Ending the practice of borrowing to pay for salaries
Ending the practice of borrowing to pay for salaries
By Georgina Kawamura
March 15, 2005
While Mayor Mufi Hannemann and the City Council debate a proposal to pay for the salaries of city employees with borrowed money, it is interesting to note that the state government has paid salaries with borrowed government funds for many years.
Governor Linda Lingle’s budget proposal for Fiscal Biennium 2005 – 2007 recommends taking significant steps to eliminate the long-standing practice of paying certain state employees’ salaries with borrowed funds. The Governor views this change as responsible fiscal and financial management.
When the state plans to build or renovate a public facility, it borrows money to pay the design and construction costs. In certain cases, a portion of the borrowed money is used to pay for the salaries of the employees working on that project.
Using borrowed money to pay for ongoing, everyday operations such as salaries is like using your credit card to give your child an allowance when you have the cash in your pocket. Borrowing funds, and having to pay interest on that money, to pay for employee salaries is a waste of tax dollars, and places the financial burden on future generations.
Just as a businessperson would not on a regular basis pay for employees’ salaries with borrowed funds, the state government should not borrow money to pay for government employees’ salaries.
The Governor is proposing to replace these bond funds with cash from the state’s general fund or special funds for certain positions in the Department of Land and Natural Resources and Hawaii Community Development Authority.
The affected employees will see no difference as a result of this change. They will continue to be paid for the good work they do.
However, public taxpayers will benefit by having the added assurance that their money is being spent wisely, and that the state is making sensible decisions when using public funds.
We are pleased to see the public officials and the news media concerned about proposed plans to borrow funds to pay current city employees wages.
We hope the Legislature will join with the Governor in taking this common sense approach to ending the practice of paying salaries with borrowed money.
Georgina Kawamura is the state director of the Department of Budget and Finance
