​Aloha,

Thank you for being a part of the monthly HHARP Community Meetings. This month's meeting on Aug 17th focused on Community Resource Mapping. Below, you will find website links to two separate worksheets for this module - please complete these worksheets and return by scan, fax (808-661-7992), or email.

Worksheet 1: Individual Capacities Inventory
Worksheet 2: Informal Organizations

Mahalo for your efforts and have a great day!
HHARP

​WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
​To view the archives of the Tax Foundation of Hawaii's commentary click here. ​​​​​​

 
Weekly Commentary

For the Week of August 13, 2017


 
The Grand Skim of Things, Part 2
By Tom Yamachika, President
 
Last week, we began a discussion about the 5% charge that is assessed against the “special funds” in Hawaii government, which we called the “Central Services Skim.”  For the last few fiscal years, the Central Services Skim has redirected about $45 million a year from the special funds to the state general fund, ostensibly to pay for shared services such as human resources and administrative costs.

This week, we look at the exemptions and the danger they pose.

Not every pot of money in state government pays the Central Services Skim.  Special funds pay it, but “trust funds” and “revolving funds” don’t.  The distinction between the three types of funds can be subtle.  The State Auditor has described a special fund as one “used to account for revenues earmarked for particular purposes and from which expenditures are made for those purposes.”  A revolving fund is one “from which is paid the cost of goods and services” by a state agency, “and which is replenished through charges for those goods or services or through transfers from other accounts or funds.”  A trust fund is one that invokes “a fiduciary responsibility of state government to care for and use only for those designated to benefit from the funds.”

On top of that, state law exempts many special funds from the Central Services Skim.  When the State Auditor examined the issue in 1994, 21 different special funds were exempted.  The exemption list has grown to 36 today, with 35 exemptions in HRS section 36-27 and one in another law.  The exemption list doesn’t appear to have a common theme or thread.  It includes, for example, the Turtle Bay special fund, the civil monetary penalty special fund, the deposit beverage container special fund, the community medical centers special fund, the Aloha Tower fund, and the sport fish special fund.

With trust and revolving funds categorically exempt from the skim and many of the remaining funds covered by exemptions, we have a chance to get into some sky-high trouble.  Take the airports, for example.  In fiscal 2016, the Airport Revenue Fund, which is largely fed by aircraft landing fees, ponied up close to $15 million in Central Services Skim.  The FAA, which put out an Airport Compliance Manual in 2009 (also known as FAA Order 5190.6B), explains that airport revenue is supposed to be used for the benefit of the airport.  The laws do allow an airport sponsor (our Department of Transportation, for example) to apply some of that revenue toward the general costs of government, if the costs are allocated to the airport fairly.  Because Hawaii’s Central Services Skim law is older than the federal laws imposing restrictions on airport revenue, our 5% skim is grandfathered.  However, the FAA made it clear in the manual that it can retaliate, such as choking off the amount of Airport Improvement Program discretionary grants, if it finds that an airport sponsor has been diverting too much.

There, of course, is the danger.  There are more loopholes in Central Services Skim obligations than a Swiss cheese, there is no common thread between them, and the loopholes have been proliferating.  It was difficult in 1994 to find that central services expenses are being fairly allocated, and the facts have worsened over time.  The federal government might wake up one day and conclude that the airport fund, which now pays roughly a third of the Central Services Skim, has been gouged.  If it decides to act, you can be sure that the action won’t be pretty.  And then, if there is carnage over the airport fund, the highway fund and the harbors fund couldn’t be that far behind.

The underlying premise, that special funds should contribute to the costs of government because they are deriving benefits, is sound.  For some reason, however, our government finds it intolerably difficult to allocate those costs fairly.  If we can fix this situation, maybe we will come up with some good ways to fix our tax system, which is supposed to allocate the costs of government to the populace.

Next week, we examine the one department that has thumbed its nose at the Central Services Skim.

