 So back to Think Tech, I'm Jay Feigel. This is Talking Tax with Tom Yamachika of the Tax Foundation of Hawaii. And we're gonna talk about the intent to veto the list, which is issued every year by the governor after the session is over. And by July 11th of this year, he will presumably do what he intended to do, what he said he intended to do. So Tom is here today to tell us about the veto practice. It is always very important. Welcome to the show, Tom. Thanks for having me here, Jay. Okay, so we're here at this part in the year where the session is over and now the governor has to do his thing. And basically the way it works under our constitution is that on a certain date after the end of the legislative session, this year it's June 23rd, the governor has to issue what's called an intent to veto list. And that is to give the legislature notice that there may be vetoes coming down. So if they want to organize a, reorganize themselves and come back into session to go overwrite some vetoes that they can do that. And the importance of it is that if a bill that has been passed is pending before the governor now, if it's not on the list, it's going to become law. Either by signature or without signature on or before July 11th, which is his final decision deadline. Well, what's interesting about this is this is his first veto practice, right? That's right, this is the first year he's governor. So this is his first round of vetoes. And we're seeing what he's made of. It's very instructive. Yeah, now one of the things is that there are no tax bills on the veto list. So everything that we've been talking about in the course of the session regarding taxes or lack thereof, that's all gonna be irrelevant. They're all gonna become law. Now, that be said, there were like 300 tax bills or so. And a very, very few of them, like maybe a handful made it past the legislature. I mean, they had a very chaotic, what they called a cattle call on the final day of conference committee. And lots of things didn't go with and pass the hopper. It ran the gauntlet, but didn't finish. So a very small number of things passed. A lot of people have called this session a failure because bad attitude, bad result, bad process, they've been mean to each other or something. But what is it that people are thinking about this particular session? What characterizes it as opposed to other sessions? Well, that's very interesting that you said that because that's not gonna come to our first topic of discussion today. There were some issues that when discussed made for a lot of bad blood. One being the first responder center in Waipahu or Belilani somewhere around there. It was a pet project of the good senator from that district who happens to be the chair of the Ways and Means Committee in the Senate. He wanted that project to go. The first responders for whom it was intended didn't particularly like it. HPD in particular said, we're not buying it, we won't participate in it. And that gave the house some very very, very big pause there and they basically killed the bill that provided for the first responder center. But lo and behold, in the budget reconciliation process, there was a legislative adjustment made and the project got funded anyway. And for good measure, there was a gentleman on the board of the High Tech Development Corporation, a gentleman named Veselis Samos, I don't know if I pronounced that correctly, but Sirmos, yes, that bill would have voted him. So one of the things that happened in the intent to veto list is that governor took a look at that appropriation and line out and vetoed it. And he also is intending to veto House Bill 999, which is the one that would vote Mr. Samos. You know, there's been a fair amount of practice in Hawaii about special legislation, legislation that does not affect the community in general, but that's directed at helping or hindering some individual, some specific individual corporation. And you know, you talk about the bill to throw Veselis Samos off the HDDC board, that surely sounds to me like it's spend data legislation, but it's also unconstitutional because it's special legislation and everybody knows it is. Isn't that remarkable that we still have such things visible for everyone to see and know about special legislation? But this is a new kind of approach and I'm disappointed that the legislature would generate a bill like that. What do you think about it? Well, I mean, if you take a look at what seems to be going on and what seems to be going on is pretty deplorable. That, you know, let us that you shouldn't be, you know, dealing in, you know, petty grievances like that, in my opinion. Well, let's talk about the first responders center. We've discussed that before you and me and it's really extraordinary that the bill to create it, which was controversial, failed, but then somebody stuck it in the budget. Who is this somebody? How could that happen? The Ways and Mains and Senator Dela Cruz, did they have that, did they do that? That's probably what happened because, you know, Senator, along with finance chair Cal Yamashita on the house side, they're the primary negotiators of the budget. One thing that happened basically changed a whole lot and that is the economy went south. So we had a projection from council on revenues that was basically $1 billion less than we had before. And so the governor calls up the good senator, meets them over the weekend and says, you know, Mr. Senator, I'm very sorry, we don't have enough money to fund your project. So I'm going to line item it. And then the senator, I don't know what he was thinking at the time, maybe he's plotting revenge. Maybe he's, you know, going to get some, you know, very large folks from my, you know, my part of the woods and go to the governor's office at some time when nobody's looking. But one thing that you have to understand is that the senator really