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Tuesday, September 02, 2014         

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State liabilities must be reduced


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This year's Legislature did nothing to deal with the staggering liability of the health care fund for current and retired state and county employees. The fund's administrator recognizes that tax increases would amplify the problem by dragging the state's economy away from recovery. Systemic changes are needed.

About 200,000 active and retired public employees are receiving $390.2 million this fiscal year through the Hawaii Employer-Union Health Benefits Trust Fund, up from $336.8 million in fiscal 2010, according to an Aon Hewit report released in May. The unfunded actuarial accrued liability — what taxpayers will eventually pay for state and county retiree health benefits — has grown from $9.2 billion two years ago to $14.5 billion.

Lowell Kalapa, president of the Tax Foundation of Hawaii, told the Star-Advertiser's Kristen Consillio that the state has neglected to put aside money to keep the system self-sufficient.

"I don't care if the market goes up," he said. "If you don't tithe regularly, you're not going to amass the capital you need to cover the benefits."

Putting the burden on taxpayers would damage the economy and thus the market — unreasonable demands during trying times for all.

Even EUTF Administrator Barbara Coriell seemed to pause over the choices ahead: "That means the state pulling in additional taxes to set up a fund so they can receive interest on it. To me it seems like the money is better served in the economy."

In an attempt to start benefits reform, Gov. Neil Abercrombie asked the recent Legislature to end generous Medicare Part B reimbursement to state retirees of deductions made by the Social Security system, typically about $150 a month. Those reimbursements, which includes doctors' services, outpatient care and other services not included in Medicare's general coverage, total $40 million a year in tax dollars — monies that would be more wisely transferred to reduce the fund's liability.

But the bill was diluted after the Attorney General's Office opined that existing recipients of the Part B reimbursement could challenge the move in court. Legislators reduced Abercrombie's proposal and looked at eliminating the Part B reimbursement only for future employees (and their spouses) hired after July — but even that timid initiative died.

"These are the types of structural changes the administration believe needs to be made to ensure the long-term viability of the EUTF plan," noted Dean Hirata, chairman of the EUTF board of trustees. Such reforms also are needed in the state Employ­ment Retirement System, but there, too, legislators rejected the governor's most important changes.

There seems to be a gradual, growing recognition by Hawaii's public employee unions that concessions in health care and pension programs are needed to avoid anger by taxpayers, who in some places have rallied to weaken collective bargaining by public employees.

The level of anger in Wisconsin and other Midwest states is not likely in labor-friendly Hawaii, where the state Constitution protects those collective bargaining rights.

Still, organized labor must begin work now on needed systemic changes in both the health care program and the public employees' retirement system, which also is encumbered with a huge unfunded liability.

Relying on taxpayers to bail them out would be a big mistake, both economically and politically.






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