Gov. Josh Green's budget proposal for the upcoming fiscal year that begins on July 1, 2026, focuses on investments in healthcare and social services.
It's a budget that attempts to balance federal funding uncertainty for programs like Medicaid and the Supplemental Nutritional Assistance Program.
For example, to adhere to the new Medicaid requirements, many of which will start in 2028, the state Department of Human Services will need to upgrade its system. Green is proposing $30 million in state general funds and $30 million in federal funds to comply.
The federal government will also reduce its cost share of the SNAP program in Hawaii from 50% to 25% in September. That will require the state to put in another $13.5 million to replace the lost federal funding.
“These social safety net programs are critical to sustain as many in our community rely on them, and therefore, we have prioritized state funding to implement the changes required to support these programs so that they can continue to serve those in need,” wrote Green in his message to the Legislature.
“We must be prepared to use state funds for priority areas that may be reduced by the federal government.”
He added that state departments should be prepared to operate with their existing budgets to administer programs.
This budget also includes revenue from the climate Green Fee that was implemented this year. It raised the transient accommodations tax by 0.75% to pay for climate resilience and sustainable tourism projects. Green's budget proposes $43.5 million of general funds to be used for those purposes next fiscal year, which is in addition to the $46 million that is included in this year's budget.
Hawaiʻi is also in the process of implementing a six-year plan to significantly reduce income taxes, which by 2031 will cost the state over $5 billion in lost revenue. Green told HPR’s The Conversation that the reduction may pause after 2026.
He explained that he would use some of the saved revenue from pausing the income tax cut to target more vulnerable populations. The current plan benefits all taxpayers, including high earners.
“I'm going to pull back $1.2 billion of that $5.5 billion initial tax package, so the people that will not get as much tax break in '27, '28 and '29 will be more affluent people,” he said.
“We passed a six-year plan that would have brought $5.5 billion of tax breaks to people. It's going to end up being closer to $4 billion, but we're going to maintain all of the tax breaks for people who are working families.”
The budget will next be considered by the state Legislature when it reconvenes in January.
