State Budget Practice Report Cards and Budget Resource Guide
Hawaii was among six states receiving an average grade of D-minus, the lowest mark possible, in legacy costs for fiscal 2016 through 2018. Like Illinois, Massachusetts, New Jersey, Texas, Washington, and Wyoming, Hawaii failed to make contributions to public worker pension plans and other postemployment benefits, principally health care, in line with actuarial recommendations. Hawaii’s chronic pension underfunding left it with only 54.8 percent of the assets needed to meet the its obligations as of 2017, almost 14 percentage points less than the total for US states.
The state’s performance in legacy costs contrasts with its steady improvement in the transparency category. While its three-year average was a B, its annual grade rose to an A in 2018 from a C two years before. The catalyst for the jump was Hawaii’s introduction of a revised system for reporting tax expenditures and initiation of reports on the cost of deferred infrastructure replacement. Those moves made Hawaii one of only four states to disclose this statistic in budget or related documents in 2018.
Hawaii also received A averages in budget forecasting and reserve funds. It uses consensus revenue forecasting based on calculations from its Council on Revenues, whose members are appointed by the governor, senate, and house.
The state’s management of reserve funds includes policies for disbursing and replenishing rainy day fund assets. In 2017, Hawaii established a volatility-based withdrawal limit for its Emergency and Budget Reserve Fund. The state cannot make a withdrawal for the next fiscal year unless it has collected, or is projected to collect, less tax revenue in the current year than in the previous one.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2016 through 2018. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.