proposals increased funding to UH and decreased funding to the K-12 schools. For the latter, he said the $275 million was twice as much as he thought school officials could spend in a year on repairs and maintenance. Typically, they spend half that, he said.

He also line-item vetoed lawmakers CARES Act appropriation to reallocate funds to the Hawaii Tourism Authority. The money, Ige said, would replace funding to the Authority he had vetoed in another measure because the “gut and replace” procedure the Legislature had employed to pass House Bill 1147 was unconstitutional.

A couple of measures that would have involved bond issuance also hit the cutting room floor.

Ige reduced the amount appropriated to the Hawaii Emergency Management Agency for the first responder technology campus to $16.6 million from $51.6 million in the supplemental budget, and also line-item vetoed approval of $17.8 million in general obligation bonds for the plans, design and land acquisition for the campus and cybersecurity data center.

“Planning and permitting for the campus is still in the initial stages,” Ige said. “A masterplan must be prepared to subdivide the campus to make possible the participation and development of the facilities by non-state agencies. It is highly unlikely these steps can be completed before funding for the project lapses in June 2024.”

MauiGrown Coffee also will lose its opportunity to have $13 million in special purpose revenue bonds issued through a state conduit as a result of Ige’s veto of Senate Bill 2357, which would have extended a measure passed in 2017 that set a five-year limit to issue such bonds.

The measure would have been in conflict with a bill floated by the Legislature this session that would have dedicated all of the state’s private activity bonds for housing-related purposes, though that measure ultimately didn’t pass.

Ige said he vetoed the MauiGrown extension because it conflicts with the 2013 Hawaii law that governs the issuance of special revenue bonds. He pointed to a chapter that prohibits authorization of such debt for a period exceeding five years of its enactment.

Senate Bill 3201, a bill intending to align the state’s treatment of general excise taxes regarding nonprofits with federal tax law, was nixed by Ige’s veto pen with the governor citing unintended consequences. The intent was to exempt nonprofits from the GET, but could have subjected passive income, like federal grants received by the University of Hawaii, to the state tax.

“Enacting the bill would negatively impact the general public, public entities and nonprofit organizations,” Ige said.

The Department of Taxation also estimated the measure would result in a steady decrease in general funds growing from $1.4 million in fiscal year 2022-2023 to a loss of $4.3 million by 2027-28, he said.