Hawaii Legislature allows veto of oil tax, overrides 38 others: Airline industry puts on 'full-court press'

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Jul. 16--A late push by the airline industry helped persuade the state Senate yesterday not to override a veto of a bill that would have raised the barrel tax on petroleum products by $1 to help pay for food and energy security programs and Gov. Linda Lingle's clean energy initiative.

The Airlines Committee of Hawai'i, which is made up of 23 carriers, told the Senate the tax increase would raise the barrel-tax burden on airlines from about $148,000 a year to $2.9 million a year.

The higher tax would have been felt by interisland airlines and carriers that have flights from the Neighbor Islands. Airlines with flights from Honolulu to Mainland or foreign destinations are exempt from state general excise and use taxes because Honolulu is a foreign trade zone.

State House and Senate leaders believed as late as yesterday morning that they had the votes to override Lingle's veto. The governor objected to the bill because it would have raised energy costs at a time when families and business owners are struggling through the recession.

"The airline industry gave a full-court press at the end," said state Senate Majority Leader Gary Hooser, D-7th (Kaua'i, Ni'ihau). "They planted seeds of doubt and apprehension in terms of the impact."

Lingle issued the last of 57 vetoes for the year yesterday, the deadline to veto bills passed at the close of session. The House and Senate overrode a record 38 of the governor's vetoes this year, including 34 in yesterday's one-day override sessions.

Lingle chose not to veto a bill that restricts high-technology investment tax credits known as Act 221, which would save the state about $120 million over two years and help with a budget deficit.

In a rare public split, Lt. Gov. James "Duke" Aiona disagreed with the governor's decision, arguing that the bill could cripple investment in the high-tech industry.

The governor also did not veto a bill that would allow public hospitals in the Hawai'i Health Systems Corp. to privatize or partner with private investors to become more financially competitive.

Both bills now become law.

The Senate opted not to override a veto of a bill that would have required developers to include more affordable housing in projects planned for Kaka'ako. The House declined to override on a bill that would have allowed the state to join the Streamlined Sales Tax Project to eventually collect taxes on Internet purchases. The House also decided not to override on a bill that would have permitted political candidates to accept more campaign money from Mainland donors and adjusted a ban on contributions from state and county contractors to only cover nonbid contractors.

Common Cause Hawai'i, the League of Women Voters of Hawai'i and other good-government groups praised the House's decision, contending that the campaign-finance bill "would have opened up new avenues for special interest money."

The most unexpected decision yesterday, however, was on the barrel tax.

The tax increase -- from 5 cents to $1.05 per barrel of petroleum product -- would have likely bumped the per-gallon price of gasoline by a few cents but would have provided the state an estimated $31 million a year for food and energy security programs and Lingle's clean energy initiative.

State Rep. Hermina Morita, D-14th (Hanalei, Anahola, Kapa'a), the chairwoman of the House Energy and Environmental Protection Committee, described the failure of the bill as a missed opportunity.

"This could have been viewed as an economic stimulus, redirecting monies that we send out of the state for reinvestment in the state," Morita said. "All I can say is, from the (Lingle) administration and Senate side, there was no commitment for food and energy security."

The Sierra Club Hawai'i chapter and the Blue Planet Foundation also criticized the Senate.

"For years, we've talked about moving towards renewable energy and ensuring Hawai'i's food security," Robert Harris, director of the Sierra Club Hawai'i Chapter, said in a statement. "Given our current energy crisis, it is inconceivable the Senate would not support a relatively manini tax in order to fund our clean energy future.

"Apparently the Senate isn't willing to move past simply talking about our problem."

Jeff Mikulina, the executive director of the Blue Planet Foundation, said the Senate "lacked the political courage to make this investment in Hawai'i's clean energy future."

State Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), said the arguments from the airlines were persuasive, particularly for senators from the Neighbor Islands. "We can't afford to have another airline go down," she said, referring to the shutdown of Aloha Airlines last year.

Hanabusa said lawmakers may consider the barrel-tax bill again next session, perhaps with some protections for interisland airlines and carriers that fly out of the Neighbor Islands.

Other senators said gas prices have already been driven higher this month after the Lingle administration and the Legislature agreed not to extend a general-excise tax exemption related to ethanol-blended gas. The barrel tax would have pushed gas prices higher.

While the House and Senate could not agree on the barrel tax, lawmakers did override a record number of Lingle's vetoes, including bills that represent important policy differences between majority Democrats and the Republican governor.

Bills that now become law include:

--A card-check measure that allows workers to be recognized as a union when a majority sign union cards, an alternative to secret-ballot elections.

--A restriction on the ability of companies to discriminate against workers based on their credit histories, with exceptions for managers and supervisors and workers in financial institutions with federally insured deposits.

--An appropriation of $12 million in state money to attract $15 million in federal funds to help hospitals cover the costs of treating the poor and disabled.

--The creation of a climate change task force through money diverted from the tourism special fund.

--The restoration of Keiki Care, a partnership between the state and the Hawai'i Medical Service Association to provide basic healthcare for so-called gap group children not covered by public or private health insurance. Lingle had pulled state funding for the partnership last year and may not release money for the program even though her veto was overridden.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.

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