Plus or minus 2%
January 13th, 2009 by Derrick DePledgeState Sen. Donna Mercado Kim, the chairwoman of the Senate Ways and Means Committee, torched state economist Pearl Imada Iboshi at an informational briefing this afternoon for what Kim considered overly rosy economic projections last year.
Several lawmakers have said the Lingle administration was slow to acknowledge the state’s economic downturn last year. But Kim, who is well known for her direct questioning, asked Iboshi why the state Department of Business, Economic Development and Tourism was so inept and whether politics influenced the forecasts.
“In hindsight, why is DBEDT so inept in being able to inform the leadership in the executive branch of what’s coming so that we can be better prepared?" Kim asked.
“Well, I’m sorry we were not able to forecast the Aloha Airline or the ATA drop, nor were we able to forecast the financial crisis,” Iboshi replied.
Iboshi said she has never been asked to revise or change a DBEDT forecast for political reasons.
Kim also pointed out that Iboshi, who serves on the state Council on Revenues, argued in October for a less pessimistic council projection while other economists wanted to go lower.
The council in October predicted a 0.5 percent decline for the fiscal year, which was used by the Lingle administration in drafting the budget. Last Friday, the council downgraded the forecast to a 3.0 percent decline, which will now require significant budget revisions.
Kim, D-14th (Hälawa, Moanalua, Kamehameha Heights), extended her criticism to the council and questioned the value of the council’s forecasts.
“So, in October, you guys had no clue that it was going to be this bad?” Kim asked.
In fairness, economists on the council specifically warned in October that the revenue picture could be worse than the projection. On Friday, economists again warned lawmakers to err on the down side of the new forecast.
University of Hawaiçi economist Carl Bonham, who serves on the council, said economists often miss the extent of the revenue decline when the economy is deteriorating at such a rapid rate.
“It’s the nature of economic forecasting,” he said. “Partly, it has something to do with our models. It also has something to do with the psychology behind the process. People can’t believe it’s going to get that bad that fast.
“I’m not trying to defend what we’re doing, I’m just trying to explain it.”
Kim was not pleased:
The question is then, if we cannot trust these projections, if we cannot trust these ...well what good is it? And if we cannot trust the projections of the state economist, then, you know, what value does this office have to the Legislature?
Because to the public out there, we seem very irresponsible. That we didn’t prepare for this. That we’re not ready for this. That we continued spending. We didn’t start the CIP projects and all the construction sooner, because, you know, everybody was forecasting all of these rosy picture(s).
But the general lay person out there looks to us that we’ve been irresponsible. And we’re relying upon the Council on Revenues. And we’re relying upon the state economist. And yet, if we can’t trust that, then what value is it for us?
Bonham said the council should provide lawmakers with a forecast and then a range that shows the higher and lower possibilities. For the current forecast, for example, Bonham said the projection could be plus or minus 2 percent -- a $100 million revenue swing.
January 14th, 2009 at 7:46 am
Ive seen President Hanabusa, when she was Judiciary Chair, scold the crap out of people - and a lot of time deservedly so - but she still did it in a way that was inherently respectful of the individual. You always knew that you had better have done your homework. If you hadnt, then you always knew, very clearly but very succinctly (like, in one swift sentence!) when Hanabusa was displeased. Still, I never got the impression that she was setting the testifier up to yank out the chair under their okole, kick them extra hard while they were on the ground, and then have the press there to report about it.
Perhaps through Hanabusa's leadership, we can hope Senator Kim might be encouraged to temper her hearing tactics as we all try our best to survive these very rough times.
January 14th, 2009 at 10:16 am
The question is whether Kim is being facetious or does she really want to do the responsible thing and chuck the whole council on revenues/balanced budget system as Sen Hooser suggested recently in his 9 points for consideration essay
http://garyhooser.livejournal.com/28081.html
I’ve never talked to a legislator who like the system yet we never see a constructional amendment to change it- isn’t it about time?
January 14th, 2009 at 10:33 am
We need to devolve power from the government back to the private sector. After nearly 50 years of rules and regs put down from on high, let's free the people of Hawaii.
Aloha,
Keahi
January 14th, 2009 at 12:09 pm
Agree w/ Hipoli. Harsh comments are not helpful. However, the Council on Revenues does need to provide a historical analysis of how their projections stack up against reality--at least over the last 10 years. Dr. Bonham's comments that even our nation's leading economic forecasters got our country's recession wrong. The Council's report should also show all of their members' projections in addition to the overall Council's numbers.
January 14th, 2009 at 10:58 pm
Keahi, when you say the private sector, do you mean like Enron, CitiBank, Halliburton, the Big 3 automakers, etc.?
January 15th, 2009 at 10:47 am
To tie Derrick’s last two posts together we already have gambling in Hawai`i- it’s the crap shoot called the council on revenues. The COR has NEVER been accurate- not once- in 10 years or 30.