Senate Standing Committee on Ways and Means

Good morning. Calling to order the 10am agenda. First we're going to hear from Jennifer Chun and her colleagues regarding the economic outlook. So good morning.

Morning. Good morning.

Happy New Year.

Happy New Year. So I'm sorry, I'm a little under the weather. So I'm going to introduce you to Dr. Joe Roos. He is going to be presenting the economic forecast and I'll be adding on about some color for the tourism portion. So Dr. Roos is going to start.

Aloha, Char, Vice chair and Members of the Committee, thank you so much for the opportunity to speak today. The presentation I'll give goes over an economic overview and also our forecast. It was very much a team effort with acting Administrator Jennifer Chun, Dr. Reem Kamida, Jacob Billeman and Dr. Seth Colby.

So, yeah, I'd like to start with a global overview. These are. This forecast is done by the Blue Chip Economic Indicator Publications, which is a survey of 50 economists that, yeah, give a global outlook for economic growth. And Starting with the U.S. the U.S. for 2025 and 2026 is, is what they call an optimistic tilt.

Blue Chip has a very optimistic tilt for 20252026 at 1.9%. Canada is a little bit weaker at 1.41.1. Japan is even weaker yet 1.20.7. We will see strong growth from the other Asian countries. South Korea, Hong Kong, Taiwan, China, and then the Eurozone will come in about 1.3 and 1.1%.

Okay, so looking at the US Economy, what are the growth drivers? One of the most Talked about is AI capital expenditure. This was about 371 billion in 2025 and it's expected to continue into 2026. There's strong household expenditures with the caveat that high income households are spending much more than lower income households.

And we'll go over this in one of the slides, but they've had high income households have a 16.7% growth since 2018 versus lower income households which was 7.9%. And then there's the strong asset wealth effect. Net worth of households is up. And also the stock market was up in 2025.

And so that wealth effect has an impact on driving spending. The news isn't all good. There's some growth inhibitors. One is tariffs and trade policies. This is the cost of the actual tariffs and the drag on the economy. But also the uncertainty of policies tends. To. Limit business investment when they're just not sure what's on the horizon.

There's cooling labor demand, job openings are down and yeah, so we're seeing the job market tighten up and then immigration and labor supply constraints. Foreign born labor force participation has been lower since, well, during 2025. Okay.

And this I alluded to earlier, but this is just showing from January 2018 through May 2025 where the spending is coming from. As alluded to earlier, high income households, the growth has grown 19.3%.

And on the other side of the spectrum, low income households, while still growing, has grown only 11.9% since January 18, January 2018 to May 2025. All right, and this is our most recent economic forecast. We will update this soon. But as of the most recent forecast, one of the main parts of this is real economic growth.

We forecast 2025 at 1.6%. And again, it's a forecast because those numbers are not out yet. And we show that while it will grow in 2026, the growth rate will decline slightly, the population growth will remain fairly flat through 2028. Income growth will be subdued due to tariffs and policy uncertainty and then accelerating in 2027 and 2028.

And visitor arrival growth is lower. And Director Chun will talk about that. A little bit. In the slides that she goes. Over 2025 and 2026, visitor growth was lower and we expect it to increase in 2027 and 2028. Yeah. One of the issues Hawaii is facing is that relative to the US Income, per capita incomes have declined.

They used to be above the US and then as of 2024, Hawaii is about 5% below the overall US and per capita income. All right, and this is just an illustration of what was mentioned earlier. GDP growth is forecast to dip in 2026 and gradually recover in 2027 and 2028.

Hawaii is forecasted to grow a little bit below the national growth rate. And inflationary pressures are highest at the end of 2025. In the first half of 2026 as we see impacts of terrorists make their way through the economy and. All right, and Dr. Colby is with us today.

But this is get collections are improving in fiscal 2026 relative to 2025. In looking at adjusted tax collections, they show resilience. The General Fund, when adjusted for 2024, estate tax payment is up 3%, General excise tax is up 7.3% and individual income taxes up 2.2%. And here's some good news in looking at inflation and employment.

First of all, the unemployment rate, the most recent data, this was updated. The most Recent data is 2.2% for Hawaii and 4.6% for November. That was updated within the past week and unfortunately it didn't make this revision. However, in the Hawaii is substantially below the US for the unemployment rate as of November. Why?

Consumer inflation was 0.3 percentage points below the nation and that was 2.4 versus 2.7. In looking at government government contracts awarded, It was increased significantly in 2022 and 2023 and then moderated in 2024 and in 2025. As of the first three months of 2025 it's actually down again 56.6%.

However, on the other side of the coin and looking at private building authorizations, they were actually up. This is for the first half of 2025 they were up 31.5% percent. Okay, so we had the One Big Beautiful Bill act which was signed into law July 2024. There are both stimulative and contractionary provisions. On the stimulus side.

It raises the standard deduction and expands the child tax credit. No tax on tips or overtime, raises the state and local tax Salt deduction from 10,000 to 40,000 and it allows full expensing of investment deduction. On the contractory side, Medicaid.

They're increasing the work requirement and Federal match starting 1-1-2027 and the snap will have tighter eligibility in addition to funding cuts.

And.

So in looking at the impacts of Hawaii, 2025 and 2026 will show slightly improvements. However, the contractionary provisions will start to hit Hawaii harder in 2027 through 2029. Okay, and just to summarize the presentation, slower but positive growth in 2026 with a gradual rebound in 2027 and 2028, the US economy is proving more resilient than expected.

Higher inflation is possible in 2026 due to tariffs and then recedes in the years following flat visitor arrivals. But stronger visitor spending from high income consumers will help Constraints in other non tourism sectors driving growth or I'm sorry construction and non tourism sectors driving growth and the AI productivity boom is expected in 2028 of 0.5%.

Hawaii is growing less than the rest of the country and fiscal transfers will have a small negative drag in 27 in 2027 and 2028. Potential risks 1 of the potential risks is high inflation as the force is fed to increase rates despite low growth leading to high inflation and low growth or stagflation.

Asset market meltdown Stocks, bonds, real estate, if they go down substantially, this will reduce consumer spending and as mentioned earlier, policy uncertainty continues and the tariffs could cause more economic pain than expected. And consumer sentiment was down in 2025 over 2024 and business sentiment.

And if that does not improve, the consumers may reduce their spending moving forward into 2026 and 2027.

Thank you.

Thank you, Joe. So we wanted to highlight a little bit more about tourism because.

Sorry. Yes. Can you move that a little to the right? For some of us it's easier to. If you can point. Sorry, you got to move this screen to the right a little more. It's going to be in her face. Yeah. Yeah. If not, look it down.

Okay. Okay, thank you. Sorry about that. So we wanted to talk a little bit about the tourism forecast. And so as Joe mentioned mentioned, we are looking at pretty much flat arrivals with moderate spending growth. And the spending is growth is being driven by increase in pricing.

And the reason why I want to show you this longer term trend is, you know, starting from 2001, you know, we use 2019 a lot of times as a benchmark because that was the last year before the pandemic. However, it's not necessarily a goal. We don't necessarily want to have that many visitor arrivals.

But from a comparison standpoint standpoint, it's good to note. So from a expenditure standpoint, we far surpass 2019 visitor spending. But the forecast through 2028, we're not going to see visitor arrivals hit that 2019 number. And again, we don't know if that's, if we ever want to hit that again.

So I wanted to show you the mix of visitor arrivals and it's a little oval on this one, but if you look on that screen, it's a little bit more round.

But one of the things I wanted to talk about is that in 2019, at the peak of visitor arrivals to Hawaii, 66% of the market was from our US domestic visitors. Now when we look at year to date, November 2025, we're now at 78.5%. So the difference in our reliance on that U.S. market is really different.

Part of it is because we don't have as strong a Japanese market, although it has been increasing month over month. We had a very weak Canadian market due to the different political things that have happened and also economic things.

So if I look at it year to date, the recovery by market, again, we're just looking at 2019 as a point in time benchmark. And you know, the US west and the US east have far surpassed the visitor numbers and the visitor expenditure numbers that we saw in 2019.

Japan is less than half the number of visitors that we had at that same period in 2019. And again, the Expenditures are slightly higher on the recovery because people are all spending a little bit more because everything costs a little bit more.

And one of the other things I wanted to highlight was that the cruise visitors, although not completely at the 19902019 rate, it's almost there, 99% but they have exceeded the amount of spending that they've brought into the state.

Would that be affected by the change in policy about kushims?

It could be right now where. We. Right now we don't know how the, how the bookings for cruises have been impact by the change.

You're talking about adding the green fee, the tat, right? Not just that, limiting the number of ships to come into.

Yes, Senator, that is not till a number of years later. So our forecast only goes to 2028. So the implement for the cruise ships I believe is in 2030.

I don't think that's true. They're already selling tickets bookings for next year.

So the impact is going to be great.

Yes. I'm not discounting that. Junction does not work. It'll be greater.

Less cruise ship arrival. Yes. Senator, you know, I do agree with you that we are very concerned about the cruise ship market. I'm not trying to blow it off or make light of that.

I'm just saying that at the time that we were doing this forecast, you know, we don't show this big growth in cruise arrivals or cruise spending. I'm just showing that through year to date November that it is ahead. And yes, there, there will be impacts, but we haven't determined what those impacts will be.

We'd have to talk to more to the cruise operators to see what their booking pace looks like, what kind of.

Cuts and the decline is going to be based on, based on what we did in 2030 because it's going to be too late to try to do anything in 20282029. You have to start now to remember what that impacts may be. If we want to repeal it, we can change it, whatever.

Right. My understanding is. So I'm working with the Hawaii Tourism Authority and they have been talking with the industry and also with harbors at, you know, to look at that. But right now we're not at a point where we have a good idea of where the, how those bookings are declined, how those ships are moving.

