Spurred by bipartisan challenges to the sloppy - and some say fraudulent - operations of the State Elections Office in the 1998 elections, the Hawaii State Senate passed resolutions in February endorsed by the House, mandating a recount of the November 3 General Election. All 408,000 ballots will be recounted. Machine error, "glitches" and operational changes between the Primary and General elections as well as different methodology among precincts cast growing doubt on the veracity of the election.

This is the first time in Hawaii history that the Legislature has ordered a recount. Elections chief Dwayne Yoshina has come under heavy fire for his role in the procedures, blocking challenges and access to ballots immediately after the election, as well as his selecting a mainland electronic counting firm - on a $1.7 million non-bid contract-that has a spotty record in a number of states. Yoshina, backed by the Attorney General's office, stonewalled citizens and denied them their right of ballot review access, as provided by law, because, it was argued, no administrative rules have been adopted to accommodate citizens. Yoshina has been involved in elections for more than 18 years. Yoshina's reappointment evaluation is underway.

A machine tally will be followed by a limited manual recount. Hawaii law has no provision for automatic recounts, no matter how close the results-some Primary contests were decided by fewer than 8 votes - or how troubling the specific circumstances of an election, such as documented machine malfunctions, an abundance of "overvoted" (spoiled), damaged or missing ballots, or votes by alleged "dead" people (Chicago style!) or non-U.S. citizens. Further, should a recount actually change the winner of any contest, Hawaii law prohibits a change after certification of the initial winner unless he or she voluntarily steps down. The real impact would be on future elections.

Legislature Planning Tax Hike?

With the 20th State Legislature now half over and scheduled to adjourn May 4, it has become clear that all the fancy words on January 20 opening day were just that - words. Nothing meaningful has been done to improve the economy, alleviate the regulatory burden on business, or cut taxes. And nothing likely will happen.

However, with the latest projections of the Governor's Revenue Estimating Committee expected to show a flat or declining revenue picture early this month, and growing talk in the money committees about a looming deficit, tax and fee hikes become more a reality.

The Governor's much-vaunted $154 million surplus during the campaign of 1998 is nowhere to be seen. What is seen is a growing deficit spurred by unfunded previous and current liabilities. These include public employee contracts negotiated but not paid two years ago; current union employee contracts; Hawaiian ceded lands revenues; $60 million-plus for the Felix-Cayetano Consent Decree (involving special educational children), numerous "emergency" appropriations for health and human services, a growing state payroll and the start of debt repayment for the white elephant $350 million State Convention Center.

The Legislature is wrestling with the biennial budget expected to be in excess of $14 billion and signs are not good for the required constitutional balancing. Or for taxpayers. The economy continues to go south-the ninth year in a row-demonstrating again if you continue to elect the same inept people they will continue to do the same dumb things.

The lame-duck Governor is not personally pushing his "vision" and is absent from the Legislature more and more. His "bold" initiatives are going nowhere. Legislation passed last year to "streamline" the state is being amended this year; calls for merit reform in civil service are getting the yuck from the unions-those who kept Mr. Cayetano in office.

A House tax package that did offer some genuine reform and relief from the General Excise gross income tax, was dubbed, "dead on arrival" by the senate president. More talk centers on increased fuel, GET, value-added, motor vehicle and TAT taxes, and new and increased existing fees.

Business beware: this Legislature and Administration continue to look away from business climate improvement. A clearer picture will emerge by next month. Meantime, hold onto your wallet with both hands.

BAD BILLS ABOUND AT THE LEGISLATURE

There are a number of BAD bills in circulation at the current 1999 Legislative Session. More than 3,000 bills were introduced during January-down slightly from a year ago - but many were aimed at the heart of business.

Five minimum or "living" wage bills (HB 625 & 825; SB 637, 819&1239) sought to raise the state's $5.25 minimum to $6.50 PLUS automatic annual cost of living adjustment. While held in committee, they're technically dead - but nothing is final until adjournment.

Two bills (HB 944, SB 1574) prohibit someone buying or acquiring a business from changing any employees for at least one year.

Project Labor Agreements-forcing contractors to abide by union rules & contract to do work-SB 1439 was back along with unconstitutional local preferences (SB 1438).

A number of special interest targeted tax subsidies-mainly for banks (SB 203), insurance companies and high tech firms (e.g. "call centers"-SB 744, SB 1323) that are not operating-were proposed at a time when small business was told there could be no relief from General Excise Tax pyramiding because, "it would cost too much."

The Y2K computer problems continue to attract our imagination with the state continuing to do everything to protect itself and its special vendors (SB 1313) while doing nothing for small business.

