HONOLULU (HawaiiNewsNow) – A council of economic experts Wednesday afternoon voted to carve hundreds of millions of dollars from the state’s bottom line over the next three years.

In addition to tax cuts Hawaii lawmakers approved two years ago, which are having a bigger impact on revenue than expected, the Council on Revenues saw Trump administration policies also dragging down Hawaii’s economy, at least in the short run.

The council brings together experts from universities and major industries to try and predict how much the government has to spend on state programs.

During Wednesday’s meeting via Zoom, that challenge wasn’t easy.

Chair Kurt Kawafuchi, a tax attorney and former state tax director, summed it up: “It sounds like a very uncertain year.”

The experts on the revenue council admitted the main factor in the economy is the unknown, especially about tariffs.

University of Hawaii Economic Research Organization director Carl Bonham said tariffs that change daily are restraining business.

“The real problem right now is you can’t lock in a contract for costs of materials,” he said as other members chimed in with agreement. “So you don’t know what your costs will be three months from now.”

That uncertainty is piled on top of other issues, like a stalled real estate market due to high interest rates and rising development costs, according to Colliers’ Mike Hamasu.

“It’s dismal, abysmal, it’s terrible right now, from our revenues perspective for our brokerage community its down considerably,” Hamasu said.

On the positive side, there is confidence about government construction continuing and defense spending holding up, for the most part, according to Scott Hayashi of SSFM International.

“Those kind of industries will continue on,” he said. “The other environmental kind of stuff, climate resilience funding, those kinds of things are going away. There is some risk, but we are not sure how it’s going to play out.”

Hayashi agreed with other members that Hawaii’s biggest economic driver, tourism, could also be affected.

“The first thing that most people were cutting out of their budget was travel, yeah, leisure travel,” the council said.

They were also concerned about continuing strength of the U.S. dollar, which makes international travel to Hawaii more expensive.

Bonham pointed out that people who can afford a Hawaii vacation are more insulated from slight economic downturns, but a falling stock market could effect luxury travel.

“One of our biggest risks is going to be the stock market still for the higher end,” Bonham said.

The council voted to reduce the estimate of state revenue growth for the current fiscal year, which ends in June, from 6.4% to 5%, and for 2025-26 from -1.8% to -2.25%.

Kawafuchi said that could mean about half a billion dollars less tax revenue over three years.

While that sounds like a lot of money, the state has surpluses and savings on hand that can absorb the reduction. Lawmakers say their main concern is potential cuts to federal social services, like Medicaid.

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