Hawaii legislators are beginning to understand that generous benefits provided to state and county work forces years ago cannot be easily reversed for the current employees or retirees. What they can and should do is make benefits for future employees more realistic — even if, unfortunately, that won’t help balance the state’s biennium budget now.
Gov. Neil Abercrombie asked state senators last week to stop reimbursing 30,000 state retirees and their spouses for the cost of Medicare Part B, for services such as doctor services, outpatient care, X-rays and other treatments not covered by the federal health insurance program for retirees.
The Part B insurance typically costs retirees $150 or so a month, deducted from their monthly Social Security benefits. Hawaii state government retirees are required to sign up for Part B, but the state reimburses them. Such an employer handout is unheard of in the private sector.
Although hissed by some state employees in a Senate committee’s gallery, Abercrombie was right in saying, "It is not fair during these difficult economic times to continue asking state taxpayers to pay this reimbursement for retirees who can afford to pay it themselves."
The problem is that cutting off the reimbursements for current retirees and in the future for present employees when they retire almost certainly would violate the state Constitution.
In response to a query by Sen. Clayton Hee, chairman of the Senate Judiciary and Labor Committee, state Attorney General David Louie wrote that such a freeze would likely be challenged in court, "with an uncertain outcome."
That is an understatement. The state Supreme Court ruled last year that "health benefits" for state and county pensioners are "accrued benefits" protected by a constitutional amendment approved a decade ago.
That obviously includes Part B costs, although that was not the precise issue in the high court’s ruling.
It might have been true years ago across the country that benefits such as numerous holidays off, extensive health care insurance and large pensions were needed in state and municipal government to make up for higher salaries in the private sector. But no longer, not by a long shot. State and local government actually caught the private sector in total compensation in the late 1960s and surpassed it in the early 1980s.
In 2009, the average yearly compensation of employees in the private sector nationally was $50,462 in salary and $10,589 in benefits, while state and local government employees were paid $53,056 and provided benefits costing $16,857, according to the federal Bureau of Economic Analysis.
Many states now are facing large budget deficits and higher pension costs with the wave of retiring baby boomers. The state constitutional requirement prevents Hawaii from fully addressing the present problem by imposing drastic reductions in current retiree benefits. The best lawmakers can do, as far as Medicare Part B goes, is to eliminate reimbursements down the road for those who have yet to begin work in the state government.
A small step, granted, but a necessary one among others to rein in civil service overgenerosity that is no longer sustainable.