GOVERNOR LINGLE UNVEILS TWO-YEAR BUDGET, SIX-YEAR FINANCIAL PLAN

For Immediate Release:  December 18, 2006

HONOLULU – Governor Linda Lingle submitted today to the State Legislature a biennium operating budget for fiscal years 2008 and 2009 (FY08 and FY09) of $20.78 billion, a capital improvement budget of $2.1 billion, and a six-year balanced financial plan.  The budget and financial plan demonstrates the State can live within its means while addressing Hawai`i’s high priority public needs.

The proposed budget supports the Administration’s continued commitment to improve the well-being of our citizens through increased support for education, healthcare, housing, and transportation improvements.  The capital improvement (CIP) budget tackles the backlog of repairs, maintenance and construction of public facilities previously deferred due to insufficient revenues.

The operating budget of $10.28 billion in FY08 and $10.50 billion in FY09 represents an increase of 4.8 percent in the first year and 2.1 percent in the second year. 

“The budget and financial plan represent a continuation of the fiscal principals and policies established during the first term of my Administration,” Governor Lingle said in her message to the Legislature.  “The increases recommended in the operating and CIP budgets reflect the need to address in a fiscally responsible manner those areas where programs have been previously deferred in the years of budget constraints and, more importantly, the need to invest adequate resources in building a vibrant Hawai`i for the years to come.” 

While the economy allows increased spending to address long-overdue needs, the Administration will continue to exercise fiscal prudence to ensure the State meets fixed cost obligations, such as debt service, retiree benefits, and payroll expenses.   The State’s disciplined approach to managing its budget has been favorably recognized by all three major credit rating agencies. 

Under Hawai`i’s biennial budget system, each budget period covers two fiscal years.  This proposed budget covers the period that begins on July 1, 2007 and ends on June 30, 2009.  As required by law, the Governor’s proposed budget must be accompanied by a balanced general fund financial plan for the six-year period of FY07 through FY13.  The financial plan shows a positive ending balance for each year of the six-year period.

Highlights of the budget include:

K-12 EDUCATION

The Lingle-Aiona Administration reaffirms its commitment to public education by allocating a significant portion of the State operating budget to this function during the upcoming biennium.  The Department of Education’s (DOE) operating budget would be $2.313 billion in FY08 and $2.344 billion in FY09 including general, federal and special funds.  An additional $142 million in new funding for operations is recommended for food services, student transportation, special education teachers and assistants, funding for substitute teachers, and purchases of classroom furniture and equipment for new schools and facilities.

These amounts include an additional 161 temporary full-time special education teaching positions, as well as $40 million to replace and provide new instructional equipment, including computers and books, to ensure that teachers and students have the materials they need to learn. 

In addition, the budget includes $51.6 million each year for charter schools, to ensure they receive the same level of support as traditional public schools.  The executive budget proposes $35.2 million each year to operate the public libraries, including additional funds to buy more books and library materials. 

To improve the physical condition of school facilities and build new schools in growing communities, Governor Lingle is requesting a total of $300 million in general obligation bonds.  The new schools are `Ewa Makai Middle School, Kapolei II Elementary School, Wailuku II Elementary School and Lahaina III Elementary School.  School buildings damaged by fire at Kalaheo Elementary and Paia Elementary will be replaced.  Kilauea Elementary will get a new cafeteria and Kapa`a Elementary a new library.  Additional classrooms will be built at Mountain View Elementary, Kaunakakai Elementary and Lana`i High and Elementary.

The Governor’s budget includes a proviso that all additional operating funds for the DOE shall be channeled to the school level into the classroom to directly meet the needs of the teachers and students.

UNIVERSITY OF HAWAI`I

To support the University in its efforts to increase the educational capital of the State, the Administration’s budget includes $1.047 billion in FY08 and $1.126 billion in FY09 for operations of the University of Hawai`i system, $60 million of which is new funding.

Incorporated within these amounts is money to increase the number of nurses trained at our community colleges, to increase the number of certified teachers trained at our College of Education, and continued support for the Construction Academy that helps students prepare for the building trades.  A total of 243 additional positions in FY08 will be provided for professors, teaching assistants and support personnel.

A total of $160 million in general obligation bonds is proposed, of which $35 million is targeted for the first increment of the infrastructure to build the UH West O`ahu campus.  This investment will attract an estimated $100 million in private funds to build out this campus. 

Other projects being recommended include the Wai`anae Education Center operated by Leeward Community College ($4.8 million) and a new Language Building at UH Hilo ($20 million).  Additionally, the budget reflects federal funds for a new Geological Survey Research Center also located at the UH Hilo campus.  A total of $50 million each year is also set aside for systemwide campus renewal and deferred maintenance. 