One education bill (SB 1270) sought to give more flexibility to the DOE by not requiring a 50% daily course load of English, oral expression and spelling; instead, it was amended by erroneously omitting ALL reference to English and talking only about computers and foreign language in the schools.(The bill was subsequently corrected). Attempts at decentralization of education, charter schools schools-within-a-school, are met with the same bureaucratic opposition as before.

Studies, task forces and "emergency" appropriations add still more millions of taxpayer dollars without solving any problems or actually aiding the economic infrastructure.

SB 792 & 1535 would undue the one positive "streamlining" automatic permit process bill passed in 1998 as Act 164. This was a key bill by the Governor and his Economic Revitalization Task Force (ERTF) last year, supported also by small business; this year he is not fighting to retain its provisions even though they haven't even been utilized.

Tax and fee INCREASE bills are numerous. HB 1046/ SB 1292 impose a 4% transfer tax on vehicles; HB 1055/ SB 1301 adds a new value-added vehicle tax (on top of weight) and HB 1056/SB 1302 hikes daily rental by 50%.

1999 Small Business Legislative Caucus Package Brings Together Bi-partisan Coalition

On February 11, the Bipartisan Small Business Legislative Caucus held a press conference to announce the following economic improvement package touching on 6 major areas. The caucus members includes co-chairs: State Rep. David Stegmaier (D), new addition State Rep. Colleen Meyer (R), and State Senators Norman Sakamoto (D) and Sam Slom (R). Briefly outlined the caucus agenda is as follows:

* General Excise Tax Pyramiding: Hawaii's General Excise Tax is applied to every transaction for sales and services in our economy. The effect is that it discourages small business activity by adding cost, and in addition export service providers are at a distinct disadvantage when competing with those of other states and countries. Bills addressing these issues include HB 188, HB 232, HB 1305, HB 1336, SB 16, SB 501, SB 638, SB 728 and SB 1202.

* Workers' Compensation: While Workers' Comp reforms that have been enacted have helped to reduce rates, a glaring omission that needs to be dealt with is that, currently, workers' compensation benefits are provided for "stress" claims of employees for personnel actions taken in good faith, such as: job performance reviews, disciplinary action, demotion, promotion, job or time relocation, etc. Legislation dealing with improving Workers' Comp laws include HB 134, SB 720, and SB 721.

* Corporate Income Tax Reduction: The reduction of our corporate tax rate would signal a more business friendly environment. Bills addressing this include: HB 977, HB 1406, SB 639, and SB 727.

* Privatization: Privatization while not a panacea, is a useful fiscal and management tool providing options to state and local government. The following legislation addresses privatization issues: HB 143, HB 144, HB 1309, and SB 725.

* Reinventing Government: The need to reduce the size of state government and to make it more efficient and accountable is a recurring issue that needs to be recognized. The Small Business Caucus believes that state employees should be integrally involved in this reinventing of government process. The following bills address government reinvention topics: HB 444, HB 747, HB 1311, HB 1645, SB 105, and SB 450.

* Tort Reform: The cost impact of lawsuits falls disproportionately on small business and there is a need to address these inequities. Tort reform will make Hawaii more attractive as a magnet for the investment of local and international capital. Bills addressing tort reform issues include: HB 66, HB 67, HB 160, HB 455, SB 500, and SB 739.

The complete Small Business Caucus package with descriptions to all of the bills mentioned above can be viewed here.

Legislators who signed the bill package are listed here. If your legislator is not on this list by all means give them a call and ask them why not?

Understanding Business in China Series

JAIMS, the Japan-America Institute of Management Science, a pioneer in intercultural management education, will present a four-part series entitled, "Understanding Business in China," March 29 through April 4, from 6-8 pm each night (6-9 pm the first night) at the Hawaii Kai campus, 6660 Hawaii Kai Drive.

The program is designed for those doing business in China and with Chinese companies. The cost is $180. Topics will include: The Guan-Xi Dynamics; Differences Between China and the United States; Communication and Social Protocol and Doing Business in China.

For information and registration, contact Rosa Chiang, JAIMS program specialist at 396-7163.

Franchise Seminar Cancelled

Francorp International's 4th annual Hawaii franchising seminar scheduled for February 24 at the Sheraton Waikiki Hotel was cancelled by Francorp in mid-February. SB has been an annual cosposnor.

Scheduled to speak was Christiane Cabot, senior consultant/analyst at Francorp, Inc., the world's oldest and largest franchise development and consulting firm, based in Chicago. The Franchise Your Business Seminar was cancelled because of poor response. It is hoped there will be a seminar next year.