Eddie Vierra, Dr. Richard Kelley, and Yuet Oy Au

This week I was very pleased to be able to join other members of our ‘ohana, as we honored the Employees of the Quarter (EOQ) who work in Waikiki. There were so many inspiring stories about individuals performing at the highest level during the first three months of 2010. Quite a few of the citations mentioned extraordinary performance and response in late February when an enormous earthquake in Chile generated a tsunami that headed out into the Pacific, with the Hawaiian Islands directly in its path. (As it turned out, the tsunami waves in Hawaii were fairly small and did little damage, but because there is no way of predicting the size of a tsunami, people throughout the state had no choice but to quickly prepare for the worst, as our ‘ohana did.) Read the rest of this entry

By Dr. Richard Kelley

It’s the tradition in show business that no matter what happens – and many things do happen – the performance must still be put on for the waiting audience. “The show must go on!” Read the rest of this entry

By Dr. Richard Kelley & Dr. Chuck Kelley

Times are tight in Hawaii, no doubt about that, and our elected officials are desperately searching for ways to balance the state budget. It’s time they get serious about cutting expenses rather than raising taxes or raiding special purpose funds.

In the average household or private business, the solutions to a budget crisis are quite simple:

1. Cut every possible expense
2. Look for any spare funds or assets lying around (e.g., break open the piggy bank, borrow from the children’s college fund)
3. See what you can do to increase income (e.g., get a second, part-time job)

Cutting expenses is harder to do than it is to prescribe, because it means favorite activities such as entertainment, eating out, travel, or buying a new car will have to be cut down, postponed, or eliminated. But the alternative could be bankruptcy!

What about “spare” assets? What would you do if Aunt Mary had left some money for your daughter’s college education? Would you dip into those funds so you could keep eating out? No way! You took that money in trust, and it would be morally wrong if you spent it on anything but your daughter’s tuition.

The same applies to government. There are three ways to balance the budget:

1. Cut every possible expense
2. Look for any spare funds or assets lying around (i.e., raid special funds)
3. See what you can do to increase income (i.e., raise taxes and fees)

Cutting expenses is hard for government too. No matter what you cut, somebody will be angry, and that could translate to a decrease in support in the next election campaign. But difficult as it is, this is exactly what must be done. Hawaii has far too much government – too many employees, programs, and services – for our small population.

Where are the leaders who will accept that for the good of us all, we must “right-size” our government, which, in more prosperous times, grew too fat to sustain?

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When it comes to the second strategy, shuffling funds around, our government must be really good at it, because they do it all the time. It’s a confusing system that boggles those of us outside the inner circle of lawmakers who control the purse strings. But it is easy to understand that shuffling funds around doesn’t grow the overall pot of money, and in fact, can be quite damaging.

For example, a few years back, the National Tobacco Settlement gave Hawaii a large sum of money. Our lawmakers at that time wisely tucked part of that settlement away into a special fund called the Tobacco Settlement Fund. This is the fund that has paid for all the successful tobacco-control programs and powerful anti-smoking ads you may have heard on the radio or seen on TV. It has been proven over and over that these programs are effective in preventing kids from starting to smoke, saving lives, and lowering health care costs in our state. Thanks in part to these educational materials, smoking in our public schools has dropped from 25 percent to 10 percent in the last decade. When polled, three out of four Hawaii residents support keeping this fund intact.

Yet today, our legislators are considering diverting a significant portion of this Tobacco Settlement money into the Rainy Day Fund, which would weaken the anti-smoking programs that depend on it. Within several years, the remaining funds would run dry, and the programs would disappear.

Shuffling funds around like this would be a huge mistake, sacrificing a tremendous long-term benefit for what? We have already hurt our children by accepting the cutback of the number of school days (“Furlough Fridays”) and the raid on the School Repair Fund. (The latter was used to pay for a special congressional election! Was there really any extra money in that fund? If you walk around our public schools, it certainly doesn’t look that way. But children don’t vote.)

Are we really ready to allow our elected officials to punish our children once again so they can avoid making the long-overdue but painful choices needed to really solve our underlying budgetary problems?

And how about the Highway Maintenance Fund? This is another tempting target. But does anyone really think this is a good idea? Well-maintained roads and highways are essential to our economy and our well-being.

The point is that just shuffling funds around – robbing Peter to pay Paul – can do a lot of damage to good programs and doesn’t solve the underlying problem, which is learning to live within our means.

But most importantly, it is morally wrong. We accepted tobacco, school repair, and highway funds – and others – in trust, just like Aunt Mary’s bequest to your daughter. If we violate that trust, we lose so much more than just money.

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Finally, there’s the possibility of raising taxes. But nobody should want to do that now. Hawaii’s families and businesses are suffering greatly, barely making ends meet. Any tax increase will bankrupt more local businesses, large and small, and put more people out of work. We already feel the pain of losing many long-time businesses. And part of that pain is the higher demand for government assistance that comes at exactly the same time that unemployment and bankruptcies are further shrinking government’s resources!

A business can only be taxed so much, before it is taxed to death. In a recession like this one, a company’s ability to pay taxes is at its lowest. The latest data shows a 29 percent year-over-year increase in Hawaii bankruptcy filings in February, according to statistics from the U.S. Bankruptcy Court.

Increasing taxes now would just mean more businesses closed, more people unemployed, and even greater government expenses. A downward spiral.

And that spiral will only be accelerated by the fact that in the long run, raising tax rates tends to actually cut government revenues because it is a disincentive to economic activity that will inevitably take its toll on the productivity of individuals and businesses alike.

Once again, the problem is that our state government’s revenues are way, way down, and there just isn’t enough money to sustain a government that has outgrown its base of support.

We all need to get more serious about cutting back in size and costs. Forget about raising taxes! Stop shuffling funds around! Focus on the only real solution – it’s time to right-size Hawaii’s government!