Projected Budget Shortfall Reduced: Furloughs, Paycuts Remain on Horizon

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More money is flowing into Hawai‘i from federal coffers and a moderately buoyed tourism industry, which Governor David Ige said will lessen both the extent and sting of budget cuts his administration proposed in December.

Speaking at a press conference Tuesday, the governor said further federal aid could result in a second postponement of state furloughs, which have already been bumped from January to July. However, he was noncommittal when asked whether a projected $300 million in added revenue to this year’s budget, and $2 billion over the next seven years, would halt any plans to cut pay to state employees.

“We need to see labor savings right now based on the current revenue forecast we have,” said Ige, referencing a yearly budget shortfall still predicted to fall in the range of $1 billion. “We have deferred any furloughs or labor savings until July 1. Nothing will happen prior to that.”

“Our policy is not to negotiate through the media.”

Increased revenue projections have already allowed the administration to roll back cuts to the Hawai‘i Department of Education budget from 10% to 2.5%, a difference of $123 million.

Another $1.9 trillion in nationwide coronavirus aid that appears likely under the Biden administration could extensively limit the need for labor savings in Hawai‘i, depending on what restrictions accompany its disbursal.

The governor said the state needs to be able to use federal coronavirus aid to offset the budget shortfalls it has created. This is a freedom that was not afforded in previous coronavirus relief packages, which focused the money narrowly toward COVID-specific response.

“(President) Biden’s package has talked about direct aid to states with flexibility,” Ige said. “That is the state’s number one priority.”

While budget prospects have improved, January revenues were still down 9.4% year-over-year. The state Council on Revenues projects Hawai‘i’s economy will not return to pre-pandemic performance until 2024.

Beyond federal aid, the biggest potential economic boon lay with the revival of the tourism industry, which is now producing between 7K and 10K visitor arrivals daily. That ranges loosely between approximately 25% and 33% of pre-pandemic visitor traffic.

Vaccine programs across the state and country will theoretically aid the return of tourism, though there is no indication yet that vaccinated individuals would be able to roam freely without the threat of quarantine. The science behind a vaccinated person’s potential to carry and spread COVID-19 while being immune to it yet remains a mystery.

Ige said the slow rollout of vaccines in Hawai‘i has resulted from a lack of available doses. The state, he continued, currently has 100 operational sites and is capable of vaccinating 70K residents weekly. That number could be ramped up over 100K per week if necessary, but the federal government is currently providing around only 40K shots to Hawai‘i every seven days.

The Federal Emergency Management Agency (FEMA) has set up a grant program to cover the cost of vaccine rollouts in their entirety. Hawai‘i has applied for $175 million to aid its efforts in this regard.

The state is also applying for funds to help cover unemployment and working capital loans used to cover payroll, which total a combined $1.45 billion. Any such funding it receives will impact future budgetary shortfalls and the subsequent need for labor savings.

Collective bargaining negotiations continue between state officials and labor leaders, as union contracts are set to expire on June 30, 2021.