We're, we're still asking for more information. And as we looked at the 2027 schedule, for example, we saw less booking, not bookings. But what we have is this website called portcall.com and we do see less reservations for ships in 2027 than in 2026.

However, what that economic impact is because not, not only is it we don't know how full those ships will be.

You know, for example, if you cut. Yeah, sorry to know. Is there going to be the same amount of ships coming in? No, no, no. You know there's a decline already. Yes, yes.

Because if they're going from 10 ships to eight ships or five ships, I don't know how many then you know that whether get, whether they're booked in full is not going to matter because. There is a decline in the numbers.

I'm hoping folks us, you know what is, what, what, what is that policy going to mean as to now these, these ships can bring in X amount of ships but now with this policy we're not going to be able to get. They can't.

Even though they get bookings. They can't.

Right.

Time will change because you never know what happens with bills that will surface. Thank you. But there's two different issues going on at the same time. One is that the green fee and the other one is the ability to allow a certain number in. So but you're saying that that's that second policy isn't until much later.

Yes. So you don't have it forecasted. But also because we don't know the impact of like the tat. Right. So let's say that we see a decline in the bookings like so we have, we know how many ships are scheduled to come in 26. But let's say there are less people that might make the cruise ships.

You know, the cruise companies decide to do something else in out years and we don't know that yet what the impact of the immediate tax is verse and then the longer term effect. So I completely agree that there will be an effect. But we're not at a point right now where we can forecast what that effect is.

But if you were to compare that to hotel room when we've increased the tat, the effects have been minimal.

I, so this is my personal opinion, this is not the DBAD opinion but my personal opinion is that you know, with the hotel rooms they've had a long time to understand that and have those additional taxes.

This is the first time that TAT is going to be applied to cruise ships and that might be, you know, a difference in the way that passengers think about it or maybe it's not.

But we, we don't know yet because we're only a few days into the year. Yeah, but the market has to respond. I mean, the market, the hotels, in fact, not just the increase in tat, but they, they added all kind of hotel user fee and you know, pool fee and towel fee.

And so they've added a whole number of fees. I mean, even though they complain, hey, you're increasing the tat, it's going to affect the numbers.

So if the market, if they want the visitor, they just don't charge some of those fees to make up for the fact that the TAT went out. Yeah.

And historically that's been some of the balance in the group markets that people have been trying to book for the convention center or citywide having those negotiating points about not having resort fees or other things like that. And that's something that the hotels can negotiate.

I don't know what points the cruise ships will be able to negotiate away in order to make up for the tia.

Well, there's a big difference with the, with the statute. Act 96 covers the cruise ships, all of the passenger charges. Yes. It's not only the cabins. And so that's where, that's why the cry is loud for the cruise lines. So if they only if that statute was only pertaining to the cabins.

I've been meeting with them until yesterday and today. I mean, they're in town. They don't mind paying the tat, only on the cabins. But the bill was flawed and it was signed and Act 96 has to change and no different as the chair is already talking about the hotel rooms and charging all those additional resort fees.

But it's a different story with the cruise lines. They don't mind paying the TAT on the cabins, but that bill includes the entire cruise accommodations. And that's why we need to fix it. And they don't mind paying. But if it does not, if Act 96 remains, they lose the injunction and whatever.

We're going to see a tremendous drop in the Cruz G. I Bet you that's going to happen next year. The ones who's going to suffer the most is downtown Hilo and Kauai because the cruise ships are on the small cities. So that's my story and it'll carry through at my Committee hearings.

Thank you. I appreciate that. One more question, kind of changing it.

So does these numbers and projections include the fact that the convention center is going to be closed down? This slide is just a comparison of the tourism recovery.

So if I go back to the.

For past years, you don't have one. Wait, do you have one for forward years? No.

This, this is, this is just showing where we are.

So from 2019 and then last year. Yeah, and so what? Okay, so if you don't mind, I only have one more slide then I can get to your question. So the, the other slide that I am ending with is that the from a real GDP standpoint the other. The non tourism industries are doing better. Tourism.

You know, there was a point in last year where we hit the level of real gdp but it's been below that. So if, if you don't mind, I'm going to go a few slides ahead to address Senator Kim. Do you have a breakdown of the non tourism later on? You can send us that was.

We do have it in our. Yeah, you can just send it later.

Okay.

Because I don't think that it's in this.

Yeah, we can send it. Okay.

Okay. So this is where we're looking at the cruise and we're looking. Based on what we saw in portcall.com we did show we are forecasting a slightly higher visitor arrivals for cruise.

But to center in noise point things have evolved, you know, since then that we did our forecast and we can expect that it would change for the next forecast. But this is where we are like this is the visitor arrival forecast by market and then going on visitor spending.

And like I said, visitor spending is expected to increase especially for the domestic markets because they are continuing to come and they are, I mean like through year to date November they are staying a little bit longer. But you see that a lot of flatness for the other markets and cruise is basically flat too.

So that's all the slides that we have.

Questions? Yeah, I got a question.

Dress the convention center part. No. Thought you said you did that. Sorry. The convention center part is going back to. Hold on. The thing about the convention center is while the convention center is closed, it's not completely closed.

And I talked yesterday with the Meet Hawaii team and they were able to move a significant amount of the bookings that they had for 2026 out to either single property or multiple properties. But they're still considering those to be citywide. They have another category called single property and they told me that for 26, single property is up.

So while the convention center is closed and they are, well, partially closed and that's not. They're more going to be for local events and weekend events. They're not going to bring in the number of room nights for the convention center itself. But those big groups have largely been moved to other properties.

So we didn't necessarily lose the business for 26 and they're still working on 27. Those single properties.

Are they all available on a permanent.

Basis or what is this was the hotel ballrooms, right? You're talking about. Yeah, we're talking about hotel ballrooms.

And like, for example, if you, if there was a big group at the convention center and maybe they have to do it over several properties because they need more space than one property has and they've booked it over a couple of hotels.

And while that's not ideal for people, you know, for the convention, but the groups have accepted that and they've tried to move it also to large properties like the Hilton or the Sheraton.

How many, how many business or conventions we probably lost because people don't want to do that.

You know, they might have come here, but because of that they're not booking. I can ask the Meet Hawaii team. Again, it's the, the convention center construction schedule is very important and that's important for meeting planners who are going to book out for 28 and further to have that confidence in Hawaii and the convention center.

So for our minds, as we understand, when is the completion of the roof construction work? My understanding is that it's done on November 12027 and that rest of that month is going to be for carpets and some painting and stuff, the internal stuff. Right.

But even though they will be completed, there are no groups, big groups offshore booked for December of 2027.

Thank you. That's almost concerning.

If there, if the answer to Senators Kim's question is hardly any. I, I'm sorry, I, I just don't know the number. I was told the number and I honestly don't remember what it is right now.

I can get that number for you. Like I did meet with them yesterday.

But there are, there are conventions that, that had to cancel because of the. There are conventions that the construction that did cancel because the construction. But some of them also moved to other years. So I would have to get the details for that.

But my understanding from the Meet Hawaii team is that they were able to move a significant amount of 2026 bookings into other properties. How many, how many government construction projects, you know, that can came in on time, completed on time.

I honestly have don't know that idea.

More so that they've never, they don't normally finish on time.

Right. There's delay said the medical school.

We hopeful that it's going to be done and ready to be booked in December.

Well, the original convention center they said was on time and under budget under Alan Hayashi.

Well, I, too many projects. But there's no Alan Hayashi anymore. But no, they're not expecting to book in December of 2027.

The, the first groups will be coming in January of 2028. It'll be ready by January. They haven't even come in. You know, they, they have to come in for budget, budget requests with some of their other projects because they're using monies from projects they're supposed to complete, like the escalators and so forth.

And if something goes down and they don't have the money, then not sure where we're going to go. Thank you, Senator Richards. Yeah. I want to go back. You talked about the tariffs, impact of tariffs, but you sort of glossed over it real quickly.

Is it because we don't know the volatility, the amount, what is going to be affected?

Can you expand on that a little bit, please? Sure. Yeah. Basically, it's just that we don't know where tariff policy is going, so it's.

Extremely hard to estimate.

It's whenever he, whatever. When he wakes up. Yeah, I got it. I hear you. So the volatility of that. So that's a wild card that we have absolutely no idea.

It's, it's very difficult to incorporate into a forecast. All right, thank you. That would be like many different scenarios that you've. Some you probably couldn't even imagine.

Yeah. Yeah. So many years ago we had programs like hula dancers at the piers when the ships came in and the Kodak hula show at Kapiolani park for the visitors.

That was a free show.

What do we have for the visitors now? I'd have to double check with HTA on the schedules, but my understanding is they still are doing the harbor greetings and airport greetings programs. And then I believe Kilohana by CNHA has taken over the hula show.

The Kodak hula show. I go to the airport three times a month and I'm not seeing one airport green.

Me either.

Maybe if you could find the schedule of when. I'll find out from them. I know that there's supposed to be entertainment.

It's not leg readings like you know, but it's. I only see people holding backwards cards.

That was naked. Yeah, that, that's not part of that.

So I'll ask HTA for the schedule.

I think it depends what the terminal schedule is.

I see some at Terminal 1, which. If you will, we're distracting from economic forecasting. Yes. I'm sorry, I'm not informed about. We should use those questions Wait for those questions for hta. Has there been any analysis on the strategic direction of HTA's economic impact on which visitor they focus on?

Because for a while we've talked about the higher spending visitors which mean less visitors, more spending, less ecological. Environmental impact.

But I haven't really heard that from HTA at all. I, I don't think that HTA has a full study on this per se. But from what my understanding is of their marketing segmentation, they do have different target markets that they are trying to address with their marketing.

