The following “Island Voices” commentary was first published on Jan. 20, 2026, in the Honolulu Star-Advertiser under the headline “Tamp down special funds, not tax cuts.”
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By Jonathan Helton and Ahryanna McGuirk
The state Department of Budget and Finance recently confirmed that Gov. Josh Green’s proposed budget plan features a “pause” of at least part of the phased-in income tax reductions that were approved unanimously by the Hawaii Legislature in 2024.
The rationale is that there supposedly is not enough money in the budget for $1.8 billion in spending that is allegedly needed between fiscal years 2027 and 2031.
But that could be a false assumption. Before hitting the pause button on historic tax cuts that are eventually expected to save Hawaii residents more than $7 billion, state lawmakers should first look for savings in the current budget.
A good place to start would be the state’s many special, revolving and trust funds, which collectively are anticipated to hold more than $5 billion in the upcoming budget year.
Cleaning up these funds might not make up for all the proposed new spending, but it could provide several hundred million dollars toward covering that gap. Doing so sooner rather than later would also give lawmakers time to identify other cuts.
For instance, the Legislature could closely examine the funds the state Office of the Auditor has already recommended be abolished or reclassified for being illegally established or used.
In its most recent department reviews, the auditor’s office identified more than 90 funds that fell into this category. According to departmental reports, these funds will hold in fiscal 2027 an estimated cash balance of at least $118 million.
State lawmakers could also look at non-general funds that could be repurposed without affecting the programs they support. In 2020, the auditor’s office identified 57 such funds holding $483 million that it said the Legislature could access without adversely affecting the programs that relied on them.
Tax Foundation of Hawaii President Tom Yamachika recently pointed to $80 million in idle monies sitting in state Department of Education funds that could be directed elsewhere.
A follow-up review of such funds might be well-worth the time and effort, especially since special, revolving and trust funds obscure how much money the state has available to spend.
They also are often used simply to prevent monies for certain programs from lapsing back to the general fund or in violation of state rules.
By law, special funds must serve a need that cannot be implemented successfully under the general fund appropriation process, reflect a nexus between the benefits of the program and the charges for the program, provide an appropriate means of financing, and be financially self-sustaining. There are similar standards for revolving and trust funds.
Since 2013, the auditor’s office has been tasked with reviewing all proposed new funds to make sure they would comply with these criteria. It also reviews each state department’s non-general funds every five years with the same goal.
Some special funds check all the boxes. For example, the state Department of Transportation’s highway fund receives fuel tax revenues, which are used for road repairs and similar projects.
Other funds, however, blatantly fail the legal criteria. The state’s “dam and appurtenance improvement or removal” special fund is a good example.
Established in 2023 to help finance the maintenance of privately owned dams, it was seeded by the Legislature with $10 million in general fund revenue — something state law says is a big no-no.
As Yamachika pointed out in June 2025, “Using a special fund in this way is not legitimate.”
“It’s fine to have a Hanauma Bay special fund that is fed by entry fees and concession commissions and that is used to maintain the park,” he said. “But the dam special fund has no income other than legislative appropriations.”
If lawmakers are looking for some low-hanging fruit to pick as an alternative to tax hikes, going after special funds like this one could be an ideal option.
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Jonathan Helton is a policy analyst and Ahryanna McGuirk a research associate at the Grassroot Institute of Hawaii.
