“Those who cannot remember the past are condemned to repeat it.”
-George Santayana, philosopher
Note: This is the fourth installment of a series on Hawaii’s Economy. If you missed it, check out the first, second, and third installments.
Now that the legislative session is well underway, one cannot help but notice the almost incessant mentions of the Council on Revenues in news reports on the State’s budget and the likely cuts that need to be made. See COR coverage by the Hawaii House Blog, KGMB9, Pacific Business News, Hawaii Public Radio, Gov. Lingle, and Hawaii Reporter. But beyond being a reliable news source, few may realize the importance of the Council, both legally and politically.
Before I continue, please know that I am not an economist, nor am I an expert on the economy. For an expert economist’s view, I *highly recommend* you pick up a copy of Dr. Christopher Grandy’s Hawai`i Becalmed: Economic Lessons of the 1990s. At 114 pages, it’s a fairly quick read. Make no mistake, while it is based on sound economic principles, in the end, it’s a memoir of sorts. Hawai`i Becalmed is an interesting read, partly because of its conversational tone and partly because of its excellent author, my former professor. You know, as opposed to my military-grade penchant for lists. I am not an Amazon affiliate and make no money from this referral. You might also try local bookstores, including the UH Bookstore, as it is published by the University of Hawai`i Press.
Here are some of Chris’ observations:
- “The COR’s forecasts of general fund revenue proved highly inconvenient for the governor and the legislature.” – p. 59, Hawai`i Becalmed
- “...the governor and legislature must consider COR’s revenue forecasts, not necessarily adopt them.” – p. 61, Hawai`i Becalmed
- “The COR’s forecasts have almost always been adopted.” – p. 61, Hawai`i Becalmed
The COR is mandated in the Hawaii Revised Statutes (HRS), our body of state laws, under Chapter 37-111. COR itself says it, “prepares revenue estimates of the state government for each fiscal year of the six-year state program and financial plan.” So that’s the legal importance. Chris goes into an enlightened discussion as to the political significance: COR allows decision-makers to rely on someone else’s expert advice. So, if they rely on that advice and things go wrong, they have a defense against public backlash.
The COR’s General Fund Forecast – January 2009 was released January 12 and projects revenue will be down 3%. As you know, I spoke with Dr. Paul Brewbaker shortly before this announcement. What I didn’t mention then is that I asked him a question relating to COR and Hawai`i Becalmed, partly because he used one of Chris’ graphs that I immediately recognized.
“If the COR is not conservative enough in its forecast, will we see a repeat of the 90s legislative session that Chris Grandy wrote about?“ In that episode, the whole budget was thrown out when the COR had to downgrade its forecast toward the end of the session. Brewbaker indicated it was possible, but that the COR had been revising its estimates lower for some time, so most legislative leaders already knew that it would be down, but the debate was over how much.
Let’s hope Brewbaker was right and that policy-makers have learned that painful lesson from the 1990s. Otherwise, we’ll have another instance of Santayana’s quote proving prophetic yet again. And remember, I said I’m willing to do my part to help out.
Again, if you really want to draw some economic parallels between the mid-1990s and now, you’ll be glad to get a copy of Hawai`i Becalmed. I just re-read it and in many ways it’s not like I’m looking at a history book, but reading current commentary on what is happening at this very moment.
Mahalo!
Note: Any errors or omissions in this post are the fault of your blogger, not Dr. Grandy or Dr. Brewbaker.
Disclaimer: The views expressed here are mine and mine alone. While I am employed by and affiliated with organizations and individuals, permission has neither been asked nor granted to write on the topics discussed here.
