Deep and painful budget cuts will be necessary to carry the county through the next fiscal year, Mayor Billy Kenoi told his county staff today at a meeting to kick off budget preparations for fiscal year 2010-2011.
The county’s projected budget shortfall is more severe than ever, the mayor said. The county already faces a $44.8 million hole in next fiscal year’s budget, which combines $33.8 million less in projected revenues and $11 million more in projected expenses.
“We’ve never faced what we face today,” said Mayor Kenoi. “Which means we’ve got to take steps that we never took before,” to make government more efficient and reduce county spending.
Projected revenue losses include 10 percent of real property taxes, the county’s largest source of revenue, amounting to about $17.9 million. The county also expects to see a loss of interest on investments amounting to about $1.6 million.
“Next year’s budget situation would be a lot worse if we hadn’t already asked our department heads to implement five percent cuts during their first six months on the job. Then we asked them to cut another 10 percent in the current fiscal budget that began July 1,” Kenoi said.
“My staff and I also took 5 percent salary cuts, and we eliminated 55 vacant county positions to help balance the existing budget.”
If the state were to take the county’s $17.9 million share of the Transient Accommodations Tax on hotel rooms, the situation gets much worse, Mayor Kenoi said. Next fiscal year’s budget shortfall would be closer to $64 million without the county’s share of the TAT.
“That’s $100 million taken out of our budget over two years — gone,” Mayor Kenoi said. “That is a real possibility.”
Finance Deputy Director Deanna Sako also warned that the Employer Union Trust Fund may add to the budget difficulties by increasing health insurance premiums for employees after Jan. 1.
The worsening overall financial situation will require “deep and painful” cuts in next year’s budget, Mayor Kenoi warned.
“There will be a major shift in how the county is going to look,” the mayor said, as departments are asked to consolidate programs and services where significant savings can be achieved.
The budget projections for next fiscal year were anticipated when the administration took a two-year look at the county’s finances during budget preparations earlier this year. That was the first time the county looked at its financial picture beyond the current fiscal year. “We saw it coming,” Mayor Kenoi said. “I’m glad my finance team has been working so hard on this.”
Mayor Kenoi remained optimistic, stressing that while the county’s economic difficulties are serious, they are not permanent. “We will once again have a growing, vibrant economy,” he said.
Mayor Kenoi expressed confidence that his department heads and financial staff would lead the county through the economic downturn. He expects the recession to hit bottom soon but remain there before starting to climb again in 18 to 24 months. “There won’t be a sharp rebound,” he said. “It will look more like a bath tub – down and flat for a while before it comes up again.”
County Finance Director Nancy Crawford asked county officials to examine every aspect of their operations and identify non-essential programs that have the least impact on the public, including travel and conference costs, vacant positions, supplies and contracts.
“This will be a time of working together,” Crawford told the department heads.
Mayor Kenoi encouraged departments to start cutting as soon possible rather than wait for the start of the new fiscal year. The earlier the cuts are made, the greater the impact because the cuts will have been in place for a longer period of time. Other areas of expected savings this coming fiscal year include:
- A wide-ranging review of county fees for services with expected increases in costs for users.
- A ban on replacing county vehicles except under special circumstances with direct authorization of the Finance Department.
- Elimination of overtime unless pre-approved and absolutely necessary for the department’s operations.
“Going forward, there will be unprecedented cuts in every department,” said Mayor Kenoi. “We need to transform government, become more efficient and provide a higher level of quality service with fewer resources.”
Analyzing anticipated and projected revenues and expenses over the past two years and a careful analysis of last year’s and the current budget were instrumental in forming the current projections.
“Thankfully last year we made the cuts that had to be made or we would now have an even greater problem,” Mayor Kenoi said.
“We are also working with our largest private employers – the hospitality and construction industries — to put our Hawai‘i Island workers back on the job so they can support their families, keep their homes, minimize the impact of the downturn, contribute to the health of our economy and to a promising future for our island,” said Mayor Kenoi.
“We will be looking for help and cooperation from throughout the community and we greatly appreciate everyone’s patience, understanding and cooperation as we work through these difficult times.”
“We can do this because of the aloha and respect we all share for one another, and because we will work hard and work together, helping one another to get through this economic recession with a minimum of impact on the quality of life we enjoy so much in our county,” Mayor Kenoi said.
“At the end of the day, the better the job we do together, the better we work together, the better we serve the public.”