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Hawaii public employee pension fund shortfall tops $12 billion

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    “The governor should just go back and start from scratch.”

    Jill Tokuda

    Senate Ways and Means Committee chairwoman

The shortfall in Hawaii’s public employees pension fund mushroomed to $12.44 billion in fiscal 2016, setting the stage for more finger-pointing in the Legislature and dealing a financial blow to taxpayers who will have to dig deep to pay for it.

A report released Monday by an independent actuary showed the deficit in the state Employees’ Retirement System pension fund widened substantially from last year’s $8.77 billion, and the pension plan is only 54.7 percent funded compared with 62.2 percent funded a year ago.

The pension plan now needs an additional $385 million a year from taxpayers to make up for the shortfall, according to ERS Executive Director Thom Williams, who took over his position in November 2015. With that additional revenue, taxpayers would be paying $1.14 billion a year to help fund the pension plan, which provides retirement, disability and survivor benefits to more than 120,000 active, retired and inactive state and county employees.

“This is going to be a big pill to swallow,” ERS board member Colbert Ma­tsumoto said Monday.

Senate Ways and Means Committee Chairwoman Jill Tokuda (D, Kailua-Kaneohe) said the new calculations were shocking, and they effectively undermine the entire two-year proposed budget that Gov. David Ige submitted to lawmakers just last month.

“It’s stunning,” she said. “This is truly overwhelming.”

For lawmakers to confront a new demand for an increase in pension payments of $385 million per year, “we don’t have that kind of bottom line, we don’t have that kind of carryover, it does not exist in anyone’s budget right now,” Tokuda said.

“It can rain money out of the sky, it still cannot account for these kinds of payments,” she said.

A bill that the ERS is introducing in the Legislature, if adopted, would increase annual employer contribution rates for police and fire workers to 42.5 percent from the present 25 percent of an employees’ wages beginning July 1, and raise employer contribution rates for general employees to 24.75 percent from 17 percent on that same date.

Without the increases, it would take the fund 66 years, or until 2082, to become whole, according to projections from Dallas-based actuary Gabriel Roeder Smith & Co. With the added $385 million from taxpayers, the pension plan would be fully funded in 25 years, or 2042.

Williams said the increased shortfall is a result of the ERS lowering its investment target, ERS members living longer and higher-than-expected salary increases across the board.

He said $2 billion of the increased shortfall results from the ERS board lowering its assumed rate of investment return to 7 percent from 7.5 percent to reflect actual market conditions. That means the ERS will need more money from contributions to make up for what it is unable to earn in investments.

About $1.5 billion of the added shortfall is due to life expectancy changes with ERS members living longer from their age of retirement to their death. And an additional $300 million of the shortfall is due to salaries increasing more than anticipated.

Williams said the ERS board is not to blame for the increased shortfall.

“None of this is a result of any decisions that the trustees have made,” he said. “We don’t have any control over mortality increases; we don’t have any control over the investment markets broadly; we don’t control the rate of salary growth across the state; and we don’t control the contribution rates, which are established by the Legislature.”

House Finance Chairwoman Sylvia Luke (D, Punchbowl-Pauoa-Nuuanu) took issue with that statement last week, saying someone in the leadership of the pension fund should resign after the fund posted what she called a “pathetic” investment return of negative 1 percent in the fiscal year that ended June 30. Luke helps shape the state budget and is one of the most influential members of the state House.

The ERS board of trustees, which approves investment decisions, is made up of nine volunteer local business and community leaders. They are advised on investments by Portland, Ore.-based Pension Consulting Alliance, which was hired in 2008 and is paid by the ERS about $300,000 a year.

The ERS Board of Trustees, governors and Legislature have taken several steps over the last six years to try to shore up the pension shortfall.

In previous pension reforms, required employer and employee contributions were increased, and overall benefits have been reduced for new members. The ERS trustees also have restructured the pension portfolio to reduce its risk with more diversification, pursued investments that perform better in more volatile environments and obtained lower fees.

Williams said the $385 million additional contribution from taxpayers is necessary to put the pension plan, which had a market value of $14.1 billion as of June 30, on the right track.

“Even though these contributions are high, they are intended to avoid great expense down the road,” he said. “So the sooner we begin to address the unfunded liability in a proactive way, the less it will ultimately cost to amortize it. By implementing these increases, we would save $225 billion over the funded horizon. Right now with the proposed contribution increases, the plan would be funded in 25 years.”

The ERS pays out nearly $1.3 billion in benefits a year and brings in $993 million a year from employer and employee contributions.

