State of the State: Hawaii

Governor David Ige discussed the details of his $28.5 billion budget, over $14 billion for each of the next two years, in his third State of the State address. Due to an apparent slowdown in revenue growth, legislators will need to shave more than $300 million in spending over the next two years. The governor’s proposals included education, housing and tourism/natural resources (which are heavily intertwined in Hawaii).

Governor Ige acknowledged the need for education reform in this state, which is ranked 45th in ALEC publication Report Card on American Education. However, the $700 million budgeted by the governor for new schools is unlikely to yield results absent meaningful changes to Hawaii’s education system. Fortunately, the governor also proposed greater local control of schools. Governor Ige also pledged $150 million for state universities as well as $61.7 million to continue installing and improving air conditioning in K-12 classrooms. Allowing school choice and easing regulations on home schooling would better ensure taxpayers’ contributions to Hawaii’s schools are rewarded with results instead of a D+ rating on performance, progress and reform. The recent declines in National Association of Educational Progress (NAEP) scores are hardly a solid return on the more than $12,000 per pupil spent annually by the state’s public schools.

Homelessness and affordable housing have been two related problems in Hawaii. The governor proposed an assortment of new spending including producing more rental units, providing rent subsidies, and constructing dozens of homeless shelters. Sadly, the governor did not indicate an openness to countering the twin government impediments to resolving the housing crises: over-regulation and rent control, which artificially restrict the ability of builders to meet the demands of the marketplace.

Hawaii has been losing domestic residents on net each year for the past decade. One of the highest personal income tax rates in the nation, the highest sales tax burden and forced unionization all contribute to Hawaii’s 42nd place economic outlook ranking according to the annual ALEC report, Rich States, Poor States. Rather than address these roadblocks to greater prosperity, the governor chose to focus on the government capital investment arm—the HI Growth Initiative—as a means to generate more economic innovation. The initiative has invested an average of $160,000 in each of 65 companies. This attempt by the state to pick economic winners may curry favor with select businesses but will be at the expense of others.

The governor also reiterated the goal of Hawaii’s Clean Energy Mandate of “generating 100 percent of our electricity from renewable resources by 2045.” He claimed this is “good for both our economy and the environment.” But as ALEC has articulated before, “Government programs designed to encourage and advance energy technologies should not reduce energy choices or supply. They should not limit the production of electricity, for example, to only politically preferable technologies.”

These energy mandates can make energy more expensive, and can also lead to more dire circumstances. Consider that the European Commission reports that more than one in 10 of those living in the EU “are unable to adequately heat their homes at an affordable cost.” Government manipulation of markets artificially inflates the price of fossil fuels, benefiting politically-preferred forms of energy and a favored class of business interests. And, politically preferred as they are, lifecycle analysis calls into question the extent of carbon-reducing advantages of some renewables. For instance, most solar panels placed in operation offset the carbon emitted during its manufacturing process only after two years of operation. Hawaii already endures the highest cost of electricity in the nation at more than twice the national’s average.

The governor’s proposals of government housing, education spending increases, subsidies, business investments and energy mandates may be well-intended. But public policy boils down to results achieved rather than good intentions. Reforms of the budget process, education system and taxation would enable innovation to sprout organically as people experience more freedom to pursue their dreams. Regulatory reform would better enable the private sector to meet the needs of consumers. As Hawaii finds itself once again in the bottom 10 of economic outlook, policy makers should keep these alternatives in mind.