In this past legislative session, we were following bills sponsored by the state Department of Transportation to raise the charges on vehicle ownership – specifically, the gasoline and vehicle weight taxes and vehicle registration fees, all of which pour money into the state Highway Fund that the DOT controls. DOT pushed for the tax hikes and got one bill through the Senate, but the bill had to cross over to the House and died a fiery death in the House Transportation Committee with TV cameras rolling.
It’s very tough to get a tax increase through in an election year, especially in the House where every member is up for re-election. But DOT’s reaction, as stated by Deputy Director for Highways Ed Sniffen in a Honolulu Star-Advertiser article, was essentially that they would be shelving capacity improvement projects like additional lanes for Highway 130 on the Big Island, Lahaina Bypass 1C to the Kaanapali Connector, Kahekili Highway widening, or anything on Kauai. Those aren’t dead, but “are just projects that we cannot move forward at this time because we cannot see funding available to fund these projects in the next 20 years.” But permits, environmental assessments, and the like for these projects have a shelf life, and a significant deferral means any progress made in clearing those hurdles may be nullified.
And then, what does DOT mean by “funding available?” House Finance Chair Luke pointed out that the Legislature gave DOT an extra $37 million this year out of the general fund to make up the difference. But Sniffen said that the projects could be freed up only if “we can get a continuing addition to our funding.” Apparently he is looking for some kind of earmarked tax before the chokehold on our highway capacity projects will be loosened.
Certainly, state agencies shouldn’t be going around signing contracts with money they don’t have. So our State Procurement Code (HRS section 103D-309) requires funds to be available before contracts are binding. But the code doesn’t require an earmarked tax before an agency can commit to a large project spanning multiple legislative sessions. Rather, the code and rules (Hawaii Administrative Rules section 3-122-102) only require that funds be available for the portion of the contract during the initial fiscal period, as long as the contract says that future payments are subject to future appropriations or special fund revenues. Contractors dealing with the state are used to seeing such contract clauses and most won’t shy away from public works projects.
Is there any evidence that earmarked tax revenues are more stable or certain than general appropriations? Recent experience with the tobacco tax tells us that the reverse may be true, as we mentioned one year ago. Tobacco tax was earmarked to fund the John A. Burns School of Medicine and its Cancer Center, but collections in that tax had recently turned south and weren’t helped by a 2015 law that raised the smoking age from 18 to 21. As a result, the Cancer Center wailed that its national designation was in jeopardy. (Somehow its designation survived.) Certainly, an appropriation once given can be taken away, but the same is true of any tax, earmarked or otherwise.
The bottom line is that although big projects like highway capacity improvements require lots of money over many years, we don’t need to have the funding in the form of special fund tax increases as long as the state is committed. What we do need is to move forward where we have already spent time and money in design, permitting, and planning so we avoid having to spend additional vast quantities of time and money to do those things over from the beginning.
Yamachika is president of the Tax Foundation of Hawaii.