Gov. Neil Abercrombie on Wednesday gave a status report on his "New Day" plan for state government. The takeaway message: This is a moment for Hawaii to catch its breath — we’re in the black now after a half-year of budget-cutting, he said — but it’s not yet time to exhale.
That’s because, although the state has painfully stemmed the red ink on its ledger for the immediate future, a long-term fiscal problem is quickly becoming a dead weight.
The governor pointed to the state’s habit of postponing the funding of the state Employee Retirement System, currently an $8 billion unfunded liability.
An even bigger can kicked down the road: the $14 billion liability in the state Employer-Union Health Benefits Trust Fund.
Pay as you go just won’t cut it as an approach to bill-payment, he rightly said, and it is truly disconcerting that the state has failed to deal with the issue to this point, when the baby-boom generation is already retiring and claiming benefits.
Now the state is in the Hall of Shame over its per-capita debt, which has earned Hawaii a third-in-the-nation ranking and erosion of its creditworthiness.
This is a recitation of undeniable facts, but now that the governor has put out the immediate fires, there should be more to say.
It’s good to see the addition of former lawmaker Kate Stanley, currently heading the Legislature’s panel overseeing the stimulus fund expenditures, to the team. A seasoned and respected presence, Stanley will become a senior adviser to work with legislators on the administration’s policy initiatives and get out a more consistent message.
She will have her work cut out for her, judging by the difficulty encountered in the last lawmaking session.
For example, the governor noted the need to fix the state’s "structural" debt at the start of his administration, but he quickly seized on a menu of financing options that largely stalled in the state Capitol.
There were adjustments to retirement benefits for public workers hired after July 2012 that will accrue some savings, but several other needed proposals didn’t fare as well. These included bills to:
» Eliminate state Medicare Part B reimbursements for new state hires and their spouses;
» Require the EUTF to provide group life insurance coverage only to public workers who retired before July 2011;
» Tax pensions as a means of raising more state revenue.
Granted, they were a tough sell, but the administration lacked a sufficiently focused messaging campaign.
If the governor wants a better outcome in the next go-around, a more detailed and coherent road map for achieving the various goals needs to emerge.
Abercrombie said rising health care costs are becoming too much of a burden on government and private sector businesses. True. But what can the state do about this?
He said the state is too dependent on imported fuel and food, and that job creation has lagged. What are the strategies for reversing those trends, going forward? What can improve the business climate that won’t take more funds than the state can rustle up during these difficult times?
But the most important messaging challenge — how retirement and health bills should be handled — also is the most difficult one. Revisions to entitlements are hard to make because people feel they’ve earned them and push back — hard — when promises can’t be fulfilled.
Bringing legislators on board for such hard decisions will take powers of persuasion and, just as important, the discretion to choose battles carefully. The taxpayer is waiting to see if the governor’s team is up to the task — waiting hopefully, because success means that some key goals can be met and that, when the bill collector comes knocking, we can afford to open the door.
