Japanese Disaster Affects Tourism in Hawaii; Moody's Cuts State's Credit Rating


Hawaii's Education System Suffers With its Economy

Hawaii's budget is roughly $5 billion for fiscal 2010 and its budget shortfall is just under 10 percent of revenues, according to Johnson.

While the shortfall sounds sizeable, it is not out of line with what other states are facing, Johnson said.

Spending on education has been a point of contention between the previous governor, teachers and Board of Education, which manages the country's only statewide school system.

Two years ago, the governor's office instituted 14 "furlough Fridays" to help the state's budget shortfall, thereby shortening the school year. After negotiations for this current school year, teachers now take six mandatory furlough days during professional development training time, which are not instructional days for students.

Wil Okabe, president of the Hawaii State Teachers Association, said his organization is negotiating with the Gov. Neil Abercrombie, who took office in December, regarding education spending for the next fiscal year.

"Because of the economy, the budget, all public sectors and services definitely have been affected," he said.

The state recently limited the availability of its high school driver's education classes, forcing some students to pay close to $500 for private instruction, Okabe said.

There are 180,000 students and 13,500 teachers in the state's public education system, according to Okabe.

Dr. Kanoe Naone, CEO of the Institute for Native Pacific Education and Culture, INPEACE, in Hawaii, said stripping money away from education will only lead to further budget problems. She said every $1 spent in early education leads to a cost savings of $4.20 in long term social services.

"The general public says they are for education and for kids, but when there is an economic crisis, it seems like education is the first to go. It's understandable but short sighted," she said. "Until we prioritize education or at least early education, we're going to continue to have economic difficulties."

One of Moody's major concerns about Hawaii's public fiscal situation is that Hawaii's pension funded ratio - or its ability to pay for pensions obligations - is low relative to other states, according to Johnson. The ratio was 61.5 percent as of June 30, 2010. Florida has ratio of about 87 percent and Wisconsin has a ratio close to 100 percent, which is "very good," said Johnson.

Hawaii's "other post-employment benefits" obligation is "quite sizeable" at $7.2 billion for state employees and $1.6 billion for teachers, which reflect full health benefits paid by the state, according to the report.

"For the present time, the state plans to continue funding these obligations on a pay-go basis as is the case in many other states," Moody's report states.

However, the Hawaiian government has "already taken actions" to fix their fiscal problems and will deplete their "rainy day fund" that's designated for emergencies, by the end of this year, according to Johnson.

"So it doesn't give them a lot of flexibility, and they probably won't rebuild it for a couple of years," she said. "But if revenues begin to turn around, they are projected to stabilize."

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