Actuary Joe Newton of Gabriel Roeder Smith, who made a presentation to the ERS trustees Monday, said if the Legislature opted to phase in the contribution increases, the period of time before the pension plan became whole would be extended.

Pension woes like those in Hawaii are playing out nationwide with only three states fully funded, according to a recent Pew report.

In an August study by the Pew Charitable Trusts of the nation’s state-run retirement systems, Hawaii’s funded ratio was tied for ninth worst in the country with 64 percent, based on 2014 data for all states. Only three states — South Dakota (107 percent), Oregon (104 percent) and Wisconsin (103 percent) — were fully funded. Illinois and Kentucky, both at 41 percent, were the worst.

Tokuda was concerned that the state Council on Revenues recently reduced its estimate of how much the state will collect in taxes this fiscal year, noting the state is still negotiating with public worker unions that are seeking raises for their members.

“You have still outstanding collective bargaining and arbitration awards that have yet to be seen, and therefore what we really have is a fake budget,” Tokuda said.

State Finance Director Wes Machida told lawmakers last week the administration set aside some money in the budget to cover increased pension obligations, but Tokuda said she doesn’t believe the administration has enough money tucked away in the budget to absorb “anything in the neighborhood of $300 million.”

“The governor should just go back and start from scratch,” Tokuda said of Ige’s budget. “I know we’re two weeks from session, but at this point this is a game changer.”

Both the state and counties pay into the ERS, with the state paying between 75 and 80 percent of the total. Of the $385 million, the state’s share would result in a payment of between $289 million and $308 million.

Tokuda said it may be possible to defer some of the new cost, but “knowing these kinds of numbers, they only get bigger with time. … Typically, the longer you defer, the more it will cost.”

Star-Advertiser reporter Kevin Dayton contributed to this story.

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    • Hawaii government is too big and full of do-nothing union leeches who are watching Netflix at work, crusing toward their taxypayer-paid retirement. Cut back the size of government now and you will cut back the amount of lice infesting the pension fund. The other tough choices that the government does not want to make are: 1. eliminate pensions entirely and transition solely to a 401K, 2. Cut back pension checks to a sustainable amount – taxpayers should not be on the hook for promises politicians made but can’t keep.

      • Totally agree, move to a 401K plan and have the employees manage their own retirement. Every private business has moved to a self managed 401k and if the state has a surplus then then they can match a percentage.
        But what really needs to be gotten rid of is the “High 3”, that is where the ERS fund is being ripped.

        • Like with all government agencies, or affiliates, there is zero accountability. As for the union, it is no different than what happens in our local elections. We just keep voting the same clowns in regardless of their track record. IBEW 1186, 1260 are all the same.

        • hawn, not “every” private business has moved to 401k. Most have eliminated any semblance of a retirement package entirely.

        • Yes, locals need to figure this out….and quickly. Everyone that votes, continues to vote for the same people. Those people/politicians that are mismanaging the government that YOU voted for, are in fact responsible for this problem, that is only getting worse every year. NOBODY can say “that’s not my fault” when in fact it is. Yes, you may not be able to control how long people live. But there are present day calculations that other pension plan managers are using to better reflect whats happening. Regardless, if you are a person looking at retiring in the next few years, and work for the government, and YOU keep voting the way your union tells you to, so that YOU keep getting the pay raises you want and the “promise” of a nice pension when you retire….good luck with that strategy. YOU are part of the problem. You gov’t employees need to open your eyes, get wise to the lame tactics your union leadership is using to maintain the status quo. I’m a union member in a private sector industry. YOUR union leadership in the HGEA and others are NOT looking out for your long term benefit as they promise you they are. Someday this ERS will blowup and you…as a retiree…will get zip. Then what? Don’t think that can happen to you? Go talk to Aloha Airline employees that thought the same thing.

        • pilot16, you spew complete fear-mongering as usual. Hawaii’s ERS will never default as States are not allowed to default by federal law, only private entities and cities are allowed to default. What they’ll do is stick-it to YOU and pick-pocket the working middle class to pay their Cadillac $500k+ a year pensions. California is half a trillion dollars in the hole, they’ll just tax the few remaining companies to death before the corporations completely give CA the middle finger and move to Texas or other tax friendly states. Hawaii will do the same, they’ll just stick their hand into your pocket and retirement and pull out whatever they can out of your wallet to the self proclaimed and self entitled lazy government union workers demanding their standard of living.

        • localguy, with a Republic congress and a business head as President, we might just be able to pass legislation to allow taxpayer not to get stuck with a bailout.