But again that would probably be better to talk to HCA about.

But I do know that they are targeting specific segments. Yeah, but if you, if they, if they were to focus on the higher spending visitor at all in General and then they can break this, those into segments. Culinary, sports, ecotourism.

But they should all be the high spending visitor chair. They did have a policy in early 2002. No. Yeah, but their plan doesn't show it. Yeah, though I'm just saying. And they're focusing on the business traveler.

That's why the convention center and the bookings were so important because the business traveler comes in, spends some money and leaves and don't impact the environment. Yeah, they're supposed to be at the conference. Yeah. Yeah, but.

Yeah. And so, but over the years I've asked HTA about that and they don't. Seem to be focusing on, on the high spending visitor. Again. Yeah. Because even like the destination management money, I'm not sure how that's being strategically invested to support the higher spending visitor.

Sorry, I can't speak to what HTA is doing on that.

If you have the data, do you share that with HTA and say this is our analysis, you know, the higher.

Income, this is where they should be because they're making it up as they go along. Our team, the Tourism Research Branch does do certain amount of research for them and we do publish it on the Hawaii Tourism Authority website.

And when I talk about segmentation, each of the markets that we're looking at, and in particular we, we had money to pay for the U.S. Japan, Canada, Korea and Australia. And each of those teams did segment the market.

Like for example US has like a affluent visitor, you know, that earned certain amount, has flown certain amount and Japan has segments that you need to belong to a frequent flyer program and have this kind of income and things like that. So there is that kind of segmentation that they are looking at.

However, I can't speak to how their campaigns are aligned with that.

And of course I do Provide that to them. Their research on the segmentation.

So yes. An interest or a survey? Yes, anything that you guys do or. Yes, yes. So I, we do it and we publish it on their website and we do have what we call traveler profiles. And we have monthly traveler Profiles for the U.S. quarterly traveler profiles for Canada and twice yearly for the other markets.

And it talks about the things that they value with their travel decisions, how Hawaii compares to that, what the different market segments that HDA marketing partners have defined and how those people value different things.

So we do have those and it is published and available to everyone on the Hawaii Tourism Authority website.

And it's segmented by. By income. It has the income profiles that they chose. So some markets chose like three profiles, other markets chose maybe two profiles. But it also has a comparison to what we call the national rep. So it's like all the markets not looking just at their segmentation. And we have that information also.

And like I said, we have it fairly frequently. We also do additional US market research for them. It's shared with hta. So yes.

And it's also on the HTA website for other people to use. And then you talked about the increase in AI. Yes. So has this just like how we're asking questions on tourism.

Hta, the data that you provide, do you do the same thing for Htdc? HTDC does a survey. Nelha, we don't. We do help Htdc.

They do a survey and we help. Them with the data analysis. I'm just wondering if, I mean they need to be prodded into investing in the right things or expanding the right things that we know are going to be able to grow our economy, which I don't see them doing that either.

Yeah, I'll definitely reach out to them. Yeah, I mean you guys are all deep it and so that's where I'm not sure why. At least guiding them to say, look, this is where the low hanging fruit is going to be in the future.

You guys should move in this direction.

Are you guys going.

I don't, I don't necessarily see that.

Right.

Understood. Yeah. Thank you, sir. Just a couple question.

I'll take it back to the convention center since that's been a issue for. Are you talking about construction or the economic. What's the guarantee? So if it's construction, let's wait for HTA if Dave brought it up.

But it's really about the economic impact. Yeah. I got something else to help. Okay. Okay.

So if the tariffs are struck down by the Supreme Court, what is the potential impact for Hawaii economy. That would reduce uncertainty? One of the issues with the tariffs is that in order for the economy to flow, we need trade flows because supply chains are so globally intertwined right now.

And so Senator, I think in answer to your question, the biggest impact would be a reduction in just uncertainty so that businesses can plan their supply chains. So why is the job creation so weak in Hawaii and what would be driving the week on job creation? I would say that job creation is in the sectors.

One is we're seeing slowdown in tourism. And actually 2025 will have. Fairly good job creation. But looking into 2026, we're forecasting a little bit slower job creation. A lot of it is we still see growth, but the growth rate will slow down. Some of that is tourism.

Some of it is a possible slowdown in the non tourism sectors. But for 2025, although the final numbers.

Aren'T out yet, we expect it to be fairly firm. Because you said earlier that our unemployment rate is down compared to the United States, right? Yes. So if it's down, then what is the creation to keeping us down that we're having jobs Moving forward?

If you're telling me tourism is going down and we don't have the job creation, why, why is our unemployment lower than the the United States if we're not having job creation?

Yeah, that's a good question.

Moving forward, we'll see job creation, but part of it is the size of the labor force and labor force participation. Labor force participation. One of the big drivers is retirements. And as baby boomers retire and move out of the workforce, the labor force participation rate goes down which. No, yeah.

Impacts the unemployment rate because there just aren't as many people in the labor force as they're used. One more. I'm done. So you, you talked about a foreign born labor. What are we doing to keep local born labor employed or attractive? Because you know, worrying about the, the foreign labor.

What about investing and try to do something for the local labor? Because every time I hear this, I don't hear nothing about that. We're going to try to build up the local labor force.

We're worried about the foreign born labor that is leaving or not going to be here to some kind of whatever is happening in the, in the continent. But again, what are we doing in the forecast of trying to keep locally and working on having local labor instead of we worrying about the foreign labor?

Because I don't see that. I. Yeah, that's something that.

I'm not sure I'm. Leaving a state with jobs. Not only the economy is not having jobs or a workforce, so they're leaving to other areas to get jobs so that they can provide for their family. Not because the cost of living is high too, in a way. But there's no jobs.

There's only certain jobs like construction. What are we doing with the other industries? Traditionally, all they do is analysis of what's going on. Right. We have not directed DBT to say what do the economic analysis on which industries in which regions will create local jobs in that area. It's not as proactive as we would like.

So there's enterprise zones. I don't know any analysis of the enterprise zones and the impacts of enterprise zones. There's foreign trade zones. I don't know any analysis of the foreign trade zones under different regions. They may have state numbers, but they don't have it.

Like how it impacts Hilo or how it impacts, you know, Kalihi or how it impacts. And then we looked at the different things about enterprise zones. There's no enterprise zone for film. There's no enterprise zone for energy. That's where some of these corporations and authorities have to get on the ball because they're not expanding.

They're there to grow the economy and to create jobs, and they're not doing it. These guys are just. They look at the information, they crunch the numbers. They don't necessarily have the authority to do what HTDC or NELHA or ADC or HTA can do.

They can be directed to get the data to give. No, that's why I'm saying the Legislature should direct them to do that.

That I just. I guess because I heard them say about that, the reduction in foreign. Yeah, that's just the analysis that because of the current policies, we can't bring in foreign labor for things that we normally would, like agriculture or sometimes construction or things like that, but maintenance.

Okay, thank you. Thank you. Thank you. Okay, we're going to just take.

A five minute break so that they we can have Dr. Bonham set up. Okay. Recess.

Reconvening. Okay. Next we'll hear from Dr. Carl Bonham who will present on behalf of Uhero.

So good morning. Morning. Mahalo. Thank you, Chair, Vice Chair, Members of the Committee, the opportunity to present our very bleak outlook. Actually, I would say I'm feeling a little more optimistic than we were when this report came out. And there's a lot's changed since then.

So when we first released that forecast, we were missing a whole bunch of data. And as that data has come in, I think the outlook has improved a little bit. And yeah, so we'll be updating, updating the numbers and I'll talk about this, where those changes are as we go through.

So whether our next forecast report says there's going to be a recession or not is an open question. The. I think actually Jen may have showed a slide somewhat similar to this.

The, the whole point of this slide is just to illustrate that Hawaii essentially has the vast majority of its eggs in the US basket, if you will. And so if you look at the left pie chart, think about the components of that that are really driven by US economic activity. It's tourism and the tourism share of GDP.

This is from 2024. That data is a DBEDT number. It's down a full percentage point from where it was the previous year because of the wildfires, because of the lost spending on Maui. But 16% of the Hawaii economy is directly related to tourism.

And if you look at the right pie chart, you can't see the number because the screen's too dark. But the number is about 7879% of visitors. This is actually average daily census are from the U.S. the big blue wedge, that's the U.S. right. And CA is not California. It's Canada 6%, Japan 5% and other 11%.

So essentially on the tourism side of the economy, that makes up roughly 16% of our economy. Almost 80% of that is US driven right now. And then on the, the other pieces, the other big pieces of the economy, state and local government and federal. Right. You put those together, you get almost 20% of the state economy.

And both of those are heavily reliant on obviously federal is completely reliant on what's going on with U.S. policy. And obviously much of state government spending and some county government spending is also very reliant on federal spending, all of which we know are under threat.

And so basically the overall growth of the US economy and to some extent the Hawaii economy have Continued to be a little bit stronger than I think most of us thought would happen. Maybe a little bit more resilient.

Question.

Yep. So what when you, I guess when you look at the overall pie. Yeah. If tourism went down 1%, which other industries absorbed it?

You mean if tourism went down 1% but the economy stayed the same, which other industries absorbed it? Well, in, in this year in particular, it's been, I'd say that the biggest growth factor has been construction. Right.

You look at construction job counts and we got the jobs numbers today from the bls and construction is still at record high numbers. Construction jobs are almost higher than federal civilian jobs at this point. So we actually saw a 2,000 person loss in federal civilian jobs in October when the doge.

When the early retirement stuff finally showed up in the data. And federal civilian job numbers are roughly 30,000 right now. That's the lowest they've been since 20082009 in contrast, construction, it just basically just keeps going up. The other sector that has been quite a bit stronger than we expected and is in a big sector is Healthcare.

