When the 23rd State Legislature adjourned May 4, many people - including the Governor and the legislators themselves -were quick to praise the 2006 session as "very good,' "collaborative," and "productive." Grades of "A" and "B" were everywhere. Except in the small business community.

Law enforcement initiatives do deserve an "A." Energy, Education and Housing bills might warrant a "B."

Small Business Hawaii gives this Legislature, based solely on business and taxpayer initiatives (not law enforcement, energy, education or housing issues) a grade of "D."

A rating of all 76 State Legislators is separate and begins on page 4.

The session rating is based in large part on the refusal of the majority lawmakers to address problems related to:

Bad UI Comp Bill Needs Governor's Veto, Costly Labor Bills Pass

For four years, Governor Linda Lingle has supported the business community's plea for unemployment compensation tax relief. Hawaii employers pay the UI tax on an annual wage base - $34,000 this year - whereas the federal FUTA cap is $7,000. Most states follow the fed or are above or below, but none higher than Hawaii. The House and Senate Labor Chairs, Rep. Kirk Caldwell and Sen. Brian Kanno would not support the reduction unless it was tied to more benefits for employees who pay nothing toward UI. In the end, the bill, SB2190 would reduce UI to the first $10,000 for two years only while the benefit amount and number of weeks the unemployed could qualify, increased permanently. Kanno, with the help of the ILWU also added a provision (poison pill) to require "willful and wanton" conduct instead of simple "misconduct" for firing an employee. Business groups didn't take the bait and wanted the bill killed. It passed and now the Governor is being asked to veto this phoney tax cut. Additionally, several bad labor bills passed resulting in higher costs and less management choices for business.

With a bloated tax surplus reaching nearly $700 million, tax refunds to individuals and business were top of mind at the start of the session in January. The Governor called for at least $300 million in tax rebates, credits and changes. The majority controlled legislature ignored her. She later returned calling for $120 million in refunds and cuts. Ignored again. The head of the Ways & Means Committee, Senator Brian Taniguchi, even proposed a Constitutional Amendment which would end the automatic refund requirement (it died). Another bill, the so-called "streamlining tax," would have taxed residents' internet sales. At the last minute, lawmakers agreed to about $50 million in tax cuts, mostly for the "poor" in the form of an increased standard deduction - but only 40% of the federal rate - and modified individual income tax brackets.

The most contentious issue was Hawaii's price control gas cap, passed three years ago and effective in September, 2005. Architects were democrats Rep. Hermina Morita of Kauai and Sen. Ron Menor of Mililani. Early on, Morita and House members did an about face and called for repeal or suspension of the failed gas cap. Menor stubbornly refused. In the end, a compromise conference resulted in a suspended - but not repealed -gas cap, giving power to the Governor to reinstate and creating a weekly, phoney, gas cap formula from the state PUC.

Cigarette Tax UP Again, Bottle Tax Expanded

Lawmakers again raised the tax on each cigarette for use in building medical facilities. Supporters are not really interested in the health of smokers; they just want the tax revenue. The infamous bottle tax (beverage container deposit law) added 68 ounce containers to the list of taxable beverages and determined that Hawaii has reached 70% recycling so that another 1/2¢ administrative tax kicks in September 1. The total tax will be 6.5¢ per container. The fund has a surplus in excess of $20 million.

More Dollars for "Education"

Because the Department of Education continues to do a poor job failing public education school, students and teachers, and is not held accountable, the lawmakers reacted by giving record amounts of additional tax dollars to the DOE.

Seven Legislators Retire

Two Senate and five House members will not be back next year. Senator Brian Kanno (D), Labor Chair, currently under a state Ethics Commission investigation, has decided to spend more time with his family. Sen. Bob Hogue (R) must resign to run for the 2nd Congressional District seat. In the House, Brian Schatz (D) likewise must give up his seat to run for Congress while veteran lawmakers, all Democrats, Dennis Arakaki, Helene Hale and Ezra Kanoho are retiring. Republican Bud Stonebraker will resign as well to continue his community religious leadership. Rumors persist that Rep. Jun Abinsay may retire for health reasons while State Senators Robert Bunda and Suzanne Chun Oakland may pursue other options.

All 51 House seats are up for re-election this November and 12 of the 25 Senate seats are also available this year.