        • nomu and localguy, I certainly hope it passes and also revokes illegitimate anchor baby US citizenship and Obamacare while at it. But getting those revoked will definitely be a hard battle. Let’s hope for the best!

        • Keep voting in those corrupt (D) Politicians Hawaii and expect a different result. The public worker Unions fund democrats campaigns, then demand outrageous taxpayer funded pension and medical benefits from them in return. Just look what the legislature did for the hospital workers on Maui that must now transition to Kaiser employment – 60 million additional payout on top of their normal pension benefits.
          The situation is out of control, the democrats have literally mortgaged the future of Hawaii’s people to their union masters in exchange for campaign money, which by the way also originates from the taxpayers in the form of union dues.
          Sooner or later the Public worker unions will need to be abolished, taxpayers cannot afford to provide public employees with benefits that are largely unavailable to most private sector workers in Hawaii. It’s just not fair to the 90% of us that don’t work for the city or state.

      • Agree, why should us tax payers cover the deficit? My company doesn’t promise us anything without us donating to the fund. If it’s short it’s short. And there are a lot of people who don’t work a full 8 hour day who are waiting for retirement I guarantee you that!

    • Mismanagement of the ERS fund is ongoing and is an old problem. Hawaii is in trouble, as are many states, as there will be little or no discretionary funds available to invest in important initiatives for young families like health and early education. Past legislators over promised benefits. They are long gone, many of them, but they have left you with a deplorable legacy. Between a bad rail plan and an overly generous pension fund, Hawaii is in for big trouble in the future. Jill is right: Governor Ige submitted a fantasy budget.

      • Your ideas are part of the problem. You want more non essential government paid programs like “invest in important initiatives for young families like health and early education.”

        Totally not needed. We have Obama care and taxpayers already cover K-12. If parents want preschool they must pay for it. Not taxpayers.

        Any expense not part of core government services like infrastructure – roads, water, sewer, utilities, is totally unnecessary. Waste of money.

        • Obamacare is going hon. And no, we need public preschool just as we need k-12. Many states already have it and so shall we..All the brain and education research shows that a quality Pre-k-grade 12 is what we need to have our citizens better prepared for the 21st century. No more “plantations” hon. Our children want the best as do their families., It is already underway. The lower income families want it and they deserve a public commitment to education. Down with the unfair 1% economy that is eroding America.

        • Great reply by allie, blaming the 1% for all the problems in the world. Again. Evil rich people are ruining the planet. Meanwhile, all the bottom feeders have their hand out with the expectation that they are owed something from everyone else. Just because.

        • allie – Obama care in name is going, the concept will be adjusted, still remain as a health care system. I thought you knew this hon. I was wrong.

          States are finding out children do better if they start kindergarten at age 6 versus 5. California is one state already made the switch. One year older makes a huge difference in learning. New to you isn’t it hon?

          Pre-K is fine as long as parents pay for it. Can’t be adding an unproven process to the load taxpayers are already carrying. I thought you knew this hon. Here is the information you need to learn how much a waste pre-k is.

          Trump will work federal vouchers to give parents their share of fed money to use on the school of their choice. Exact process has yet to be finalized. Suffice it to say this extra money will go a long way from reducing the cost parents pay to send their children to a higher quality charter, private, or other school. You did hear Trump say this right hon?

    • Wes Machida should leave B&F and go back to running ERS. The deficit has grown immensely in the years since he left and his performance as B&F head is questionable.

    • “the fund posted what she called a “pathetic” investment return of negative 1 percent in the fiscal year that ended June 30.”

      I’m not great at investing, but even my investments make at least 5% a year.

      -1%. What the heck are they doing?????

      • If I am not mistaken, the stock market was performing poorly most of calendar year 2016 (until after the November elections). That could explain the poor performance since even my 401k was “negative”. Can’t ask the ERS to perform much better than the stock market overall. Now if the fund didn’t post better year-end 2016 results, that would be a different story.

        • From the sound of your comment it appears we have found the ERS fund manager. LOL

          SPX had a 18.05% return in 2016. Almost no one lost money in 2016. NO ONE!

        • @dragoninwater Learn how to read.

          ‘the fund posted what she called a “pathetic” investment return of negative 1 percent in the fiscal year that ended June 30.’

          Almost everyone lost money up until June 30, 2016. EVERYONE!

        • droid, not true, it’s a fund managers duty to reallocate funds into performing assets. Leaving funds in an index like the SPX index would have gained almost 2% from the dividends alone even if the SPX remained flat for the entire fiscal year.

          So no, you failed miserably as a retail investor if you think everyone lost money even by midyear of 2016!