So we were, and the reason we were anticipating a weaker picture for healthcare is because it's not, it's not just hospitals, it's healthcare and social assistance. Right. It's all of these nonprofits and agencies that rely on federal support for providing services.

But we haven't seen the kind of job losses there that we expected or they're being offset by, by hiring in the, in the hospitals, for example.

Does this know the source of, of where it's coming from? Is it private?

Is it government officials? All of this, all of this is private. If, if it doesn't say federal or state, it's all private. So even now that doesn't mean all the money came from. Right. So you could look at health care. Is, is seven and a half percent of Hawaii's GDP in 2024.

A lot of that money is coming from federal funds.

Right. You can't segment the federal to state or federal funding.

Yeah.

But Carl, on the construction part, that's, I mean it's going to be.

And I've got a forecast chart that talks so. And there's another example of where the bulk of that money is coming from federal. Right. So that's, that's the one area where federal spending and actually when Joe was presenting, they were talking about, he was talking about government contracts awarded.

There was a $8 billion contract awarded by NAFAC in May or June and for some reason it hasn't shown up in the government contracts awarded, data.

There were press announcements and you can, and I mean I've talked with Brian Dredging and others and you know, they're expecting that money to flow and so that's an award that happened this year. But the spending is going to go on for the next four or five years.

Same way with some of the work that's going on at Pearl Harbor. Right. It's not going to end this year. And so in, in our view, the construction sector continues to be a, a resilient piece of the overall forecast.

There's a lot of condos being built. Some high end condos is going to be a flood of inventory whether or not it's going to sell or not. And people might not be building if there is a glut.

I mean that's so I guess I wouldn't characterize us as being in a situation where we're going to have a glut.

If you look at the sales records of the people who are building those high end condos, they're pre selling them and in many cases they have to pre sell a large percentage of the building before they can get their financing. And I'm not hearing any news about, you know, people backing out. That's always a risk. Right.

You could have have people backing out, but I guess I'm, I'm not. That's not something we're building into. Our forecast, it's a possibility.

Understanding is, these contractors have put in affordable units and affordable units are not selling.

That's different.

So, yeah. Yeah, that's a, that's a very real possibility. Yeah.

Terms and so forth is really not affordable?

Right.

Those units are sitting there. That's going to have an impact.

Yeah. But as you know that, I mean the way that it works is basically the, the market rate units is what carries the building and you know, not selling the affordable units is a bit, is important.

I don't know if we'll see an experience like we have in the past where when those units sit long enough then the rules start to change. I don't know if that's something that will happen again.

Yeah, it's a, I mean it's, it's a real problem with interest rates the way it is and with that the affordable units are not accessible to, to a lot of households.

Just pull up on that for a sec.

Yep.

This may be separate discussion with a different agency, but lately, just in the whole universe of available, I guess I should say planned affordable units, that are in that pipeline or even you know, like 5-10 years out in some respective pipeline, the number that are now being planned for with various credits and things that are concessions, right, when you're developing like a luxury apartment or whatever.

If those are being transferred into for example like DHHL or one of the other agencies that already have a mandate to build housing, does that change the overall number of units in that pipeline or change the...?

Wow, that's a, that's a really good question. I really don't know the answer to that. Yeah, good question. Food for thought too. Thanks. So, this is just continuing on the same theme but for our reliance on, on US visitors and Jen actually showed some numbers that were similar to this.

So, these are, these are visitors from different markets all indexed to January of 2020, right before the pandemic, right, so everything starts at 100. And so, the blue, the blue is US arrivals and as you can tell, that's above 100 almost over this entire, the entire time period.

So, it's, it's really the US visitor that came back in the revenge travel days with, you know, using rental—U Haul rental trucks—on Maui to get around and, and but they've stayed. Right? So, we're still at about, I think we're 6 or 7% above 2020 levels.

These are number of people and even with some growth that we've seen from Japan over the last several months, Japan is still languishing at sub 50%. So, basically, this just gets to the same point and that if the US economy weakens and or were to have an outright downturn for whatever reason, Hawaii is in a fragile place because of our reliance on—this is, this is the stuff that we worry about.

Right? It doesn't, it doesn't say that that's going to happen. But the other markets, particularly Canadian, right, is down sharply this year and isn't likely to take up, take up the slack.

And I understand not only the Canadians but the European travels which as the high spending, like Japan, the Japanese had come into Hawaii, but this immigration thing that has been set up, it is killing the European travelers.

It's—the overall international is primarily being dragged down by Canada. But you're, you're right, it's not just the Canadian and I will comment on one thing, is that the Japanese visitor is no longer the high spending visitor, at least not in dollars. Right?

So, really, right now, the US Visitor is actually the high spending visitor, certainly not the Canadian. And yeah, and we've been digging into this a fair amount, trying to understand why visitor spending is going up in the—primarily in the last three or four months when the number of visitors has been falling. Right?

So, if you look at the average daily visitor census for the whole year, it's basically flat. I mean it's gone through cycles, but we don't have more visitors here. The hotel room rates are not up, occupancy rates are, are roughly flat. But for some reason, visitor spending has shot up over the last three or four months.

And yeah, we haven't figured out why. I mean, in the data, suppose—the data suggests that visitors are spending double digit. The growth rate in visitor spending per person is growing double digits on things like eating at restaurants, renting cars, and shopping. Even while spend—even while prices in those areas, if you look at other sources of data, consumer prices, for example, for food away from home or transportation, are not growing anywhere near that rate.

So you have flat visitor numbers, but visitor spending shooting up and yeah, hotel rates are basically flat. Yeah, yeah, it's, it's.

So, you have flat visitor numbers, but visitor spending shooting up and yeah, hotel rates are basically flat. Yeah, yeah, it's, it's—excuse me—it's pretty puzzling actually.

Maybe it's not flat, but it's just, maybe it's just expensive, historically. Have you looked at?

Yeah, they're certainly not flat over time. Right? I mean, hotel room rates.

But I mean, so, year over year, hotel room rates.

But, but not year over year, but over a trend of time, you know, a period of time.

Because my sense is at a point, it's just like it's just so expensive to, to stay. Right? And so, you're just attracting, at a certain point, the higher spending visitor anyway because you have to have so much.

Well, so, so, I mean the, the first question is, is what's going on because we're seeing a higher spending visitor? But if we were seeing a higher spending visitor, you would think that we would see higher room, higher room revenues. Right? So, in other words, the higher spending visitor stays in a more expensive room.

I'm saying is it was already high. So, you, you had people with revenge travel money paying the higher rate, but it was just now that's.

But then it would be the—so, because the visitor numbers are, are flat, you would, f you're, if you have more people who are higher spenders, you've got to have fewer people who are lower spender, on the average, should be falling and it's not.

So we've got to figure it out. What the formula is, right.

So, that means there's room for us for HTA to really focus on the higher spending visitor.

Well, I think there always is. Whether or not it works and whether or not that's what they're doing. I can't, I can't answer that.

Sorry, real quick.

I don't think so.

You have the data that shows that US is, the higher, the higher spending.

Yeah. If you look at per person per day spending for US visitors, you can see it on our, our data portal, it's probably on deep, one of DBED's dashboards, and it's—I'm going to say $290 a day, something like that. In Japan, it's probably 260.

Yeah. According to DBED's report, in October, yeah, the number of visitors went down, but then spending went up.

Yes. Yeah. The spending numbers for the last three months have been surprisingly strong and...

Compared to the past high spend?

Well, so when you—I have a slide about real visitor spending at the end of my, and so, when you look at spending over time, really doesn't make any sense to look at the nominal numbers. Right?

Because we don't care if spending goes up because prices went up. That doesn't, you know, price increases that are coming from tariffs or oil or what, or general inflation. They don't help the economy. That's just, that's just dollars. And so, if the business is charging more but all their costs went up, they're not thriving. Right?

They're not going to be adding workers. And so, you really have to deflate. And when you look at, in real dollars, visitor spending is not up. I mean it is a little bit the last three months, but say compared to 2019 or 2021 or 2022, it's not.

So, staying on the, the theme of dependence on US, this is what—for the US economy, it's kind of a story of is the glass half full or glass half empty? And the labor market is half empty. Overall GDP growth is half full. The, the risk that, that we've been focused on is really from the labor market.

And basically, this, we focus on just the horizontal lines. So, in 2024, before data revisions, the US was adding 200 and, excuse me, 170,000 jobs a month. After the data revisions, and this is a preliminary data revision, we think the US economy added about 110,000 jobs a month. When you take into account the data revisions, right.

Every year the data gets revised and no one's making up the numbers or anything, it's a—basically, the preliminary data is all based on a survey. The final revised data is based on all the—essentially UI claims, or not UI claims, but the, the, the entire population of people who are eligible for UI insurance.

So, we actually know how many people are working. It just takes time for the data to, to get adjusted. So, using the adjusted data and basically since Liberation Day, I don't know why I called it that, but since April, the US economy has been adding about 17,000 jobs a month.

So, effectively, and you can see the blue bars bouncing around, right, some months are positive, some months are negatives. So, essentially, the US labor market is basically at stall speed. And it's that fragility that that makes us worry about—it wouldn't take much to, to tip those into negative territory. And as we—Joe was talking about, the US unemployment rate has risen to 4.6%.

And that's what's underpinning, we think, some of the weakness in, in tourism that we saw this year.

Federal...are all losing their jobs.

Yes. And actually in, in the, actually the, the big negative there, the minus 90,000, I think it was 99,000, a whole bunch of that was federal.

Most of it was federal. And in that same in October, as I said, we saw about a 2,000 person loss of federal civilian jobs in Hawaii.

