Liberal Lovefest

This week’s issue of Midweek waded into the political discussion by offering a flattering spread on the two money chairs (Sylvia Luke and Jill Tokuda) in the state legislature.  In it, the author goes to great lengths to ignore the spotty legislative record of these two legislators to deliver a fairy tale fitting for bedtime stories told to the next generation of Young Democrats.  While it takes very little scrutiny to shatter the façade painted by Midweek, it is disheartening that they are perpetuating the lies and deceit told by sitting legislators – especially in an election year.

To be clear, much of the time in this blog is spent scrutinizing the chairs of both money committees in the Legislature – the House Finance Committee and the Senate Ways and Means Committee.  Conventional wisdom would dictate that more space should be devoted to criticizing the Senate President and the Speaker of the House.  The disproportionate scrutiny is justified because (a) the incredible amount of influence and power that these committees wield, relative to other committees, and (b) specifically how Luke and Tokuda use this power to leverage their own agendas.  If there is one thing that the Midweek’s Dan Boylan got right:

Thus the power and the potential of Luke and Tokuda.  House Finance and WAM (Ways and Means) decide the fate of every bill referred to them: those by the governor and those by the Legislature’s 31 subject committees.  Legislation sans funding is meaningless.

I would have been content to give this article a pass.  Midweek is known neither for its substance nor its depth in reporting.  The cover, however, made an assertion that could never be delivered upon:

Da Sistahs: Looking Out For Your Money – Jill Tokuda (right) chairs the Senate Ways and Means Committee.  Sylvia Luke chairs the House Finance Committee.  In other words, they control the purse strings at the Legislature.  And they’re very picky about what they’re willing to spend money on.

The truth is, they are not picky at all.  They are not even judicious.  Let’s look at the Dynamic Duo’s greatest hits:

Department of Hawaiian Homelands (DHHL) : The courts found that under the watch of Luke and Tokuda, DHHL was underfunded to the tune of $28 million.  In her ruling, Circuit Court Judge Jeannette Castagnetti wrote about the net effects, “DHHL suffers from a lack of funding and staffing, which adversely affects beneficiaries of the Hawaiian Homelands Trust.

Turtle Bay: Under Luke’s watch, a check was written sight unseen to finance a conservation easement at Turtle Bay for $40 million – a proposal that never received a public hearing.  In a gotcha moment (that later backfired), then Governor Neil Abercrombie admonished Luke’s (and then Senator Ige’s) “creative math”.  In a rare admission of guilt, Luke confided to the Honolulu Star-Advertiser when Derrick DePledge wrote:

Luke said she was not surprised there was a mistake in the bond declaration bill because lawmakers scrambled at the end of the session to find $40 million in bond money to finance a $48.5 million conservation easement at Turtle Bay Resort. 

If one cannot even add the numbers correctly, perhaps they would be better off chairing the House Judiciary Committee.

Kihei High School: In what is turning out to be a highly contentious issue, Luke has funded the construction of a high school in Kihei despite declining enrollment on the island.  In an April 26, 2016 Op-Ed to the Honolulu Star-Advertiser:

To add insult to injury, the House just slashed it (money allocation for a new building at Campbell High School) by half to $15 million, while appropriating $37 million for a new high school in Kihei that is not needed; enrollment there (Maui/Baldwin) is projected to decline by 409 students while West Oahu (Campbell/Kapolei) is predicted to rise by 769 students. Even more remarkable is that the Senate allocated zero dollars for Campbell and upped the Maui appropriation to $38 million. What are we doing?

Funding only half a building at Campbell High School?  Building a high school where there is no need based on student enrollment?  Clearly, Luke and Tokuda are NOT picky about how they spend your money.  If that was not the case, they would be guilty of playing politics.

With sympathy to the Kihei students who must commute to attend Maui High School, there is no need for a Kihei High School.  With existing Kapolei and Campbell High Schools stuffed to the gills with students, a long-talked about high school in East Kapolei is the fiscally-responsible thing to do, not another band aid on a campus that cannot and should not be supporting an excess of 3,000 students.  Alternatively, Tokuda could agree to reduce the number of under-enrolled high schools in her area from three to two so other areas of the state could be better served.

Luke and Tokuda have a long track record available for scrutiny despite the hopes of liberal-loving media that you look past the comedy of errors.  Upon examination, the illusion of “picky spending” and “fiscal prudence” is seen for what it really is: petty politics and legislative factionalism.