          If you do have a fund manager that can’t beat the SPX, well, maybe you should fire the fund manager and invest in the rail since it’s the promised gold mine that will revitalize Oahu and turn it into the next Singapore! LOL

          BTW, why didn’t the ERS fund manager buy Detroit municipal bonds with a hansom coupon of 7.7%?

        • i made +3.56% during that period in my own separate retirement and i’m not even an expert..i could’ve made the state money

  • It is very simple. The country cannot continue putting in money for retiree benefits. We can’t. There isn’t enough money. People live longer, need ever greater care, and there are fewer industries for our children to be in because we have a “virtual” economy built on paying people for ideas, not actual THINGS. No one wants to face the awful truth that in fifty years, there will be a meltdown. We think we can adapt, there will be solutions in place. Japan is already living the nightmare. An aged society with zero population growth. This means no one is replenishing the workforce, which means less tax revenue, while the senior population burgeons.

    • This state is heading where Detroit has been, to the court to file bankruptcy. This mess is created by the Demoncrats of this state with their open purse attitude when dealing with the do-nothing welfare w#hore government unions. If you ask a government worker how their retirement pension is calculated, it is based on the last three years of service(no service). What they do is accumulate all their sick leave, vacation days not use and start selling them at the last three years of their employment in addition they start doing overtime when there is no need for that and that is how these government welfare w#ores are bankrupting THE REAL TAX PAYERS. The Demoncrats are so afraid of government unions because they know government unions will produce fake news against those politicians not supporting these government welfare w#ores in the election cycle. It is time we THE REAL TAX PAYERS stand up to these Demoncrats and government unions or else we are going to be paying these pensions until we are no longer able to work. Let’s stop this insanity before it gets worse.

        • The move to a 401k would help but not entirely. Best move would be to mandate furloughs for all non-essential county workers to help meet the budget overruns. Then proceed to outsource as many of those jobs as possible to eliminate the liabilities.

        • Be realistic as you know that will never happen as the legislature will keep it solvent. Retirees vote. If they were to lose their retirement funds, what would become of our economy not to mention them?

        • It’s an excellent idea. Government employee roles are way too large. We could seize the opportunity to have state employees justify their salaries, bounce about 75% of them, and get real about the size of our local government.

      • Pension fund was not raided to the tune of $12 billion. The excessive money pit comes from failed policies allowing pension spiking, poor investment choices, failure to control pension costs.

        California also has out of control money pit pension costs. Fortunately a very smart Associate Justice James Richman made a broader point: “While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension.”

        Basically saying do not count on your pension to be your sole source of income. Each worker needs a maxed out Roth IRA, other investments. Go into retirement with no debt. Always live beneath your means.

        • the fund was raided for hundreds of millions, if you look at the DECADES over which it was raided, it’s easy to see that investment gains over the years would have shrank that 12 bil by quite a bit.

        • agree..investment decisions were just horrible. Hawaii continues to give away the bank to sly and devious insiders. Look at the disastrous (for the taxpayer) Kealoha backroom deal.

      • actually, it was the legislature themselves that raided the fund time, and again over the past few decades. Hababooza, the exalted one was one of the architects. It was as if they decided to run up the credit card, and now we’re stuck footing the bill.

        • They can fix that problem real quick. Invest 100% of the ERS into the rail!

          The rail will earn the ERS 1,000% gains! Mufi and Krook both said so! Think of your children and grand children! The RAIL MUST BE COMPLETED and FUNDED 100% with ERS funds! You great grandchildren will thank you for your contribution for the betterment of the island!

  • Hawaii’s stingy taxpayers are just going to have to work harder to keep the gravy train rolling for our treasured state employees. Actually it’s a little unfair to blame employees it’s the incestuous relation between democrat politicians and unions. Politicians keep the unions fat dumb and happy via union dues and the unions kick back money to politicians in the form of campaign contributions and fat money envelopes. And the suckers left holding the bag are tax-paying working families.

  • The legislators in Hawaii do a great job! That is why they get re-elected year after year. You make me so proud! Just raise the taxes to pay for whatever you need, I do not mind at all. I enjoy it. #luckywelivehawaii

  • All the commenters saying how Republicans bring down the country. Everybody needs to look at home. Our wonderful union run popular vote democratic state about 12 billion shortfall. Maybe we can make it up with the rail? How about getting Stevie Wonder to do a benefit concert? Maybe we can get our 99% democratic state run house of reps and state senators and gov to fix it by clicking their heels 3 times. Bwahahahaha

  • over 12 BILLION and growing. Thing about that. Why does Hawaii keep electing the same politicians and allowing incompetent people to run this State. Next great idea from our legislature will be to raise taxes!

