Infrastructure, housing top priorities in Hawaii governor’s bond-heavy plans

Hawaii Gov. Josh Green highlighted $373 million of infrastructure and housing spending in his supplemental fiscal 2025 budget, calling it his administration’s top statewide priority during his State of the State speech.

He also renewed a call for a climate change impact fee expected to collect $50 million that he said would have helped cover costs related to the wildfires that devastated parts of Maui in August. Recovery efforts on the state’s third-most-populous island were a focal point of his speed, delivered Monday.

When Green presented his proposed budget in December for the fiscal year that begins July 1, he estimated recovery from the disaster that burned down the town of Lahaina and killed 100 people will cost the state about $500 million, including $60 million to settle claims by survivors who lost family members. His budget includes $40 million in additional funding to prevent or fight future fires.

“Today I am here to report that — although we have faced great challenges and suffered even greater loss over the past year — we have come together as one ‘ohana to recover and to heal,” Green said in his speech. “I am here to report that the state of Hawaii is strong.” 

Pointing to ongoing costs from the Maui fire, Green’s proposed $19.2 billion supplemental budget released in December shifted some capital improvement spending from the general fund to bond funding.

He proposed $890 million in GOs for capital improvement projects statewide with general fund capital improvement projects to be reauthorized as GO bonds to maintain strong reserves and keep the projects on track. Green said then that “repurposing state resources” in this way will ensure that general funds are available to allow continued support for statewide priorities and respond to the impacts of the Maui wildfires.

Green also proposed $600 million in the budget for recovery costs through 2027 and worked with President Biden “to ensure that federal funds will pay for 100% of debris removal and emergency protective measures in the disaster areas — support which will save Hawaii hundreds of millions of dollars as we recover.”

His supplemental budget also includes $452 million to help fund the state’s response to the wildfires and as well as statewide wildfire mitigation and response initiatives. The funding sources include $237.9 million in general funds, a $200 million revolving fund ceiling increase to the Risk Management Revolving Fund, $12.8 million in federal funds and $1.5 million in special funds.

The rapid return of visitors to Hawaii, along with the influx of federal funds, helped Hawaii’s economy surge after the initial impact of the COVID-19 pandemic, Green said.

The state’s unemployment rate hit 22.6% at the beginning of the pandemic, Green said, but fell to 2.9% in October, and remains at that level, according to a Hawaii State Department of Business, Economic Development and Tourism report released Tuesday.

The governor said he thought the Maui fires would erode some of the post-pandemic recovery, but his decision to reopen West Maui on Oct. 8 has ushered in a recovery. The Council on Revenues adjusted economic projections up from 1.3% growth to 4% when it released its report two weeks ago, he said.

“Last year, I made 22 budget cuts through line-item vetoes — saving us over $1 billion across the next two fiscal years — and we were able to balance the budget and preserve our entire $1.5 billion Rainy Day Fund. These surgical cuts — plus the positive projections for our economy — will allow us to invest more in critical issues like access to healthcare, affordable housing, and homelessness,” Green said.

He wants investor-owned short-term rental housing targeted at visitors to shift into long-term rental housing for residents or be sold to year-round residents. With that in mind, he floated legislation that offers a tax amnesty for two years, whereby if owners of houses now being used as short-term rentals sell their houses to an owner-occupier local family, they won’t have to pay a capital gains tax.

“Building alone won’t solve our housing crisis — we need to find new ways to make buying or renting a home more affordable in Hawaii,” Green said.

“We have to take further action to return thousands of short-term rentals to the local housing market,” he said.

“I will sign into law any bill the Legislature sends me that will help move short-term rentals and vacant investment properties owned by non-residents into our local housing market — to increase supply and bring down prices for our families,” he said.