 with Tom. That's Tom Yamachika, president of the Tax Foundation of Hawaii. I'm Jay Fidel. This is ThinkTech. We're going to talk today about the shadow budget. You've heard of the shadow docket of the Supreme Court. And that kind of conveys the notion that it's not quite right, that the shadow docket is actually a way the Supreme Court cuts corners and sheets on providing the justification for their decisions. That's what they say. So when Tom selected this topic, Hawaii shadow budget, I was very interested. Tom, welcome to the show. Thanks for having me, Jay. Shadow budget is very provocative and very, it's a curious title for a complex notion. And it's also very interesting that the constitution of the state of Hawaii requires a balanced budget. And you wonder exactly how can you achieve that? I've always wondered about that, but it's not as simple as that, is it? Oh, no, there's certainly a lot of moving parts. And let me just kind of give you an overview of what happened in this legislature. The legislature's vote to approve the budget bill was held on May 1st. It was approved, of course. The session ended on May 4th. The final worksheets for the budget were released on May 15th. So even for members of the legislature who were voting on the budget, a lot of the detail wasn't even available until a couple of weeks after they voted. Can I just ask you this? You know, the way you put that, the implication is that they didn't exist or had not been finalized by the time the session was over. And in that 15-day hiatus, what you had was people catching up and actually writing them after the legislature was done. Am I right? Yeah, let me quote Russell Ruderman, you know, former state senator. He was quoted in civil read about that and what he said was, the budget bill was not finished by the deadline and the leadership insisted that members voted it anyway, even though many important expenditures were still blank. That is, they voted on a budget bill that they had not read because it wasn't written yet. There's something really not kosher about that, isn't there? And the question is, where's the accountability? Who is going to say, wait a minute, you know, you have your constitutional duties, procedures, obligations to conduct us, you know, a legislative session and you do it after the session, you do it without notice, you do it behind our backs. Who is going to stop them from doing that? Who indeed, I mean, it's a very tough problem because what are you going to do, suit and validate the entire budget and through the entire state and chaos? Where's the governor? Well, the governor has some ability to make some changes. I mean, he can line out and veto stuff, especially in budgets like this. But, you know, his power is pretty much limited to that to say yes or no on either bills or budget line items. If he says no, yeah, you can take out the appropriation, but that means there's no money. Let me ask you this. There's two thoughts that cross my mind and of course we have a lot to talk about today, but I just want to ask you this. Suppose he said, that wasn't right, that was not legal, that was not appropriate, that was not sunshine. I want you to call a special session and do it proper and I want the public to have notice and transparency the way the Constitution requires. So, if you want the state to proceed, call a special session. Otherwise, I do not respect this budget. He could do that, couldn't he? In theory, I think he has the power to call a special session himself. But what are they going to do? Well, they'll have to do it right, won't they? Well, is that going to happen? I mean, the last time, you know, there was a special session for a controversial bill. I remember the 2017 session with the real bill out bill. Basically, what happened was once the session was gaveled in, everybody was reading from a script. They had the bill already worked out. They held hearings and they listened to testimony, but there was a predetermined outcome for each of the hearings. That sounds like what might happen again, but you know what? I mean, when he does this, I mean, my little model here, what he does is he would say, really, this is not kosher. You can't do this. And every time you do this, I am going, in my term, as governor of the state, I am going to call a special session and get used to it and get used to the fact that I'll be watching you and I'll be making public statements about it. What about that? Would that help? It might help. Yeah. I think somebody's got to rein in some of this abuse that's going on. It does have to be public accountability. If the voters aren't going to, you know, render judgment, somebody's got to. It's an attitudinal thing, though. It's an attitudinal thing that flows from a few powerful people in the legislature who have created other problems, controversies, you know, abuses. And I know that, you know, in your, the discussion you contemplated for the show, there are other things. Why don't you talk about the other things? Well, well, first off, remember, there is a $200 million item that the governor can spend at his discretion. The big issue with that money isn't the basic concept, i.e. governors have been given discretionary funds before, but the way it made its way into the budget bill. It was not in the budget bill when the House Senate conference committee voted to approve it, but they voted to approve the bill with amendments and that gave the money chair's license to put other stuff in the bill, which they did. And of course, the final vote was held later. I mean, even the House Finance Chair admitted that the $200 million was added to the bill after the conference committee voted on it, but before the final vote was