  • House Finance Chairwoman Sylvia Luke (D) is being disingenuous with her comment about the ERS board due to the investments’ performance. Had she taken the time to look at the performance of the stock market during the period in question (Jul 1, 2015 – Jun 30, 2016) she would find that the Dow Industrials, SP 500 and NASDAQ all were essentially flat during the timeframe in question. The ERS did however make a huge mistake in their actuarial assumptions and continue to do so, even with the 7% discount rate. On another note, the ERS shortfall is but one of the two shoes to fall on the legislature. The second shoe, the EUTF, which accounts for the post employment health benefits is almost completely underfunded and has a much larger unfunded accrued liability. You can bet your sweet bippy that it too had a bad hair year in FY2016. Where they are correct is that, if they are not funded at the required rate, the costs down the road are unsustainable. Just like the old Fram oil filter commercial said, you can pay me now or you can pay me later.

    • Just because the market was flat does not mean the fund could not show a better return, hell if they invested in money market funds they would have shown a return even if small. That is the reason you hire experts to manage your money. 7/1/15 – 6/30/16 my 401 was up 7.3%, managed by a top broker investing in the right stuff. The ERS has been mismanaged for years, that time period was not the only time the fund had a poor performance.

      • The difference between you and me is my comments are verifiable to any reader who knows how to look at the charts for those specific markets while yours are anecdotal and, based on the market’s performance are a statistical anomaly for that timeframe. In order to exceed the overall market by that margin, I would suspect your portfolio obtained high-risk/high-reward content which may suit your investment strategies, but is outside the box for pension fund managers with fiduciary responsibilities and legal consequences you do not share. A more accurate measurement would be to look at 1-year, 3-year, 5-year and 10-year performance measures and do a comparative analysis with a broad spectrum of other state and municipal funds.

        • Again that’s why you hire experts, you create a balance in your portfolio. The ERS needs to support present and future retiree’s. The way some of these retirees are allowed to retire
          (high 3, including overtime) the fund cannot survive investing in low risk. Never compare yourself with other municipalities and say if they performed poorly then it would have been okay if you did not perform. Yes these fund managers have a responsibility, but when you can’t perform the fund loses and so do the retiree’s and taxpayers.

        • That’s correct the ERS has a risk reward mandate and must balance it when choosing investments. Yes its disappointing to take a loss in this past year but having the fund invest in more risky and volatile funds could reduce members portfolio significantly and that’s what the ERS main concern is “preservation of capital” with a reasonable return, yes in some case negative in some years but more positive in the long term. We are not in a casino when you are dealing with your retirement nest egg.

        • Absolutely spot on Mr. Shibai. Luke is not being disingenuous, she is flat out ignorant. Like the rest of the uninformed, she’s going to look at her 401k and think she’s a financial genius. It’s not an apples to apples comparison. Look at other similar funds, there are examples right here in Hawaii. A zero growth for the year is typical in this market. You will see at no other company their leaders clamoring for the investment managers to be fired. Luke is too d-u-m-b to see the forest for the trees.

    • Never would have been in this position if the democrats did not skim off anything over an 8 percent gain from the fund for years. This was happening until Lingle put a stop to it.

      • Actually, that was a contributing factor, but there are many other factors in play that allowed the state to ignore the inevitable consequences of underfunding the trust funds. Among those were, and still are, the accounting practices used by the administrations, including Lingle’s, that kept the issue from the public’s sight. The continued failure to publish the annual financial reports in a timely fashion, and demonstrable ignorance on the part of our elected representatives to understand the contents contained therein ultimately bring the state to the position they are now in. To that I might add the abysmal failure of the “free press” to fulfill their constitutional imperative to keep the public informed adds to the witches’ brew that eventually must be swallowed.

  • Blame Obama care for keeping retirees living longer thereby increasing retirement cost. A retiring presidents gets the blame whatever ails the State? Goes with the turf!

  • ERS board is to blame. If they worked at it they do have some control over their excuses of not having control. Our governments are being run by a lot of idiots. And we voted for them. Sadly a lot of smoke and mirrors.

  • This pension / health Hawaii issue has been a financial problem for years. Nothing new! Plus, we’re not the only State who’s struggling. Nevada and California are States which are also in deeper kim chee. These Legislators sound like Trump! We need solutions and not just talk.

