Today we will take a brief look at one of the two proposed constitutional amendments which will be on the ballot this November. The proposed amendment is Senate Bill 2807. SB2807 looks to make an amendment to Article 7 Section 6 of the Hawaii State Constitution. The current wording of the section provides for taxpayer rebates or refunds, provided the state’s general fund balance, exceeds 5% of the state’s general revenues over two consecutive years. Confused? Put simply, currently, there is a 5% trigger in place which limits how much money the state can have saved up in the general fund account. If the trigger is reached, the excess money must be returned to the tax payers by either a tax refund or tax credit.
SB2807 is trying to change that. How will it change the rule? The amendment would give the state legislature the option of giving back the money or placing the money into one or more state funds. These funds would provide temporary sources of funding in the case of emergency, economic downturn, or an unforeseen reduction of revenue. The Hawaii Constitution currently has no option for lawmakers in terms of what to do with excess money. The amendment would provide an alternative to the required tax refunds or credits.
Everyone can remember the paltry payouts of previous refunds from the state. These amounts weren’t enough to even purchase lunch for the day. This was a result of the required refunds. Of course, it is easy to understand why the rule was initially in place. Everyone enjoys getting money back from the government. After all, we pay our taxes and feel entitled to some sort of reimbursement whenever the government is doing well. Also, the stipulation prevented those in charge of the government from stockpiling a surplus and taking advantage of the people. It prevents lawmakers from taking the money or distributing it to their supporters.
However, like every law or regulation, there will always be some negative effects. The miniscule refunds are an obvious one. Yet the main concern being addressed by the proposed amendment looks to provide a safety net for the state budgets of the future. For example, after 9/11 happened, Hawaii tourism took a major hit. As a result the economy slowed and began to suffer. There was not a back up plan besides the rainy day fund. However, imagine if more money had been placed into the rainy day fund or a similar fund, rather than issued in the form of a tax refund to the people of Hawaii. It seems much wiser to have the state save and invest the excess funding rather than issuing a $5 tax credit to Hawaii taxpayers.
This November the voters of Hawaii will be able to create such an option for lawmakers. A yes vote will authorize the Hawaii Legislature to decide whether the 5% general fund trigger will lead to money being put into emergency funds or refunds and credits to taxpayers. A no vote will keep the current statutes in place and not create the option. It is in your hands Hawaii. What will you choose?
*A handful of Hawaii’s policy makers were contacted for their opinions on this issue. However, as of this publishing, none have responded.*