taken in both thousands. Oh, that is really, that sounds like a huge abuse and a hide the peanut thing in the, in the, in the scale of hundreds of millions, which the public had no way of knowing about and could not have weighed in. That's right. There's a lot of other things that the public didn't know about and couldn't weigh in on and we're going to go through them, you know, a few more of them later. But it did leave a bad taste in the mouth, in the mouth of some of the House members. And so there were a few who actually voted against it. You know, I don't know what's going to happen to them next session, whether they're going to be stripped of, you know, committee assignments for failing to tow the line. But we gotta, you know, we'll have to see. That's another aspect of the abuse. It really sounds like the, you know, the autocratic approach. If they don't join you on whatever you're doing, even if it's wrong, you punish them. Yep. And there's, there's even, I think, some instances of, you know, disrespecting the, the bicameral nature of our legislature. We've heard a lot in the news about the first responders training facility near Mililani that was championed by Senator De La Cruz, because it's in, you know, his district. It was included in an appropriation for the High Technology Development Corporation. Now, earlier in the session, there was actually a bill to authorize the first responders technology campus. And the House Higher Education and Technology Committee chaired by Representative Amy Peruso. She didn't move the bill. Thought it was dead. Yep. She thought it was dead. She was the one to know. Yeah. But, but guess what? $50 million went into the budget anyway to support this project. But then it was the story of Vasilis Simos on the High Tech, the Hawaii Tech Development Corporation. What happened there? Oh, yeah. There was lots of news coverage on that, including this morning. What happened there was Vasilis Simos is one of the vice presidents at the University of Hawaii. He's on the board of High Technology Development Corporation. And he was against this, this project. So what happened was there was a a bill to appropriate some money to the High Technology Development Corporation. And it got changed at the last minute in conference committee to add a provision that changed is the qualifications for the board of the High Technology Development Corporation. Specifically, it says that vice presidents at the University can no longer be on the board. It has to be a regent. So really, really, Tom, just stopping you right there. That is, that is poppycock. That is ridiculous. I was the chair of the then called the High Tech Development Corporation. And Vasilis Simos would have been a great catch for us because he's very senior at the University. He supervises or he has supervised the tech elements of the University. The few people in the state would know more about tech research than Vasilis. And he would be a great catch as a member of the board of the Hawaii Tech Development Corporation. To exclude him, you know, that's like pretty clear what they were doing. They were, anyway, go ahead. Yeah. And Civil Beat this morning was quoting Representative Quinlan is basically saying, look, I was given the choice of either voting for this bill in conference committee or saying no and a key appropriation for HTDC would then fall to the fall to the cutting room floor. And he was concerned about having that appropriation in there. So he went along with it. So this is how this is House Bill 999. And so we'll see what we'll see what the governor does with it. But apparently it's paired with an appropriation of some kind. So if if the bills vetoed, there'll be financial consequences to HTDC as a result. And where is Vasilis? Is he on the board of HTDC? He's on the board now. Yeah. That was a clear attempt at retribution. It was a clear attempt at trying to control the members and thus the votes of HTDC on this issue, wasn't it? Not only that, but you know, the executive director of HTDC, Len Higashi, he just resigned. He just quit. You know, you'd think that they would they would not politicize HTDC. Its mission is so clear and useful. He quit. He quit, I guess I'm making a guess here because of the politicization, don't you think? I don't think he was reached to comment on that, but that is it's very suspicious. It's very suspicious. And I think what you're, you know, your explanation makes a lot of sense. But let me let me kind of show you what these legislative worksheets that we've been talking about are and, you know, what they look like and what this vehicle called a legislative adjustment is. So let's look at the first slide, which is page four of 1070. That's there are 1070 pages in the budget worksheet. So two reams of paper and then some. Well, here's what it says. This is a, you know, two columns. One is one on the right is the governor's request. On the left is the, you know, what's in the budget bill. And the governor asked for $1.5 million for the coconut around us for a speedal task force, which 750K and a green waste program 750K. And on the left side, it says the legislature does not concur and there's no money. So basically what they're doing is they're taking that governor's request and zeroing it out. Okay, so that's one way budget worksheets work. Let's go to the next page, page five of 1070. Did they have a vote on this? They have a vote on this. Yes, they can approve the budget bill or die. Got it. So this one is a governor's request to add funds for plant pest and disease control. This one says legislature concurs and this money is, you know, shifted over to the left column where the money is there. And on the bottom of that