2014 State of the State
Governor, State of Hawaii
Tuesday, Jan. 21, 2014
Hawaii State Capitol, House Chambers
Madame President, Mister Speaker, members of the Hawaii State Legislature, former governors, distinguished justices of the courts, mayors, representatives of our Congressional Delegation, other elected officials, honored guests, family and friends. Aloha.
As we begin our session I ask that we set aside our political preoccupations and reflect on the privilege we have to serve and the responsibility to look to horizons beyond our own concerns. I ask that we begin today with a moment of silence to honor Hawaii National Guard Sgt. Drew Scobie of Kailua, who died earlier this month in Afghanistan. He was only 25 years old. He leaves behind his wife, his 4-year old son, and another child yet to be born. Our hearts and best thoughts are with his family during this time. On March 25, the Legislature will hold its Joint Session for the Hawaii Medal of Honor Ceremony to recognize fallen soldiers with Hawaii ties. I, and I think everyone here, want to work for the day when we have no more fallen to recognize for their ultimate sacrifice, no more families to console for their loss. But, prior to that day, I ask for us to join in a moment of silence and reflection in honor of Sgt. Scobie and his family.
[MOMENT OF SILENCE]
When I entered office, we issued a call for a New Day in Hawaii. We presented and implemented a plan that has guided this administration and our state over the last three years through difficult times. We faced hard choices and had to make tough decisions. I am grateful for the Legislature's collaboration as we navigated through troubled waters. The question before us then, is -- what direction shall we now set our sights?
Where do we see our Hawaii -- our people, our keiki and kupuna, our aina, and our businesses -- in the future? To answer that core question, we need look no further than our island values. We must be trustees with a duty not just in the present, but to the long-term future of our islands. We must be stewards with a responsibility to protect our identity and our precious human and natural resources to become more self-sufficient.
The State Budget
For three years, we have strategically managed our resources, endured shared sacrifices, made fiscally prudent decisions, and have seen our economy improve. This has resulted in a general fund balance of $844 million in fiscal year 2013, a historically unprecedented figure that represents a turnaround of more than $1 billion since 2010! I want to extend my appreciation to the Legislature for helping to make some of those tough decisions, our public sector employees who made sacrifices, and the people and businesses of Hawaii whose faith and patience made this effort possible.
I am able to report to you, our state government's financial house now stands on solid ground.
We are now entering a new phase. The administration's package and supplemental budget do not rely on any new taxes or fees! On the contrary, as you will see, I believe we may be able to reduce taxes in key areas. We have the resources to deliver services to the people of Hawaii while living within our means. And, what is most important, is my administration's budget philosophy ensures our budget is sustainable. Our financial plan accommodates fluctuations in revenue projections in the years to come.
We are stabilizing future costs and expenditures. We are concluding collective bargaining agreements, several of which are for multiple years. We have taken affirmative action in addressing our state's unfunded liabilities -- for medical benefits for retirees -- and pensions, salvaging both from fiscal disaster.
We are committed to strengthening the finances of the state with a plan that builds our state reserves up to 10 percent of general fund revenues. These reserves will allow us to weather possible future economic downturns and to guard against the public service cutbacks of the recent past.
Financial rating agencies recognize our efforts and have improved their outlook assessment from negative to "stable" to "positive." What then of the future? I shall outline a few central elements for your attention this morning, and I will address other issues in more detail -- such as housing, agriculture, and energy -- though messages to you in the days immediately following.
There is no more critical issue before us than early childhood development and education. I look forward to strengthening relationships with the private and nonprofit sectors by the passage of the constitutional amendment to provide for partnerships in early education. I appreciate the Legislature's support last session for our expansion of the Preschool Open Doors program.
Administrative rules are nearly complete. The program envisions providing assistance to 1,200 families of 4-year-old children that will no longer be eligible to attend kindergarten as of Aug. 1 this year.
This modest approach is not enough. Some 5,000 4-year-olds will be affected by this change in the age-requirement. Some families have the financial capacity to afford the average pre-school rate of $8,100 per year. Many middle income families will struggle and have to make difficult choices. Most lessor-income families will be precluded from the option of making any choices.
