State budget office seeks billions for fixed costs; asks to raise mass transit fund ceiling

Luis Oliveri, director of the State Department of Budget and Finance, told the House Committee on Finance that the department’s primary role is protecting the state’s credit and managing fixed, nondiscretionary costs across state government.

Oliveri presented the department’s biennium requests for fiscal years 2026 and 2027, saying most of the increases the agency seeks are for statewide fixed obligations rather than discretionary program additions. "Our main responsibility is to make sure and protect the state's credit," Oliveri said in opening remarks.

The department requested increases in general funds for debt service ($23,500,000 in FY2026 and $63,700,000 in FY2027), retirement benefit payments ($41,800,000 in FY2026 and $76,500,000 in FY2027), and health premium payments ($57,800,000 in FY2026 and $74,500,000 in FY2027). Oliveri also described requests for personnel and systems investments, including position requests in the financial administration division and a multi-year migration of the Employee Retirement System’s pension administration computer platform.

Oliveri said the Mass Transit Special Fund ceiling must be raised because collections tied to the GET increase are exceeding the existing statutory ceiling. "This actually is just a ceiling increase," he said, noting the department had been collecting amounts above the current limit that are intended to transfer to the City and County of Honolulu for transit work.

Committee members asked how interest earned while funds sit in the state treasury is handled. Department staff said the interest earned on the Mass Transit Special Fund is credited to the general fund under the current statutory arrangement; the department said interest income is managed under the state treasury’s short-term investment rules and directed by statute.

The presentation included staff details: Oliveri introduced deputy director-level staff responsible for retirement, treasury, federal awards management, ERS administration and public defense budgeting. He emphasized that the department’s operating budget represents a small share of its total outlays because roughly 98% of the department’s budget covers nondiscretionary fixed statewide expenses.

Members asked follow-up questions about ceiling mechanics, carrying interest, and how to treat infrastructure financed by special funds or public-private partnerships. Oliveri said the department would consult bond counsel and the Treasury to examine options for structuring reimbursable bond issuances and to clarify how debt-funded projects whose debt service is paid by special funds would affect the state debt ceiling.