Facing a $1 billion budget gap, Hawaii prepares to reopen

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Hawaii Gov. David Ige outlined a roadmap to reopening Monday after weeks of battles with lawmakers over the state's response to the coronavirus.

The plan being discussed by the House Finance Committee and Senate Ways and Means Committee to reduce the $1 billion shortfall involves using $395 million from the rainy day fund, not filling vacancies in state bureaucracies and issuing $20 million in general obligation bonds to replace $20 million appropriated for Aloha Stadium redevelopment.

Hawaii has the lowest coronavirus fatality rate in the country and one of the lowest case rates per capita of transmission, Ige said.

There have been 641 cases of COVID-19 identified in Hawaii, of which 13% required hospitalization, according to Hawaii's Department of Health.

“We have witnessed a consistent downward trajectory in new cases, and 90% of total cases have recovered,” Ige said. “Our hospitals currently have significant surge capacity to protect our kama’aina [long-time residents of Hawaii] should further outbreaks occur."

"We have witnessed a consistent downward trajectory in new cases," said Hawaii Gov. David Ige.

A mandatory 14-day travel quarantine, early testing, closing all but essential businesses, mandating face coverings and physical distancing have helped reduce the number of cases, Ige said.

Hawaii, like other states, has faced some pushback from residents, who are suffering economic distress as a result of the economic restrictions to slow the growth of the pandemic.

“While efforts to protect the health of our people have prevented many potential deaths, they have also caused financial hardship,” Ige said. “Impacts on Hawaii’s economy have included estimated unemployment around 30%, or 220,000 people without jobs, a 72% decrease in small business revenue between January and May 2020, and a 60% increase in foodbank demand."

The state had its outlook revised to negative by Fitch Ratings in April, but the agency affirmed the state’s default rating at AA-plus. Moody’s Investors Service also changed its outlook to negative affecting $6.9 billion in outstanding general obligation bonds and $4 million of certificates of participation.

S&P Global Ratings analysts wrote in an April 27 report that tourism-dependent states like Hawaii and Nevada are among the hardest hit by travel restrictions in the age of COVID-19. S&P also gave Hawaii a negative outlook while affirming its AA-plus rating. AA-plus rated Nevada also holds a negative outlook from S&P.

"States most dependent on tourism are likely to see credit pressures due to the loss of revenue, spikes in unemployment, and reduced economic activity and may face a significant lag during the recovery," said S&P credit analyst Ladunni Okolo. “We consider Nevada and Hawaii to be the most severely affected states based on tourism's share of their economies.”

While acknowledging residents' frustrations with the business closures, Ige cautioned that the reopening must be done safely, carefully, and based on science and data.

"When it comes to reopening Hawaii our approach must be gradual and phased to ensure the health and safety of everyone," Ige said. "When we achieve a solution that can truly protect our people, such as effective treatments, natural herd immunity and/or a vaccine, we will achieve Hawaii's 'New Normal.'"

Hawaii began reopening low-risk businesses, such as floral shops, pet grooming services and car washes two weeks ago. In the second phase, it will allow medium-risk businesses to reopen and people to return to recreational activities on a limited basis.

The third phase involves reopening the remaining businesses while incorporating transitional modernization opportunities, according to Ige's plan.

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Coronavirus Economy Hawaii