      • However due to worldwide global terrorism, Hawaii remains one of the few “safe” resort destinations and rakes in BILLIONS in tourism related commerce. Illinois cannot say the same. Hawaii should be in a surplus, HOWEVER wasteful spending like the Oahu train to nowhere project (City or State project don’t matter, money comes from the SAME distressed Hawaii taxpayer), constantly bailing out UH and its Cancer center and dead end money pit projects and tax loop holes (Act 221, etc.) and extremely generous welfare benefits for a large percent of the population has put Hawaii on the road to bankruptcy like Detroit. It is like Boxer Mike Tyson making hundreds of millions of dollars but still ends up bankrupt. Reckless spending outstripping income, even in Hawaii where income is in the BILLIONS from tourism and military spending still cannot keep within its means.

      • Not a problem. Expect your state taxes to double or triple until the $12 billion is paid down.

        During this time greedy unions and their lapdog elected bureaucrats will be working hard to further increase their pension and medical benefits.

        • Don’t pay any lawmakers. No medical, pension, travel expenses. nothing! Save a million and tell the Lt. Governor, the job is on Oahu. Find an apartment , pay for it yourself or step down!

      • No they are not. When 100% of your GROSS income is derived from the tax payers then whatever they skim in taxes from you paycheck is double-taxation. Thanks to “D” socialist policies and growing the government union workforce to absolutely R_E_T_A_R_D_E_D levels has resulted in the productive workers getting raped by the bean-counters trying to pay the non-productive waste in the government unions. Kind-of a self fulfilling vicious cycle because no one in the “D” party has the balls to tell the politicians to sack 80% of the useless dead weight or outsource it like corporate America already did in the private sector. LOL

  • Lord Acton stated that “power corrupts;” absolute power corrupts absolutely.” This is what happens when the Democrats, relying heavily on government unions to hold power over the past 40 plus years, cater to them in terms of government employee benefits. The salaries are really not that far out of balance with the private sector, but the generous benefits surely were and are. I know because I worked for both the federal and state governments. I used to cringe when the government, when times were tough, stated their policy of a “warm body” policy. Defer maintenance, such as buildings, roads, and other infrastructure. As if bad roads, public housing, parks, sewers do not affect the lives of the all taxpayers. Tell that to those in public housing with rats and leaking roofs.

  • Problem is not all state and city and county employees contribute to the plan but when they retire they are payed by the plan. That has to change everybody should contribute.

  • Anyone who thinks the math works on putting in a sliver of your income for 20-25 years to THEN get the MAJORITY of your income for OVER 25 years, deserves to fall victim to this Ponzi scheme like any other Ponzi scheme victim.

  • This is just the tip of the iceberg. A huge unfounded deficit also exists for retiree medical coverage. It is obvious that the Plans are too generous and are unaffordable. Benefits need to be cut!

  • The ERS board making bad investment decisions and/or getting bad advice from their investment advisor are largely to blame. Negative 1% return on investment? A 12 year old kid could do better. Who the heck are they investing in?

    To hell with the ERS board trying to duck responsibility.

    • Exactly! This is why they should be 100% invested in the rail! Every single penny of the ERS should be invested into the rail! Taxpayers won’t miss a penny of it!

  • Everyone out here in the real world has to live within their means – what’s wrong with the State? Stop making promises to the employees that you can’t keep.

  • Don’t worry…TOURISTS will make up for all of this!!! (same recycled response to rail fail taxes in perpetuity)


    SAME Colbert Matsumoto that’s on the HART board and standing to profit from his real estate purchases along the PROPOSED route?????

    • 12 billion for this 15 billion for rail. This entire state needs to be audited by the feds. and have the results posted for the public to see. Reelecting the same people over and over as they continue to appoint the same types over and over. Is there any point where the folks here will say enough is enough? Not yet?

    • Yes, Shopoholic, and one of the companies he heads also scored a valuable medical marijuana dispensary license (to be opened in Kapahula where a former BOH branch was).

  • We should look into what the legislators whom are non contributory and receive pension from the ERS. Legislators should not be a full time job and should not receive any pension from the state.

  • The State and County governments should tell the unions: “Do you want a raise this year or do you want the pension to be funded? Either/or but not both. Your choice.”

    • The Government unions will write back threatening to bubble in “R” on the next election ballots. “D” politicians cave-in and offer a free lunch plate and give them both raises and then lawmakers cook up new taxes to stick-it to the working middle class.

      • I am not sure if the reason why this is the case is because the amounts contributed to the pension fund is on an after tax basis (I believe). Taxing the funds again once someone retires would be double taxation. Kinda similar to the concept of a ROTH IRA, contributions is after tax, then withdrawals tax free.

