Hawaii Governor Josh Green said he may reduce parts of last year’s income tax cuts and use the state’s emergency reserves to address a growing budget gap. Lawmakers and officials are preparing for discussions on funding for programs like housing and food assistance.
The state Tax Department estimates that the income and excise changes will shave about $630 million from revenues in the current fiscal year and roughly $817 million in the fiscal year starting July 1. As the cuts phase in, they are expected to reduce collections by about $1 billion in fiscal 2028 and more than $1.1 billion in the following year, according to Honolulu Civil Beat. That is a sizable dent in a state general fund that typically pulls in about $10 billion a year, and it sits at the center of Green's case that he needs all options on the table when he submits his budget.
Rainy Day Fund And The Federal Squeeze
Complicating the picture, Green has been warning that recent federal decisions, including a government shutdown and tariff changes, could strip roughly $3 billion from Hawaii's revenues over the next six years. He told a local interviewer that the state will probably have to lean on its reserves to keep services running. In a Nov. 18 appearance he said the rainy day fund holds about $1.58 billion and added, "I will not be surprised at all if we have to take several hundred million dollars to make sure we keep everything together" to stabilize the budget, as reported by Hawaii News Now. That kind of framing helps explain why the governor is now publicly revisiting last year's tax deal.
Targeted Rollbacks For Higher Earners?
Green has floated the idea of dialing back some of the future benefits for households earning above roughly $250,000 a year. He suggested that scaling down those parts of the package could save as much as $1.8 billion and free up money for housing and food supports, though he also stressed that nothing is final as he works on his budget proposal, as per Honolulu Civil Beat. Any attempt to roll back the cuts would require action by the Legislature and some hard bargaining with lawmakers who helped pass them in the first place.
How The Math And The Law Work
Under state law, money from the emergency and budget reserve fund can be spent only through a legislative appropriation, which means the governor can recommend using the rainy day fund but cannot tap it on his own, as noted by Hawaii Revised Statutes. That setup all but guarantees a political showdown over whether to lean on reserves, scale back tax relief, or trim services.
What Comes Next
Green is expected to file his budget in late December, after which lawmakers will have weeks to sift through the numbers and competing proposals. Public hearings are likely to turn into a high-stakes debate over keeping the tax cuts intact, trimming them for higher earners, or drawing down savings. Municipal leaders, social service advocates and business groups are expected to lean hard on negotiators as the state tries to balance its books without blowing a hole in vital programs.
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