State has budget surplus, but don’t get any big ideas

When you ask for solutions, sometimes the answer is more than you asked for.

For the past half decade, for instance, no one wanted to know how to pay the billions needed to ensure medical payments for retired public employees.

Agreed, unfunded liability is not a sexy issue, but ignore it and you wind up like Detroit or Illinois.

The mostly unnoticed but startling answer from the Legislature was the state’s largest new expenditure program.

The money went not for mandatory early education, not laptops for all school kids, not even the ever-roiling University of Hawaii construction program.

It is a $500 million fix to pay the health care costs for state retirees. As state money goes, $500 million may give you pause, but it is not unheard of.

This program, however, is like a line of elephants marching trunk to tail down the calendar. Every year, we must spend another $500 million until you have walked for 30 years.

That is about $15 billion, which is about what it is needed to pay for the public workers unfunded liabilities for health care.

Sen. David Ige, chairman of the Ways and Means Committee, who came up with the bill, compares it to a 30-year mortgage that we are paying off one year at a time.

"Over the next five or six years, it will be the biggest expansion of government ever, but because it is an obligation already accrued, it has to be paid," Ige said of his plan.

Not paying for retirees’ health care and pensions didn’t bankrupt Detroit or put Illinois’ wallet in a vise, but because of their financial troubles, they can’t pay the promised money and those workers are facing the first of many cold winters.

"For governments east of the Mississippi, everybody is watching the Detroit cases; a lot of the fiscal managers want the ability to file for bankruptcy because they don’t want to meet the accrued obligation," Ige said.

House budget chief Rep. Sylvia Luke added that Hawaii is showing a very healthy balance sheet. Tax collections are up, so even after subtracting the looming $500 million bill, the state still has a $300 million surplus.

"Don’t spend it," said Luke.

"We can’t spend it," said Ige.

"We are being told that by 2017 we will be looking at a slowdown, so this is the time to be prepared for it," said Luke, who added that she wants to save money now and not repeat the boom-bust patterns of previous state budgets.

"We want to learn from mistakes of past and not get into same cycle," she said.

Ige, a Pearl City Democrat who is running for governor against Gov. Neil Abercrombie, said he was careful to write the unfunded liability bill, House Bill 546, so it becomes part of the state financial plan.

"All that means as the economy grows, we are going to make sure this gets paid first before we expand new services or create new programs.

"Before we make a commitment to early childhood education, we want to remember that we owe $500 million in already accrued benefits," Ige said.

If the temptation is to just loot the treasury when times are good and ignore it when times are bad, Ige and Luke said the law is written to force the payments.

In simple terms, Ige and Luke are telling the kids, Not only do they have to eat their vegetables, but before that, they must clean up their rooms and afterward, do the dishes.

Richard Borreca writes on politics on Sundays, Tuesdays and Fridays. Reach him at rborreca@staradvertiser.com.