​
 
PRESS RELEASE-- FOR IMMEDIATE RELEASE
 
August 17, 2017
 
Lahaina, HI -  WMTA ANNOUNCES SPECIAL SPEAKERS COMING TO PARTICIPATE IN EMERGENCY PREPAREDNESS
West Maui Community Disaster Planning Meetings Scheduled for Thursday, August 17, 2017 at Lahaina Civic Center in the Main Hall at 5:30 p.m.
 
Guest speaker from HI-EMA (Hawaii Emergency Management Agency) will be presenting on Module 4 - Community Resource Mapping.  This module will offer guidance for assisting individual skills and community resources that could assist in disaster preparedness planning, response and recovery efforts.
 
The WMTA is working with the Maui Emergency Management Agency, The Pacific Disaster Center, and the State Emergency Management Agency on developing a customized disaster plan designed to meet West Maui’s specific needs. The isolation from the Island’s major hospital and airport, due to frequent road closures, fires and flooding, have highlighted the need for special preparedness planning. Our community is diverse and we need everyone’s participation to develop community plans.
 
The Hawaiian Hazards and Resilience Program (HHARP) is a series of monthly workshops, presented by subject-matter experts, to provide education for hazard understanding and offer tools and information resources to guide community mitigation, preparedness, response and recovery planning.

The current meeting schedule follows:  

• August 17, 2017           5:30-8:00 p.m. Lahaina Civic Center – Main Hall
• September 21, 2017      5:30-8:00 p.m. Lahaina Civic Center - Main Hall
• Further meetings will be announced.

 
These meetings are free and open to the public.
 
The West Maui Taxpayers Association invites you to join us and be a part of the solution to plans that may well be the reason why lives will be saved when disasters strike. Please put these meetings on your calendar and plan to attend!
 
Visit www.westmaui.org for additional information and keep up to date on what’s happening.
 

​
WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
​To view the archives of the Tax Foundation of Hawaii's commentary click here. ​​​​​
 
Weekly Commentary

For the Week of August 6, 2017


 
The Grand Skim of Things, Part 1
By Tom Yamachika, President
 
In this space, we have often spoken of funding government with “special funds.”  Special funds are pots of money dedicated to a specified purpose.  Money in the fund can be spent for the specified purpose without going through the general appropriation process at the Legislature.  Agencies love them because they can spend money without interference by meddlesome lawmakers.  Supporters of the programs and services that the fund is spent on like them too, because the fund is dedicated to their program or service.  Or so they think.

But there is some “skimming” going on.  A Hawaii law dating back to 1955, which now can be found at HRS section 36-27, says that 5% of any special fund’s income will be paid to the state general fund to pay “central service expenses,” which we assume are shared services costs such as payroll, accounting, compliance reporting, and other administrative costs.  HRS sections 36-28, 36-28.5, and 36-29 apply a similar skim to the highway, airport, and harbor funds respectively, except that the 5% applies to the fund’s income net of payments for principal and interest on bonds.

The same 1955 law contained another provision, now found at HRS section 36-30, which says that each special fund “shall be responsible for its pro rata share of the administrative expenses incurred by the department responsible for the operations supported by the special fund concerned.”  This law does not provide for a flat percentage, but instead requires the state department in charge of the special fund to figure out the proper administrative costs.

Reports to the Legislature by the Department of Budget and Finance show the amounts assessed in recent years:
 
Fiscal Year Ending 6/30/
Central Services Expense Assessments
Departmental Expense Assessments

2016
$ 44,216,395.76
$ 3,137,519.32

2015
46,154,994.98
3,733,194.31

2014
45,108,045.50
3,497,915.92

2013
39,093,748.69
3,206,727.79

2012
39,468,690.86
2,981,309.31

2011
40,516,153.25
3,789,295.21

2010
32,804,292.00
2,951,017.00

2009
31,703,168.00
3,336,976.00

2008
37,486,514.00
2,693,986.14

2007
30,473,089.00
2,169,355.00

Source:  Department of Budget and Finance, Budget, Program Planning and Management Division website

In 1994, the State Auditor, Marion Higa at the time, issued Report 94-17 on these assessments.  She concluded that it was appropriate for special funds to pay their fair share of administrative costs.  But she observed that a flat 5% seemed to be an arbitrary percentage and wondered whether it was a reasonable amount, observing that other states that charged central services expenses were charging quite a bit less in percentage terms. 