We know that the early years of a child's development are crucial in setting the foundation for a child's behavior and lifelong learning. From birth to age 5 more than 85 percent of a person's brain development takes place. An alarming number of our children are entering school without the basics needed to succeed in school, such as, wanting to read, vocabulary acquisition, and learning how to behave within a group.
Investing in our children's early years will pay dividends down the road in the form of healthy and contributing adults, reduced crime and incarceration, and less dependency on social services.
We invest in ourselves by investing in early childhood education.
Our plan is to build and strengthen Hawaii's mixed-delivery system of early learning programs. Community-based preschools are now and will be a key component. To expand access for 4-year-olds, we are proposing direct services in 32 classrooms across the state, half of which are on the neighbor islands.
We are seeking additional resources for Family-Child Interaction Learning programs. We are proposing support for families who participate in Preschool Open Doors. These requests total approximately $8 million. Our plan is targeted, aimed at helping those who otherwise have little or no options. These initial investments will serve an additional 1,040 children and their families.
I realize this is an election year. Political agendas and ambitions are being formulated. But let us take children out of these equations. Let us resolve -- all of us -- to be champions of children. You have my pledge and my word on that.
Our unemployment has improved to the fifth lowest in the nation. Three years ago, the Unemployment Compensation Trust Fund was practically bankrupt. Our progress over the last three years has allowed us to reduce Unemployment Insurance tax rates for 2014 by 35 percent. Employers will pay $130 million less in taxes, or $300 less per employee on average for 2014.
A hard-working sector in our community has gone seven years without seeing their wages rise. Therefore, I will be proposing a bill to increase the minimum wage by $1.50 to at least $8.75 starting in January 2015. Average weekly earnings have increased 16 percent since 2007. For minimum wage workers, it's zero. Currently, 21 other states plus the District of Columbia have higher minimum wage rates than Hawaii while our minimum wage earners are confronted by much higher living costs.
It is a myth that increases to the minimum wage just benefits entry level workers, mostly teenagers. In Hawaii, 85 percent of minimum wage earners are 21 years old or older. The last four times the minimum wage was raised, on average, the number of jobs increased by of 2.2 percent over the following 12 months. Twenty percent of our children under six years of age, or 22,000 keiki, live in low-income working families.
I am aware the issue of tip credit in the hospitality/restaurant service sector was the stumbling block last year. I am prepared to accept a reasonable accommodation on this point. Employees who earn tips, as I did waiting tables at Chuck's Steak House in Waikiki, have the opportunity to earn tips and to add to their income. Minimum wage earners in other jobs do not. They cannot offset any deductions. Let's move quickly and resolutely on this issue.
Homelessness is an issue for which there is no simple answer. In 2011, I established the Hawaii Interagency Council on Homelessness. The council is comprised of state department directors, federal agency representatives and community, religious, and business leaders. Mayors and county councils across the state are united in coming to grips with this issue. On Oahu, where the need is greatest, we could not have a better partner than Mayor Kirk Caldwell and the City Council lead by Council Chair Ernie Martin.
In December, the interagency council submitted an action plan to you for your consideration. »We must now deliver on the Council's plan; for example, by giving support to the "Housing First" program, which houses and cares for the chronically homeless and those who suffer from a disability. »Housing First, an evidence-based best practice, is being used in Denver, Seattle and Utah. It has established that providing housing and support services under this mode saves taxpayers money and reduces homelessness.
When I took office, many inmates served their sentences out of state. This sent Hawaii dollars out of state and took many inmates away from appropriate facilities and alternative programs here in the islands. In addition, it often decreased the chances of successful rehabilitation as prisoners were away from their families. Hawaii had no plan or commitment to do or act otherwise.
Nearly 2,000 prisoners were in Mainland facilities. At the end of the last fiscal year, we reduced that number by 600. Starting this July, more prisoners will be coming home when we re-open Kulani Correctional Facility on the Big Island.
It is clear that we need additional facilities. Most of our current decades-old structures are deteriorated, over-capacity, and poorly designed.
The Department of Public Safety has issued a request for information to procure a comprehensive plan to return prisoners, build facilities with sufficient capacity to keep those prisoners who present a danger to our community properly incarcerated, and provide programmatic options while keeping our communities safe.
