UH Manoa Chancellor Virginia Hinshaw made her own public assessment of the budget mess last week.

According to Hinshaw:

“The reality is that budget cuts at UH Mânoa over the next two fiscal years will total at least $66 million or 26% of our general fund budget of $260 million. “

The chancellor described the cuts as “proportionately among the largest” facing any major research university in the country.

There have already been untenured 150 faculty and staff terminated when their contracts were not renewed, Hinshaw wrote.

In our nearest neighbor, the the failure of the state’s budget process has prompted a painful question: “Do we want a University of California?”

In California, the question was prompted by the governor’s refusal to raise additional state revenue rather than attempting to rely wholly on program cuts, because it may be impossible–or take impossibly long–for key institutions like the university system to recover from the damage caused by those cuts.

The California Faculty Association web site gathers news clippings weekly and is worth checking.

Our own Governor Lingle is sounding more like California Gov. Schwarzenegger every day.

The governor continues to perpetuate the belief that California’s real budgetary problem is excessive spending, not inadequate revenues, a belief that’s a core mantra of the state GOP and Grover Norquist’s “starve the beast” theology.

To do that the governor uses a chart – probably his favorite – showing spending is climbing more steeply than revenues. But as the recent UC “Cuts Report” points out, “the chart has a number of flaws: is not corrected for inflation, for population growth, for growth in any agency’s client base or legal mandate, or for the great variation in growth among different agencies.”

More important, the chart omits the fact that $6 billion a year – far and away the biggest part of that alleged spending increase – is in fact the result of Schwarzenegger’s cut in the vehicle license fee. Because he rolled back that fee by two-thirds, the state has had to backfill to local governments the money the levy would have raised. Were it not for the car tax cut, the state would probably have no need to cut any spending, either for K-12 schools or higher education or anything else.

That reference to a prior tax cut being a big part of creating the current California crisis caught my interest. Is that also the case here?

Most people have forgotten that Hawaii’s legislature approved a significant cut in income tax rates in 1998, with the top rate falling nearly 25%. State revenues dropped accordingly. I have to assume that the compounded effects of that decline in state revenues is the backdrop to today’s crisis.

According to a 2002 study prepared for the 2001-2003 Tax Review Commission:

In 1998 the Legislature expanded the individual income tax brackets and reduced tax rates for the 1999, 2000, and 2001 tax years. They also repealed the food income tax credit and created a low-income refundable tax credit. The Tax Department estimated that these changes would result in revenue losses of $72 million in FY99, with losses increasing to $234 million by FY03. Those projected losses will continue to have an impact on state revenues throughout the decade. [emphasis added]

For most of the past decade, Hawaii’s highest income earners paid a top income tax rate of 8.25%, well below the 10% paid up until 1999. Here’s a chart of the rollbacks in tax rates passed in 1998. It was not until this year that the legislature reversed those cuts and adopted new higher rates for those earning more than $300,000 annually, passing the bill over the governor’s veto.

While Lingle had harsh words for the bill, it was largely simply reversing the cuts made a decade ago.

Here’s an updated summary of the situation in the states compiled by the Center on Budget and Policy Priorities.

In a news release, the Center commented on tax increases:

Currently, states are weighing increases in sales, personal income, business, excise, and vehicle taxes. States often reduce taxes during economic expansions and increase them during downturns. In the recession of the early 1990s, some 44 states raised taxes. The record shows that these tax increases did not damage the states’ subsequent economic performance.

An advantage of tax increases is that states can design them to avoid impacting low-income families and other residents who are having difficulty making ends meet.

“If tax increases are designed well, they can help states address the serious budget problems they face while also protecting their economies and their low-income and elderly residents,” Johnson said.

I’m with Senate President Hanabusa. Enough political posturing already. Time to work out a reasonable solution that includes new revenues as well as cuts.