Politics in Hawaii: Is Something Broken?
From the Bishop Estate scandal of the 1990s to today’s Act 221 and Department of Education governance, politics in Hawai‘i is plagued by a lack of transparency and accountability.
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When Perez went to the Capitol looking for reactions to his story, a few legislators said they had been shocked, shocked to read about such a poorly designed process. They promised to give the matter their immediate attention.
Even House Speaker Calvin Say expressed a willingness to look into the matter. He said, “If there’s a way to make the process more open ... I’m open to that.”
I think I’ve learned my lesson, though. This time I’m going to wait and see what happens before I tell anyone that transparency and accountability are just around the corner.
On Act 221’s Anonymous Beneficiaries
There is seemingly no aspect of local politics that is immune to our habitual lack of transparency and accountability. Consider the practical impact of Hawaii’s high-tech tax credit, Act 221. It gives a 100 percent credit to anonymous investors, even when the high-tech business in which they invest fails to create a single job, or fails to generate a penny in revenue. Up to 49 percent of the investment doesn’t even have to be spent on high-tech in Hawaii! Act 221 also applies to investors in movies that are made in Hawaii, such as Blue Crush and The Big Bounce. Hawaii taxpayers reportedly chipped in $28 million to finance those two, as reported in The Honolulu Advertiser.
Nobody knows what the total tab for Act 221 will be—it could exceed a billion dollars. We do know that other taxpayers will have to pick up that share of the cost of government in Hawaii.
I’m not against using a reasonable amount of our state’s resources to help build a high-tech or movie industry. But the way we currently do it reflects politics at its absolute worst. A small group of anonymous beneficiaries is feasting while everyone else engages in open competition for the scraps that are left.
This anonymity is absolute. Because it is confidential taxpayer information, officials could go to jail for divulging key details. (We found out about Blue Crush and The Big Bounce only because the producers of those movies volunteered the information.)
A small group of anonymous beneficiaries is feasting while everyone else engages in open competition for the scraps that are left.
The lack of transparency has kept the public in the dark about Act 221, making any form of accountability impossible.
This might be less upsetting if the act had worked as advertised. However, despite an accumulated cost approaching a half billion dollars (so far), the high-tech industry in Hawaii has seemingly gone backward, whether compared to growth in high-tech outside Hawaii or to other sectors within our local economy, according to independent economists hired by the 2007 Tax Review Commission.
This is exactly what Hawaii’s most experienced venture capitalists predicted when Act 221 was first being considered in 2001. According to them, Act 221 would make it more difficult—almost impossible—for high-tech companies in Hawaii to secure later-round financing. They predicted that serious venture-capital investors would not want to get involved in businesses that had been structured and marketed as tax shelters.
They said it wouldn’t help high-tech in Hawaii, and it hasn’t. I question whether Hawaii’s taxpayers have gotten anything of lasting value, either, for the $150 million they have already handed over to well-heeled investors in movie deals—whose names we will never know.
The Habit of Secrecy
Too often, the proposed solution to a perceived problem in government involves a Byzantine, opaque process, as if we could solve political challenges by pushing our political processes deeper underground. For example, when Lingle made her first round of appointments to the University of Hawaii Board of Regents, critics charged that those selections were overly “political,” meaning that the governor had made those appointments to reward political supporters rather than on merit.
This prompted the Legislature to change the selection process. As of this year, governors may select UH regents only from a very short list of names developed by an independent panel.
But this change didn’t eliminate the politics. All it did was move the politics behind a closed door. Before, if the public perceived a governor’s appointments as being overly political, they knew who to hold accountable: the governor. Now, if the public thinks a new regent is unqualified, or is doing a lousy job, who can be held accountable? Surely not the governor, whose choice was limited to someone else’s short list. Surely not the panel, since it operates behind a closed door and most of us couldn’t name its members.