And here may I add a personal note of gratitude from me and my wife, Dr. Nancie Caraway, to this legislature. You have passed and we are now implementing a Domestic Workers' Bill of Rights -- only the second such law in our nation. Headlines from around the world, as recent as yesterday, confirm a sordid picture of exploitation and degradation. You have also strengthened laws against domestic violence and human trafficking.
Thanks to all of you, the intense work of the Attorney General's office, the Department of Labor and Industrial Relations, the Civil Rights Commission, the State Commission on the Status of Women, and the Office of Community Services -- these crimes against our common humanity will not be tolerated in Hawaii.
Turtle Bay and Dole Lands
There are times for planning, and there are times for acting. Now is the time to preserve open spaces at Turtle Bay.
The dispute over the expansion of the resort into adjacent coastal and open lands has been going on for decades. Whether in the courts, in permitting proceedings, within the North Shore community, or the community at large -- this issue has been divisive and disruptive.
I am requesting authority to use general obligation bonds to obtain a conservation easement of more than 600 acres at the site. This guarantees these lands will remain open and free of development, and open to Public Access in perpetuity.
Similarly, I am requesting general obligation funds to enable the state to work with a renewable energy company to purchase agricultural and conservation lands currently owned by the Dole Company -- nearly 20,000 acres of open space between Wahiawa and Haleiwa on the North Shore of Oahu.
We need to make this investment to secure these lands so that they do not become a temptation for development and urbanization. Moreover, this purchase will ensure a combination of energy production and contemporary farming.
Mauna Kea is Hawaii's gift to the world -- the best place on the planet to observe the universe. It is without peer. It provides an unparalleled opportunity to advance our knowledge of our universe. Today, we celebrate 50 years of astronomy in Hawaii with 13 observatories from 11 countries and over a billion dollars in infrastructure atop Mauna Kea. One project will solidify Hawaii's position as the world's premier astronomy center -- the $1.3 billion Thirty-Meter Telescope (TMT). The TMT will be the catalyst for the development of high tech and high paying jobs. TMT is partnering with the Institute for Astronomy's Akamai Workforce Initiative to train local college students for technical fields. The initiative promotes STEM initiatives relating to local robotics and science programs. TMT is also investing $1 million every year in education so our keiki can reach for the stars. Our state must support and ensure that this tremendous opportunity comes to fruition.
This leads us to the reality of climate change, which is becoming more and more evident across Hawaii and the planet. Our islands are especially vulnerable to the impacts. We cannot wait to act.
In the fall, I was appointed by President Obama to serve on the State, Local and Tribal Leaders Task Force on Climate Preparedness and Resilience. At the first meeting in Washington in December, governors, mayors and tribal leaders from around our country discussed the effects of climate change in their jurisdictions. One thing was apparent despite our vast geographic, topographic and community differences -- today's climate changes are warning bells signaling the necessity for preparedness now.
At the forum, we emphasized that the Hawaiian Islands are a learning laboratory for scalable, innovative mitigation, adaptation policies and techniques, and providing a model on local and regional collaboration.
The State Office of Planning has been instrumental in coordinating efforts to update our Ocean Resources Management Plan. We have a state sustainability coordinator in the Department of Land and Natural Resources with authority to work across department lines for planning purposes.
The Senate-House Majority Package includes the Hawaii Climate Adaptation Initiative, which supports research, planning and coordination. The Interagency Climate Council plays a key role in this initiative. I will be convening Resilient Hawaii Forums this year to engage stakeholders -- Native Hawaiian organizations, natural resource managers, the military, tourism officials, agricultural representatives, researchers and government at all levels. These forums will create a climate change roadmap for Hawaii.
Protection of our environment from invasive species must be a top priority. We are experiencing a biological crisis and deadly threat to our isolated ecosystem, our natural resources and our economy. A multitude of invaders -- such as the little fire ant that can blind animals and destroy nesting birds and hatchlings, the coconut rhinoceros beetle, and parasites attacking coffee crops -- graphically illustrate the seriousness of the issue.