But then Hawaii is still one of the lowest states with the lowest unemployment.

Hawaii always has the lowest—not always, that's too strong. Hawaii is almost always near let's say the bottom five for unemployment. The only time—and it's, it has to do with the structure of our, of our labor market. And it's, so, it's generally true and it is also the case that our—we are adding jobs.

It's not that we're not adding any jobs. We're adding jobs at a slow pace, but we're adding them faster than we're adding labor. Right? So, with the age of our workforce, with people moving away because they can find better jobs, higher paying jobs elsewhere, our labor force growth has been much slower than even our slow job growth.

And as a result, the unemployment rate has slowly fallen. So, sometimes the unemployment rate is a really good indicator to tell you about the strength of your economy. Sometimes it's not, right? You could have an unemployment rate that's very low because everybody left and there's nobody around to work.

So, you could have a very low unemployment rate then. So, Joe talked a little bit about the chaos that's been created by the tariffs. And so, this is just a plot of how much the tariff rates have changed since the start of the year. The average effective tariff rate in the US was about 2.5%.

The start of the year, it got as high as almost 30%. Right now, we're at about 17%. And then there's all kinds of, of exceptions. And so, like if you make computer chips in Taiwan, you don't, your tariff rate is not the same as the overall Taiwanese economy.

But this is creating a tremendous amount of uncertainty for businesses and is playing an important role in why the labor market has slowed so much nationally. The SCOTUS decision, I saw the headline the other day—I didn't read the story—that said they might actually release their decision on Friday.

So, you know, what, what that effect will be in Hawaii and elsewhere is kind of anybody's guess.

My, my guess is that if they were to say, okay, you've imposed these illegally, that the Trump Administration will choose to essentially impose similar levels of tariff using legal means, because there are four or five different ways that you can impose tariffs. The reason they went the way they did was because it was fast.

You just declare an emergency and you, and you go, right? Canada's sending all their fentanyl to the US, so just impose a big tariff on Canada. The other ways take much longer.

So, I don't think the uncertainty is going to go away, but we might see an initial reprieve and it's possible that some Hawaii businesses would get money back. Right? So, it's, it, it's really hard to say, but it's creating a situation where the labor market in the US has been very, very weak.

Investment outside of AI has been very, very weak, and consumers are about as pessimistic as they have ever been, which is pretty fascinating. It gets to the point that basically the very top of the income distribution is thriving. They're seeing big gains, big stock market wealth gains. They're not worried about losing their jobs and they're doing great.

And the rest of the population is struggling with rising prices. Yeah, egg prices have come down a little bit. Gas is still above $2 a gallon in most places. But overall, the cost of living is a challenge for the, for the, the middle class and even above. And that's where you get the pessimism.

The growth that I just mentioned in stock market wealth, the top line shows the change over time—excuse me, it's the level. It's measured on the left axis. But we've seen tremendous growth in stock market wealth as opposed to the sort of slow plotting growth of personal income, which is the bottom line on the right axis.

And that's driving high end consumption which may be contributing to the higher visitor spending in Hawaii. I—no doubt that it is. It just, I'm not sure it's enough to explain all of that. I'll just tell you what this says, you don't need to.

Basically the, the dark blue bar, if you look at the, the 2025, those are two, those are the first and second quarters of 2025, on the far right side of that graph. The dark blue bar is AI investment. If it weren't for, it's information processing.

So, if it weren't for investment in data centers, overall investment in the second quarter of 2025 would have been negative. I mean, if we didn't have that or at least much, much, much smaller, right, if the number had been compressed.

And so, essentially, US growth is heavily dependent on small pieces of the economy—AI investment, high end consumers. Now, we're going to get a boost from tax. Joe had a slide where he talked about the benefits of the, of the tax cuts. And those are going to, those are going to be real.

They're going to impact Hawaii, they're going to impact the US. People are likely going to see larger tax refunds this year from federal tax refunds and some state tax refunds as well because of tax law changes that you know, weren't fully taken into account in withholding.

And then, that money will start to flow throughout the US economy and Hawaii's economy and contribute to a little bit stronger 2026. So, this is not, this is similar to Joe was showing data from blue chip. These are our forecasts.

We, we've revised our—so, our forecast for 2025 and we can say it's a forecast because we still don't have—it's actually an estimate. We don't have the full data. The dark blue bar is the United States.

Our estimate for 2025 that we're working on for our next forecast release is closer to 2.2% growth, higher than the blue chip forecast. We may have more data than they had when that, that blue chip number came out. And our forecast for 2026 is about 1.9%. So, we don't have a forecast for a US recession.

We think that growth is fragile because of the concentration of the growth coming from investment in data centers and high end spending. So, you could imagine if you, you know, if you want a worst case scenario, instead of the stock market growing 15% in 2026, it falls by 10%. That, that is a very different.

It falls because Nvidia—Nvidia stock—plummets and then that translates into much less consumption by high end—spend—consumers and possibly less investment in data centers.

So, the drop in the mortgage rates are part of that economic forecast?

Except that at least in our forecast, mortgage rates were barely budging and so, we would be in much better shape. More widespread spending. Really, if you look at housing as housing investment, that previous slide showed housing investment being very weak. It was a little bit better in the third quarter.

But in many parts of the country, you could argue housing is basically in recession. And certainly, that's the case in Hawaii in terms of the overall condo market with very, very little activity there for a whole variety of reasons—high HOA fees, problems with insurance, et cetera. But the mortgage, the mortgage situation is part of that.

Even if the Fed lowers interest rates by two or three times next year, we don't think the mortgage rate is going to come down very much. It will come down a little bit better. It is. But you can actually get perverse effects where the Fed is lowering interest rates because they think labor market's weakening.

But if inflation is staying high and people are worried about long term debt, then the 10 year bond rate stays elevated, even goes up after the last Fed cut, the long rates went up. All right. And you can have mortgage rates going in opposite directions.

Yeah. So, I just kind of, I want to top on. You keep talking about Canada and U.S. mainland and you know, what's causing the decline in tourism in the state. But you know, you don't get into the fact that Canada is have, you know, corporate tax fees.

You know, their economy is, is driven because of the stuff that they implemented on themselves. You talk about tariffs and stuff like that because he said the emergency tariff with...also he did that. But Canada and some of the other countries, are we looking into why the decline is declining?

Because you're saying the United States is going up, right, in, in the tourism. But Canada, do you, do we look into why Canada not coming? Because you talk about that, you know, the, the, the US is coming and the cost and everything. But do you look at their economy? Of course, the economy is carbon tax.

They have a lot of carbon taxes and a lot of the economy of the food, their gas, the fuel, all costing more money.

So, the reason that the Canadian economy was as weak as it was in 2025 was because of trade. So, in, and they had it, we had one negative quarter of, of GDP growth and that was completely trade driven. In other words, less exports to the United States. And I mean, yeah, everything matters, right?

Their tax structure matters, their labor markets matter. But when you have shocks like the tariff chart that I showed, that's the immediate impact. Their economy recovered a little bit in the third quarter. I think it was stronger. But Canadian visitors to Hawaii have been in decline since the wildfires.

So, this is not just about what happened in 2025. We lost roughly 10% of our Canadian visitors in 2024 and another roughly 10% in 2025. So, it's not just, you know, about one bad year of Canada. It's also about the fact that they, they were big visitors to Maui, and they didn't come back after the fires.

Well, that is talking about Canada. You're talking so much about the United States, which is great, but is Australia and Japan. So we really—you dissected Canada, so are we dissecting all the rest of these economies?

Yes.

But the point is, so, the point is that—the reason I'm talking about the US is because they're 80% of our visitors.

So why is it the..?

So, yeah, all the other ones matter. Okay?

But do we know why the decline in Japan and Australia?

Japan's rising. So, Japan is actually seeing pretty, pretty significant increases in Japanese visitors over the last five or six month, so.

And, and I, I can't remember off—I mean, other international, most of the international decline is Canada. So, the other international is down a little bit, but not nearly as much as Canada.

We spend a lot of money advertising Hawaii in, in, in the Asian countries.

I, I don't, so I don't know how much money HDA is spending on which country, unfortunately.

Okay. So, we can ask the spending on, of each team.

So, on, on a positive note, we don't know why, but real visitor spending has bounced back after hitting a—so, this is real visitor spending. So, here we're, we're deflating with the Honolulu Consumer Price Index because we have that data for 50 years. We can, we can—and it's the only consistent price index we have.

So, after a very, very weak summer, you see the sharp decline where we tested the lows of visitor spending post wildfires. Over the last four months, real visitor spending has rebounded. And as the, the subtitle says, are visitors really spending 15 to 20% more on food, entertainment, and transportation? I don't know, but that's what the data says, so.

Well, if you trust your data.

Well, it's not my data.

So, sharp a decline in 20...

Well, so, that's the other thing that's going on in, in the, in the tourism data is it's become more volatile. So, it, the, over the course of 2025, right, we saw a really strong start to the year and then a really sharp drop in the summer and now we're seeing a rebound and it's unusual. So, I don't know what's, what's driving that. You know, we tend to interpret it as being driven by actual visitor activity.

But there's other things going on as well in measurement and I can't explain it, but I do know it's more volatile than normal. The—so, basically, that's our last forecast. It just shows that we were anticipating a relative.

After the sharp drop, which you can see at the top, the dark blue line is the whole state, excluding Maui. We separated out Maui because it's undergoing a different dynamic. It's still recovering from the, from the wildfires and so, Maui really just sort of weakened in 2025.

The, the rest of the state, particularly Oahu, saw a sharp decline in the summer and then our forecast was for a fairly flat prolonged recovery. The most recent data tells us that the Oahu is still the big, the big drag, and yet, visitor spending is, is rising across the state. So, that'll all get revisited.

