Hawaii’s Shadow Budget
Recently there has been criticism heaped on the Supreme Court of the United Sates for making very important rulings via a “shadow docket” consisting of motions for various kinds of emergency relief. Those rulings are typically made on the papers alone, without the benefit of oral argument, and normally do not contain discussion of the precedents or the reasoning in the “normal” opinions of the Court. Here in Hawaii, we have a shadow budget, not a shadow docket. First, this year’s budget includes $200 million that the Governor can spend at his discretion. The big issue with the $200 million isn’t the basic concept – governors have been given discretionary funds before – but the way that line made its way into the budget bill. Specifically, it wasn’t in the budget bill when the House-Senate conference committee voted to approve it. The conference committee did vote to pass the budget bill “with amendments,” however, and the $200 million was then added to the bill before both houses held final votes on it a few days later, as House Finance Chair Kyle Yamashita acknowledged. That left a bad taste in the mouth of some of the House members, especially, who vented their displeasure on the House floor and voted against the bill. Next, $50 million was included in the budget for a first responders’ training facility near Mililani. It was included in an appropriation for the High Technology Development Corporation. Earlier in the session, however, lawmakers had considered a first responders technology campus. Rep. Amy Perruso, chair of the House Higher Education and Technology Committee, held hearings on the bill and found out that Honolulu Police Department had no intention to use the facility. “We currently have the facilities … this bill proposes to create,” HPD testified. Rep. Perruso’s committee killed the bill. But some senators refused to take no for an answer, and through a “legislative adjustment” process added the appropriation to the budget bill anyway. And there was retribution for a key dissenter. The legislature passed a bill changing the legal requirements for membership on the board, which would have the effect of booting Vassilis Syrmos, one of the members of the HTDC’s board of directors critical of the first responders’ park. (The language kicking out Mr. Symos wasn’t in that bill, HB 999, until the conference draft.) And then, how about our public school teachers? In HB 1004, lawmakers funded $187 million in the upcoming biennium to fund negotiated raises for unionized teachers. But the budget bill taketh away what that bill giveth: the budget bill contains a $167 million reduction of the Department of Education’s budget. Rep. Jeanne Kapela complained that the budget “continues the historic underfunding of our public education system.” And finally, the budget process had many similarities to “ready, fire, aim.” As former Senator Russell Ruderman pointed out in a Civil Beat article, the Legislature’s vote to approve the budget bill was held on May 1. The session ended May 4. The final worksheets for the budget were released on May 15. “The budget bill was not finished by the deadline,” Ruderman says, “and the ’leadership’ insisted that members vote on it anyway, even though many important expenditures were still blank. That is, they voted on a budget bill that they had not read, because it wasn’t written yet!” Supreme Court, you have your shadow docket; we have our shadow budget. Which is more mysterious and arcane? More importantly, what’s wrong with this picture?
