 Aloha and welcome to Business in Hawaii with Reg Baker. We are a show that broadcasts live every Thursday afternoon from 2 to 2.30 in the studios of Think Tech Hawaii and beautiful downtown Hualululu, Hawaii. We focus on successful businesses and individuals in Hawaii, try to highlight their successes and how they made it work here in Hawaii. There are challenges. We are an island. There are transportation costs. There are elements of living out in the middle of the Pacific that drive costs up that other parts of the country don't have to deal with. And so we've got some unique challenges here, but there are success stories. All we got to do is look at the Pacific Business News. They have a book of lists, actually multiple lists of successful companies all during the year. The Small Business Administration also has their lists of successful companies. And I act as one of the judges with the SBA going through and helping to decide which companies should be awarded during the year for their successes. And I can assure you it is not an easy process. We have a lot of applicants, a lot of well qualified companies and individuals, and that's a very difficult challenge sometimes trying to find the best accomplished stories in businesses to win the awards. As a matter of fact, we're going to be having an awards luncheon coming up in a few months. And the winners have not been announced yet, but I'm sure they will be soon. And then we'll be recognizing them at the SBA luncheon here, I think it's in May. We do have a guest today that many people know. He has been in the news quite a bit. He is the CEO of Grassroots. He has been in that role for a few years now and has been very successful at it. He has also been recently elected as trustee for OHA, which is the Office of Hawaiian Affairs. Now that role that he has is a very challenging one and a very difficult one. And so he's usually very, very busy. And today is not an exception. So today, Dr. Akina, please come in. I was just going to say how busy you are and how it's been very much of a challenge for you to get to all the different meetings and duties that you have. Now, you're the newest trustee or one of the newest trustees on OHA, but you still have Grassroots going on, too. So you've got a lot of balls in here. First, let me say aloha to you and apologize to you and the entire audience out here for being a few minutes late. But Reg, such a great person, a great show to be on. Yes, I was elected to the Office of Hawaiian Affairs as a statewide trustee at large. And I continue because that's only a part-time position. I continue to be president and CEO of the Grassroots Institute of Hawaii, which is a public policy think-tank. Right, and it's a very important one because it's really a great way to disseminate some information throughout the community that impacts not only businesses, but ultimately the individuals, too. Well, absolutely. And in fact, we want to come up with a better economy, a better government, a better society, and do it without creating partisan lines. I think that there are enough people in Hawaii who want to see a future that is great for our keiki. We can work together. And that's been a major theme of mine. That's why I wanted to come on your show just to talk a bit about how I think we can do a new kind of politics in Hawaii. You know, we really need to try to figure out how to make that work because I don't know about you and others. But for me, I'm getting a little burned out on all the political rhetoric that's going on. And I wish we could just start paying attention, trying to get something done and move the ball forward instead of all this bickering. Well, you're not the only one, Reg. I think that a lot of people when they look at different projects that have been scuttled in our state, different endeavors that have divided people such as the rail and Honolulu and so forth, that when that happens, when that takes place, and I'm going to adjust this to make sure that I can be heard all right, we don't work together. You know, Reg, I like to say a Hana Kako, let's work together. And I think that there is a ground that attracts people together where we actually help one another. And the good thing about the political arena is we can use it to discover that. As long as people are willing to have a little bit of an open mind and explore the possibilities. I mean, I see a lot of people, they just shut their mind and they just want to do it one way. And that can be kind of a roadblock at times. Well, there's nothing wrong with people taking a stand. We live in a democracy. Ideas need to be competitive in order for the best ideas to rise to the top. We need to have political parties that are competitive. The problem is when there's only one voice in power. For example, our state senate, Sam Sloan was the friend of many people, whether they're democrat or republican, but he lost his seat. And as a result, something else happened. Our state senate became the only one in the United States with only one party. Whether you're democrat or republican, that's not a good thing. Because the functions of government don't take place. The people don't get represented as well as they would if there was some competition. Well, both sides need to be heard. That's right. And with one party, sometimes that doesn't always happen. That's right. Now, there's no hiding the fact that some of my views have really lined up well with many of the conservative positions that Sam Sloan had. And some of my views have been different. But I think if I'm going to share something with friends who have more conservative leanings when it comes to taxes, when it comes to the size of government, fiscal accountability and so forth, we have to recognize that it's not enough for us to complain about the system. We have to come up with a politics in which we're providing solutions that actually will work and will do things that people need. Do you think it's a coincidence that, you know, so Sam's not in the senate anymore, but it just seems to me, watching all these bills, you know, both on the senate