Date: July 15, 2004
Location: Honolulu, HI


"A lot has changed since a year ago when I was here talking with you. The indicators are predicting a very good year ahead for all of us. We have record level job growth, amongst the highest in the nation, and a very low unemployment rate. We have a recovering visitor industry, something so many of you have worked so hard to achieve.

We've also caught a couple of breaks because interest rates have remained low, the economy in Japan and mainland United State is in recovery. We have an extremely robust construction industry and real estate market. And record low levels of bankruptcies and foreclosures. And these are all great signs. State revenues have caught up with the expanding economy. And our year end showed that we had one hundred million more in revenues. They had pegged a 5.2% increase in revenues, and we hit 8.3% increase. And that's good news. Now, some people, when they heard about the extra one hundred million, they came up with a lot of ways to spend that right away. And we will release some funding for selected health and safety issues to make certain we keep our infrastructure in good repair. But we really have to keep our spending under control for future obligations that our state faces in the years ahead. Future obligations include increased debt service, increased contributions to the state's retirement system, collective bargaining agreements that we have already negotiated and that will be negotiated and increased health insurance costs for the state's work force.

I think it is important to point out to you that the legislature and the governor have a different approach to budgeting based upon the requirements that we each face. There is no law that requires the legislature to adopt a balanced budget. But, there is a law that says the governor has to propose a budget that balances. Which puts a different burden on us. Also, the legislature does not have to present a six year financial plan, nor do they. The legislature can simply go from year to year. Whereas, by law, our Administration must present a balanced six year financial plan. So, we have to take those future obligations into consideration. And that's why we can't go out and spend the one hundred million dollars. However, my prediction is that the September revenue reports will also be very strong. The business community haw worked very hard to help us get into a position of better times. And I am extremely optimistic about the future. I appreciate very much Christine's focus on worker's compensation. Because it was an area that we felt we could get some progress on this session, but were not able to, and with your help I am confidant that the nine point plan that we have drafted will be a good starting point for us to talk about real worker's compensation reform in the upcoming session.


Now, having outlined the obvious to you, that things are going better, something you all know a little about the budgeting process that we face, I want to state what is not so obvious, or perhaps just something that we don't want to face. But, a stronger economy has not touched all equally. And, I want to discuss with you today one of the most influential audiences in the state. I want to discuss with you the growing problem of homelessness throughout the state of Hawai'i. We have an exploding need for affordable housing. On any given day in our state, we have over 6,000 homeless people. Forty-five percent of these live on the neighbor islands, a fact that astonishes many people. Of these 6,000 homeless people, 30% are what we would classify as chronically homeless. Chronically homeless means constantly homeless; it means repeatedly homeless. It means the people you see sleeping at Ala Moana beach park, and people you pass by sleeping in the streets. Many of them are disabled, suffer from serious mental illness and substance abuse. We as a state have let this problem go on for too long. If we don't address it head on, and seriously, and collectively, it will have a profound negative impact on all of us. And let me outline the impacts, as I see them, if we continue failing to address this issue. First, I want to talk about the impact on property values, the visitor industry, business and the overall economy.

How long do you believe that the luxury condominiums going up across from Ala Moana park will retain their value, when instead of several hundred people living in the park at night, there are thousands of people filling the park at night. And when it becomes too crowded they will wander across the street in front of the project where you are selling units starting at $750,000. How long will the visitors continue returning when instead of being able to spend a day at the beach, they are greeted by families of homeless people who have taken residence on the beaches. And how long will those small businesses on the Fort St. mall survive when their customers have no where to sit because the benches have all been moved to discourage homeless from sleeping on them because they have no where to live. Those are the negative impacts I see on property values, the visitor industry and on our overall economy.

But, this is a moral issue here, that we ignore at our own peril. We have come dangerously close to accepting the homeless situation as a problem that we just can't solve. In some cases it is "out of sight, out of mind" and I am referring to the families, hundreds of them, living on the beach on the Leeward coast, living on the beach on Maui, and living on the public beaches that are meant for our recreation.

