Legislators counter veto by calling special session

Lawmakers gathered at the state Capitol on Tuesday for a special “override” session to consider Gov. David Ige’s veto of a bill to provide severance payments or retirement bonuses to workers at three Maui County hospitals, but quickly recessed without voting.

House Democratic Majority Leader Scott Saiki said lawmakers and the governor agreed to delay action on Senate Bill 2077 to give Ige more time to try to reach agreements with the public-workers unions in connection with the privatization of the hospitals.

Lawmakers are scheduled to return to the Capitol on Monday to continue their deliberations on whether to amend the bill or allow the governor’s veto to stand.

The Legislature last year authorized privatization of Maui Memorial Medical Center, Kula Hospital &Clinic and Lanai Community Hospital, and Ige signed an agreement in January to have Kaiser Permanente operate all three.

The hospital deal would be the largest privatization of public facilities in state history, and Ige predicted it will save the state $260 million in hospital subsidies over the next decade.

However, the privatization effort has been fiercely opposed by the public-workers unions that represent about 1,400 employees at the hospitals. Many or most of the personnel are expected to continue working at the hospitals for Kaiser, but they will no longer be state workers.

The United Public Workers union sued in federal court to try to block the transition, claiming the privatization violates the contract clause of the U.S. Constitution. The UPW has two contracts with the state covering the unionized hospital workers, and those union contracts do not expire until July 1.

The 9th Circuit Court of Appeals in May issued an injunction that temporarily stalled privatization after judges expressed concerns about the impact of the deal on union members. Kaiser had been scheduled to take control of the hospitals July 1 but has been unable to do so.

In the meantime the Hawaii Government Employees Association this year lobbied lawmakers for SB 2077 to provide for severance payments or retirement bonuses for hospital workers who will lose their state jobs because of privatization.

Under SB 2077 all unionized Maui County hospital workers would be given a choice between taking a lump sum payout or early retirement if they qualified. They would also be entitled to more generous health care benefits.

State Finance Director Wesley Machida said workers opting for the severance payout could receive up to 50 percent of their base salary. For instance, a worker employed by Maui Memorial for 10 years who had a base salary of $50,000 could opt to take a $25,000 severance payout. Workers would be eligible for that payout even if they went on to work for Kaiser.

Ige vetoed that measure Monday, saying that flaws in that bill would jeopardize the tax-exempt status of the Employees’ Retirement System. Ige also expressed concern about the cost of SB 2077, saying in his veto message that the separation benefits, retirement bonuses and other costs could total more than $60 million.

Ige instead offered up a less expensive alternative for lawmakers to consider.

The HGEA has expressed particular concern for employees who worked for the hospital system for years and are close to earning retirement benefits under the state system. Some of those workers would be unable to vest or secure those retirement benefits once the hospitals are privatized because they will no longer be state employees.

As part of his veto message, Ige proposed allowing hospital workers close to qualifying for retirement benefits to buy a limited number of “service credits” to qualify for state retirement benefits. Ige also proposed that the unions and the hospital system be allowed to negotiate new supplemental agreements to provide for severance payments.

Ige’s proposed draft measure would provide $25 million in state funding to pay for the severance payments and other fringe benefits that would be provided under the supplemental agreements that are negotiated with the union.

Lawmakers now have the options of amending SB 2077 to incorporate Ige’s new proposal of making other changes to the bill or allowing the veto to stand. They could also attempt to muster a two-thirds majority to override Ige’s veto, but a joint statement issued Tuesday by House and Senate staff said leading lawmakers do not plan to do so.

House Speaker Joseph Souki (D, Waihee-Waiehu-Wailuku) said lawmakers delayed action on the bill Tuesday to give Ige a chance to bargain with the UPW to reach a settlement in the union’s federal lawsuit over the privatization. When asked whether lawmakers will require a settlement of the UPW lawsuit before SB 2077 wins final approval, Souki replied, “I would think that’s very important.”

Souki said that HGEA has not been involved in the latest negotiations over the bill.

HGEA Executive Director Randy Perreira on Tuesday issued a terse statement about the veto, saying that “the governor’s actions and words at this point are insulting to the hard-working employees at the Maui region hospitals.”

Saiki, the House majority leader, said lawmakers also want an agreement to be negotiated with HGEA that would bar any similar lawsuits over privatization by that union.

“Senate Bill 2077 has to be positioned to address all of the claims,” said Saiki (D, Downtown-Kakaako- McCully).

During a news conference Tuesday afternoon, Ige was asked why the state didn’t delay the privatization effort until the union contracts with the hospital workers expired next year.

“This is the first time we have ever done anything of this magnitude in the history of the state of Hawaii. So there were a lot of things that we were doing for the first time,” he said.

“I think, all things considered, everyone involved — the public employees, the unions, the management of the existing facilities, as well as the Kaiser people — have done remarkable work to get us to this point, and we all, I think, are committed to successful completion,” Ige said.