Some state senators are criticizing the Green administration for its proposal to pause the historic income tax break for Hawaiʻi families.
That criticism came during Monday's confirmation hearing for Seth Colby, director for the state Department of Budget and Fiscal Services. Gov. Josh Green appointed Colby to the position in November.
The Senate Ways and Means Committee grilled Colby about its proposed budget, considering a tight budget year featuring the loss of federal funds and the recovery effort following the Kona low storms.
A focus for the committee was the administration’s proposal to pause some of the sweeping 2024 income tax relief law for local households. Doing so could preserve $1.8 billion in state revenue.
But senators wanted the administration to cut spending or raise revenue instead. They also said that funding is available to keep more of the tax breaks intact.
“The rainy day fund is at about almost $1.6 billion, the carryover balance for 2025 was $2.12 billion. … The general fund lapses were $533.1 million,” said Sen. Donovan Dela Cruz, who chairs WAM. “So, what I don't understand is we're putting a pause on some of the tax breaks when we have all this cash. And we did not even look at that many cuts in departments, but your whole thing is we have to make it affordable, we have to help businesses.”
The Senate had proposed taking funds from job vacancies and other unused funds to make up the budget shortfall.
Colby said one of his priorities is to ensure that the state maintains its high credit rating, which in part is determined by the state’s rainy day fund. He also said that a balanced financial plan contributes, too.
“If you cut vacancies right, they're just not going to show up in the lapses. It doesn't save us a lot of money in terms of balancing the financial plan, and that's what we're concerned about,” Colby said.
The supplemental budget this year, which is tied to the proposal to pause the 2024 income tax breaks, is one of the biggest debates in the state Legislature this year. The Senate and House of Representatives are trying to settle their differences this week.
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