In a significant move, Hawaii’s economic council has projected steep reductions in state revenue over the next three years. This decision arises from the impact of previously approved tax cuts and ongoing economic challenges, intensified by policies from the Trump administration. The council, comprising experts from academia and key industries, convened virtually to assess the grim outlook for state programs and finances.
Chair Kurt Kawafuchi expressed the collective sentiment of uncertainty pervading the meeting, stating, “It sounds like a very uncertain year.” The experts emphasized how the fluctuating tariffs pose serious threats to businesses as they struggle to secure stable contracts for materials, thus sowing further doubt into the economic landscape.
Challenges are compounded by a sluggish real estate market, beset by high interest rates and increased development costs, as highlighted by Mike Hamasu from Colliers. He lamented, “It’s dismal, abysmal, it’s terrible right now,” referencing the drastic downturn in brokerage revenues. Nevertheless, some sectors, like government construction and defence spending, remain stable according to Scott Hayashi of SSFM International, who noted an uncertain but resilient outlook.
Tourism, Hawaii’s economic lifeblood, faces daunting challenges as fewer travellers opt for leisure trips amid budget cuts and a robust US dollar, driving up international travel costs. Carl Bonham pointed out that luxury travel could also suffer if the stock market continues to decline, stating, “One of our biggest risks is going to be the stock market still for the higher end.”
In light of these factors, the council voted to reduce the projected growth rate for the current fiscal year from 6.4% to 5%, with even bleaker forecasts of -2.25% for 2025-26. This translates to a potential revenue shortfall of approximately half a billion dollars over three years. However, Hawaii’s current surpluses and savings should cushion the blow, though there are concerns about potential cuts to federal social services like Medicaid.
Hawaii’s economic council has reduced state revenue projections significantly over the next three years, citing tax cuts and economic uncertainty due to changing tariffs and a sluggish real estate market. Chair Kurt Kawafuchi highlighted concerns about potential impacts on tourism and rising costs, while certain sectors like government construction remain steady. The revised revenue growth estimates suggest a potential deficit of around half a billion dollars, although existing surpluses could provide a buffer.
The Hawaii Economic Council’s projections underscore a challenging period ahead, marked by significant revenue cuts influenced by various economic factors, from tax policies to market stagnation. While certain sectors exhibit resilience, the uncertainty surrounding tourism and the stock market poses considerable risks. Ensuring stability and responsiveness in funding state services while navigating this tumultuous landscape will be crucial for Hawaii’s economic future.
Original Source: www.hawaiinewsnow.com