and the house side, that's kind of going through the process right now, there seems to be an awful lot of them focused on raising taxes. More than I've seen in the past. Well that's because this year is not an election year. If you track the legislature, raising taxes is not a popular thing when you're also trying to be elected. But in an off year, yes, those bills flow. And we have seen bills that have attempted to raise our general excise tax, which is quite pervasive. Very few people realize that about 50% of our state coffers are filled by the general excise tax. I'll let you as an accountant explain what it is. But we've also seen attempts to raise property taxes and so forth. And, you know, part of it is a mindset that says the only way to get these goods that we need in society, a better education system or transportation, the only way is to raise taxes on the tax-paying public. And at the Grassroot Institute, we challenge that idea. We point out that sometimes raising taxes is actually something that harms getting good things to people. It has pushed a lot of people away from Hawaii. People have relocated because of that. And these are good, solid people. And it's a shame to see them go. But, you know, you raised an interesting point about the general excise tax. Sure. And I think, if I'm wrong, please correct me, but you've got an economics background too. Well, some economics. That was my first major in college. All right. Well, you're more than most people then. But, you know, we have what they call a general excise tax. That's right. Not to be confused. With a sales tax. With a sales tax. And they're two completely different animals. That's right. So I think if we try to equate the two, and I've seen different numbers on this, but we've got something because of the excise tax and how it works, equivalent to about a 12 or 13 percent sales tax? Well, the result of combining our GET, our general excise tax and our sales tax, is that when it hits the consumer and the business person, it takes on a greater impact than either one of them alone. And the people who are hurt the most are often the people that in the legislature through these bills, we're trying to help. Let me give you an example. One of the bills that we spoke out about a couple of years ago was designed to help those at the lower end of the economic ladder, the poorest in society. But it was going to raise the GE tax. We pointed out that those at the lowest end of society pay in effect a higher percent of their own salaries or their own income in GE tax because of the way they shop. And they could pay effectively 13 to 18 percent of their income on GE taxes as we construct them here in Hawaii. That's one of the highest rates, if not the highest rate in the nation. And by looking at that data, we can see a lot of times things that sound conservative fiscally actually are going to be good for the poor. In the true sense of the word, I mean it actually will benefit the poor, which we really need to do because in a lot of people, it's not obvious, it's not clear to a lot of folks, you have a lower social economic group that is struggling. They're the ones that use most of the different type of support programs that are out there that really drive the taxes. And if we can get them to a higher level on the economic ladder, then the cost is going to drop in the social welfare area. I think one of the things in addition to leading rather than complaining that we need to do if we're going to gain some political clout, whoever you are, is to unite rather than divide. There are so many things around which we are divided here in our state. I think people are tired of that. It doesn't mean that we all have to think the same way. No, we cherish our diversity in our state. But political leaders are going to have to bring people together. I remember when I first came to the Grassroot Institute, I spoke to an interesting audience. Half of them were Hawaiian native independence and sovereignty activists. The other half of the audience were a collection of conservatives, libertarians, Tea Party people, Republicans. Interesting mix. It was. It was an interesting gathering. And it was hard to reconcile the two groups together, so I threw my speech out. And then I said to one group, I said to the conservatives, you don't want the federal government telling our state what to do. You don't want the government interfering with small business or your own decisions in life. And they all cheered and went, yay. And then I turned to my friends in the Hawaiian sovereignty movement and said, now you don't want the federal government telling you how to run your own self-determinism. You don't want bills like the Akaka Bill or you don't want the Department of Interior to be running what it is to be a Hawaiian entity. And they all cheered and went, ew. And starting with that group, people came together across different political lines. And ultimately that was one factor in my election when we had an overwhelming number of votes when it came to the 2008-16 general election. For my seat in trustee at large in the Office of Hawaiian Affairs, we garnered 164,000 votes. That's impressive. It is because to become a legislator here, you need about 15,000 votes or 10,000 votes to become a congressperson, 80 to 120,000. Because we were able to bring people together around a unified point, we saw 164,000 votes. Let me ask a question that I don't know if you know the answer. How many votes does it take to become the governor? A little more than that. In this last election there was only one election in 2016 in which more people voted and there were more votes for the winner and that was for Senate. Brian Schatz. Oh, yeah. But the voter's behavior changed. It was incredible. Very few people actually voted in the OHA election in past elections. Sometimes as few as 45%. Most people left that blank because they didn't see how relevant OHA is for everyone in Hawaii. In my election, trustee at large, in 2016, 73.1% of all voters marked their ballot. And I think because they were more aware of some of the