By: Jeff Tadashi
In October 2020, Hawaii’s unfunded liabilities for infrastructure and public health benefits rose to $97 billion. Largely due to the pandemic, $97 billion is $9 billion more than the $88 billion in unfunded liabilities calculated in 2019. The pandemic itself did not get Hawaii to an $88 billion debt. This arrival is due to long-standing Democrat economic policies that were only been amplified by the coronavirus lockdowns.
The additional $9 billion debt rising between 2019 and 2020 consists of $1.3 billion for the Honolulu Rail Transit (HRT), $595 million for unemployment insurance, $137 million for Medicaid, $1.4 billion for public pensions, $505 million for the public health benefits, $1.2 billion in bonds, and a $4 billion state general fund shortfall by fiscal 2023. The costs are further deconstructed as follows:
>> Costs for the Honolulu rail project recently spiked by $1.3 billion, due to an extra $832 million in projected construction and related expenses and a $450 million reduction in revenues from its share of the state general excise and transient accommodations taxes.
>> Hawaii’s unemployment fund has borrowed $595 million from the federal government to continue making unemployment payments, since the fund was depleted in May 2020.
>> Medicaid costs nationwide increased by 12.2 percent because of bolstered enrollment due to the spike in unemployment. According to the Kaiser Family Foundation, Hawaii’s costs are an extra $137 million.
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>> The state’s public pension fund had an estimated investment return of only 1 percent for fiscal year 2020, which is far below the target of 7 percent. This low return could increase it’s the pension funds unfunded liabilities by $1.4 billion to $15.4 billion.
>> Hawaii’s public health benefits debt will increase by at least $505 million because the Governor Ige allowed the state and counties to skip their prefunding payments in July 2020. The total likely will be more because of the unrealized investment returns due to the suspended payments.
>> The state has sold a record $995 million in taxable general obligation bonds in 2020 to stimulate the local economy by spending on capital projects. This money will need to be paid back with $246 million in interest.
Governor David Ige has said he will reduce state spending by cutting programs and implementing 10 percent furloughs from fiscal year 2021 -2024, but even then, the state will run out of money by 2024, resulting in a cumulative deficit of $785 million by fiscal 2025. So far, the government has not moved forward with 2021 furloughs. There must be another way found besides asking our neighbors to not be paid. Cutting costs for the Department of Education is also akin to cutting 10-20 years off your lifespan in order to live more comfortably now. Education must be viewed as an investment and not a cost. This is especially true because we are going to hand these problems to our descendants who given cuts to their education may be less intellectually capable of solving them.
Numerous economic and financial experts agree that raising taxes as a means to pay for Hawaii’s debt is the wrong approach. Hawaii already has the highest tax rates in the United States. Taxpayers here were in economic duress due to the tax rates before the pandemic.
Hawaii’s unfunded liabilities will drag down the economy, stifle opportunities and weigh heavily on Hawaii taxpayers now and into the future. These unfunded liabilities are also a root cause for the rising inflation that we are seeing nationwide.
The state’s collapsing economy and increasing debt load should be a wake-up call for Hawaii lawmakers. Our Democrat lawmakers should reduce spending, ease taxes, scale back regulations, and generally make it easier for Hawaii to get back to work. If our current lawmakers ever hope to bring our economy back from the brink, the only way is to cut spending, lower taxes, reduce regulations, rely more on the private sector, and let people get back to work in more jobs than we have now. Opening casinos on Hawaiian Homelands, having a state lottery, and legalizing and taxing cannabis would all help this state fund itself and become much more resilient.
Hawaii residents will be on economic hard times for years, maybe even decades, to come unless Democrats turn against everything they have ever done and reverse their course. Democrats won’t turn and they will lead us to Nuʻuanu Pali economic cliff where they intend to give taxpayers one final higher taxation shove to the state’s economic doom. For Democrats, it is better to rule in economic hell than to serve in economic heaven. They must be voted out.