The, this chart, which I had updated—well, I updated on my computer, not on this on—and we actually just got today two more data points for jobs and the dark blue line—so, the dark blue line is payroll jobs, total statewide payroll jobs, federal, private, everything.

And with the next two data points, the line ticks up a little bit. We're almost back to where we were at the beginning of the year. So, that spike that you see, that's January 2025, we've almost recovered to that level in November. And this is data that—these are our estimates of payroll jobs.

So, we take the data that the BLS produces, and DLIR—I guess it used to be DLIR, it's now DBED—as a collaborative arrangement with the Bureau of Labor Statistics and helps produce that data.

What we're doing is we're adjusting it for the revisions that are going to come and we won't get them until March, but we have the data that they use to do the revision. So, our data looks very different than the preliminary data. The preliminary data would tell you we've seen almost 2% job growth this year.

Our estimate of the forthcoming benchmark revisions say we've average less than 1% job growth this year. It's a pretty big difference, just like it was for the US, right? The—and that's been our primary concern and what led us to, to essentially forecast a mild recession for late 2025, early 2026.

So, another data point that's come in more positive, this, the gold line here is job openings. This is from the Bureau of Labor Statistics Job Openings and Labor Turnover Survey. We just got that data, I think on Tuesday. And those job opening numbers bounced up for October. The—they're still at a level.

So, if you look at the horizontal line there, it's at 100. This is indexed. So, it's not actual number. It's the actual number of jobs, job openings indexed to February of 2020. The job openings from BLS, the gold line, is at the lowest point. It's been going back to 2018-2019.

So, you can see it fell dramatically during the pandemic. I guess I might have a pointer here. Oh, I do. Can't see it on zoom, but the job opening numbers are now up out here roughly the same as what they were back in 2019. And the reason that I highlight that is just that, I mean, I think there's some reason to be concerned about the increase in the minimum wage, not from, I mean obviously, if you have a job, good, it's going to help, right?

If you don't have a job or if you're a new entrant or you lose a job, I think in, in the current environment of weak job creation and minimal job openings, it's going to be harder for entry level workers to find work with that $2 minimum wage increase.

I'm not suggesting that there's anything we can do about it, but it's something, something to be aware of.

Went up on January 1st by $2 and it two years from now, it'll go up again and then it stops.

It goes up again?

Another $2. Yeah.

It'll stop at 20—at $18 an hour.

Well, that line could get even worse.

Yeah. I mean to—assuming that if the labor market recovers, right. The last time it went up, it went up from, it went up to $14 two years ago, but that was in the middle of the post pandemic hiring boom and very few workers were, were actually earning less.

We're earning the minimum wage at that point, right, because you know, Zippy's was offering a $1,000 hiring bonus and they were paying more than the minimum wage in order to recruit people. But we're in a different labor market now.

I think, if I remember correctly from our forecast report, our estimate was that about 50,000 workers would be impacted by the wage increase. Right? So, they were earning less than the $16 minimum that we now have. And so, they would see their wages go up. And that gives you an idea of the overall impact on the economy.

But if you went back to, to 2022, the number was much—4 or 5,000 maybe workers would have been impacted because everybody was already earning more.

There's that unknown factor about how many restaurants or stores will close.

Absolutely.

Restaurants, I think they're already talking in their own circles about getting out...

So, they, they will absolutely be looking at ways to conserve on, right? I mean they're, they're being hit—restaurants, retail, everybody else is being hit with cost increases all over the place, right?

Whether it's because of tariffs or it's because of, of health insurance or it's because of overall insurance, all those costs come into play and then you add an increase in labor costs and they're, they're definitely going to look at ways to, to cut costs.

You know, your statement on it's going to be harder for a new employee to get hired with the minimum entry level.

Entry level, non-skilled. Yeah.

So, it's basically the, the fact that they're nonskilled that, that's the.

Yeah. I mean, well any, it's not necessarily not skilled. It's just who, you know, what, what's the characteristic, what's the, what are the characteristics of a worker who might be earning 14, $$15, $16 an hour. Right? 16 now. Right?

And that's the lowest entry wage you can, you can have. So, think about teenager who is looking for a summer job.

Yeah. No, I'm just trying to work backwards in that sense where how do we make sure that our programs like community school for adults or DOE provide the training to mitigate what you're seeing.

Absolutely. Yeah. And I actually think we're, I think we're working with Department of Labor on some analysis or training programs.

Senator Fevella had said but how do we help locals get these jobs? So, that means we have to provide the training and make, make those investments so that that class of people can.

We are—we're recruiting right now. And if I remember correctly, some of the, of the people we've been talking to have been doing some really interesting stuff on job training programs nationally and how effective they are. So, I'll actually, I'll share that paper with you.

You don't have that breaking up—broke, broken up—by zip code, do you? that information?

Work training programs?

Where the, where the population is of people, or could be—I don't know if it's even possible—where they're having a hard time getting into the entry level jobs because they don't have the training. Because then we can be very specific with which school or which program. But if it's, I don't know. If you can think about it. You can think about it.

Somewhere—some are higher.

That's one. He's saying. Yeah, that's one. But if there's, if there's a clue on.

Well, you could also just, I mean think about counter help in a restaurant. Right? Back, back, counter. You know, people who are chopping vegetables. Right? They lose their job. Then are they going to be able to find a, a job back? That's the.

No. So, that's where the jobs are. What I'm trying to figure out, where are the potential employees? Are they in low income communities where, in that sense, we could provide the training in that specific community? They're going to have to commute to the job, but.

Yeah, we'll, we'll, we'll give it some thought and see if—I, I'm not sure that we could come up with that kind of data, but it's worth thinking about.

Yeah.

So, are the jobs also by, by different geographic areas so that you can see what you...?

Could match them up. Yeah, yeah. Different training, different jobs.

Jobs with a minimum requirement. I mean, this could be like dishwashers.

Sure.

Right, so, how much training are we requiring?

Yeah, no, yeah, that's, that's not going to, right. It's really about training that takes you out of the dishwasher job and into maybe you run the cash register or whatever the skills are necessary to get in.

Because you want, you want to move people up the ladder so that you free up that job for someone who doesn't have skills.

And you send them to UH.

If they can afford it.

But some of those jobs are going away. Right? Some of those jobs are going away with AI and so, they might not need cashiers, they need dishwashers, because they have...

The cash—the cashier is, is more likely than the dishwasher to go away. Right? But sure.

You put all the, all the, all the dish, dishes, and you spray it and you don't need a lot of dishwashers. Yeah, yeah.

And I don't know if this is getting into the weeds of your report, but do you guys take in consideration at all like just the landscape of those, like the ages of those entry levels, which is like maybe high school, that kind of stuff?

Because the, the concern that I have is that with technology, social media, that kind of stuff, I mean the, the, I think the reality is to acknowledge the fact that some of the work ethic is not as there—it's not as strong as it used to be. So, do you guys factor in your reporting? Like maybe these kids are so detached from personal interaction that they can't do basic customer service.

So, I don't think we've ever tried to address that particular issue.

I know in our last report, we had a box on what we know about AI and the, you know, there's, there's been a fair amount of reporting that it's creating hiring obstacles or job finding obstacles for, particularly for younger workers.

And here are so many having working in two and three other jobs.

Yeah, but that's, that's not new, what you're saying. That's in DOE curriculum, I think on people skills, soft skills, all of those things. That's where McKinley School, McKinley Community School, they have the build your skills, specifically for soft skill building.

Should be.

But we gotta, you know, more data, then we can be more specific. Okay, go ahead because you got like eight more slides.

We can—so, this just basically points out that the job losses and actually, if I were to update this, these are actual change in jobs from second quarter 2025 to fourth quarter 2026. So, that includes history plus our forecast.

And essentially, the biggest job losses that we were anticipating was in Federal Government minus 1000, almost 1600 jobs. We already saw that in, in the month of October, and actually, we'd already seen 1300 jobs lost by, by the second quarter. So, we were starting down, and we've gone down further so that'll get updated.

The decline in state local government jobs, that was really our forecast because of relatively weak tax revenue growth and some slowdown in expected state and county spending. The biggest contribution is in construction, as I have mentioned several times. So, this gets at the construction picture, and it shows our forecast, so through—and this data would be through halfway through 2025.

So, we have permit data, and these are all permits. The dark blue wedge is residential building permits—are all measured in real dollars. We deflate them using the DBED's construction cost index. The wedge in the middle is, is nonresidential permits.

So, think about, you know, when they build a condo on top of Ala Moana, that'll show up in non residential, even though it's residential. So, you can see that the residential permits have increased since say, the mid—well, certainly since post great recession.

But the bulk of the activity is that big wedge on the top which is all federal. And what we do there is we take the Federal Government contracts like the, you know, 5 billion and the multiple contracts that have been awarded over the last three or four years that are 5, 6, 7.

The last one I mentioned was an $8 billion award the NAVFAC gave out. I believe it was in April or May. And then, we take that and we spread it out over the expected spend period. Right?

So, when you got the big award to do the dry dock, all the spending didn't happen in that month that the award happened. Rather, it's still ongoing. Right? They're still working on it. And so that's how we get that relatively stable, high level of spending.

Do you have—Carl, do you have. These are permits, but do you have the applications for permits, so we see how we...

We do. It's a mixed bag. We, we have, I think we still have permit applications for Oahu. It's hard to get that information from the counties. It would be really awesome if the counties standardized on the reporting of permits and included permit applications, makes it because...

Housing Committee Bill.

We should talk. That's pulling teeth.

Counties outside of city and county, they're all technologically related already. It's all documented. So, I don't see how you folks can get the information.