To determine whether the 5% flat amount is fair, we need to know what costs this charge was meant to cover.  The State Auditor recommended that the Department of Budget and Finance put out some rules, which the statute authorizes explicitly, to add clarity and consistency.  It’s 23 years later and we’re still waiting for those rules.

In upcoming weeks, we will examine other issues relating to the Central Services Skim, as I call it, including the sheer number of funds that are exempt from it and how continued proliferation of the exemptions may get us in sky high trouble with the federal government, and the one department in state government that flatly refuses to pay a penny of the Central Services Skim.

WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
​To view the archives of the Tax Foundation of Hawaii's commentary click here. ​​​​
 
Weekly Commentary

For the Week of July 30, 2017


 
No Hanahana, Kaukau Anyway
By Tom Yamachika, President
 
Growing up in these islands, I always heard the part-Hawaiian proverb that describes a very simple work ethic: “No hanahana, no kaukau.”  Meaning: if you don’t work, you don’t eat.

Recently, some very notable people including Mark Zuckerberg of Facebook have been championing the idea of “universal basic income,” which basically is a payment from the government to individuals simply for being alive.

Our Legislature latched onto that idea, passing House Concurrent Resolution 89.  That resolution says that universal basic income “is analogous to providing social security to every citizen at a level sufficient to cover their basic needs.”  It “would allow individuals seeking job retraining or working part-time to maintain a basic standard of living,” and “would also allow more people to share part time work between the fewer number of jobs that may be available, while lifting burdens on businesses, and providing a more secure and substantial safety net for all people, ending extreme financial poverty, and providing for a more financially sustainable and equitable future for all citizens in spite of coming economic disruption.”  It asks two of our government agencies to get together a working group to study the issue and come up with a report, including proposed legislation.

In other words:  No hanahana, kaukau anyway.

My advice is to keep two things in mind.

One:  How do we pay for it?  If we are talking about $10,000 per resident per year, for example, with a million people in our state we are looking at a price tag of $10 billion.  That amount would fund Honolulu rail in one year rather than the 30 years or so that taxpayers are now on the hook for.  And we would need to pay that every year.  For those who think the answer is to soak the rich, we just signed into law a bill that gives us the second-highest maximum income tax rate in the country.  Are we seriously thinking of going to that well again?

Two:  If you build it, they will come.  Whatever becomes of Hawaii v. Trump and the other court cases challenging immigration policy, U.S. nationals have a constitutional right to travel between states.  If we dole out copious amounts of cash to each resident, we will magically find more and more new residents.  We also will find that it is not legal to exclude them from the distribution.  Alaska has a Permanent Fund built up with taxes on oil extraction, and tried distributing it to residents based on how long they’ve lived in Alaska.  Its system got shot down by the U.S. Supreme Court.  Now Alaska makes Permanent Fund payments to everyone who has lived there a year.

How did most of us non-Hawaiians get to Hawaii in the first place?  Folks in other countries saw the United States as the land flowing with milk and honey, and were willing to come here and work hard in the plantations and elsewhere.  These immigrants were ancestors to most of us.  Some of us may be immigrants ourselves.  And now we are talking about making a land where you don’t even need to work to make money.  Go back to Point One again, because we are going to have cost overruns.