issues and if something as basic as knowing that they did have a choice that they could vote. That's right. Over 300,000 people, 330,000 people in the last election and this was not reported by the news, voted for an OHA candidate. Wow. And what that shows is when you take issues away from dividing people along political lines and find a central point around which to rally, uniting rather than dividing is a good political strategy. We've all got common ground somewhere, but we need to take a quick break. Dr. Ikeena will be right back, but this is Business in Hawaii with Reg Baker. I've got Dr. Ikeena with me today and we're talking about some very important issues in Hawaii. We'll be right back. Aloha. Thank you. I apologize for being late. I'm Kaui Lucas, host of Hawaii Is My Mainland, every Friday here on Think Tech Hawaii. I also have a blog of the same name at kauilukas.com where you can see all of my past shows. Join me this Friday and every Friday at 3 p.m. Aloha. Aloha. My name is Richard Emory, host of Kondo Insider. More than a third of Hawaii's population live in some form of association. Our show is all about educating board members and owners about the responsibilities and obligations and providing solutions for a great association. You can watch me live on Thursdays, 3 p.m. to 4 p.m. each week. Aloha. Hi, I'm Chris Leatham with Think Tech Hawaii and I'd like to ask you to come watch my show, The Economy and You, each Wednesday at 3 p.m. Welcome back. This is Business in Hawaii with Reg Baker and my guest today is Dr. Akina and we've had a very spirited conversation in the first half of the show about some of the more important issues that's going on in Hawaii right now. And Dr. Akina is also the CEO of Grassroots Institute and has a very interesting newsletter that goes out at least once a week. And this last week he had a very scary story that's not new, but it always scares me whenever I read it. It's about the unfunded liabilities that we have in Hawaii and how they just seem to get bigger and bigger and bigger. Well, you know, Reg, one of the problems we have here in Hawaii is that we owe our retirees more money than we have for them. So there are these wonderful people who work for the state government and county governments who have devoted their lives and when they retire they will find in their pension funds their health care program that we don't have the money to pay for them and their needs. And neither will we have the money by the time their grandchildren are grown up. And this is what we call the unfunded liabilities because the two insurance accounts we have, one of them people know as the ERS, the Employee Retirement System, and the EUTF, which handles health, are not managed in the way they are in the private sector. If you had an insurance company and you're familiar with this and an insurance policy for any number of things, you'd want to know that the money is there. Well, they have reserves that are set aside that are supposed to be earning and keeping up with things in order to meet these obligations. So our total of unfunded liabilities as of last week, because it's a floating figure, was at least $23 billion. Billion with a B. That's right, and that's huge. It is. One of the things is that we're cash-strapped in the state in any case. And so when we move ahead and increase our expenditures at the state legislature through various bills to do things that people want that are good, we have to take from Peter to pay Paul. And we end up frequently rating these funds. Well, there's a limited amount of dollars and you have to move them around in order to meet the obligations. It's not an easy job, and they have to make some hard decisions. That's right. And these unfunded liabilities have grown over the years and they're for legitimate, as you pointed out, very legitimate purposes, but they're basically pensions and retirement funds and then also the commitment that we made to fund the health care for these retirees. That's right. And people are retiring. And this is getting bigger and bigger and the costs are going up higher and higher. It's just, you know, somehow we've got to control it. Well, we have to think outside the box. One of the things we do at the Grassroot Institute is look at models across the nation. Now, Hawaii's unique. We can't just import some other model. But there are best practices in the world and in the nation. One that may be too extreme for us is to take a look at Singapore, which is a very different place, but where their government makes a profit. And as a result, payments for things such as insurance and housing for others comes from the money being made. We have a different model here. In our state, in order to raise revenues, we tax the taxpayer. And there's a limit to how much we can do that. So while we have some of the highest-paid county workers in the nation here, some of the highest-paid government workers, and there's nothing wrong with them receiving high pay and benefits and salaries. And it costs a living inside here too. So there's some correlation. That's right. But while that's the case, the problem is sustaining that is done on the backs of all taxpayers. And we can only go so long in doing that. We've got to find another solution. Are you familiar with the wagon analogy? Tell me that. The wagon and the cart? Yes. Okay. I understand the concept. There's a wagon or a cart. And back a couple hundred years ago, there was, say, ten people pulling this cart, or nine people. And one of the people was in the cart. They needed to help. They were the lower-injured. And so they needed the support of the other nine to get them through. And so there was nine people pulling this wagon. And there was only one that needed to help. And as years have gone on, people have begun to shift. And now the last number I heard is that we've got about six or seven people in the cart and only three or four that's actually pulling it. Which, to me, that means that we've got about 30% of the population paying all of the taxes to help support the other 70%. You know, at some point, it's