  • Before more tax payer bailouts there has to be some sort of accountability and change in the funds management. A negative return by ERS fund managers last year despite a very robust market cannot continue. Current State and City employees should contribute more as they are the benefactors. Also should seriously think about right sizing the workforce to save further costs. Does that mean cuts in services? No like the private sector the state/city has to become better, faster, cheaper and do more with less.

  • We should also suggest Krook Caldwell loot the entire Hawaii government pension system (ERS) to pay for the rail and mandate furloughs for all non-essential county workers to help meet the budget overruns. Let’s bankrupt the county and in the end ALL inept useless non-essential government jobs will be eliminated or outsourced to Asia or India for a 1/3 of the cost so the rest of us will no longer need to worry about more taxes to pay for “solutions” we never asked for.

  • bite the bullet vs self serving HOPE that it will work.. out that is why they are STILL requesting more…LOOK AT HOW LOW BANK INTEREST RATES HAVE BEEN …VERY EASY TO CHOOSE TO NOT SEE THIS …MORE VOTES AND LESS TURMOIL ..BE BRAVE ALOHA

  • The finger pointing, must first start with, the ERS Executive Director, and then the Hawai’i State Legislature. There was gross mismanagement of the ERS. All of the watch dogs & oversight people, didn’t warn the public or do anything, to stop this financial hemorrhaging. An old fashioned housewife, could have done a better job, than all of the alleged experts.

    The Government-Union, is doing its part, with negotiating for more money & benefits, to keep up with inflation, and the loss of benefits. Contracts negotiations, only involve money – benefits – contract language. Working for the government, should not be a despised occupation.

    Maybe, a highly successful world banker, and a highly successful bank, was the better way to deal with the Hawaii State ERS. Political Nepotism – Cronyism – Favoritism, is the likely culprit and blame for this financial disaster.

    Now, “We the People” will suffer, for the shortcomings & failures, of the Hawai’i State Legislature & the Governor.

      • Indeed– that is the next shoe to drop.

        Already, the good people of Hawaii have seen:
        1. Property taxes increasing
        2. Likelihood that the “rail tax” will be PERMANENT
        3. Roads/Sewers/Infrastructure bursting at the seams

        I foresee a very bright and prosperous future for Hawaii.

        Good luck.

  • There should be no rush to cover something that is not due for many years.

    We need to also invest in our own infrastructure. Much growth is expected and we will be to pay much of that when the time comes.

  • It is incorrect to say that the taxpayers are entirely on the hook for the shortfall on the state employee pension fund. This is only party true as all state and city employees contribute to the
    pension fund while they are working toward retirement and becoming vested and eligible to receive a pension . Do not forget that the salaries for the average state worker is
    relatively low in comparison to the pay in the private sector, the city. and the federal government. Here in Hawaii, the state lags well behind the City and the Federal government in terms of
    salaries. In exchange for the lower salaries, state and city employees receive some degree of compensation for this by the benefits provided such as a pension and medical insurances upon retirement and sick and vacation leave while employed. . All state and city employees pay for their own medical coverage while employed.
    The reason that the pension fund is so much in the hole is partly because the state legislature twice pulled a raid on the pension fund and siphoned off millions of dollars for spending
    purposes. At the same time and for years, the State and the Counties has failed to properly contribute their proper share into the pension fund as they were supposed to, again so the politicians could continue their lavish spending. As they say, Rome was not build in a day and this applies to the huge shortfall in the pension fund. The blame for this lies at the feet of the political elite
    who have been running this state into the ground for the past 50 years. So no matter how well the ERS invests the pension fund monies, they cannot make up for what the political elite
    has been doing all these years. These politicians have been kicking the can down the road time and time again and I do not see things changing.
    Governor Ige promised that he was going to increase the State’s contribution to the pension fund and I do hope that he honors that pledge.
    I guess my point is that the blame on this problem is not that of the average State or City employee or the public unions for that matter and it really does not have much to do with salary
    increases or benefits. Salary increases are tied to contract negotiations between the unions and the employer and the increases have been relatively small and benefits have been reduced
    and employees have had to pay more for their medical plans so for many, just being able to keep up with the increasing cost of living continues to be a struggle.
    Those at the top and the political elite and their cronies meanwhile are doing very well but everyone else, not so much.

    • Same lies and B.S. response from union state workers in California every single year. “We earn less…” my a$$. When you factor in unemployment, job changes and life events in the private sector the public sector employees are the only ones collecting $500k+ pensions in California and Hawaii. THE ONLY CADILLAC retirements anyone is getting is in the public union government sector. Most private sector employees look forward to a pathetic SSA retirement that barely pays the bills.

