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Bridging the gap

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Gov. Neil Abercrombie made his opening statement regarding the state of the budget at his first town meeting at Pearl Ridge Elementary School on Feb. 17.

There were a few dozen progressives at the state Capitol yesterday afternoon, part of a nationwide demonstration of solidarity with public workers in Wisconsin, but they shared their small march with activists opposing potential federal cuts to Planned Parenthood.

In Hawaii, one of the most union-friendly states in the country, the debate over public-sector union rights and benefits has not approached the scope or intensity of Wisconsin or other states in the Midwest. The underlying issues, however, are much the same.

Gov. Neil Abercrombie, who has been loyal to the labor movement for four decades, has said he does not want to demonize public workers as he attempts to close a projected two-year budget deficit of $700 million. But he has also said that public-sector union health care and retirement benefits are unsustainable and in some instances unjustified, that the many can no longer afford to pay for the benefits of the few — rhetoric that mirrors what conservative Republican governors are saying on the mainland.

"We neither need nor want what is taking place on the mainland regarding public workers, unfunded liabilities and health care costs," Abercrombie told the state House Finance Committee in a note on Friday asking lawmakers to keep his tax revision and spending cut proposals alive. "In other words, we must meet our responsibilities to fund our obligations without resorting to accusations and confrontation."

Several of Abercrombie’s proposals to balance the budget fall directly on public workers and retirees.

The governor wants to generate $112 million a year from a tax on pension income, which would apply to retirees in traditional defined-benefit pension plans, many of whom are retired public workers. The House Finance Committee is working with the Abercrombie administration on an alternative that could exclude a certain amount of pension income from taxation and impose the tax at higher income thresholds than the governor has recommended, which would bring in less revenue for the state.

Abercrombie wants to save more than $40 million a year by ending state Medicare Part B reimbursements for retired public workers and their spouses. Early yesterday, the House Finance Committee approved a bill that would apply to future retirees and would set reimbursement rates at the lowest level possible. The changes would mean much less savings for the state in the short term but could help contain costs over time.

THE GOVERNOR wants labor savings of 5 percent — about $88 million a year — in contract talks with public-sector unions. The amount is equivalent to one furlough day a month.

Abercrombie has agreed to a 60 percent to 40 percent split between the state and labor on public-worker health care premiums for the last quarter of the fiscal year that ends in June. While the governor put aside money to extend this agreement in his proposed two-year budget draft — at a cost of $54 million a year — the administration has indicated that the split will be a negotiated item in contract talks.

Working past midnight Friday, the Finance Committee advanced a bill to split the premium cost at 50 percent by law and make the subject nonnegotiable in the next round of contract talks, which would weaken labor’s collective bargaining rights.

Abercrombie has also called for structural changes to the Employees’ Retirement System, which has an unfunded liability of $7.1 billion. The Finance Committee moved out several ideas yesterday to restructure the retirement system, including adjusting the retirement age and benefits for future retirees.

"Overall, his budget plan is kind of impressive in the fact that it has offended everybody," said Lawrence Boyd, a labor economist at the University of Hawaii-West Oahu’s Center for Labor Education and Research, adding that he believes Abercrombie has taken a balanced approach and has not singled out public workers.

Contracts between the state and three public-sector unions — the Hawaii Government Employees Association, which represents many white-collar workers; the Hawaii State Teachers Association; and the United Public Workers, which represents many blue-collar workers — are up at the end of the fiscal year in June. The University of Hawaii Professional Assembly, which represents faculty, has a six-year contract that runs through June 2015.

DURING HIS CAMPAIGN for governor last year, Abercrombie said he would not pursue furloughs or pay cuts for public workers in contract talks. He was, however, careful to couch his promise on his understanding of the state’s financial health. In a written response to questions from the Star-Advertiser in October, Abercrombie said: "Of course, if economic conditions change, then everything must go back on the bargaining table."

Abercrombie is now suggesting — with his outline of 5 percent labor savings — that he will be expecting concessions. Kalbert Young, the state budget director, said last week that the 5 percent figure is not a hard target but is a clear indication the administration expects labor savings to help balance the budget.

Randy Perreira, the HGEA’s executive director, said the most troubling thing about Abercrombie’s budget draft is that it expands state spending while asking public workers to accept concessions.

"So that’s obviously a cause for alarm," he said.

Perreira described the events in Wisconsin and other states as "a political and ideological assault" by Republican governors against Democrats and their allies in organized labor. But he said there are some parallels with Hawaii.

"To some degree here, lawmakers also cite the same costs as part of the problem and are using that as justification to seek changes and make cuts, where I think we would argue that, certainly, we don’t view public employment to be the problem," he said. "And while we all have to face the budget situation in some fashion together, it should not be where it’s just put onto the backs of the employees."

While public-sector unions may have come out bruised from the last round of contract talks with Republican Gov. Linda Lingle, Perreira and other union leaders believe people in Hawaii have a strong sense of fairness and a history of supporting workers’ rights. Hawaii had the third-highest union membership rate in the nation in 2010 at 21.8 percent, according to the federal Bureau of Labor Statistics, behind New York at 24.2 percent and Alaska at 22.9 percent. The national rate has fallen to 11.9 percent, down from 20.1 percent in 1983. Hawaii had been second in the nation — at 23.5 percent — behind New York in 2009.

"The middle class (depends) on the collective bargaining rights of labor unions," said HSTA President Wil Okabe, referring to teachers and other rank-and-file workers in public service. "If the middle class goes down, what would happen to our economy?"

UHPA Executive Director J.N. Musto said it is unfair to imply that public-worker benefits are the cause of the state’s budget deficit or the unfunded liability in the retirement system. He said the deficit is related to a national and global economic recession influenced by corporate financial decisions. ERS administrators have said the primary cause of the unfunded liability in the retirement system is the decision by state lawmakers a decade ago to shift portions of the annual earnings to help with the state budget.

"The question is, how much of the crisis, which by every measure was not of their (workers’) making, will have to be borne by them financially? That’s the underlying thing," he said. "I guess it’s going to prove that old adage: Life is not fair."

Musto also said the battle in Wisconsin should provide some context for Hawaii. Wisconsin Gov. Scott Walker, a Republican, is asking state workers to pay about 5.8 percent toward their pensions, about the same as what many Hawaii public workers are already paying. Walker wants state workers to pay about 12 percent of their health care premiums, up from about 6 percent. In Hawaii, public workers are paying closer to half of their premiums in exchange for the promise of free health care in retirement.

State Rep. Gil Riviere (R, Schofield-Kahuku), a freshman who serves on the House Finance Committee, said the state could consider honoring the benefits public workers have earned to date, but adjusting benefits going forward for both existing workers and new hires. He said it would be "patently unfair" to change the benefits for current retirees.

"I think the primary consideration is to not renege on promises made," he said. "I think everyone would agree with that. And I think there’s a great fear — and there does appear to be some chance that things will be retroactively repealed, and I don’t support that.

"The question is, how do you go forward? And I think most people would agree that we have to look at closing the gap for the unfunded pensions and benefits. So I would support altering it going forward."

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