When print is not even worth the paper that it is printed on, the only thing that this week’s issue of Midweek is good for is lining the bottom of the bird cage.

 

 

No Specific Reason

The latest installment of “Working Hard or Hardly Working” (WH/HW?) comes from Senate Ways and Means Chairwoman Jill Tokuda.

HB2501 came at the request of Alexander & Baldwin (A&B).  It would permit a “holdover” water rights while their filing before the Land Board is being reviewed.  This became necessary with the imminent closure of Hawaii Cane & Sugar (HC&S) (a) to preserve water service to more than 30,000 upcountry Maui residents, and (b) to transition the company’s land holdings from sugar cane to diversified agriculture.  The latter is what triggered a review of A&Bs water permits.

In the latest draft issued by the Senate Ways & Means Committee, A&B was specifically excluded from the bill while ten other applicants would still benefit.  When Tokuda was pressed by the Honolulu Star-Advertiser, she offered her wisdom:

“There’s no specific reason”

A recent article offered fivethirtyeight.com (“How much should state legislators get paid?“) examined the compensation that lawmakers receive across the nation.  Compensation is not just what legislators are paid directly as salary, but includes per diem expenses.  For example, neighbor island legislators are rightly compensated a single roundtrip ticket from their districts to Oahu every week.  They are also compensated for their housing accommodations in Honolulu during the legislative session.

When all is tabulated, Hawaii legislators received the largest compensation for any part-time or hybrid legislature in the nation.  For their work from the months of January through early May, Hawaii legislators are reported by NCSL to be compensated $68,352.

Keep in mind that this is what they are paid for four months of work.  This is lumped on top of what should be their normal, full-time employment.  What is the point of a part-time legislator when their only gainful employment is being a lawmaker?

When legislators receive a full year’s salary for only four months of full-time work, “For no specific reason” is not the $68,352 response that taxpayers deserve – especially when the action jeopardizes the sustainability of our islands and water services to 30,000 constituents.

There once was a time not too long ago when lawmakers were not afraid to work hard.  The mentality of public service and judicious oversight had lawmakers holding marathon hearings from 1PM in the afternoon until 2, 3 or even 4AM the following morning.  These days it seems that they are all trying to make happy hour down at Hukilau, or the fundraiser of one of their colleagues to liquor up and enjoy being lavished with expensive food by lobbyists.

A case can be made for proper compensation of legislators.  There is a saying in the private sector that says “you get what you pay for”, and the findings by fivethirtyeight.com seem to support that.  Current legislative leaders, however, are starting to look less and less like hard-working private sector employees and more like 9-to-5 entry level employees.  If a $68,352 manager in the private sector made a decision based on “no specific reason”, they would be terminated immediately.

Is your legislator working hard?  Or hardly working?

Necessary and proper

Elected officials are engaged in a free-for-all, looking at the rail tax surcharge to fund their next pet project. Sylvia Luke wants it as a slush fund to purchase Ali’i Place. Ernie Martin wants it to build affordable housing. Dan Grabauskas wants to be sure the money goes where it was intended – building rail. These elected officials rely on the fact that the average Joe/Jane Q. Citizen will not go back to the law (Act 247, 2005) to vet their proposals, and to use the smell test to establish whether it is indeed male bovine excrement. [1]

That’s why we’re here. By popular request, we will be performing the “smell test” on all of the latest rail tax developments. Keep in mind, questions of law are best answered by someone with a background in law. But while I am no expert, it only takes a few minutes to read Act 247 and half a pot of coffee to figure things out.

The law is explicit: money is for rail only.

When the law was drafted, it was anticipated that elected officials of various colors would attempt to raid the money for their own pet projects. Language was added specifically to prevent this, earmarking Oahu’s portion:

(c) Each county with a population greater than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to subsection (a) shall use the surcharges received from the State for:

(1) Operating or capital costs of a locally preferred alternative for a mass transit project; and

(2) Expenses in complying with the Americans with Disabilities Act of 1990 with respect to paragraph (1).

This language is very telling. It can only be used as an “alternative for a mass transit project”; it cannot already exist. The term of art is that the money is “encumbered” – it must be used for a very specific purpose, and no other purpose. Rail tax revenue cannot be used for TheBus or HandiVan services. But nowhere in that language does it permit rail tax revenue to be used for affordable housing.

