One of the proven strategies for economic stimulus is investing in capital improvement projects that put people to work. The return on investment for infrastructure spending is always high. However, during economic downturns the benefits are magnified. Every $1 spent on infrastructure during the Great Recession resulted in between $1.50 and $2.50 in gross domestic product (GDP) growth. In addition, construction projects will be most competitively priced for public projects when private investment is scarce.
But the return on investment also depends on what projects are funded. The state legislature has proposed a $2.8 billion capital investment project (CIP) budget for the coming year, with funds allocated to the programs as shown in this chart.
Why so much for transportation? One reason is that there are a lot of dedicated funds for transportation capital projects. The Hawaiʻi Department of Transportation’s budget for 2020 included more than $1 billion in special funds—most of which come from “user” fees of one kind or another—and another $40 million in federal funds for roads and airports. In addition, federal COVID-19 funding bills provide $241 million explicitly for Hawaiʻi transportation projects. These COVID grants make up 14 percent of total transportation CIP spending for the coming year.
But Hawaiʻi has so many other targets for infrastructure investment. The Hawaiʻi Executive Conference (HEC) reported a total of $63.4 billion needed for investment in infrastructure in its 2019 report, Troubled Waters: Charting a New Fiscal Course for Hawaiʻi.
Our list of capital needs would have affordable housing at the top. The HEC estimated a budget requirement amounting to $3.2 billion for housing needs. Notwithstanding Hawaiʻi’s chronic shortage of housing affordable to the people who live and work here, this year’s proposed CIP budget makes barely a 4 percent dent in housing capital needs. We estimate that every $100 million added to the budget of the Hawaiʻi Housing Finance and Development Corporation (part of the state Department of Business, Economic Development and Tourism), can add 500 new affordable housing units.
Another consideration for how we spend our CIP funding: Building new housing creates a lot of local jobs. According to the Bureau of Labor Statistics, Hawaiʻi has more than 2,000 plumbers and 6,100 carpenters, but only 40 local workers trained as “paving, surfacing, and tamping equipment operators.” And after the construction is done, there would exist 7,400 new jobs in building maintenance, such as property managers, cleaners, and security guards, compared with just 210 highway maintenance jobs.
So let’s invest wisely in Hawaiʻi’s capital needs. Sure we need roads and schools, but every family deserves to have a home they can afford.