page, there is a paragraph that says legislative adjustment. Add funds for plant pest and disease control. Now this is what a legislative adjustment is. So they put something into the budget worksheet under a particular program and they add money to it. In this case, they're adding two million dollars. Beyond what the governor asked for. Yeah, but it's interesting because they put in coconut or an oscarist task force, one million dollars, green waste program, one million dollars. So they basically zeroed out the governor's request and they added more money. How's that possible? When you shake it and bank it, is that legal? Yes, it is. It's in the final version of House Bill 300 and legislature voted on it. So when the governor signs it into law, if he does, then it's totally legal. Okay. You have a number of other points, you know, that are of interest here. And then there was the school teachers who negotiated for a hundred and eighty some million dollars in raises. But that negotiation, the result of that negotiation was not what the budget has said it would pay. How come there can be a discrepancy like that? It was not a discrepancy. It's a different bill. What the legislature did was the past HB 1004, which funded the teachers for a hundred and eighty seven million. But in the budget bill, they kind of got the education department back by saying, okay, that's going to cost you a hundred and sixty seven million. Almost the same amount, not quite, but almost the same amount. Twenty million dollars, Tom. If you ever feel that's not much of a difference. So let me know because I could really use that money for ThinkTek Hawaii. As could we all. That's a lot of bread. Okay. So they negotiated a hundred and eighty seven million. But in the budget, they got a hundred and sixty seven million. Who handles the shortfall? DOE. So I suppose then that the short end of the stick would follow the HGEA members. So they wouldn't get the raise they thought they negotiated? Well, HSTA got the raise. HGEA is another union comprising not the teachers, but the administrators and the higher mucky mucks in the Department of Education instructor, which is huge, by the way. I know. But what, you know, why the difference? I mean, if you if it's right there on your desk and it says they negotiated a hundred and eighty seven million dollars in raises. And then what is an eyesight question? How come they gave them twenty million dollars less? But did they not understand what the negotiation was? Did they were they renegotiating? Is that what they were doing? It's hard to tell. But apparently there were some people in the some powerful people in the legislature saying, OK, there's got to be a cost to this. So somebody has to bear the cost. What is what is kind of more interesting is the Hoyt Tourism Authority. Because between the different bills to to basically defund the the Tourism Authority and or blow it up and make it into something else. All of the money for the Hoyt Tourism Authority kind of fell by the wayside. So they have no appropriation. So either the governor uses some of that two hundred million to to prop up HTA for another, you know, for another couple of years or HTA withers on the vine. What does that mean? What does that mean to the HTA not having any money? What what is the effect of that? You can't you can't pay people so you can't do anything. It sounds like the debt ceiling issue on the federal level. You're stuck. Well, it's it's even worse than that because you can't then you can't spend any money at all. Well, I'm trying to make sense of all this and find a common denominator. And a couple of things that occur to me in light of our discussions on a variety of shows in the past about the special funds and all that. It's like you have two realities. One reality is, well, you're supposed to have the structure and and special funds are really not a good idea in the structure. And the second is you have to have a balanced budget. Okay, we know that. And you have to, you know, engage your spending by what the council on revenue revenues tells you, you know, at the beginning of the of the session. And the third thing is really important. It has to go through the process. You have to respect the committees. You have to respect their votes. You have to respect the law, really. That's on one side of the ledger, so to speak. That's good in theory. In practice, in practice, we see it's a little bit different. That's the point. Yeah. In practice, we see it's a little different people. Disregarding, tucking money away in special funds that sit there, you know, completely dysfunctional. And then the legislature that's committees does one thing. But somehow, somehow, and it's not known exactly how a few choice powerful individuals, you know, they do what they want, regardless of what the legislature has voted for. And the public, you know, they're the victims. The public are completely on the outside of this. And then and they are an announcement is made about this is what it's going to be. And the governor doesn't have that much control over it. And it doesn't sound to me like from a fiscal policy point of view, fiscal policy may not be the right word. From a fiscal process point of view, it is not what it should be. It is something different. What do you think? It's definitely different. I mean, you would hope that in a good democracy that people would know what they're voting on, that the detail would be out there, that people, you know, could comment on it. And, you know, all of the comments taken into account, you know, they might not necessarily agree with every commenter, but at least there's a process for for views to be made known. A lot of what we've just been