Setting the stage for a crucial June special session
The legislature’s interrupted 30th session will reconvene June 22nd through July 10th. During its brief May session, the legislature took the actions described below but held off on deciding how to spend the majority of federal COVID emergency funds from the CARES Act.
Crucial decisions now need to be made, not only to address critical needs in our community, but also because CARES Act funds have to be spent by the end of December. Federal law requires that the funds be used to address health and economic conditions related to COVID-19. They can’t be used to plug the holes in the state budget due to revenue short-falls.
The following is a brief recap of how the legislature set the stage for the June 22nd session with decisions made in May.
Appropriating COVID Funds
The legislature passed Senate Bill 75, which made the following appropriations of federal dollars intended to off-set health and economic effects from COVID-19:
$40,000,000 to the state Department of Defense for COVID-19 response, “provided that any COVID-l9 related law enforcement activities are conducted in consultation with the attorney general”
$1,360,000 to the Department of Labor and Industrial Relations (DLIR) for pandemic unemployment assistance
$8,154,000 to DLIR for information technology and staff for the unemployment division
$80,009,671 to Hawaiʻi County as a share of CARES Act funding
$66,598,757 to Maui County as a share of CARES Act funding
$28,715,551 to Kauaʻi County as a share of CARES Act funding
$36,000,000 to the Department of Transportation for for COVID screening and testing
$14,000,000 to the Department of Health for COVID outbreak control and tracing
$635,986,000 to the Emergency Budget Reserve Fund from the CARES Act
In addition, Senate Bill 75 authorized borrowing up to $2.1 billion from the Federal Reserve Municipal Liquidity Facility. This action is also authorized in House Bill 1631.
Executive Budget Cut by 8%
Last year (2019), the legislature passed the biennium budget for all state programs, covering fiscal years 2020 and 2021. Between biennium years, the legislature typically passes a supplemental budget, often with additional funding for new and expanded programs. This year’s supplemental budget bill (House Bill 2200) cut the executive budget for both years of the biennium. For the current year, which will end June 30th, $1.25 billion was whittled from approved spending, reducing the budget to $14.5 billion from $15.8 billion, an 8 percent cut.
Judiciary Budget Cut by 7%
The legislature also cut the biennium budget for state judiciary operations by 7 percent, going from $185 million to $172 million. However, the legislature added $85 million for the judiciary’s capital improvements. This is detailed in Senate bill 3080.
Capital Improvement Budget Cut by 56%
Last year, the legislature passed a big capital improvement project (CIP) budget for the 2020-2021 biennium. In May the legislature passed House Bill 2725, which amended last year’s CIP budget, decreasing it by 56 percent from $4.8 to $2.1 billion.
State Borrowing Authorized
The legislature passed House Bill 1631, which acknowledges and authorizes deficit spending, as allowed by the State Constitution, and approves borrowing up to $2.1 billion from the Federal Reserve Municipal Liquidity Facility to pay for operations approved in House Bill 2200 (the executive budget noted above). HB1631 also approves general obligation (GO) bonds for capital projects.
Raises Delayed for Elected Officials and Appointees
The legislature passed House Bill 117. This bill delays implementation of raises recommended by the State Commission on Salaries that would have gone into effect for the governor and lieutenant governor, judiciary, department heads and deputies on July 1, 2020, and for legislators on January 1, 2021.
Funds Transferred and Borrowing Increased
In Senate Bill 3139, the legislature gathered up special funds and withdrew previously allocated general funds, transferring it all to the Emergency Budget Reserve Fund (EBRF). The legislature allocated $250 million in general funds to the Rental Housing Revolving Fund (RHRF) in 2019 for the current fiscal year, plus nearly $200 million more in accumulated funds. All that will go to the EBRF and, instead, RHRF projects will be funded by GO bonds. General funds amounting to $20 million to develop the stadium will go to the EBRF to be replaced by $170 million in GO bonds. The legislature also rerouted $25 million in special funds for mental health and substance abuse and $8 million from Tobacco Settlement funds to the EBRF.
These transfers are putting more general funds into the EBRF where they can be redeployed for operating expenses. Where general funds had been appropriated for capital projects, they’re replaced with GO bonds to be paid back over time. This would be akin to a homeowner deciding to pay for a new roof with a bank loan (GO bonds) instead of writing a check (general funds).
Budget for the Legislature Increased by 5%
All the bills described above were passed in May. However, in March the legislature conveyed the request for its own operating budget to the governor. House Bill 2661 covers the expenses for the legislature and related offices—the State Auditor, the Legislative Reference Bureau, the Office of the Ombudsman and the State Ethics Commission. The legislature’s budget increased by 5 percent from the $43 million approved for FY2020 last year to the $45 million approved for the FY2021. This is the only bill that the legislature passed so far this year to be signed by the governor.
In a year like no other, the upcoming short session needs to produce a short-list of actions to support individual and economic recovery. One good place to look for priorities is the Hawaiʻi Working Families Coalition’s well-thought-out list of recommendations. The stage is set.
