Hawaii

State Budget Practice Report Cards and Budget Resource Guide

Hawaii was the only state to earn an A average in four out of five budget practice categories evaluated for fiscal 2017 through 2019. The one miss was a glaring contrast to its four top grades: In legacy costs, Hawaii averaged a D-minus—the lowest possible score—for failing to adequately fund public worker retirement plans. 

In transparency, Hawaii along with Tennessee, California, and Alaska stood apart from other states in revealing the cost of deferred infrastructure maintenance. This information appears in Hawaii’s supplemental budget, which includes such costs for each fiscal year. The estimates include about $500 million for roads.

Hawaii’s top mark in reserve funds stemmed from policies that parallel best practices cited in the recent Volcker Alliance working paper, Rainy Day Fund Strategies: A Call to Acton. It was one of only twenty-one states to use historical revenue volatility to estimate the appropriate amount to set aside in its Emergency and Budget Reserve Fund—a move critical to achieving its A average.

Hawaii’s A average in budget maneuvers reflected an improvement in its annual marks after the state notched a B in fiscal 2017 for using a one-time transfer from budget reserves to cover recurring expenditures. It avoided that budget-balancing practice in 2018 and 2019.

The D-minus average in legacy costs, which include pensions and other postemployment benefits (OPEB), principally health care, reflected the state’s pension funding level of 55 percent in 2018, 15 percentage points below the total for all states. Hawaii did raise its annual grade to D in 2019, after the legislature decided to fund OPEB in line with actuarial recommendations. 

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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 presented here are taken from the 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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