HONOLULU -- Gov. Linda Lingle said she plans to delay some income and corporate tax refunds until after July 1 to help the state deal with its $1.2 billion budget shortfall.

The state will delay about $275 million in returns while still complying with the 90-day period for refunds.

"Under the law, we are allowed to have tax refunds returned within 90 days from April the 20th, and that takes us into July. So, by just delaying refunds into the first part of July, that saves us $275 million in our 2010 budget, and that's a big part of how we make up the remaining whole," Lingle said.

Lingle said Monday that snaring the counties' share of the hotel room tax, or transient accommodations tax, about $100 million, would help the state deal with a projected $1.2 billion deficit over the next 18 months.

The governor said she fully expects a battle over this controversial proposal. Last year, state lawmakers rejected the plan after strong opposition from county mayors.

"I would assume that all the mayors and the councils will stand up to try to keep that," Lingle said. "I won't be surprised if the counties object, but I think they're prepared for it."

"I would have hoped that as a former Maui mayor, Gov. Lingle would understand that taking resources from the counties does not solve the problem,” Big Island Mayor Billy Kenoi said in a written statement. “The counties rely on the transient accommodations tax to balance their budgets, and for the state to take away that source of funding puts pressure on the counties to raise taxes at the county level."

“I was very surprised to read of the Governor’s recommendation and the change in her longstanding position that the TAT funds should be preserved for the counties. We incur significant costs related to tourism including: parks maintenance; lifeguards; police and fire services; road maintenance; and the list goes on and on. Losing all of the TAT would be devastating to our budget and we are hopeful that there will be continued dialogue with the state on this matter before any decisions are made," Kauai Mayor Bernard Carvalho Jr. said in a written statement.

Honolulu Mayor Mufi Hannemann said Lingle is opening the door to higher "property taxes so counties can continue to provide essential services."

Maui Mayor Charmaine Tavares said the Valley Isle should be able to "recoup our own investments in the visitor industry."

The governor's plans follow projections by economists on the Council on Revenues that projected another drop of $40 million in tax revenues.

Lingle said she intends to raise additional money by increasing insurance commission taxes, cutting the state's contribution of public employee life insurance premiums and stopping prescription drug reimbursements for spouses of retired state employees.

Lingle's proposed budget would not bring major cuts in government services beyond those previously enacted. It does not call for further layoffs of state workers.

The governor did layout plans for other cuts and moves including: the transfer of $10 million in excess balances from special funds.

Resources:
E-mail budget questions to Lingle's administration
State's Web Site