When I come out of my house, on Miller St., the house that the people of Hawai'i built for the governor, we take a right turn on Punchbowl Street, to come into Waikiki for all of the events that I attend, and on most mornings, when I make that right turn, there is a man sleeping and living in the root system of a tree right across from Queens Hospital. And I pass him many times a week. When I leave even earlier in the morning to swim at the Y, the Nu'uanu YMCA, we take a right turn on Queen Emma Street, there is a man covered with an oily tarp sleeping on a bench outside of St. Andrews Church. And I wonder, sir, if he is a veteran of the Vietnam War. Is there anyone here who hasn't walked by a homeless person, this week? What do you say to your children about these people? I know that walking or driving by the homeless bothers you the same way that it bothers me.

The aloha spirit and the concept of ohana are not mere words to us, they mean that we care for other each including those we don't know. We need to live these concepts by facing this issue head on. Now, I want to pause and acknowledge those who have provided temporary shelters at the homeless facilities on all islands. They have been working in the area of homelessness for a long time with great compassion and they are tireless in their efforts. But what they are providing down at IHS or other shelters is not a long-term solution to homelessness. And that's why no matter how many of those shelters are built, the problem gets worse and worse. And there are more and more people sleeping on the beaches and on the benches around town.

The long-term solution involves a lot more affordable rental units. We need at least 17,000 rentals over the next five years that are affordable to those meeting eighty percent of the median income or less in our state. Now, meeting even half of that need will be a huge undertaking that we just have to commit ourselves to.

To give you an idea of how poorly we've been doing in this area, currently we are not even supplying twenty percent of the needed units statewide. And we have to quit kidding ourselves about this problem. Thos of us in government have to stop tinkering around with this issue and get serious.

I want to outline for you the steps that we are going to be taking to address this issue. And it's going to change dramatically. The legislature in this past session, agreed to give us an extra one hundred million dollars in bonding authority for our state agency to begin to address this problem through some public and private partnerships. Now, one hundred million is not going to get us where we need to get to but, nonetheless the legislature, I feel, was generous in approving this because previously we haven't spent even nearly that amount in trying to get affordable units on to the market. So, I appreciate your cooperation in this matter. And I might mention to you an important fact for a business person to know. The one hundred million dollars in authority doesn't count against the state's overall general fund indebtedness, because it is paid for through the income of the various projects.

Another step the state is taking is to identify state lands that would be available and appropriate for low income affordable rental projects. This is critical. A major component of the cost of housing, as you know, is the cost of land. We have identified two major parcels on the Big Island and had discussion with the mayor and planning people there. And they are in agreement on these two parcels. And, as you know, they are both in West Hawai'i. That is where all the economic activity is taking place, and yet there is almost no affordable housing on that side of the island. We have identified five parcels on Kaua'i, which is facing a horrible situation with affordable real estate generally, but certainly affordable rentals specifically. We are working with several private projects on Maui that are making their way through the permitting process.

On July the 19th, in another step we are meeting with major state developers, land owners, construction industry people and the non-profit sector who work with the homeless to sit down and ask those people who develop for a living what their thoughts are on how best to address this problem and to try to involve them in our efforts. The government, quite frankly, is inept at getting large numbers of affordable units on the market, and we need the help of the private sector to achieve our goals.

We will develop before the end of the year a six-year plan to address this issue. It won't be like previous plans on homelessness because we have many of them. The state has many. The counties have many. The non-profits have many. This will be an action plan on how to produce real units that can house real people. And the counties will have to step up to the plate on this too, and take a hard hard look at their permitting process. And every time a project comes into a county council on the neighbor islands, and they talk about that it's going to create traffic they are going to have to examine that. Of course it's going to create traffic, where people go, they have cars. There's no mass transit on the neighbor islands. So, by definition, any time you put more people in a place there's going to be more traffic. But the alternative to more cars on the road is more people on the road and on the beaches. To me, it's not even a close call. So we will be asking the mayors and the councils to re-think how they have been approaching these projects when it comes before them. And again, in this next legislative session, we are proposing to raise the standard deduction on the lowest wage earners in the state so that they have more disposable income to use towards rents.

I've described a very big undertaking and I want to stress that I know going into this that we in government cannot achieve it by ourselves; we need the support of the business community as well as the non-profit sector. I'd like you to leave here today thinking about how you're going to fit into this statewide effort. What role you're going to play in addressing this serious problem.

Ultimately, we will be defined as a people by how we treat those least able to take care of themselves, and I don't want us to be found lacking. We tell people that we are different from other people, that we are different from other places because of our aloha spirit, the concept of Ohana, and the way we care for each other. This is the time to prove it. This will be one of the toughest issues we have ever faced and I know, that working together, we are certainly up to this challenge."