going to collapse. What's going to happen if we've only got one person left pulling the cart? Right. That's right. Now we have to understand that the retirement system for public employees is only one system within our state. There are multiple systems that we're financing. And the solution has really got to do with thinking bigger. Turning Hawaii into a place that preserves our beauty, our unique culture, our heritage, but also is a destination for venture capital from across the world. We have start-up businesses, but the next level of capital doesn't seem to be here. We need to change that. We need to, you're a businessman. We need to turn Hawaii into a business engine that will bring greater prosperity for everyone. And at the Grassroots Institute, we believe that one of the ways to do that is to lessen the level of regulation that we have on businesses here. Yes. And as you probably know, I sit on the Small Business Administration Regulatory Review Board, and we look at federal regulations on a regular basis to try to figure out how we can either eliminate or to modify to try and help the businesses become more successful. That's right. And hopefully we've got a new administration that's been making some noise about dropping the regulations. It'll be interesting to see how this all plays out. You mentioned venture capital, and I am a business person. I've been doing it for a long time. I've got a lot of clients that I still work with. One of the challenges that we have always had in Hawaii is that it's not a huge market. It's a smaller market. And a lot of companies, when they invest, they would prefer to invest in an area that's got maybe a lot more growth potential. But in today's world, with the virtual reality and the electronics and the internet, that's not as much of a problem as it used to be, depending upon the industry that you're getting into. So what we have to do is try to create an environment that the venture capitalists can come in, make the investments, and then provide an opportunity or a platform to springboard that out to the rest of the world. That's right. Absolutely. Given today the markets in finance, in science and technology, in communications and so forth, Hawaii is not disconnected from the world. This has opened up huge market space. The problem is the structure of government regulation here, both state and federal, keeps us a very small closed protected market. And if we can make some change there, we're going to be able to take advantage of global forces and control them as well. Some people are somewhat afraid of opening up Hawaii to further development. Development doesn't necessarily mean planting high-rises on every open space. It doesn't have to be brick and mortar. And it also gives us the resources with which better to protect our environment and our cultures. Well, think of what could happen if we had the opportunity to waive, say, a GET type of taxation for any business that would export some of their technology. And to be able to open that up and help them, not only to grease the wheels to help with the exporting, but also make them competitive price-wise with the rest of the world. I would agree that there are many immediate steps we can take. We can think of a dozen on the level of what you just suggested in terms of opening up areas where we're not taxing. But at the same time, we need a bigger vision. We need to have a government that recognizes that the role of government is not to grow bigger and bigger. And we've documented at the Grassroot Institute that the public sector here in Hawaii is growing faster than the private sector, which should support it. Instead, we need to have a government that sees it's the other way around, that government exists so that the private sector, private individuals, the corporate world are able to grow and that the needs of everyone are met by an increasingly prosperous state. That's going to take a lot of effort because we haven't had that mindset, I think, since the first governor. Well, even prior to the first governor, we had visionaries, Prince Kuhio, King Kalakaua, others who wanted in Hawaii to be far more than just a rare destination that is protected from the rest of the world. They wanted to protect the culture and the environment, but at the same time see us as the hub of commerce in the Pacific and now we can be globally. Interesting. That's a very good point. So this thought has been around for a very long time. How come we haven't been able to make it happen? Well, that's an interesting point you bring up. It has been around for a long time. At one point, Hawaii was the shipping hub of the Pacific. You couldn't go down to Honolulu Harbor or other harbors on other islands without seeing large numbers of ships in port all the time. We had sugar cane, we had pineapple, we had other commodities that were being produced in the 1800s and 1900s, but our government decided to enact a law to protect shipbuilding in the United States called the Jones Act. And at the time it was enacted in the 1920s, we were one of the largest shipbuilders on Earth for civilian ships that carry cargo. Because of this protectionism, which we've never lifted, we are now the producers of less than 1% of the tonnage of deep bottom ships in the world. And if we could just modify that a bit, update it for the 21st century, we could reverse something that has kind of cut off Hawaii from the level of commerce that it could really establish. I think that might be a topic for a whole show. Absolutely. And I'd love to come back and revisit that, but believe it or not, we have run out of time. Well, it's been delightful to be with you and with your viewers today. Thank you for the good work you do. I'm so glad that you could cut some time out of your schedule to come down and visit with us today. So thank you very much, Dr. Kena. This is Reg Baker, business in Hawaii. We broadcast live every Thursday from 2 to 2.30 from the ThinkTech studios in downtown Haluulu in the Pioneer Plaza. I hope to see you next week. Until then, aloha. Well, thank you. And again, I apologize.