HDOT examines its fiscal multiplier effect on state’s economic growth

It’s official, the National Bureau of

Economic Research recently announced we are now in a recession. What will the economic recovery look like? The Hawaii Department of Transportation has already been working on projects that will help rebuild the economy, as long as our funding isn’t raided.

It may be tempting for state leaders to defer projects or raid special funds, but economists know that is not the prudent or fiscally responsible option. HDOT projects act as an economic fiscal multiplier. The more we spend improving infrastructure and keeping people working, the more it multiplies the economic recovery. On the other hand, the less we spend the more the recession hurts. The cumulative impact could redefine Hawaii’s transportation landscape, traffic flow, peak-hour congestion, as well as transportation-related environmental impacts. In a recession, we know the economic multiplier means even more. This is because in a downturn, spending in the private sector is decreased, and therefore government fiscal activity is less likely to be “crowding out” other activity. A great example of this multiplier is the 2009 American Recovery and Reinvestment Act during the Obama Administration, which estimated a multiplier of 1.5, meaning that every $1 of fiscal spending would result in $1.50 increase in real gross domestic product. HDOT has agreed on a similar effect and a fiscal multiplier between 1.2 to 1.8 is embedded into the department’s evolving economic recovery efforts. As the state navigates this turbulent time, HDOT can function as an important, stable source of investment in the state’s economy.

It is important to remember that HDOT does not receive traditional taxpayer money from sources like income tax. Instead, HDOT is self-sustaining and self-funded. We make revenue from sources like user fees, tenant rent, dockage and wharfage, airplane landing fees, vehicle weight and registration, and fuel taxes to pay for operations, maintenance, and capital improvements. Funds administered by HDOT are specific to the division’s special funds, as well as federal aid and grant awards received from the U.S. Department of Transportation, Federal Highways Administration, and Federal Aviation Administration. The HDOT is not reliant on our State General Funds.

HDOT’s economic response efforts and activities will provide immediate contributions to job creation, revenue enhancement, and workforce development. We all understand the challenging times we face, and the HDOT has focused on doing its part to improve response to COVID-19 and the economic recovery.

We’re all in this together and HDOT is committed to its pivotal role in ensuring healthy economic growth to shape a new normal emerging from COVID-19. Our recovery strategies and fiscal multiplier effects will provide profound benefits to the community on the road to recovery.