Posted tagged ‘budget’

Guv agrees to pay losing bidders

July 13, 2011

The last batch of bills signed by Gov. Neil Abercrombie included one of the hold-your-nose gems of this year’s Legislature — HB 985, which allows the state to reimburse some losing bidders on public works projects  for the cost of preparing their bids.

The measure, which Abercrombie approved without comment, allows the state to spread around more money without evidence of public good to contractors who also happen to be generous campaign contributors to legislators and the governor.

The bill was introduced by Maui Reps. Angus McKelvey, Gil Keith-Agaran, Joe Souki and Kyle Yamashita, along with Kailua Rep. Pono Chong.

The reimbursements would apply to design-build contracts on projects worth $1 million or more, with the top three pre-qualified bidders eligible for repayment on the cost of preparing conceptual design drawings.

Sponsors said such welfare for losing contractors would encourage more small local companies to submit bids, but none of the House and Senate committees that approved the bill offered evidence that other jurisdictions have successfully used such methods to either increase the quality of competition or reduce contract costs.

Paying losing bidders is virtually unheard of in the private sector; reputable contractors view bid preparation as a cost of doing business and have it down to a science.

Testimony in support of the bill came mostly from architects, engineers and other consultants known to make political donations that obviously pay off nicely for them.

The measure was opposed by the City and County of Honolulu, which said, “Codifying a rigid process that destroys flexibility would be costly and disadvantageous.”

HB 985 received unanimous final passage in the House and drew “no” votes in the Senate only from Sens. Clayton Hee, Donna Mercado Kim, Sam Slom and Malama Solomon.

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The chicken and egg of tourism promotion

June 28, 2011

Gov. Neil Abercrombie raised hackles in the local visitor industry when he proposed to cut $10 million from the Hawai‘i Tourism’s Authority’s $81 million allocation to help balance the state budget, and again when he specifically criticized the $4 million HTA spends to bring the Pro Bowl to Honolulu.

The Legislature got in on the act by claiming a bigger portion of the hotel room tax for the state general fund by capping HTA’s share at $69 million.

Washington state has taken that strategy of budget balancing to the extreme by ending all state funding for tourism promotion by the end of the fiscal year, leaving the function of marketing to visitors entirely to the industry.

According to an AP story, the state’s Senate Republican Leader Mike Hewitt made some of the same points Abercrombie did in criticizing the Pro Bowl, saying, “When you’re taking kids off health care and raising tuition, you have to make some tough decisions.”

There are limits in comparing the two states, as tourism isn’t as central to Washington’s economy as it is to Hawai‘i’s and that state was spending only $2 million on promotion before funds were cut.

But it points up the fundamental question on tourism promotion in recessionary times: Do you cut marketing along with other state spending to help balance the budget, or are you better off doubling down on promotion to bring in more visitor spending and tax revenues that help dig out of the recession?

According to the AP story, the country is divided between the two approaches, with states such as New York and Arizona cutting back sharply while others like Michigan are stepping up spending on marketing.

In Hawai‘i, there’s little question that the expected devastating blow to local tourism from the Japan earthquake and tsunami has been softened by increasing promotion in other markets.

This isn’t a good argument to keep having every time a recession rolls around.

The smart move would be to have an objective and cool-headed discussion as the economy rebounds so we have a clear strategy in place one way or the other the next time we face a recession.

Abercrombie’s budget strategy is on target

June 24, 2011

Gov. Neil Abercrombie is on the right track in ordering state departments to cover the remaining $50 million budget shortfall for 2012 by finding entire programs that can be eliminated instead of making across-the-board cuts.

Slashing across the board is a poor management practice that sidesteps any setting of priorities and bleeds every program equally without regard for its relative value to the state’s health and welfare.

Former Gov. Linda Lingle relied on this approach as state revenues plunged during the recession, and as a result, many of the most important state agencies are left without the resources to adequately fulfill their core functions.

Every program supported by the state has its constituency and terminating them can be painful, as with the administration’s recent decision to end state subsidies for Vanpools Hawai‘i.

This is a good program that gets cars off of our congested roads, but better to eliminate expenses like these that are toward the edges of the of the state’s primary responsibilities than to cut deeper than necessary into core functions such as education, public health and the social safety net.

As always, the devil is in the details and whatever programs state agencies target for elimination are going to make some people angry.

But the governor’s  insistence on setting clear priorities that preserve the most funding where it is most needed is a welcome step.

Kapiolani parking raises hackles

June 3, 2011

Freshman Councilman Stanley Chang is in hot water with some of his Waikiki constituents for being slow to react to the Carlisle administration’s proposal to substantially raise parking rates around Kapiolani Park.

