State tax revenue forecast to drop 11%

HONOLULU — State tax revenue — severely depleted because of the coronavirus pandemic — will likely decline 11 percent this fiscal year if tourists begin to return to the islands by mid-November, an advisory panel for the governor and lawmakers said Wednesday.

The estimate from the Council on Revenues assumes a 14day quarantine requirement for travelers will be lifted in time for the Thanksgiving and yearend holidays. Instead, travelers could be required to take a COVID-19 test before boarding flights to the islands.

Carl Bonham, a University of Hawaii economics professor who sits on the council, said he’s predicting about 1.8 million tourists will come to the islands this fiscal year, which runs July 1 to June 30, 2021. That’s sharply lower than the 10 million travelers a year before the pandemic.

Travel dropped to near-zero when Hawaii imposed the 14day quarantine rule in late March.

The state planned to eliminate the quarantine and institute a pretravel testing program in August, but it’s repeatedly delayed the change, blaming a surge in community spread of the virus and a shortage of COVID-19 tests in the islands and other states.

The council’s revenue forecast was a slight improvement over its previous prediction of a revenue decline of 12 percent.

The estimate would have been worse if the state hadn’t shifted its income tax filing deadline from April to July because of the pandemic. The new deadline moved some $300 million in income tax payments from last fiscal year into the current year.

Income tax collections have been relatively strong, partly because of generous unemployment insurance benefits provided by the federal government through the end of July and loans given to help small businesses keep employees on their payrolls.

The council predicted revenue will rebound 8.5 percent next fiscal year, which is lower than the 12 percent increase it predicted in May.

Council member Kristi Maynard said one reason for the smaller gain was the state only having one income tax collection bump, in contrast to the unusual situation this fiscal year.

Council vice chairwoman Marilyn Niwao said she expected growth to be held back next year because the state’s economy is unlikely to have a boost from federal coronavirus relief funding. She’s also heard predictions that airlines and hotels don’t expect tourism to recover until 2023.