couldn't do much at this point because if, let's say he were able to get the votes to override the governor's veto of that part of the budget, what's going to happen? Well, there's not going to be enough money to execute it. So the governor has discretionary authority to restrict spending when there's no money. Fair enough. So he can basically starve the project anyway. So overriding the veto would accomplish nothing. And I think the good senator knows that. But that's so with every line item veto, isn't it? Well, yeah, if the economy goes south, if the economy goes north, then that's a different story. Well, since we have less money to play around, that's a very good argument for sustaining any cuts that the governor's going to make because you really can't do anything about it if you don't do anything. And a lot of governors just don't do anything. And when it comes time to execute on the budget, oh, we don't have enough money for this, so I'm going to restrict it. Well, a couple of things that really is surprising about the economy changing direction. That's another issue, maybe another show. But as I recall this first responders center was going to cost hundreds of million, right? This was not small change. Yeah, 50 million. 50 million is what the appropriation was. And it was controversial, as you said. And I wonder whether the council on revenues or re-estimation and the re-estimation that maybe the economy is going down is really just political cover. And that the governor had other policy reasons. And reasons that are rooted in lobbying and organizations that come and talk to him. The footnote to that is, I don't know if this always happens, but it seems to me that it happens a lot. There's a parade of people that come after the session is over to lobby the governor about what he's going to veto. A parade. Of course there is. And during the session, they lobby him after. And it's, you know, people spend their whole lives lobbying. And so maybe in this case, they were some persuasive lobbyists that convinced them to kill the bill or kill the project, whatever the financial condition of the state is. Well, that's possible, but if we weren't in such a financial reversal type of situation, then overriding the veto would do something. You see. And it wouldn't be an exercise in futility. I give him credit. And I'm interested in your opinion on this. I give him credit for being careful with our money. I give him credit for responding to the council on revenues. I give him credit for responding to at least some, you know, community interests that don't like this project, including HPD. And all in all, you know, for whatever reason or whatever combination of reasons, I think with the right thing for him to do. What do you think? Yeah. And I think the way he went about it was I think, you know, very respectful, very transparent. Again, what many governors would do is they wouldn't say anything. And, you know, as the year unfolds, you know, it would become apparent that, well, you know, we've got a million dollar downturn. So something's got to give. This is one of them. I'm restricting this, you know, this funding. Well, just looking at that one, it seems like he's off on a good start as far as the veto practice is concerned. Right, so let's go and look at some of the other ones on his budgetary veto list. By far the biggest item was the rainy day fund. As the budget passed, it would have contributed an extra billion dollars to the rainy day fund, 500 million a year, you know, 500 million in 2023, 500 million in 2024, okay. And the governor said, well, we don't have that huge surplus anymore. So he knocked off half. Oh, I didn't know that the governor could do a fractional line item of veto. That's interesting. Yeah, well, there were two appropriations, one for each year, you see. So he could just line out one year, that's what he did. Oh, okay, that's a lot of bread. And of course it's a special fund and so it's questionable fiscal policy. What are your thoughts about it? Well, I mean, there are people who may disagree with me on this, but I am very wary about keeping too much money in a special fund, especially if it doesn't do anything in real time. Because we're just keeping it there for a rainy day, right? So almost by definition, it's not gonna do anything. And we have current needs here in the state. We've got infrastructure that needs building. We have like toilets at the airport that need repair. We need like showers fixed at the university, lots of educational facilities at the school level, all of that, all of those are current needs. And we can't simply defer maintenance forever, which is what we had been doing. And I had a thought to what you said, and it's this, there's a storm out there with our name on it. There's climate change, extreme weather coming our way. Who knows what kind of natural disaster we may experience. And we are not really hardened. We are not really resilient. We need to spend more money on becoming resilient. But when you've put it in a rainy day fund, it's like amorphous. There's no label on it. There's no particular project on it. I guess it's discretionary, but you don't harden your systems. You don't improve your infrastructure. You don't build resilience with it. It sits there and you are not resilient for the real rainy day. That's right. And it's for that reason that a number of departments have other slush funds like we talked about before, like the Hawaii Hurricane Relief Fund, which has 187 million dollars. Even though the machinery on the fund has been defunct since the early 2000s. Now, if it made sense to have the money there and to have the machinery cranked up and ready to go because the storm with our name on it is coming this way at some point, I mean, then that's fine. That's a policy decision that can be made. But if you're going to basically wind everything down, which they