Hawaiis Furloughs, Layoffs, Shortfalls

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Hawaiis Furloughs, Layoffs, Shortfalls

• Making Things Worse
• Lawrence W. Boyd Ph. D.
• University of Hawaii West Oahu Center for Labor
  Education and Research
• June 25, 2009

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Be Afraid, Very Afraid

• Right now we are on the same track as the Great
  Depression
• It was the actions of those making policy that
  made the Great Depression Great
• And these actions were based on ideas.
• Something like the actions of Linda Lingle
• Need to hold bad policy accountable not get
  wrapped up in false choices

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Follow the Money
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What the Council on Revenues Actually Forecast
Source Council on Revenues
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How Big A Problem?

• The actual size of the problem is around
  200,000,000
• Multiples of that are continuously reported.
  (billion deficit)
• This magnifies the problem
• Makes unreasonable measures appear reasonable

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A Word on Legal Authority
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A Further Word on Legal Authority
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What the Governor Says

• 730,000,000 through 2011
• 688,000,000 furloughs
• 42,000,000 Medicaid Cuts
• Repeat Council on Revenues forecast
  586,161,000 through 2011
• THE CUTS ARE 25 PERCENT LARGER THAN THE COUNCILS
  ESTIMATES

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Then There is Page 2
Source Council on Revenues
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Economic Impact

• Larger than necessary
• Magnifies the results because it reduces
  consumption, which goes to the private sector,
  multiple of 1.5 (same as tax increase)
• Roughly 516,000,000 reduction in private sector
  annually
• Just under1 percent decline in growth
• 50 to 60 million reduction in tax revenues
• There are also output effects.Reduced school
  year, delays on projects, unemployment, social
  security etc.

Income
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Examples of Different Cuts to General Funds
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Governors Plan Also Covers Other Special Funds
and Federal Funds
SourceEM_09-03_Interim_Budget_Execution_Policies_
_Instructions_for_FY_10_1st_Quarter
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So Whats Wrong?

• Magnifies problem
• Damages private sector economy and recovery
• Harms government output, efficiency
• Legally dubious on several levels
• Constitutionally does not have the power
• Withholds special funds, federal funds, etc.
• Changes budget, and priorities, across an entire
  biennium

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Alternative

• Avoid this as much as possible
• Minimize rather than maximize problem
• Cuts or tax increases.
• 200,000,000 reduction in expenditures and/or tax
  increase annually
• If needed to fund FY 2009 shortfall use surpluses
  from Rainy Day fund and Hurricane Relief Fund
• Spread these broadly. Reduce expenditures
  throughout entire budget.