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Reimer: 10 peas in the county budgetary pod

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By Michael Reimer

I think of myself as an informed voter. I do not pretend to understand all the machinations of the budget process or the administrative rules that control it. But I do have a common sense knowledge that says if income is down, expenditures must come down.

All governments are vulnerable to economic downturns. They fail to recognize that they are also vulnerable to economic bonanzas. Hawaii County is no different. This is not something inherited from a previous administration nor created by this one. But it is a challenge to resolve. The Mayor is in a tough position. He is required by law to submit a balanced budget. The best he can do is to take estimated income and balance it with estimated expenses. And that is hard to do in a political system.

It is up to us, the rank and file taxpayers to offer suggestions on how to improve and stabilize the budget process.

But when your back is against the wall, if you wait until the last minute, options are diminished. The easy way out is to increase taxes.

Let’s look at the recent past. The Kim administration’s highest budget was about $403 million. This year’s budget, two years later is $375 million, less than 10 percent different. In two or three years can that 10 percent not be found in decreased expenditures? Have fixed costs gone up so much that it has completely absorbed the 10 percent and added more? Have revenues decreased so much that taxes must be raised?

The government cannot stagnate even in tough years. Think today of what has to be done tomorrow. Are there solutions to the County budget that do not require a raise in taxes? Yes. I have some ideas and I would guess that you do too. From the most fundamental – turn out the lights when the room is empty – to the largest source of revenue – property assessments.

I sent to all Council members a perception paper entitled “10 peas in the budgetary pod.” It was where to look for savings. Some of the 10 items were: Past, Priority, Postpone, Privatization, Pay-as-you-go, Partnerships, Pension, Public input, Permanence, and Politics.

Its intent was to get the Council thinking outside of the crisis management box. Plan ahead. Perform some cost analyses. “Budgeting is not simply an exercise in balancing revenues and expenditures one year at a time; it has a long-range perspective in assessing whether program and service levels can be sustained.”

This county and probably 3300 other counties got caught in the economic blight that hit real estate. The reason is they were taxing the wrong descriptive item of the property. They were taxing the most vulnerable of the tax base, assessments. Tax something else less fickle than sales prices.

We are enduring the consequences of a speculative real estate market. Suppose a $300,000 house in your neighborhood sells once a year for three years. Now your assessment and those of your neighbors by default is based on an increase of nearly $100,000 in commissions and transfer taxes. Burst the bubble and the County is out money it never should have included in the assessment. Real estate taxes should be based on something tangible such as square footage.

Raising real estate taxes presents many enigmas and should be abandoned. The TAT was raised and now there is an increase in taxes for hotels. Farmers pay less in land tax but more for their home on that land. Non-residents are getting socked with very heavy tax increases but those investors include many Island residents. Beware of the impact on the golden goose investor who often provides property for affordable rental. As an alternative, simply reduce the age allowance on residential property by a few percent.

Staffing needs have to be reviewed. Salaries and benefits are the highest portion of the County budget. Cross training would be important. Move the staff to the areas that need them. The concept of perpetually funded vacancies is archaic. You don’t need more staff or funded vacancies, what you need is staff mobility.

Pensions are a volatile issue. Whatever is proposed to bring them into cost effective arena will be unpopular but must be done. The federal government and some states have made sweeping changes to their pension programs. The County can change if it chooses to and frankly, it needs to change.

Favorite projects must be forgotten. Unpopular issues must be discussed. Shared sacrifice must be more than empty rhetoric. Every attempt or suggestion to obtain stimulus money should be vigorously followed.

The Mayor took his shot and now it is forwarded to the Council. Politics as usual must be set aside. This is also the public’s opportunity to be heard. Contact your Council representative. Give them your positive ideas.

(Michael Reimer is a Kona resident and retired Science and Policy Group consultant. He offered this commentary at the Kona Town Meeting on Tuesday, May 11.)

One Response to “Reimer: 10 peas in the county budgetary pod”

  1. Gary says:

    Excellent suggestions! It’s ludicrous for Kenoi to continue to simplistically phrase the budget crisis as only a choice between “essential services” (police, fire, etc.) or higher taxes. How dare he use such deceitful scare tactics.

    Here in Hawaii the sacred cows of County workers / pensions (that make up the bulk of the voting block that perpetually elects our “leaders”) are NEVER looked at when budget problems arise. Unfortunately it’s impossible to sustain what amounts to nothing more than a pyramid scheme —- one day it will catch up with this County, as it has already in many places on the mainland.

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