Hawaii County ended the last fiscal year with $52.7 million left over to be applied to this year’s budget, according to an Oct. 15 report to the County Council.
The fund balance — money not spent in the previous year that’s carried over to the new budget year that began July 1 — is higher than usual because of an infusion of federal money from the Coronavirus Aid, Relief, and Economic Security Act and because some county obligations were suspended because of the coronavirus pandemic.
“The fund balance is primarily the result of expenditures in several areas being lower than expected due to the focus during the fiscal year being on the pandemic much of which was funded by CARES Act, careful spending by the departments, as well as cost items for collective bargaining being paid by the departments,” Finance Director Deanna Sako said in the report to the County Council.
In addition, the county had budgeted for a worst-case scenario in case people didn’t pay their property taxes on time, but delinquencies were less than expected.
“In light of COVID-19 we, along with most of the country, had anticipated a percentage of the real property taxes not getting paid in the applicable fiscal year due to taxpayers struggling with loss of jobs/income,” said Real Property Tax Administrator Lisa Miura. “While this was a concern in all tax classifications, collections for real property taxes were higher than we had expected.”
While the county was shorted about $19 million when the state swept the transient accommodations allocation, the county also was relieved of the obligation to pay about $20 million for unfunded future retiree benefits, primarily medical and insurance obligations. The payment on that obligation, known as OPED for other post-employment benefits, was suspended by the state Legislature until the budget year that starts July 1, 2023.
The OPED obligation is in addition to the employees’ pensions and retirement funds, which at $79.1 million account for about 13% of the $610 million annual operating budget.
The County Council is currently working on a local-option transient accommodations tax of 3% to be added to hotel rooms and other short-term rentals to make up the lost share from the state. Mayor Mitch Roth has called the new tax a “necessary evil” to plug the budget hole.
The bill for the TAT increase, and also the report on the fund balance, will be considered by the council Finance Committee meeting scheduled for 9 a.m. Wednesday.
Kohala Councilman Tim Richards has kept close tabs on the budget and the fund balance. In a normal year, he would be more concerned that the state took in so much more money than it apparently needed, but these last couple of years haven’t been normal, Richards said Friday.
He said about $25 million to $35 million is probably a good buffer in a county budget this size, to be ready for unforeseen contingencies.
The county received about $60 million in direct federal coronavirus relief money. And that’s not counting an estimated $168 million in public transit, housing, public health programs and direct aid to residents and business in the form of rent and utilities relief, unemployment, stimulus checks, coronavirus testing and response and other forms of government aid.
At the same time, the lingering pandemic has slowed county projects and services, leading to lower expenditures.
“The fund balance is high, but I’m not too excited because it’s a very unusual year with very unusual income streams,” Richards said. “I am concerned, though, about some of these looming holes we are going to have to fill.”