HOUSING

To continue the Administration’s work in addressing homelessness and affordable housing, an additional $128 million in operating funds and general obligation bonds is proposed during the biennium.  This amount includes $13 million in general funds for support services at homeless shelters, doubling the amount in the current budget.  An additional $10 million in general funds will be used for much-needed maintenance and repair of vacant units in public housing projects.  This will be coupled with $40 million in general obligation bonds for major repairs and renovations to public housing buildings statewide.  An additional $15 million in general obligation bonds for repairs and renovations of elevators in public housing projects is also included.  The Rental Housing Trust Fund will receive an infusion of $50 million in general funds over the two years to leverage with private and non-profit developers to build more affordable rental units.  

In addition to these amounts, $14.4 million is proposed for a North Kona water system to open up state lands for construction of 2,500 affordable homes. 

Also the Administration is accelerating the annual payment ($30 million) to the Department of Hawaiian Home Lands, allowing them to spend $90 million from the Trust Fund during the biennium because of their exceptional track record of placing native Hawaiian families into homes.

HEALTH AND HUMAN SERVICES

For the two fiscal years, $56.8 million in additional funding is targeted for those with developmental or mental health needs.  This amount includes $20 million for outpatient mental health services for over 5,000 adults and $3.1 million for increased staffing at community mental health centers for counseling and treatment.  Also, $20.3 million is targeted to help people with developmental disabilities and $13.4 million to help 2,000 children who need early intervention services.

A total of $1.196 billion in FY08 and $1.247 billion in FY09 is requested to ensure residents in the Medicaid program continue to receive health care services.  The biennium budget includes $5.6 million for healthcare services to the communities of Hana, Moloka`i and Wai`anae.  The 12 community hospitals managed by Hawai`i Health Systems Corporation (HHSC) will receive a State subsidy of $52.1 million in general funds to bridge their financial gap.  An additional $1.5 million each year is set aside for Kahuku Hospital should it affiliate with HHSC.

For health-related capital improvements a total of $77 million is recommended, including $20 million for both years for repairs and renovations to the community hospitals and $57 million to finance safe drinking water, wastewater treatment, and improve Department of Health facilities.

TRANSPORTATION

The Administration’s budget reflects the continuing need to repair and modernize our airports, highways, and harbors.  A total of $715 million is provided in the two-year budget.

The Airports budget of $349 million includes a new connector and automated people mover at Honolulu International Airport ($21.3 million), improvements in the Diamond Head Concourse ($43.3 million), and a cargo building and taxiway at Hilo International ($20.9 million).

The Harbors CIP budget of $27.7 million includes pier improvements at Honolulu and Kahului.

The Highways CIP budget of $339 million includes Honoapi`ilani highway widening on Maui ($46 million), the North South Road on O`ahu ($35 million) Mamalahoa Highway improvement in South Kona ($5 million) and improvements to Waimea Canyon Drive and Koke`e Road on Kaua`i ($2 million).  To relieve traffic congestion in West O`ahu, $17.2 million is requested for the East-West Collector Road in Kapolei.

ENVIRONMENT

Reinforcing the State’s stewardship responsibilities for our natural and cultural resources, an ambitious CIP program totaling $143 million is proposed.  This will allow the State to continue rock fall mitigation on Kaua`i and at Diamond Head, acquire land at Ma`alaea Small Boat Harbor, and retrofit the air conditioning system at `Iolani Palace.  As in past years, the Governor is asking approval of $20 million for state park improvements and $20 million for small harbor improvements.

In addition, $30.8 million is proposed to perform assessment, maintenance and remediation of dams and reservoirs on all islands.

The Department of Land and Natural Resources biennium operating budget of $205 million includes $2 million per year to restore monies to the Invasive Species Council, as well as funds to hire 40 additional Conservation Enforcement Officers, 10 new park rangers, and five parks maintenance personnel. 

TAX RELIEF

The State Constitution requires that the Legislature provide a tax refund or credit to the taxpayers of the state when the general fund exceeds revenues by more than 5 percent for two consecutive years.  We have met that threshold.  The Governor’s six-year financial plan accommodates the opportunity to provide meaningful tax relief and new legislative initiatives that will be presented to the Legislature in the 2007 session.

The Multi-Year Program and Financial Plan and Executive Budget as well as the Budget in Brief can be found on the Department of Budget and Finance Web site at:   www.hawaii.gov/budget .

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For more information, contact:
Georgina Kawamura
Director, Budget & Finance
Phone:  586-1518

Lenny Klompus
Senior Advisor – Communications
Phone: 586-7708

Russell Pang
Chief of Media Relations
Phone: 586-0043