Rebrand
By ddepledge
Gov. Neil Abercrombie on Monday repeated his promise to replenish the state’s rainy day and hurricane relief funds, which he drained to get through the last fiscal year.
Some lawmakers have talked about possibly rebranding the hurricane relief fund, a pool of money that has functioned as a cash reserve in the past decade since the state’s hurricane insurance program for homeowners ended.
Insurance commissions have advised that lawmakers keep about $70 million in the fund to help the state purchase reinsurance in the event private insurers flee after another hurricane, like they did after Hurricane Iniki in 1992. But the roughly $180 million that had been left over in the fund the past decade — and was tapped to help end teacher furloughs on classroom instruction days and balance the budget — was meant to be transferred to the general fund.
Credit-rating agencies that judge the state’s finances consider cash reserves like the hurricane relief fund an important safety net.
Kalbert Young, the state’s budget director, said the name of the fund is not significant. He said the administration wants to replenish the money to help maintain a healthy cash reserve.
Political Radar
December 20th, 2011 at 3:02 am
The replenishment of the rainy day and hurricane relief funds came from the issuance of state bonds. That means that the taxpayers are on the hook for the repayment of the bonds in the long run, and no savings or program cuts were used to pay back these funds. The so called “premiums” that the administration says it used for the repayments are essentially prepaid interest payments for the bonds and are not savings or some other source of funds.
December 20th, 2011 at 1:10 pm
So, how much is left in the fund after last session’s “tap”? In other words, how much needs to be put back in to get back to the recommended $70 million balance? All of it?
And “draining” the hurricane and rainy day funds was not a unilateral act by the governor. It can’t be done by the governor alone. Even if the governor asked for the money, the legislature had to authorize it so, if there is some negative inference being drawn here from “draining” the funds to end furloughs and balance the budget, the legislature shares equal responisibility.
December 20th, 2011 at 2:47 pm
Manoa, unless I’m mistaken, you’re only partly right on this. What has been redeposited in these funds is the savings yielded by a sale of bonds used, in part, to refinance existing bonds on more favorable terms. So, while you’re right (I think) that whatever was deposited into the funds as a result of the bond sale is, itself, borrowed money, it’s not like the bonds were sold for that purpose or that the deposit even comes close to replenishing what was “drained” from the funds last session.
December 20th, 2011 at 2:58 pm
Since the name is not important, lets call it “The Slush Fund.”
December 20th, 2011 at 3:27 pm
No one person is that smart that they don’t have any advisors telling them what to do and how to do it.
If they are, they are either scammers or in jail.
December 20th, 2011 at 11:09 pm
Ohiaforest3400: I am totally right about the effect of the borrowing to replenish the two funds. Take a look at the administration’s documents on the financing and the accounting standards by which all financings are accounted for. There is no such thing as a “premium” in the accounting for bond financing. It is just prepaid interest, that’s all. Plain and simple explanation.
December 21st, 2011 at 1:30 pm
MF, I obviously don’t have your knowledge/expertise so I can’t tell if this is a distinction without a difference, semantics if you will. The blog post that follows this one says “we” got $900 million from the bond sale but incurred “only” $800 million in debt for it. That suggests a realization of $100 million, whether it’s called a premium, prepaid interest, or something else. I’ll take your word for it, ‘tho, and go try track down the dox.
December 23rd, 2011 at 12:38 am
Ohia-
It’s spin. You get $900M for $800M book debt because the state issued at above market (for its credit rating) interest rates. No free lunch.
In the end, we borrowed more money. Nothing to be excited about one way or another. Not a brilliant victory by the Gov, not a dastardly scheme either.