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GET on Health Care
One of the bills in this past legislative session that fell to the cutting room floor when it probably shouldn’t have was Senate Bill 1035, which would have exempted medical services provided by health care providers if the services were paid for by Medicaid, Medicare, or TRICARE (the healthcare system for the uniformed services). At first, it looks like a dumb bill. Yes, health care providers get paid for their services, and they pay general excise tax (GET) on those services. So do most other providers of services like lawyers, accountants, and computer repair shops. And besides, the doctors and other providers are rich anyway, so why do they need a tax break? But consider this. Many doctors work at hospitals. Some of them could be considered wealthy depending on how you define wealthy. But the GET is not in play here at all. It’s not imposed on the doctors, nor is it imposed on the hospitals. Why? The doctors as employees of the hospital don’t pay GET because employees don’t pay GET on their wages. That’s why most of us poor saps who trudge into work every day and collect a paycheck a few times a month don’t need to worry about GET. For the hospitals, those now in Hawaii are either government entities (Hawaii Health Systems Corporation hospitals) or nonprofit organizations (Queen’s, Kaiser, Kapiolani are examples). Government entities don’t pay GET because the government doesn’t tax itself. Nonprofits don’t pay GET because the tax law says that nonprofits get a tax exemption for money they make for activities that are central to their exempt purpose. Being a hospital, infirmary, or sanitarium “as such” counts as an exempt purpose in the GET law, so the payments the hospital gets for medical services beat the tax. The tax still catches income from any side hustles such as parking fees or vending machines, but that revenue is peanuts compared to payments for medicine and medical services. So, let’s go back to doctors and other healthcare professionals. If they practice with a nonprofit hospital, then the GET doesn’t apply either to the hospital or to the professionals. If they open up their own clinic or are in solo practice, the GET applies with full force. Medicaid, Medicare, and TRICARE pay the same money for the same medical procedures regardless of who performs them, and they require the recipients of that money to just take it and be content with it. When GET is applied to the medical bills, the laws governing Medicaid, Medicare, and TRICARE prohibit the medical professionals from passing that tax on to the patient (or anyone else). Does anyone other than me think that there’s something wrong with this picture? Even if you might not have sympathy for the healthcare professionals in general, it does seem that doctors and other health care professionals in private practice, who are especially important to support Neighbor Islands and rural communities, are getting the short end of the stick for no good reason. Maybe our lawmakers can do something about that next legislative session. Another Rainy Day Slush Fund
Many of us in Hawaii are aware that we have an Emergency and Budget Reserve Fund, enshrined in chapter 328L, Hawaii Revised Statutes, to save money for a “rainy day,” that is to say, an emergency. In the most recent legislative session, the state budget bill provides for an additional one billion dollars to be socked away into that fund, $500 million a year. But, as it turns out, that’s not the only “reserve fund” we have. As the Department of Budget and Finance kindly explains on its website, we have the Hawaii Hurricane Relief Fund (HHRF). This fund was set up in 1993 to provide hurricane insurance coverage for property owners here in Hawaii Nei in case the private insurance market proved unreliable. This was thought to be a good idea when Hurricane Iniki whacked us in 1992. In the years since Iniki, however, private insurers returned to the market. The HHRF shut down in 2002. Section 431P-16(i), HRS, contemplates that when the HHRF dissolves, any net moneys remaining in the fund, after the payment of debts and other obligations, will go back to the State general fund. Did that happen? No. Instead of dissolving the HHRF when it was clear that it was no longer needed, State officials decided to keep the money – just in case. The Department of Budget and Finance says that there is now $186.7 million left in the fund. A little more than ten years ago, lawmakers did in fact tap into the fund. After the State’s budget took some hits from the Great Recession of 2008, laws passed in 2010 and 2011 appropriated millions of dollars from the HHRF to restore public school instructional days when our government found it necessary to furlough state workers to make ends meet. (Do you remember “Furlough Fridays”?) The law also allowed the Governor to tap into the HHRF fund to maintain program levels for essential government services, but required general excise tax revenues to be diverted in fiscal years 2014 and 2015 in order to pay back the fund. As a result, we now have $186.7 million in this “just in case” fund that not too many people know about. Our state government is taxing us, the taxpayers, at a very high rate to obtain money that just sits around doing nothing. Not only are we failing to pull down federal moneys that have been made available for us, as we have written about on several occasions before, but we are squirreling away tens or hundreds of millions of dollars to gather dust in some bank somewhere, rather than putting the money to use fulfilling basic needs. Obviously, our lawmakers were aware of this secret fund, as they used the money in 2010-11. I wonder if our lawmakers today know about this as well. If they do, why don’t they demand that the HHRF be dissolved with the balance of the fund transferred to the general fund, as the law requires? Certainly, there is a need for some money to be kept aside just in case, but we already have a rainy day fund for just that purpose. We fed $500 million to that fund last year and are on track to stuff it with another billion dollars this and next year. Let’s make it easier for everyone. If we are going to put money aside just in case, let’s have it in one place, the official Emergency and Budget Reserve Fund. That way everyone knows where it is, why it is there, and how much is set aside. No hoarding cash away in slush funds! |
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