Despite Projections for a Double Digit Economic Downturn in 2021, Budget Chairs Do Not Anticipate Statewide Pay Cuts

Senate Ways and Means Committee Chair Donovan M. Dela Cruz and House Finance Committee Chair Sylvia Luke said the financial projections issued by the State of Hawai‘i Department of Taxation Council on Revenues were “about what they expected” during this coronavirus damaged economy.  

Based on the Council’s projections and using the federal CARES Act funds, strategic budget cuts and possibly federal loans, Dela Cruz and Luke believe that the state can weather the economic downturn without imposing school furloughs, statewide pay cuts or cuts to critical social services. (See full press conference video below).

“The Council on Revenues said there are lots of unknowns is the economy, like when the 14-day quarantine will be lifted,” said Representative Luke. “They are predicting a downturn followed by a sharp increase.”

The Council projected a 7% decline in the economy for fiscal year 2020, a 12% decline in fiscal year 2021, followed by a 12% percent increase in fiscal year 2022 and annual increases thereafter.

The Legislature has appropriated about $562.5 million in CARES Act funds to the counties to provide COVID-19 response support, including rent subsidies, direct food aid and business support to residents in need. Of the $1.2 billion total, $635 million of the CARES Act money will be moved into the State’s Emergency and Budget Reserve Fund or “Rainy Day” fund to hold until a decision can be made in June how to best use the funds.

“We are going to have to look for strategic cuts so we can ensure that we can still provide assistance for basic needs.  We have a combination of options to consider,” said Senator Dela Cruz.  “The Governor will most likely suggest cuts based on the Council on Revenues projections.  This is going to have to be a group effort and we will all need to work together to develop a proposal that we can all support.”

The budget committee Chairs said there are still may unknowns in the economy and the months ahead are critical. It is not yet known if the US Congress will provide additional support to the states and they are very concerned about maintaining the unemployment fund, especially after federal support expires in July. Federal loans are available to states to cover unemployment funding, but that decision will have to wait until the terms of the loan are made clear.  

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*Video courtesy Hawai’i State Senate.