The administration is seeking to collect $2 million a year for park maintenance by raising meter rates around Kapiolani and Aala parks from 50 cents an hour to $1 and requiring that the meters be fed 24/7 instead of just during daytime. The higher fees would presumably be extended in the future to other parks such as Ala Moana.

The increases drew some opposition from Oahu residents who use the park and nearby beach as a place to enjoy relatively inexpensive time with friends and families.

But most of the outrage came from residents of the condos that surround Kapiolani Park, who have few other places to park.

The higher rates — and especially extending them all night — could cost them hundreds of dollars a month, which they regard as an unfairly steep budget-balancing burden placed on only a few.

Chang threw in with the opponents and announced this week that he had persuaded his colleagues to recommit Bill 30 to committee at their meeting today, but the critics complain that he was uncommunicative until now and voted for the measure on the first two readings.

They aren’t convinced that Chang’s colleagues won’t throw the junior councilman under a bus and plan to show up at the meeting to apply pressure.

Chang’s handling of the matter seems less than deft and it’ll be interesting to see if it’s just inexperience or the beginning of a pattern.

A hurricane of politics

June 2, 2011

It appears that a decade of drama over the Hurricane Relief Fund may be over.

Gov. Neil Abercrombie signed a bill allowing him to take $42 million from the $117 million hurricane fund to help erase the budget deficit for this fiscal year — and to drain the fund entirely if more is needed.

The hurricane fund has been a subject of endless misunderstandings since it was created to provide windstorm coverage to Hawai‘i homeowners when private insurers left the market after Iniki.

It was funded with premiums collected from homeowners receiving state coverage, which ended when private insurers returned to the market.

Former Gov. Ben Cayetano proposed draining the hurricane surplus during the last recession, arguing that its purpose had been served and the funds should be diverted to other priorities.

He was shot down by opponents led by Republicans, who pushed for the surplus to be returned to homeowners who paid into the fund, a dubious proposition since they’d gotten the insurance they paid for and had no legitimate claim to refunds.

Opponents then shifted their argument to preserving the surplus to pay for damage to public facilities in a future hurricane, but that wasn’t the purpose set by the enabling legislation.

Finally, the argument became holding the money to resume state provided insurance if private insurers leave the market again.

It would be nice to leave a little money in the fund to jump start the program if necessary, but it would be mostly funded with new premiums from homeowners and $117 million is more than needed for a quick restart.

Bond analysts liked the cash reserve that the hurricane surplus represented for the state, but it’s difficult to justify leaving the money idle when the state has bills to pay.

Rep. Belatti on legislative pay raises

May 9, 2011

Rep. Della Au Belatti, a leading critic of HB 575 extending a 5 percent pay cut on legislators, administrators and judges, posted a comment Saturday after most people had stopped following the comment thread on our Friday post, “Legislators extend their pay cuts — for now.”

Belatti was mentioned in some of the comments in that thread, and to make sure contrary views get fair airing, I’m repeating her comment below.

Feel free to post your own comments agreeing or disagreeing with what she has to say, but please observe the courtesy of keeping it on issue rather than personal.

While I get it why many feel it necessary to comment under pseudonyms because of their jobs or other situations, I would like this blog to become a forum where people who wish to use their real names feel comfortable doing so and I give a quick hook to unduly personal attacks against those who do. Thanks for understanding.

Dave, as always, I appreciate your blog; and while I know there are things we disagree on, I too think highly of you and the forum you provide to both elevate and inform the discussion.

First, just to respond a little to the characterization made by “Earl of Sandwich”: the Majority Leader described a yes vote on HB575 as a symbolic vote that provides opportunity and options. More than just “sounding the alarm” on this bill, my no vote on HB575 was also symbolic and a way to highlight the choices that are before us as legislators. As I stated on the floor, I have no objection to a 5% reduction, but how we get there is important. We as legislators need to do a better job of crafting the laws in the first place and then not abuse legislative process so that we are not placed in this awkward situation of passing such a flawed and, in my view, unconstitutional bill.

Second, and more importantly to elevate the conversation and also to respond to “Earl of Sandwich’s” question, the story of salaries does not simply end with the House’s vote on HB575 and the Governor’s potential veto. The rest of the story is also about the TIMING of that veto, whether or not the Legislature goes in to special session, and the whole host of unfinished business that was left undone due to botched conference negotiations.

As noted, the Governor can veto by the 45-day period specified in the State Constitution and the Legislature can come in on July 12th to address those vetoes. He can also veto before July 12th, as nothing in the Constitution prohibits an earlier veto message, and the Constitution permits the Governor to convene a special session of the Legislature or 2/3 of each chamber can by written request call for the convening of special session anytime after adjournment.