Rep. Chris Lee, credited as being the “brains” behind HCR 89, is quoted as saying: “Pursuing hard work enough to make a decent living no longer applies in an economy in which automation and innovation have taken that away from so many people.”  Hawai`i statewide annual average employment for the calendar year 2015 was 637,813, a 14.5% increase over the 557,041 in 2001, according to DLIR statistics.  That doesn’t look like our labor force is tanking because of the automation and innovation that have taken place over the last 15 years.  That flawed premise is no justification for adding universal basic income to the social programs and tax credits we already have (including a few we just extended with the income tax hike bill just signed into law).

Aloha,

Today's HHARP meeting will be at 5:30pm at the Lahaina Civic Center. If you are planning to attend, please click on the document links below, print each document, and complete the following:

1. Identify items you already have on the suggested 'Disaster Supply Checklist' 
2. Have all attendees complete the 'Family Emergency Plan' 

ready_family_emergency_plan_template.pdf
disaster_supply_kit_checklist_pdc.pdf
​

Mahalo & see you there!
Warm regards,
Joe Pluta

WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
​To view the archives of the Tax Foundation of Hawaii's commentary click here. ​​​​
​
 
Weekly Commentary

For the Week of July 16, 2017


 
The Field of Dreams Led to the Slammer
By Tom Yamachika, President
 
On June 7, 2017, the Honolulu City Council voted to authorize bond funding to keep the Honolulu rail project on track.

What they might not realize is that bond funding dramatically raises the stakes for transparency around the rail project.

Beginning in late 2007, the U.S. Securities Exchange Commission began scrutinizing state and local governments to protect investors in what then-Chairman Christopher Cox called the increasingly complex municipal bond market.

In April 2008, the SEC charged five San Diego officials, including the former city manager and auditor, with fraud.  City officials were accused of certifying financial statements in 2002 and 2003 that were false because they failed to disclose that the city was purposely underfunding its pension system.  Eventually, the officials agreed to pay penalties ranging from $5,000 to $25,000 — the first such fines levied against officials in a muni-fraud case.

In 2010, the SEC established a new unit to investigate misconduct in municipal finance, with an emphasis on pension funding.  They charged New Jersey in 2010 and Illinois in 2013 with fraud connected with bond offerings for misrepresenting that their respective pension systems were well funded, when they were in fact under water by billions.

In April 2016, the SEC turned the heat up another notch on Ramapo, a suburb in New York.  The plot in this case sounded like “Field of Dreams” – officials in Ramapo wanted to build a $58 million baseball stadium after voters in the town overwhelmingly refused to guarantee bonds to pay for its construction.  The officials went to the bond market anyway and raised the money to build the stadium, now called the Provident Bank Park, in part because they “cooked the books of the town’s primary operating fund,” according to the SEC.  Instead of just going for fines and penalties, however, the agency involved Preet Bharara, who then was the U.S. Attorney for the Southern District of New York, to indict the town defendants on criminal securities fraud, wire fraud, and conspiracy charges.  In May 2017, a federal jury convicted then-Ramapo Supervisor Christopher St. Lawrence on 20 of the 22 felony charges.  The fraud counts on which he was convicted carry 20-year maximum terms.  He will be sentenced on September 28th.

Back here in the Aloha State, there is a growing chorus of people who are expressing misgivings about the financial parameters of the rail project.  One reader writes, “No one trusts the rail cost projections.  No one trusts the rail ridership projections.  No one trusts the rail energy use projections.  No one trusts the rail land condemnation projections.  No one trusts anything about rail.” Those who are now overseeing the project need to be concerned that going out to the bond market with cooked books is a recipe for repercussions of the federal criminal variety. 

It doesn’t matter that the officials involved have gotten no personal benefit from the project.  Mr. St. Lawrence had nothing to gain personally from building the Provident Bank Park.  He just wanted the park built, no matter what.  He now may be getting a one-way ticket to federal prison.  Officials here may have the best of intentions, but they better be telling the public the truth.  Or else.