State senators have been reluctant to approve funds to fill a shortfall in the major disaster fund of more than $400 million.
The gap is largely due to the cost of housing for displaced Maui wildfire victims living in hotels who are currently ineligible for the Federal Emergency Management Agency reimbursement.
At the center of this conflict is $1 billion from carryover funds, or leftover projected revenue, that has not been assigned anywhere.
It works as part of the state’s reserves and would be the source of funding if senators approve Gov. Josh Green's request.
Senate Ways and Means Committee Chair Donovan Dela Cruz said it's the lack of a plan from the administration that's causing the alarm.
“My feeling is, no, we're not going to let you dip into the carryover until you come up with a plan,” he said. “Because there's no end in sight on the spending.”
Green needs $350 million to pay for displaced Maui residents in hotels, but that would only last until July 1. It is not yet clear what would happen after that.
This request from Green comes after the state already spent about $200 million from the major disaster fund on hotels for displaced Maui residents.
During a Senate Ways and Means Committee meeting last week, senators said that Green restricted $116 million from departments internally and redirected those funds to the major disaster fund, making up a large portion of the $200 million that has already been spent.
The state is still working with FEMA to lower amount of people who are considered ineligible so they can qualify for reimbursement. That's why the state budget department stressed to senators that the number will continue to change. In the last month, it has already dropped by about 160 households.
Rep. Kyle Yamashita, chair of the House Finance Committee, said he’s watching how much money the state will need to put up front because FEMA reimbursement can take years.
“Historically, what we get back from FEMA is not immediate,” Yamashita said.
“So basically from this committee's perspective, that money, we cannot consider it in this financial plan because it'll be in the out-years when they give us those reimbursements. So that's the big problem," he continued.
The state is still receiving FEMA reimbursements for the 2019 Kīlauea volcano eruptions that led to the destruction of homes and businesses.
Yamashita said he would only want to use reserve funds as a last resort.
“Unless it affects services, unless we have to start cutting warm bodies, you know, those kind of things, I think that's when the rainy day fund kicks in,” he said.
“But until we get there, we should look at other options.”
Senators have already asked departments to begin considering cutting between 10% and 15% of their budgets to compensate for the costs.
In addition to the governor’s request, carryover funds will also take a $300 million hit to pandemic hazard pay for government workers.
That could pose a problem because the state’s policy is to keep the carryover fund at least equal to 5% of the general fund.
Currently, that's about half a billion dollars. After both deductions, the carryover fund will be about half that amount.
But the state’s other reserves, including the $1.5 billion rainy day fund would remain untouched, keeping the state's total reserves at about 19% — just below the overall state policy reserve target of 20%.
In 2022, former Gov. David Ige submitted anadministrative directive, setting more conservative targets for how much each of the state’s reserve funds should have. It was submitted around the same time that the state started significantly increasing its reserve funds.
From 2019 to now, the rainy day fund has tripled in size.
That administrative directive is the policy that the state continues to follow.
Green is expected to present a comprehensive Maui housing plan next week.
