Wednesday | December 13, 2017
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Right-size your budget

Updated: 
May 18, 2017 - 12:05am

Dear mayor and county council,

The Hawaii Island Chamber, representing its 275 businesses and community members on the island, is alarmed to see that the proposed 2017 – 2018 Hawaii County budget has reached a level of $491.2 million resulting in probable tax increases of 6.1 percent.

In context, we note the following:

* The 2000 – 2001 county budget was $175 million. This year’s proposed budget is a 280 percent increase over the budget of just 17 years ago.

* Population has grown from approximately 149,000 to 198,000 over that period.

* On a prorated basis this works out to a county budget of $1,200/person in 2000 and $2,500/person in 2017, an increase of 108 percent.

* The average inflation rate has been just over 2 percent per year over the same period.

In short, the growth in budget cannot be explained by a combination of population growth and inflation. Although the county may now be operating differently than it did in 2000, as residents it is difficult for us to see improvements in services or new services that explain the differences.

We see from reports and understand the challenge of employment cost increases set at the state level and loss of TAT funds also at the state level. As businesses we, too, have increases passed on to us from suppliers, governments and others on a regular basis. Beyond that we find that competitive challenges from the internet, competitors in our own market and others drive us to increase customer service and add new services. While it is widely believed that businesses simply pass on higher costs to their customers, this is not often possible and certainly not possible on a cost-for-cost basis. In that sense, all organizations – government, private and NGO – are in the same situation. We all face the same basic issues although they may come in different forms.

When we see new or increased costs coming to us, businesses have limited options. We may be able to increase our prices somewhat; we may be able to find ways to become more efficient; we may find that certain services can no longer be offered; we may find it necessary to reduce employment either replacing lost employees with new equipment or reduced services or we may simply have to absorb the new costs through reductions in margin. In essence, government is in a similar position in that there is a point where it can no longer pass on the effect of higher employment costs or lower revenues due to citizen resistance. We believe that this is such an occasion.

In context, the economy is strong and has been strengthening now for several years. Real estate prices are on the rise and have been rising for several years. If under this condition, the county cannot make its original budget, the budget needs to be reduced to the point where it is not in deficit and does not require an increase in taxes. This, the chamber believes, is what is required for the county to right-size its budget.

If taxes must be raised when economic times are strong, we shudder to think of what will happen when the inevitable down turn arrives. Better to prepare for that scenario by right-sizing when times are good. We need a budget that the county (its residents) can truly afford.

Thank you for this opportunity to express our thoughts and concerns.

Mike Kaleikini is president of the Hawaii Chamber of Commerce

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