Nearly 200 small business owners and government leaders gathered at the Small Business Hawaii 30th annual conference, held Wednesday, January 11 at the Ala Moana Hotel, where fellow entrepreneurs shared their success stories — and their challenges in operating a business in Hawaii.

In addition, Gov. Linda Lingle’s cabinet members outlined the governor’s plans in 2006; Congressman Ed Case, D-Hawaii, highlighted his priorities in Congress; the controversial new gas cap and proposed Akaka Bill were debated; and author and businessman David Heenan talked about why the brightest in America leave for foreign lands.

Honored at the 30th annual conference was Lex Brodie, 91, who founded Small Business Hawaii three decades ago when he realized that the Chamber of Commerce of Hawaii was not representing the interest of small businesses.

At the time, Brodie had his own highly successful small business — Lex Brodie’s Tire Company — and was faced with the same workers’ compensation problems that small businesses face today. Brodie, who now spends more time on his surfboard then in the office, has had many accomplishments in his life that were highlighted, including being the highest-ever vote-getter in the Board of Education election two times over, a position he has since retired from.

Congressman Case, D-Hawaii, Second District, opened the conference with his views on the extreme partisanship in Congress and how that hinders elected officials’ work for their constituents. He says his biggest concern is the bloated and ever-increasing federal budget, which will soon have a debt of $8.1 trillion.

“Getting the budget under control will require some tough and controversial decisions,” Case says, noting America is experiencing the fastest growth in government spending since President Lyndon Johnson. “We have to come to some middle ground.”

During his talk, Case focused primarily ways the federal government can help small businesses, including through loans and procurement. Many small businesses are missing out on billions of dollars in federal government procurement — including in helping to rebuild the Gulf Coast after it was devastated by Hurricane Katrina, says Case, because of the federal government’s cozy relationship with a select few big businesses.

In addition, the government’s use of Project Labor Agreements, which require businesses working on government jobs unionize their shops, have cut down on small businesses’ ability to secure these major government contracts.

On an international front, Case says he is working to speed up the Visa process so that more people can come from China to America, specifically Hawaii, to live, work, study and open a businesses. There are around 30,000 people now coming to America every year from China, but many more would come if the process becomes simpler, Case says.

Robert Thomas, the Hawaii representative of the Pacific Legal Foundation, is working on a number of cases to help Hawaii’s private property owners protect their property from government condemnation and to ensure that taxpayers are fairly taxed for that property.

Many state lawmakers around the country are pushing for local legislation to counter the U.S. Supreme Court 2005 decision, Kelo v. New London. The highly controversial decision, which outraged property owners around the country, allows government to condemn the private property from one owner and turn it over to another, if that second entity can establish it will bring in more tax revenue to the government.

The Kelo v. New London case has helped to spark a revolution of sorts, Thomas says, and brought lawmakers from both parties together to counter its affects on a local level. He noted private property owners today, as America’s forefathers did, have become more passionate about their rights.

“The right of property ownership was so important to America’s founding fathers that it is mentioned three times in the U.S. Constitution and once in the Declaration of Independence. Not even free speech – our first amendment – was mentioned that many times in these documents,” Thomas says. “Because of this case, all sides of the political spectrum are jumping into protect private property rights.”

He highlighted a Pacific Legal Foundation case on Kauai, where voters by a two-to-one margin, supported a Proposition 13 type of reform to the Kauai property tax code, so that property owners would have their tax capped at their 1998 assessment unless they purchased property after that year. In a highly unusual move, the county sued the county to have the initiative thrown out, and the case is now being appealed to the Hawaii Supreme Court by the Pacific Legal Foundation on behalf of four Kauai taxpayers.

Though small business owners are optimistic by nature, many of the attendees voiced their growing concern over Hawaii’s nearly-worst-in-the-nation rated business climate. Some of the main focus centered on ways to counter the:

• The highest overall tax burden in the nation, including skyrocketing property taxes and the 12.5 percent increase to the General Excise Tax, which goes into effect in Jan. 2007;

• The worst possible rating nationally for workers comp (F) with the majority party in the legislature refusing any of the governor’s reforms;

• Some of the highest number of mandates and regulations imposed on small businesses;

• A tip credit of 25 cents when the national average is $3. (A tip credit allows a restaurant owner to reduce a tipped server’s hourly wage by an amount designated by the state so the owner can raise the pay of non-tipped workers (such as cooks and dishwashers) and make the pay-scale more equitable);

• The recently implemented gas cap, which has drained nearly $30 million in additional taxes and revenues from the consumer since being implemented Sept. 1, 2005.

• The bottle tax, in effect since Jan. 1, 2005, which imposes a tax of 6 cents on every bottle and can sold in Hawaii.

• The highest cost of living in the nation.

Gov. Lingle was in the Philippines, however three of her cabinet members, including Senior Policy Advisor Linda Smith, Department of Commerce and Consumer Affairs Director Mark Recktenwald and Department of Transportation Director Rod Haraga, highlighted the governor’s business package for 2006.

Recktenwald noted the 2005 Legislative session was a “great disappointment” for the business community, saying he hoped 2006 would bring much-needed reforms. He says because many entrepreneurs who are sole proprietors cannot get health insurance, his department will lobby for a bill that would mandate that insurance companies cover these sole proprietors the same way they would a small business that is incorporated with employees.

The insurance commission, under the Department of Commerce and Consumer Affairs, also will continue to lobby to take over the investigation into fraudulent activity surrounding workers compensation claims, something the Department of Labor currently does but does not have the resources to handle.

This proposal, and others to reform Hawaii’s failed workers comp laws, did not pass the state Legislature last year, even though Hawaii is continuously rated with an F grade for having the worst laws in this area. Finally, stopping identity theft is a major priority for Recktenwald’s department. He says many small businesses as well as their customers fall victim to identity theft. He hopes a bill will pass that enables consumers to freeze their credit reports if they believe they have been victimized – that way, no loan can be granted or credit card opened if no credit report can be issued, he says.

Recktenwald is one of several of the governor’s cabinet members working to improve Hawaii’s economy and help Hawaii’s businesses.

Haraga, director of the state Department of Transportation, said he will work to prevent the transportation funds from being raided this year so that he has the money he needs to fix Hawaii’s dilapidated roads.

He says millions of dollars are needed to fill potholes, reinforce guardrails, post lights and widen the freeway. In the past decade, lawmakers raided $140 million from the transportation fund.

Hawaii has the highest-in-the-nation gasoline taxes, which are regularly increased by state officials to replenish the funds after they are raided for non-transportation-related services.

Smith, the governor’s senior policy advisor, says the state Department of Taxation, headed by Kurt Kawafuchi, has doubled the amount of delinquent tax collections since the governor took office from $100 million a year to $200 million a year, which helps level the playing field for businesses. Department of Labor and Industrial Relations director Nelson Befitel also has worked diligently to dramatically improve Hawaii’s “F” rating for workers compensation conditions in Hawaii. Unfortunately, Smith says, the Democrat majority in the Legislature passed a “handcuff” bill that prevents Befitel from administratively making those reforms.

The governor outlined her proposals to improve Hawaii’s business and economic climate in her 2006 address. However, Gov. Linda Lingle’s state policy advisor Smith gave a preview of some of the governor’s proposals for this legislative session: