Hawaii’s educators are asking state lawmakers to bump up funding for education by increasing the general excise tax by 1 percent.
The penny increase sought would bring the state general excise tax to 5 percent on the neighbor islands and 5.5 percent on Oahu. If approved, House Bill 1368, introduced by Rep. Roy Takumi, D-Pearl City, Manana and Waipio, at the request of teachers, would transfer 20 percent of general excise tax revenues to a special fund aimed at funding facilities maintenance and teacher salaries.
Currently, the Department of Education receives about $2 billion, or nearly half the state’s general fund.
Department of Budget and Finance Director Kalbert K. Young submitted late testimony on Tuesday before the House Economic Development and Business Committee stating that the proposal would increase general excise tax revenues by about $823 million. The bill passed the committee Tuesday by a 7-1 vote with one person excused, and next goes to the Education and Finance committees.
While deferring to the Department of Taxation in regard to supporting the 1 percent increase, Young said his department is opposed to creating a special fund within the general fund to be used for special purposes. He also noted opposition to the Department of Education spending the money without appropriation.
“While we continue to recognize the importance of education, educational needs must be weighed against the priorities of the state as a whole through the budget process,” Young testified. “As such, we would not support earmarking GET and use tax revenues for DOE, as we believe that general fund requirements should be reviewed on a statewide basis based on priorities and available resources.”
Takumi said Wednesday the bill introduced is the result of grass-roots efforts at Oahu’s Campbell High School to find ways to better fund schools.
“The purpose is to build awareness in the community that if we want a quality education system in our state we have to pay for it,” he said. He said he supports funding schools, but is not yet sure whether raising the GET is the right mechanism to do so.
Proponents, including numerous teachers and parents, testified that the increase is needed to ensure school facilities are maintained and teachers receive pay that they can survive on without public assistance.
“Hawaii has one of the highest teacher turnover rates in the nation, which is degrading the quality of education for all our children,” testified members of Parents for Public Schools Hawaii. “As advocates for children and families in public education, PPSH is concerned that we cannot develop excellence when 56 percent of teachers are gone within five years, when we lose excellent teachers to higher paying jobs, when vacant teaching positions are difficult to fill, and when many positions are filled with emergency hires who do not meet teacher standards. Our keiki deserve better.”
“Our state has cut every possible ounce of fat from the education budgets,” testified Keaau resident Patti Pinto. “It is time that we raise our revenues and begin to address the problems of substandard school buildings and resources. We cannot continue as we are presently; additional funds are necessary to even begin to solve our many school problems.”
Hawaii’s teachers union, the Hawaii State Teacher Association, said it is not involved and does not endorse the legislation.
Opponents of the bill say any increase to the general excise tax will have profound impact on the state.
“The general excise tax is perhaps the worst tax to increase as far as rates because of its broad-based application,” reads testimony from the Tax Foundation of Hawaii. “Increases in the cost of living, as well as the cost of doing business in the state will drive more and more businesses out of operation and with them the jobs Hawaii’s people need.”
Though just a 1 percent increase to the general excise tax is requested in the legislation, Tax Foundation of Hawaii President Lowell Kalapa said Wednesday that the increase, if computed to a retail sales tax, would equate to a 14 percent to 15 percent tax.
A general excise tax differs from retail sales tax because it is assessed on every transaction, including for services and foods.
Currently, the 4 percent general excise tax equates to about an 11 percent retail sales tax, he said.
“It’s going to raise roughly between $900 million and $1 billion, which is coming out of the economy and that is that much less that can be spent,” he said. “Businesses as consumers pay general excise taxes and the cost has to be recouped and the only thing that can be raised is the price of the items on the shelf.”
There is also concern that the money put into the special account could be raided since there is no designation that it can’t be used elsewhere than education, Kalapa said.
Takumi, while noting he had not read the committee-amended bill, said the legislation, when introduced, stated that all of the 1 percent shall go to education, but did not break out how the funding should be divvied. The bill, as amended, states that the funding is exclusively for public education, but there is no stipulation it can’t be used elsewhere.
“Given the track record, the Legislature will raid it,” Kalapa said, pointing to the state’s use of money from the hurricane and rainy day funds for purposes other than originally intended.
Rather than a GET increase, Kalapa said the department can look within itself for savings by, perhaps, having volunteers conduct facility maintenance and reducing overhead and administrative costs. He agreed the state can also work to increase the number of visitors, currently about 8 million annually spending an estimated $13.9 billion, according to the Hawaii Tourism Authority, equating to some $557,000 in general excise taxes, for funding.
“Are the services we’re providing critical, or are they just frosting on the cake?” Kalapa asked. “We need to sit down and look at the overall situation and approach the problem holistically.”
Further, Kalapa said that the state shouldn’t even be considering a general excise tax increase after Gov. Neil Abercrombie in his state of the state address noted that there was enough surplus to re-establish the hurricane and rainy day funds.
“If that’s the case, then why are we looking at these tax increases?” Kalapa asked. “We don’t have a revenue problem.”