So, depends on their reporting system. Right? So, so, for example, and I'm not trying to call anybody out, in fact, I'm not even going to mention the county. There's a, a county that has the data on application date, and—but they don't put it in any of their monthly reports or their daily reports. And you know, we use the permit application date when we calculate how long it takes to get a permit approved that we publish in our housing factbook.

You don't want to show that it's been sitting on somebody's desk.

Yeah. So, you could guess which county I'm talking about. But, so, the only way I get the data is I have to pound—I have to ask somebody for the data every year and wait for it to get an email.

Okay. You work on the bill with.

Yeah, it would be, it would be very helpful. So, because I've got eight slides, I'll go more quickly. That's just our, these are just our forecast charts. So, you could see a very—we, we were forecasting a very mild downturn in, in jobs.

So, we're talking about an increase in the unemployment rate of, of 30-40 basis points. Not much. And you know, if the current trend continues, we're going to be completely wrong. You know the unemployment rate just keeps falling. We still think that job growth is going to be very weak in, in 2026. And that's yeah, similar.

I think Joe talked about the risk to inflation. So, inflation on—this is Honolulu inflation. That's the gold bars. And essentially, Honolulu inflation throughout the year was on the way down.

It started off in the mid, say, 4 to 5—4%, 4.5%—at the start of the year, fell to about 2.3, 2.4%—no, excuse me, 2.2% and has been rising since then ss some of the tariff pass through starts to show up.

We think that we'll still—we'll see more of the tariffs pass through. Most estimates suggest that businesses have eaten a sizable something on the order of 50% of the tariff. In other words they're shrinking their profit margins. And the question is how long will that continue?

It'll continue a long time if the economy is weak enough because they can't sell their goods if they pass through the price increases.

So, our expectation is we're going to see a little bit of an increase in inflation to around 3% in middle to, say third quarter of 2026 and then, start heading back towards a more long term number. So, it's not a, not a huge increase. And then our, you know, our GDP forecast was for zero for 2026.

That's likely to be too low and we'll be updating that in—and that was basically based on a 2026 decline in tourism following a week 2025. So, I can skip over the long run stuff in the interest of time. There was a question about real—about visitor spending long term.

So, this is a chart that shows real visitor spending going all the way back. So, here's where we are right now. This is—must be quarter. I think this is monthly data. S, that was probably September, maybe October, data.

And so, you can see in 2025, when you adjust for inflation, we're below where we were in 2019, we're below where we were in 2021, 2022, and we're below where we were in 1989. That's the importance of deflating using a price index.

So, I'm going to stop there and.

Question with regards to Maui and the policy now with regards to vacation rentals. I understand it's all now because of the impact of the Mayor's bill.

So, the Bill passed, right?

Right.

There's been a lawsuit filed and there's also, I guess there was a—was it a tig or a pig or there was—that recommended modifications.

And I don't think they've come back and met on those suggestions yet.

My understanding of those that do have the permits, but they're not renting out their accommodations because, you know, it's pretty much stalled here.

Oh, I see what you're, I see what you're saying. You're saying that that uncertainty or people are—okay. Yeah, I don't know. I mean, I can say that the tourism, overall tourism recovery on Maui, has certainly been slower than I think many of us expected.

I have no doubt that that's playing some role because it doesn't take much for visitors to be worried that, you know, they're going to rent an Airbnb and then they're going to show up and it's not going to be available or something like that.

So, I have no—and on the, on the owner side.

The owners of those properties are not putting it on the market because of the uncertainty.

So, I don't know. I'm not sure why. I mean, if I were an owner of a property, I would certainly be renting it. I don't know why that would be the case because implementation isn't—it's not going to happen in 2026.

I believe it's 2027 was when the first, and that was only a portion of the...list properties. So, you know how this—I don't think we'll be incorporating impacts of the...lists issue in our next forecast report because it's, it seems to me like it's completely unsettled at this point.

Okay, we're going to recess.

Quick question.

Quick question, because if not, we're not going to have a lunch break.

Okay, real fast. We just keep going. Skipped over, priced out of paradise, which is the population change and it says estimated based upon birth and death, so it doesn't include moving.

So, that particular slide, and for some reason I've lost control over.

Oh, because it's lunchtime.

Yeah, that must be.

See if that did it.

No, I'm not. Well, we were supposed to be from 11:30. So that slide going is actually showing natural population change. And so it's literally births minus deaths. So it's. And no moving. Well, yes and no, because if someone moves, it would contribute to lower births. Right.

So if you have this many people living here, save 100 people living on the Big island, and 10 of them move, then your birth rate, your number of births is going to go down just because there's 10 people who can't. But. But I'm not adding in migration.

I think that's your question. Yeah, so basically, that's right.

So Big island, but it's exporting out of Honolulu. Yeah, that's exactly right. I mean, the Big Island's population is growing. That's right. But their natural population is. Is essentially zero. The natural population change. So it's not because there's more people being born than are dying, it's because people are moving in, presumably to the Kona side.

But I. I don't know that.

Okay. Reconvening. Okay. Next we'll hear from DOTAX, who will discuss revenue collections and projections. So, good afternoon.

Good afternoon. Chair Dela Cruz, Vice Chair Moriwaki, in case she's watching. And Committee Members. Yeah, she's coming. Thank you for the opportunity to present our supplemental budget request for fiscal biennium 2025-2027. May I introduce the members of my team? If you could just raise your hands. Yeah.

I'm going to introduce Deputy Director Kristen Sakamoto, Special Assistant Gary Yamashiroya, Administrative Services Officer Ming IT Services Office Chief Corey Higa, Taxation Services Administrator Nikki Thompson, Acting Taxation Compliance Administrator Madeleine Alai, Tax Compliance Coordinator Susan Adamson, Tax Collector Dongyan Min, and Tax Research and Planning Officer Baybars Karacaovali. And at this time I would like to.

I guess I'll turn it over to Baybars to do his presentation. Okay.

Good afternoon. Good afternoon. Thank you for the opportunity to present. I'm the newly appointed Tax Research and Planning officer and prior to that I was an economist in the Tax Research and Planning office for seven years and an economics professor at UH, Mono prior to that.

So I will provide an update on the state tax revenue collections and the projection as requested. And as some background, I will be providing fiscal year 25 and then the current fiscal year, the first five months of fiscal year 2026 numbers and try to provide some background regarding the tax collections and what, what goes into them.

As some background, please note that the the fiscal year 2025 visitor arrivals were up by 3.4% and General excise tax collections followed this pattern with 3.3% growth in fiscal year 2025.

Then going into November 2025, for the first five months of fiscal year 2026, the GT collections were up by 7.2% compared to the same five month period last fiscal year. In fiscal year 2025, individual income tax collections were flat compared to the prior year at about $3.3 billion.

And I highlighted the yellow section in and starting in January of 2025, this is when the new withholding tables went into effect in light of the tax cut bill Act 46 of 2024.

So the decline in individual income tax collection starting in January 2025 is in line with the revenue estimates that we provided to the Legislature for the Act 46. And that's part of the reason why we see a flat growth in fiscal year 2025.

And to follow up, just to remind, as a background, there were two significant tax tax bills passed by the 2024 Legislature and the, the first one is a multi year implementation of an individual income tax cuts. Effective tax year 2026, the standard deduction amounts have almost quadrupled.

So this started back in calendar year 2024 when the standard deduction amounts doubled and then effective this January they almost quadrupled from their original levels in, back in 2023. And the, the tax brackets have also been expanded for starting earlier calendar year 2025. And we took that into account by changing the withholding tables.

So all the taxpayers have seen a more, more, less cut from their paychecks and, and retaining more of their disposable income. So given the progressive nature of our individual income taxes, the way these tax bracket expansions have been working is that it's giving bigger of a tax break compared to your tax liability the lower the income.

So although it has benefited everyone, the benefit is proportionally higher for lower and middle income groups, especially with the expansion of the standard deduction increases.

Can you come back to the GET?

Yes.

So what do you, which industry or industries generated the most get or where was the growth in which industries were?

I don't, I don't have the precise numbers, but it's, it's an overall, overall growth. So not, not in a specific industry doesn't stand out per se. What we have is by business activity. So retailing is the, is the biggest part. That's where we collect 4%.

But overall all the sectors have been growing more or less at this rate. And part of it is of course the inflation is a factor. Right. So these are nominal. So even if there was no growth in economic activity, you would still see an increase in GT collections based on that.

Yeah. So the economist previously had said that even though hotel room rates were flat, spending went up. So I just was trying to figure out where, how that correlates with what you're presenting.

Yes. So it would be mostly because the, the majority of the get at the 4% rate is the one that, that would contribute to this amount. So that would be more in retail sales rather than than wholesale activity. So. But I can get back to you with further breakdown.

Okay. And then the same for the income tax. Which industries provided a growth in income tax?

Again, we don't have a breakdown for by industry per se. All I can tell you is that this is, we have individual taxpayer level information. So the thing that having that access allows us to do is we're able to do whenever a tax Bill comes up, we can look at the changes, how it's going to impact.

But we don't break it down by industry. So that would be more for business income maybe, but that's not something we track for the individual income taxes.

Okay, that's fine. It.

Thank you. So going back to the to the current fiscal year 2026. So for the first five months of fiscal year 2026 as of November 2025 the individual income tax collections were down by 15.5% compared to the same period in the previous year.

And this is in line with the revenue estimates that I shared in the previous slide. We had about an estimate of 600 million reduction in General Fund collections due to the tax cut Bill for fiscal 26. So this is already showing its signs. The. And understandably it does.

It does get into it is part of the impact that will be coming up when I talk about the General Fund. There's also other two significant tax tax bills that were passed by the 2025 Legislature.