Based on this, as far as I can tell, here are the different scenarios:

VETO BEFORE JUNE 29, 2011: If the Governor vetoes HB575 some time, let’s say at least 10 days before June 30, 2011, then presumably the 5% pay cut of 2009 will not be extended and the pay freeze that was set forth will be lifted on July 1, 2011, resulting in pay raises for all executive, judicial and legislative officers. This window of time will then allow the Legislature, if it truly has the political will and both House & Senate leaders really want to extend the 2009 pay freeze & the 5% reduction, enough time to go into session and fix HB575.

VETO AFTER JULY 1, 2011: If the Governor vetoes HB575 after July 1, 2011, the 2009 pay freeze & 5% reduction will have been lifted and all executive, judicial and legislative officers will effectively get pay raises. The Legislature can still go in and then impose 5% reductions. Under this scenario, we, the Legislature can claim it wasn’t our fault that all salaried officers essentially got a pay increase given the veto schedule set forth in the Constitution and the date of effect and repeal of the 2009 pay reduction, but even in light of that pay increase, the Legislature still cut and reduced salaries of all public officers in the spirit of shared sacrifice.

NO VETO: If the Governor punts, then those constitutional questions I raised are still present. Presumably, the Legislature can then fix the more serious constitutional flaws with HB575 (especially the one that would give legislators nearly a $10,000 pay increase in 2014 while keeping judges and executive officers at their 2009 step freeze), but what about the other serious concerns raised by the Judiciary that effectively demonstrate that judges are woefully underpaid? Also, a legislative fix could still result in some type of pay raise between 2012 and 2014 that would undercut and complicate the initial story that legislators extended their 5% pay cuts.

So what’s my solution, my proposal? There’s already been talk about a possible special session because of possible downward projections by the Council of Revenues (although I’m not sure about this given UHERO’s recent report that says Japanese tourism downturn is not going to affect Hawaii’s slow recovery) and because so many bills (upon which there was agreement) did not move due to missed deadlines and botched conference negotiations. The Governor can veto before June 29th, and whether called in by the Governor or the Legislature ourselves, let’s convene a special session to deal with any veto overrides (if there are any), deal with unfinished bills for which there is essentially agreement, and let’s have an honest discussion and clean fix for the matter of public officers’ salaries until the salary commission is set to convene and make its next set of recommendations.

(One postscript and a comment lest any commenter wants to be snarky. (1) As a matter of disclosure, the law firm I work for does have claims against the State in the claims settlement bill that the Legislature failed to pass out. In public statements about a possible special session, references to this claims bill have been made as a reason to return for a special session. I disclosed this matter to the Democratic caucus upon discussions regarding the request by the Governor for both House and Senate to reconsider bills that had failed to make it out of Conference Committee. I believe other colleagues may have firms that also have claims, but I’ll leave it for them to make those disclosures.

(2) Dave, the failure of the claims settlement bill to move out could be the subject of another discussion that focuses on the conduct of the Legislature to deal (or not deal) with bills that should as a matter of policy not be subject to the gamesmanship that is typically associated with conduct of conference negotiations….but I’ll leave that blog topic for you if you are so inspired and want to delve into the matter.)

Legislators extend their pay cuts — for now

May 6, 2011

Well, true to the word of some of our friends who post here, the Legislature extended the 5 percent pay cut on lawmakers, administrators and judges for two more years when the House accepted Senate amendments to HB 575.

I’m glad they did the right thing — for now anyway. The issue may not be settled, with legislators raising ominous questions about “constitutional” problems and some urging Gov. Neil Abercrombie to veto the bill so they can “fix” it.

A veto that resulted in any portion of the frozen pay being restored would blow to smithereens Abercrombie’s credibility with the public on his pitch for shared sacrifice.

Equally problematic would be a legal ruling restoring the pay raises issued by state judges who would benefit, based on pleadings by legislators and administrators who would benefit.

The vast majority of the public isn’t going to buy any arguments about legal complications. They know right from wrong and they see it as simply wrong for top public officials to take pay raises for themselves in a crushing recession while demanding painful sacrifices from everybody else — pay cuts for unionized public workers and tax increases for citizens.

Any complications are the Legislature’s own fault. If there are problems with HB 575, it’s only because legislators waited too long to resolve them and ran out of time.

The awkward entanglements between the pay of legislators and that of administrators and judges were introduced by design when lawmakers crafted the 2006 constitutional amendment creating the state salary commission.


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