Hawaii

State Budget Practice Report Cards and Budget Resource Guide

Hawaii won top A average grades for fiscal 2015 through 2019 in three categories: budget forecasting, budget maneuvers, and reserve funds. It joined California, Idaho, Tennessee, and Utah as the only states to collect three A averages.

In reserve funds, Hawaii was notable for clear statutes that govern the replenishment of its emergency and budget reserve fund. For example, at year-end, 5 percent of the state’s general fund balance must be transferred to the reserve when general fund revenues for two consecutive years exceed the previous year’s general fund revenues by that amount. This policy helped Hawaii amass a $378 million rainy day fund balance at the end of fiscal 2019, equivalent to 4.8 percent of general fund expenditures—up significantly from 2015, when the fund held $90 million or 1.4 percent of expenditures.

Hawaii was one of seventeen states to earn an A average in budget maneuvers by avoiding one-time revenue and expenditure tactics to achieve balance. The state also received an A in budget forecasting. Consensus revenue estimates are produced by a panel whose members are chosen by the governor and legislative leaders. Revenue and expenditure projections cover six years.

In legacy costs, Hawaii received the lowest grade possible, a D-minus. That reflects pension contributions for public workers that trailed actuarial requirements, as well as a 55 percent funding level as of 2019. The state accelerated contributions for other postemployment benefits (OPEB), primarily health care, to 100 percent of actuaries’ recommendations in 2019 under a law passed six years earlier. Its B average in transparency reflected the inception of reports on deferred infrastructure maintenance costs in 2017 and on tax expenditures in 2018. While tax expenditure reports are common, only four other states—Alaska, California, Illinois, and Tennessee—publish similar infrastructure data.

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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 2021 Volcker Alliance report, Truth and Integrity in State Budgeting: Preparing for the Storm, 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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