The first one is relating to kind of closing a loophole eliminating the double benefit of PTE tax credits be added back to the qualified Members taxable income that has about 30 to 40 million dollars impact. And then the next one is the so called climate impact fee or the green fee that passed Act 96.

It was discussed earlier this morning when I was following the testimony of DBET. So this increases the transient accommodations tax by 0.75% and also imposes a new TAT for the first time on cruise ships. The combined effect of these two bills was estimated to generate about 120 million additionally to General Fund.

Going back to the update on the tax revenues though, the transient accommodations tax collections were actually slightly down in fiscal year 2025 about 1.5%. And then looking into what might be going in there to give some background, this in part reflects the negative impact of the Maui wildfires in August 2023.

As you can see in this picture, the dark blue region refers to the Maui County TAT liability and it was down by about 22% which stayed the same for fiscal 24 and 25. And actually if you look at Maui's share, it has shrunk by about 7 percentage points in the last two fiscal years post the wildfires.

So we're still seeing the impact of that. But for fiscal year 2026 the year to date growth is about 1.8% compared to the same period previous year. So this is in line with some of the debt and UHERO numbers that were presented. Lastly the the fourth major tax collections are in corporate income taxes.

It does show a lot of volatility but it was down by about 17% in fiscal 25 and it is in line with the national trends. And the other thing that happened in 2024 was the pass through entity tax was reduced from 11% to 9%.

Although this is supposed to be revenue neutral, it created this previously non existent tax that the partnerships and the S corporations would be paying. So that increases the tax collections that we monitor. In terms of corporate income taxes. To give you an idea, the magnitude of this is about 185 million in PTE taxes.

Looking to the current fiscal year for the first five months, we again see a decline in corporate income tax collections by about 16.4%. This is again in line with the national trends. The median state US state saw about 20% decline in corporate income taxes in the current fiscal year.

And across the nation the corporate income taxes are down in fiscal year 2026 primarily because of the post pandemic slowdown in revenue growth after they. They had record highs after the pandemic coming. Yes, please.

With regards to that on the corporate income tax, you know those that are delinquent. It's not in this chart. Then these are. I understand. The last report I saw a couple of days ago, all those delinquency and collecting taxes seems like it's. It was pretty much predominantly on corporate tax delinquency.

But it wouldn't be in the chart. It wouldn't be.

These are the actual collections section. Okay. So why does the corporate text of the fluctuation on their taxes, why is such a big fluctuation?

It is basically the nature of the business cycle and seasonality of it. So it's better to look at it in totality. So like overall a fiscal year and it does follow directly the national trends, what is happening in the corporate world and any changes that might be happening at the federal level as well.

Can I ask questions? So the delinquent taxes, is that in any of your charts?

These are the actual collections. So if, if it's not. If it's not collected then it would not be in there. Yes. In your presentation.

Not in my presentation. Okay, so why not? And what is, what is the amount of taxes that are in the rears?

Yeah, he's only doing the economic component. I'm just doing the revenue.

We can ask that of the Department. Yes. So for that reason. So no, not intentionally. It's just. I'm talking about the revenue collections and the projections. So that might be a question for our Director. Thank you. All of that was leading up to what's happening to the General front.

The General Fund was up by 4.2% in fiscal year 2025. But I highlighted the September 2025, that was a one time boost, about 315 million boost to estate tax collections in September 2024. Without that, the General Fund growth would have been mostly flat. And leading up to that.

So as we go into the fiscal year 2026, as of November 2025 for the first five months of the fiscal year, the General Fund is down by 10.5%. Now if we remove that the impact of the one off boost of the estate taxes, the growth would be negative 3.2%.

And this is predominantly because of the multi year tax cuts that are happening at the individual income tax level. So the projections do follow what the revenue estimates we provided, which are then taken into account by the Council on Revenues, which I will talk next.

But if we assume 0% growth for the rest of the fiscal year and every month, we would end up at negative 4.6% growth year over year by the end of fiscal 2026. And this is precisely what the Council on Revenues forecast in their last meeting in September of last year. They're actually meeting today.

So I'm gonna have to run back and, and run the that meeting at 2pm today. So the Council on Revenues might revise these numbers, but their current forecast currently stands at negative 4.7% for fiscal 2026. And it just means that they expect the revenues to stay flat for the rest of the year compared to the previous year.

Your prediction is that what council members are going to go down even further?

I have no idea. So we'll find out as we meet, as they meet later this year this afternoon. The numbers that I ran are based on what they forecast about economic indicators. So I do run the models and then the models are. Seems like they're slightly more pessimistic, but we will, we'll have to see what they. It's.

It's completely up to them. We'll find out later this afternoon.

Okay. Because depending on what they say, there's either going to be maybe a little more cash than we thought or we're going to have to make additional cuts, correct?

Yes. So this is why we are as of this hour today and their projection for the out years are taking into account all those legislation that I had mentioned. So if there are any changes obviously to legislation, these numbers are subject to change. We are Tax Research and Planning Office.

We assist them in taking all these, the impact of all these legislation into account when they're making their. Their forecast. Yeah. So this concludes my presentation, but if you have any questions, I'm happy to answer.

Thank you. Okay. DOTAX. Okay. Yeah. Which one is on? Wait, where is. Where do we go to?

The only significant supplemental request that we have is the funding for the Tax Review Commission. If you go to table four, then it's priority number four. So, last session, the Tax Review Commission was given a $200,000 budget for them to do their work. The members only got recently appointed and so..

They're not going to spend the money in the current fiscal year. So, we're just asking for the money to be shifted and given to them for the upcoming fiscal year. Everything else in our request is revenue neutral.

Wait, can you explain that delay again?

It's just that the members of the Tax Review Commission were not appointed until recently. And so, we just. We have..

Confirmed yet too as well. Yeah. Do they get confirmed?

They have to come up for confirmation in this session. Yes. And so, they will be meeting—I believe next week is their first meeting. But we're just asking for the money, their budget, to be shifted into the upcoming fiscal year because that's when they're going to be spending it. Okay.

All of the other requests on Table 4 are basically revenue neutral.

Okay. Zero, wait, wait. Tanter came, had a question.

Thank you, Chair.

Go ahead.

Okay. You know the position for the Hawaiian, is that still not confirmed? Because I don't see it yet in the upcoming year. So, is that a new position that still going through the process?

The one that we requested? It's not in a—didn't make it through finance.

Then not hired yet then.

No. No. So, if you compare table four to table six. Okay. So, table six is what made it through BNF and the Governor's office, which is zero. So, all they're doing is moving money they already had from one fiscal year to another, which is why it's flat.

And for that position specifically, we found another position within the Department to redescribe. So we will not be requesting funds for that or establishing that position.

Thank you. Yeah. So, you can see from table four everything they asked for and what the decision was. And then table six is what they got.

Table ten. So, you have here transfers, interdepartmental transfers. In the middle of the page, you have HB 300 CD1. Six positions were erroneously requested. What do you mean by “erroneously requested”? And who requested it?

That was our mistake. That was our mistake. It should have been positioned.

We wanted the positions where we. The mistake was that we had identified the positions as being under the IT section or the IT office, when in fact it should be under the Director's office.

So, why was that mistake made if that's what was the intent? I mean, I don't understand. It was your request, right?

That's correct.

Director. And you want it in your office, yet somehow IT got asked for and was in another.

Unfortunately, yes.

Okay, so then let's go to table.

I want to ask a question to IT. So, it is to me really important because of your tax modernization. I thought that you had these positions and you were going to grow your own. And do you still have FAST contract employees on board, or what is the status?

Because to me, depleting the IT section—so important—is critical. And I don't know why you switch positions to the Director's office. What—what positions are being switched?

No, these are non‑IT positions, and so they never should have been under it. They do work closely with it, but this is the business—they handle the, I guess, the business part of IT changes or system changes. And so, these are basically tax experts that, you know, work within the Department.

They're not, they're not programmers or anything like that. And so, they, they shouldn't be working under IT.

Yeah, but in terms of what is done in your divisions, I see it as a major division. Right. For all of your modernization. So, if you're taking positions out and putting them in your office, what are they doing in your office? Because I see the operations as being really important to the Department.

Yeah. So, the six new positions that we created—these are the ones in question. None of these are developers or IT people, per say.

Table 18.

Table 18.

Table 18. Maybe if I ask the questions I get here.

Okay, so the six positions that you said you erroneously asked for are on page 18. And so, I guess the Data Privacy Officer. And these are all exempt positions, right? These are exempt positions.

Two of them are exempt. The Data Privacy Officer and the Tax Business Analyst Correct.

Exempt. The others are. So, who's doing this work now? So, who is the Privacy Officer position, or who was doing that? Who was the Business Analyst position? Who was doing that?

So, right now the duties of the Data Privacy Officer are being shared amongst multiple positions. The IT Chief, our Special Assistant, and myself are all doing portions of that job right now. The tax business analysts—that is being done by the business analysts who are currently housed in the IT division.

But the long‑term goal was to move a lot of these personnel into the program office under the Director's office.

But both of these people report to the Director anyway. Not these individuals you're moving, but the heads of the departments that they work in. Right. Don’t they already report to you, like the planning? Yeah.

The IT. The IT teach.

Yes, for sure. Yeah. And then these positions you're taking out—coming out of the, coming out of the tax specialist and…right? So the program team of rules is coming out of the Administrative Rules section. Right.

So, the program—the people who are currently doing the job of the business analysts—are currently reporting to… They're basically reporting under the IT Chief. And the thought is that the program office will separately report directly to the Director because it's supposed to be a bridge between Compliance and the Operations section and the IT division.

So, we wanted to create another office under the Office of the Director that reports directly to the Director.

Okay, so the information specialists coming out of the Tax Research and Planning. Right, that's one of them.

No, the.

Oh, that's different from the program.