talking about is action outside of the public comment process without any public comment. And even, you know, in flying in the face in some in some instances of the newly organized committees that did hold a hearing and did take public input and thought it wasn't a good idea. Wow, we have a problem in Mudville. So, you know, I mentioned before the possibility of the governor being fully advised that he's well experienced in these matters he served in the Senate for a long time, could say something. He could say it to them, either on the, you know, job on a level of vision from the fifth floor to the third and fourth floors of the square building, or he could go public and say this isn't working well. I am going to expect better. He could say that. Of course, that's politically dangerous. Those same people who seek retribution against the members of HDD, for example, you know, would seek retribution against him. That would be easy enough. That would be easy enough, right? Yeah, and then you'll be very easy for those individuals to say, okay, there's no budget, it's your fault. Right. The blame game theater. Yeah. But let me let me offer another thought. What about the state auditor? Is this something that could, does, should fall on the desk of the state auditor? And to look at this and say there's something wrong here? Well, I think there's an inherent conflict because the state auditor is a legislative agency. It's created to serve the legislature and report to the legislature. So it's probably not going to be assigned to a scrutinized and reported in its own self. Who then could call for reform or accountability? Is it have to be a federal agency, a federal investigative party? Who then? Maybe the AG. We have an attorney general. Supposed to enforce the laws. If there are laws that are not being followed, the AG is supposed to do something about it. But the AG works with governor. That's right. AG is executive branch. So you don't have the same conflict. In a larger picture here, you have a failure of the process of the state as laid out. You have a failure of the procedures in the legislature as laid out. And as we voted for legislators who would follow these procedures. And if they're not being followed, there's really something wrong. And so here's my concern about all of this. These things, I don't think that people care that much if they know it all about these things. But they are likely to get worse, don't you think? Because if you get away with something, then you're likely to try something more aggressive. Is that happening? I think that is part of the dynamic. It's been said that absolute power corrupts absolutely. And you see that the moneychairs of both chambers, and I think more with the Senate ways and means chair, he's got power in his way to round. And I think something's going to be done about that. It's just a matter of too much concentration of power. Is this something that is only recent or has it been happening over the years? I think it's worse than usual. There has been a lot more, I think, power flexing in recent years. This year, we also saw a lot of bills being killed by the speaker, because things would go to conference, and for some reason or other, house conferees wouldn't get appointed, or house conferees that are appointed would get dismissed. And that kills the bill. So either the speaker of the House or the Senate President has basically a veto power over all bills. And it just so happens that the House Speaker's been exercising that veto power a lot more recently. Yeah, it's another way to kill a bill, just another way. And it's focused in the hands of only a couple of people. By the way, the doctors, you know, we have a curious doctor shortage in the state where we're down by 800 doctors against what we should have. And that affects public health. In fact, House came around the state, especially the neighbor islands, and especially people who are disadvantaged. And it was important to try to pass some bills to slow down the doctor shortage and make life and practice in a way more appealing to doctors. And there were a bunch of bills that were passed, that were passed by both houses of the legislature. But they were killed at the last moment, because somebody failed to appoint a member of the conference committee. And boy, the doctors were who who about that. It worked so hard, but in thousands of hours trying to explain to everybody about how the doctor shortage was serious, and how it could be remedied at least in part. And it got the bills passed. But then they failed at the last minute. And you can't tell me that was a slight of hand mistake. It wasn't. It was, it had to be intentional. It's not that hard to appoint a member of a conference committee, is it? No, not at all. I mean, it's just, again, the Speaker of the Senate President wielding veto power, which is what it is. Yeah. Okay. I wish I could say that we have come up with some solutions here, Tom. Well, we haven't yet, but we know at least where a lot of the problems are. So hopefully we can focus more attention on that. And then people can actually sit down and look at these and try to come up with some real solutions. What does the Washington Post say that democracy dies in darkness? We really have to keep the light shining. Yep. And we got a lot of shadow to worry about. So Tom Yamachika, President of the Tax Foundation of Hawaii, thank you so much. Thank you for having me on the show. Thank you so much for watching Think Tech Hawaii. If you like what we do, please like us and click the subscribe button on YouTube and the follow button on Vimeo. You can also follow us on Facebook, Instagram and LinkedIn and donate to us at thinktechhawaii.com. Mahalo.