The work of the Interagency Hawaii Invasive Species Council is tasked with combatting this menace. I endorse legislative initiatives proposing up to $5 million to meet operating costs of Invasive Species Programs.
This session, my administrative package will include a sustainability investment strategy to advance targets in clean energy development, local food production, natural resource management, waste reduction, smart growth, green jobs creation, and housing for the working middle class.
This includes funding to support watershed protection, farming infrastructure, invasive species management, e-waste recycling, transportation planning and creating jobs and meeting needs.
Early in my remarks, I commented on the necessity of providing pre-school education as a foundation for the future of our children. That observation needs to be bookended by consideration of ways to promote security and dignity on the other end of the spectrum of life -- those of us experiencing our senior years.
Not only do we need to protect seniors from fraud and abuse, and assist with care issues, but I believe we can provide tax relief measures that will have practical and immediate benefits for seniors.
I will be asking the Legislature to look at the way we tax seniors in order to provide more equity and fairness for those on fixed and middle incomes to see that more of their money remains in their pocketbooks. We need to bring parity to way we look at and tax retirement income.
I accept and understand the message on pension income and taxation. If you have an employer-sponsored pension, it is exempt from income tax. That will not change. But everyone may not be aware that other pensions -- not employer-based -- are being taxed right now. Thousands of Hawaii seniors are paying income tax even on low- and middle-income retirement benefits.
I propose to exempt any presently taxed income from all sources for taxpayers age 65 and older with an adjusted gross income (AGI) of $25,000, AGI of $35,000 for heads of households, or AGI of $45,000 for joint filing.
This assures these seniors will not have their retirement income taxed. This will affect as many as 25,000 or more seniors throughout Hawaii.
I propose to double the current refundable food/excise tax credit for taxpayers 65 years or older whose AGI is less than $50,000. This is a direct payment to the senior taxpayer. This will affect as many as 110,000 Hawaii seniors or more.
I am requesting we increase the Kupuna Care budget by $4.2 million and make it permanent. This program enables seniors to remain in and receive care in their homes. This is an investment that will pay big dividends as our senior population ages, grows in numbers, and lives longer.
These proposals address the practical everyday reality of expenses for seniors, provide across-the-board fairness in application, can take effect immediately, and fit comfortably into our long-term financial stabilization plan
I began my remarks today in sad recognition of the sacrifice of his life by Sgt. Scobie. I have spoken of other sacrifices we have made or need to make in acknowledgment of our responsibilities to and for each other and to advance the common good of us all.
Referencing that sobering context, please allow me to conclude my thoughts today with some reflection on the passing of our beloved Loretta Fuddy. It is difficult even now more than a month since her death to accept its finality because of the vitality of her presence. I said at the time our hearts were broken but I also know she would remind us of the Biblical admonition that life is for the living -- the duty to carry on, to offer the hope and encouragement to others that marked her life -- every day of it.
I would like to thank the University of Hawaii Foundation for setting up the Loretta Deliana Fuddy Memorial Scholarship in Health, Human and Public Service. This will provide a lasting legacy to University of Hawaii students on any UH campus, who are committed to pursuing a career in health, public and human services.
Loretta was a lifelong supporter of public health measures. She was a lifelong advocate for families and children. She set the standard for helping those in dire need of services that promoted and nurtured their health and well-being.
I am requesting additional funding for the Department of Health's Early Intervention Services. The program provides critical services to children with developmental delays from birth to three years of age. The program provides positive intervention in the crucial areas of cognitive and physical function, social and emotional well-being and adaptive skills. Loretta Fuddy was their champion.
There are, of course, several budget requests and bills that will be proposed for the Department of Health, all of which are important. Nonetheless, I am asking for specific attention to make funding for Early Intervention Services a priority. This will serve as a fitting tribute and appropriate legacy to honor Loretta. There will be lasting benefits for the affected families and children -- the children she loved and cared for passionately to her last day.
None of us knows with any certainty how much time will be given to us. What we do know is that the time given us as public servants is a public trust. We justify that trust only by acting in the public interest.
The financial stability we've achieved, coupled with our long-term plan to sustain it, presents us with the opportunity to act both with confidence and dispatch. Public trust and the public interest can meet and be joined -- now. Let's do it -- together.