Ka Wai Ola - Office of Hawaiian Affairs, Volume 12, Number 5, 1 May 1995 — Deficit spending could bankrupt trust [ARTICLE+ILLUSTRATION]

Deficit spending could bankrupt trust

Rowena Akana Trustee-At-Large As you may recall from my article in the March issue of Ka Wai Ola 0 OHA, I told you about the losses that we incurred in our financial investments in the fiscal year of 1993-1994. On assets of $147 million, our nine investment managers made $345,300 in profits, for whieh they charged us $370,000 in fees. Because the amount of money appropriated by the Board of Trustees for grants and donations is based on a formula tied to

the interest, dividends and gains realized

on the Office of Hawaiian Affairs' investment portfolio, our ability to fund the Grants, Subsidies, Purchase of Services and Donations (GSPD) Program is highly dependent on the good finaneial heahh of the portfolio. Such a poor financial showing clearly puts the GSPD Program at risk. For the fiscal year of 19931994, $850,000 was set aside

for the GSDP Program. Towards the end

of the fiscal year, deficit spending forced further trust fund appropriations and brought the total allotment to well over $1.1 million. Although the same formula remained in plaee for the fiseal year of 1994-1995 and $802,790 was appropriated, no allowanee was made for the poor performance of our portfolio. In fact, that $802,790 figure is based on portfolio

protits ot $2,018,602, whieh never took plaee. Worse yet, the deficit spending has continued unabated for the fiscal year of 1994-1995. It has even gotten worse, and led to further erosion of the trust. On September 15, 1994, the Board of Trustees approved $1,072,499 in grants, including $157,735 for eight grant projects that, although they had died earlier in the subject matter committees, had somehow made their way to the full Board, in violation of all standard procedures for moving action items out of committee. Large amounts of donations were being moved out in the months running up to the election as well, contradicting the original plan for the GSDP Program in whieh dona tions are limited to 5% of

the total GSDP Program budget. These two spending bursts presented the Board of Trustees with a $1 million shortfall to make up. In essence, the GSDP Program had already run out of money by September, 1994 (and even had gone $350,000 over budget, and anticipated going over budget still further by $650,000) in the first three months of the fiscal year! No program ean afford to spend 225 percent of its budget in the first quarter of the fiscal year. If this rate of spending stays consistent, they will spend nine times the amount of their budget by the end of this fiscal year! The huge appropriation of $2.1 million to 'Aha Pūnana Leo in a single grant, made in January of this year, will make these grim numbers far, far grimmer as well (Incidentally, this grant somehow changed from being a loan guarantee when passed out of the Budget, Finance and Policy Committee into an outright grant when presented to the full Board, another violation of the procedure for moving items out of committee, like the eight grants mentioned earlier.) While deficit spending is not sound policy over the long haul (for govemment agencies or families), the Office of Hawaiian Affairs is nevertheless falling prey to this behavior. The problem becomes even more serious when these shortfalls are made up out of trust funds. The Office of Hawaiian Affairs must learn to live within its means. Programs and divisions must watch their spending closely and any and all proposals to appropriate supplemental trust monies must be given the most careful scrutiny. Getting too used to an attitude of "buy now pay later" risks bankrupting the trust.