have, then why keep slush funds in many different places? The only thing that you're doing is hiding the money. Yes. And then when you do have a bad day or a rainy day or a storm with our name on it, it's too late. It's too late to build resilience after the fact. And if you're not resilient to start with, then damage is greater and the cost of repairing it is greater. So it's really backward planning or upside down planning. That's my reaction to it. Yeah. Now, we talked a little bit about the Hurricane Relief Fund before. It was actually used when the Great Recession hit or maybe a little bit before that to kind of pay some teachers instead of furlough Fridaying them. But it was accompanied by a charge on the GET to pay it back. Whereas, I mean, the same thing probably could have been accomplished by not involving the fund. I mean, why involve the Hurricane Relief Fund if you're going to just divert money from the GET anyway? I mean, why don't you just divert the money and have that pay for what you need? Yeah. Try to explain that all this fancy bookkeeping to the guy on the street with a woman on the street and they're not going to understand or appreciate it. And I don't. Anyway, let's talk about the GET. Anyway, let's talk about the procurement exemptions for the Department of Education. What happened there? Is that on the veto list? Yep. That one is Senate Bill 1518. The bill gives the Department of Education several procurement exemptions. Okay. Why? According to the bill's preamble, the DOE is basically a big honkin' department and doesn't have time to be bogged down with such silly things as procurement laws. But hey, everybody else has to follow those laws. So why the heck are you so special? Wow. I mean, if they had more transparency in their budget, which some other organizations have been fighting for for years, we wouldn't have to worry about stuff like this, but they're so large. Their budget detail is not detail. It's not granular at all. The bill says the state's electronic procurement system is so complicated and onerous. It places a heavy burden on school administrators who need to comply with the law. Well, everybody else does. So what makes you so special to be exempt from it? So that's why it's on the governance list. And I think that's a good thing. I agree with you. Let me add, though, that the Department of Education has a huge allocation of funds, huge. What are they? They must get many billions to run DOE, right? Oh, yes, of course. And it's all islands and it's unlike any other state. But let me add this thought, though. I was on the High Tech Development Corporation years ago, 20 years ago. And it was like the bane of our existence that the procurement code was such a royal bang. It was humbug about everything. And it required us to create bureaucracy and to continue bureaucracy and to just do business. And I don't think HDDC was alone in this regard. Everybody felt that the procurement code ought to be fixed. Well, I like the Sunshine Law. No, that's another one. That's locked in amber. And anyway, what I get out of this is that the DOE thought that they should get an exemption because they're special. And the rest of those slobs out there will have to continue to deal with the humbug and unmodified, unreformed procurement law, which nobody liked. And so I feel that if you're going to try that, how about reforming the procurement code for everybody? Yeah, that's what you gotta do. I mean, if the procurement code ain't working, you fix it. Don't say, oh, this department is special. It's the fair-haired child. So he can do other things that nobody else can. No, that's not the way you do it. I agree totally. Good for Josh Green, but he's not gonna allow that to happen. Another point for him on this year's veto practice. Let's go to the artwork part. You told me before the show that that was more amusement than policy, but what is happening with our artwork collection? We have a huge artwork collection. Yes, we do. We have a very large artwork collection that we own at the state level. And so somebody got the idea of, well, let's monetize it. And we've accumulated all this artwork because there's actually a set aside in the budget for a certain percentage of the budget to be used for artwork. Now, somebody had the bright idea, okay, well, we have all this art sitting around here. Why don't we make it work for us? So the bill says, all right, let's loan out the art to private individuals, businesses, or entities for reasonable financial consideration. That way we make the art available for a lot more people to enjoy and the state gets some money. We win situation, right? Well, the governor doesn't think so. His veto rationale is that property bought with taxpayer funds, which it is, has to be used only for a public purpose. And lending it out to private entities is not a public purpose. It's just money grubbing. Well, there is a bit of a tradition on this. I don't know whether it's happened in recent years, but I do remember the state foundation giving art to businesses downtown and letting them hang it in their offices. But I tell you, I always felt a little uncomfortable about that, in a couple of reasons. One is that, yes, it is state property. What are you doing, is it really an arm's length transaction that they would pay a very modest rental for these paintings and the like. The other is, what happens if they lose them or somebody takes them one fine night? What then? Are they gonna make up for it? And the third problem is that there's plenty of room for abuse, isn't there? When you start renting valuable art to your friends and relatives. So I agree with him. I would veto that bill also. Not to say that the museum is the great shakes. The museum is supposed to show and rotate this art is no big deal. And we could use a much better museum and that's how we could show it. Yeah, now, the thing that doesn't