While Ernie Martin can say whatever he wants in the media to support his bid for mayor in the coming election, his proposal does not pass muster. Either he knows that the law expressly forbids this (and is wasting taxpayer money by even suggesting this alternative) or is ignorant to this reality. Treachery and ignorance (whichever it is) are not qualities becoming of the City Council Chairman, let alone someone aspiring to be Mayor.

Ernie Martin fails to pass the smell test. His proposal to cap the amount of money for rail is similarly misguided.  Suppose you went to Lowe’s in Waikele looking for a garage door remote with a budget of $20, but the only model on hand costs $21.00.  Common sense is to purchase the remote and get on with your day.  Ernie Martin would have you drive down to the Home Depot in Pearl City or do without it altogether.  While going beyond budget is always distasteful (and should be minimized), overage can sometimes be justified.  The only difference between the garage door remote and rail transit is the scale of the project.

Interestingly, media outlets failed to conduct their smell test. Had they done so, headlines would be much different.

The state MUST take 10% of the rail tax revenue.

The law is also very specific:

Out of the revenues generated by county surcharges on state tax paid into each respective state treasury special account, the director of finance shall deduct ten per cent of the gross proceeds of a respective county’s surcharge on state tax to reimburse the State for the costs of assessment, collection, and disposition of the county surcharge on state tax incurred by the State.

By law, the state is required to take ten percent of the rail tax revenue. Had the authors of HB1309 (CD1, 2005) intended for the state to take only what it needs, the language would likely have stated “shall deduct not more than ten per cent”. As absurd as it sounds, my reading of Act 247 indicates that administration of the rail tax should equal ten percent of the revenue it generates. That’s a lot of bureaucrats for a very simple task that requires a checkbook and a calculator.  In this sense, the Attorney General’s position is absolutely right.

Necessary and proper

However, for the Attorney General’s position to remain consistent, any excess revenue from the 10% must be used toward administration of the rail tax. It cannot be used to fund air conditioners for public schools because the money is encumbered. However, could it be used to modernize the tax collection system used by the Department of Taxation (DoTax).  The antiquated tax system, after all, is used to collect the rail tax surcharge?

This is what Sylvia Luke and Jill Tokuda (the two money chairs in the Legislature) are counting on. Since money from the rail tax can fund the DoTax, they can use money that customarily was allocated to DoTax on other pet projects, like purchasing a plush downtown office building (Ali’i Place).

If I were the Tax Foundation, I would focus less on the “10%” language and argue that the state is restricted to utilize only what is “necessary and proper”. From Act 247, 2005:

For the purpose of this section, the costs of assessment, collection, and disposition of the county surcharges on state tax shall include any and all costs, direct or indirect, that are deemed necessary and proper to effectively administer this section and sections 237-   and 238-  .

Modernization of the tax collection system is neither necessary nor proper because the rail tax can be administered without the modernized system. While it would be nice, it is neither necessary nor proper. [2]  The attorney general, Sylvia Luke and Jill Tokuda would be hard pressed to demonstrate that $160-million (as noted in today’s HSA) is the total cost to administer and distribute rail tax revenue, but they benefit from the ambiguity of Act 247.

While the state is required to take 10% of the rail tax revenue, they are also bound by the “necessary and proper” clause and only permitted to utilize what is “necessary and proper”.

Nothing new…

The astronomical portion the state takes to administer the rail tax is nothing new. Fiscally-minded legislators have introduced many bills the past several sessions to decrease the amount taken by the rail tax. The failure of both money chairs (Jill Tokuda and Sylvia Luke) to pass a bill out of conference committee to decrease the amount that the state skims off the rail tax demonstrates that they do not believe this is a problem. Besides, who wouldn’t want an extra $160-million to play with in their budget?

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[1] While this blog is intended to be PG, sometimes you need to call it what it is. The euphemism was the best option.

[2] Imagine that I gave a friend $100 to purchase a spam musubi. The understanding is only the “necessary and proper” amount should be used to purchase the $2 spam musubi from 7-11. “Necessary and proper” does not entitle my friend to use the remaining $98 to purchase new tires for the bike that gets you there, even though that bike got you to 7-11 to purchase the spam musubi. To purchase the same spam musubi, that friend could have just walked to the store.

[3] Admittedly, my time commitments have not permitted me to evaluate the brief they have filed with the courts.  Should I be wrong, I would happily correct or retract any inaccuracy.