sit well with me though is that if they're thinking that this program could get the state into federal tax trouble like compromising the state's tax exempt bond program or getting people's exemptions scotched. Somebody out of testified about this during session and nobody did. So what do you think as a matter of law? I don't think that jeopardizes the state's exemption or ability to operate in any way. It's just a small thing. It doesn't have any tax import, does it? Well, the argument is that if you make this available to private people and you're borrowing money, then you violated your bond covenants. You can't borrow for private purposes. Okay, my gut on it is that this is such small potatoes. It's really not gonna get in the way. Yeah, it just seems kind of small but who knows. Anyway, that's kind of that program. And then I wanna talk a little bit about special purpose digital currency licensure. Yes, let's do that, very important. Okay, Senate Bill 945 would have Hawaii start to regulate cryptocurrency but the 80 plus page bill contains a lot of words but no money for DCCA to turn those words into action. It can't go anywhere then. Can't really go anywhere. Yeah. Well, this all seems to reinforce the notion that the legislature didn't do a whole lot this year. And we had plenty of noise about corruption and bullying. We heard, you know, strange experiences in the legislature and fights and vendettas and all that but we didn't see a whole lot of good policy come out of it. And you know, and Josh Green has been around the block, he was kind of a stiff neck legislator himself. He didn't actually fall in line when he was in the Senate. He was exercising independent judgment and he certainly is doing that now. And maybe this is really a breath of fresh air that he put these things on the list and each one of the things that you and I have talked about, I don't think it's accidental, has good policy to it. So he's making at least, you know, at least to that extent, good veto decisions in his first year. I give him credit. I mean, who knows what else he's doing and whether we would approve of that too. But on this veto list, it sounds like he's doing the right thing. What do you think? Well, it's certainly a promising start. And of course, we're one year into a four year term. So there's plenty of time left to see how that plays out. And it's unfortunate that, you know, one of his initiatives to, you know, give significant reform in the tax system kind of hit a wall in the legislature and didn't go anywhere. But maybe that'll gain a little bit more momentum next session. Did you like that, Bill? It wasn't bad, yeah, it wasn't bad. It's something that we needed for, you know, many years, but. I give him credit for that too. Okay, you know, he's gonna run into a snag when the legislature is intransigent, but at least he tried. He came up with something. I'm not sure he can get things through the crowd that controls the legislature, but at least he tried and I agree with you. He probably will, should put that bill in again. He should keep on going. I think what, you know, what he really needs to do is what Blanchiardi does at the city level. He needs to connect with the community. We need to hear from him. Maybe he should come down on ThinkTech. Yeah, yeah, he needs to use his bully pulpit. Yeah. And get the public riled up and let the legislature know from the community what they want, what they need. And, you know, if the community is engaged, the legislature will do different things. Absolutely, but they were not gonna be engaged if you don't talk to them. That's right. You know, I think it's very interesting that he makes the veto list, the intent of veto list, and he calls the legislators who, he's gonna veto the bills that they were championing and he talks to them and very transparent and respectful of them and all that. But what about me? I wanna hear from him. I wanna hear exactly what he says to them. I wanna know, I wanna hear his policy reasons for all of the vetoes. And it wouldn't be hard and guys like you and me, we would support him in that because he does have good policy behind these vetoes. I really think he's missing the boat on trying to explain it beyond the members of the legislature who are pushing him. It should be more than lobbying, it should be informing the public, so the public can have confidence, all about confidence, right? Yeah, and I think he's starting to do that. And I mean, I think the press needs to trust him more and maybe give him a bit more of a microphone. Yeah, I agree. But I think in general, if you wanna look over what he's done in the past six months, since he took office, this is a good sign. This is a good sign that he's being independent about it and he's calling a spade a spade and he's not allowing himself to be pushed around. And I can only see that when he gets to lay in the land and appreciates it all the more exactly what he can do and not next year, for example, he'll be even better at it. And we can expect that, I mean, maybe I'm talking too soon and out of school, but from this indication, we can expect a good administration. I certainly hope so and we'll see how that goes. Yeah, okay. All right, well, so you think there's any surprises between now and July 11th? I don't see any right now, but you know, the legislature's full of surprises. So we'll see what happens with them. Is there any other indication that it might be a special session? Not so far, but again, you never know. We'll see you in a couple of weeks. All right, Tom, thank you so much. Really appreciate your help, your help today. Thank you for having me on the show. Aloha. Thank you so much for watching Think Tech Hawaii. If you like what we do, please click the like and subscribe button on YouTube. You can also follow us on Facebook, Instagram and LinkedIn. Check out our website, thinktechawaii.com. Mahalo.