      Let’s compare the numbers: The MAXIMUM SSA a retiree can receive is $2,639 a month in 2016 after 35 years in the workforce.
      The maximum a CalPERS or ERS retiree gets is unlimited. Many retire at 55 with self-proclaimed disability earning $41,666 A MONTH ($500k+ annually)

        • that’s california..this is hawaii..the average retiree earns between 1250 and 2000 a month

        • Why are you so upset? Even earning a $150k-$300k+ pension is insanely lucrative. Truth hurts when someone exposes you government union crooks doesn’t it? The more you mouth off the more facts I expose to the public and the more the public starts to finally learn all the tricks and scams you guys have been pulling on them. Look at all my sources, where are yours to disprove mine?

        • hanabatadayz, dragon uses the same mentality as he does with $1 Detroit homes for homeless people. When he spins it,,, he spins it HUGE! $500K pensions and $1 Detroit homes. Strictly delusional.

        • RetiredWorking, $1 Detroit homes exist to this very day. You like to ignore the facts as usual. You also claim that the links to the credible sources I posted were fake too? Maybe you should write the WSJ and call them out on it because they were the first to publish it. I don’t reference the WSJ here as most don’t have a subscription to the WSJ so the articles are of no use to link here. Go Goolgle anything I post you old upset crow.

    • Thank you for the well-balanced view of the situation. Too many criticize and blame the hard-working state workers who are just trying to provide for their families. The bottom line is ALL workers, both private and public, want stability in their lives.

        • Care to share your numbers and sources?

          I can easily post annual salaries of many who game the government sector jobs as they all move up in ranks year after year and all getting a chance to be the big boss and then immediately retire at 55 with self-proclaimed disability. While most will not be in the $500k+ range, most will retire in the $150k-$300k range. So even if my $500k+ is not applicable to all, it sure beats 99.999% of the private sector as not a single private sector employee will earn more than $31k annually from SSA no matter how high their earnings in prior years.

        • can you name some positions? The top salaries in government in Hawaii are overnor/mayor/athletics director/chancellor/UH coaches. I think the governor makes like $140k, the mayor maybe $130k. The directors of state departments make like $110-120k, and that’s the peak of salaries, everyone below them earns less. And that’s salaries, not even considering it’s for PENSION, which is generally a lower % than high salary.

        • bobbob, don’t try to fool us. The base salary is just the tip of the iceberg, no single government union employee earns the base salary, it’s always double and triple after they get bonuses and overtime and stipends and other B.S. made up incomes.

          Source #1 … Public Employees Making Bank On Pensions!!! –

          Source #2 Feel free to look up salary for any government employee or department, the base salary is a joke, after OT and other perks they make out like bandits…

  • Look at the bright side. California is only $500-billion in the red for their pension. That’s half a trillion dollars in the hole!!! Just keep looting the HI ERS coffers and issuing $500k+ annual pension packages to every Tom, D!@k and Harry relative every devout “D” politician offered a union government position to. Hi can be number 1 again, go invest the ERS pension into the rail your devout “D” leader promised would return billions in profits form millions of patrons commuting on it.

    • A very smart Associate Justice James Richman made a broader point: “While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension.”

      Meaning states can negotiate to reduce the rate or increase going forward, work to lower pensions for new hires. A truly smart state would change the laws to end pensions for all new workers, move to the Roth 401k plans. It is the only way to survive.

  • Let’s take a vote. I’ve worked for private companies all my life and managed my own retirement. I also pay in to the state retirement fund I suppose because I use state services but heck if I’m going to double down on my contribution for something they can’t control. I’ll continue to contribute but opt to vote to see how others feel about contributing to something we won’t be part of………kinda like the rail project.

  • ERS Executive Director Thom Williams has a special announcement for all retirees collecting those $500k+ Cadillac pensions at the age of 55. DROP DEAD ALREADY!

  • Please do not worry people of Hawaii. There is no need to panic and there is no need to worry that your state is trapped in a downward spiral as a result of every dollar coming in going to the rail. The rail is your savior. It will solve all of Hawaii’s problems. Everything will be okay.

    Good luck.

    • Yes 100% spot on Allu!!!!

      Think of the billions in profits the rail will bring in ridership revenue! The entire Hawaii government pension system (ERS) should invest 100% of it’s assets into the rail and mandate furloughs for all non-essential county workers to help meet the budget overruns. The taxpayers will never miss a penny of the ERS funds! If we build it they will come and your children and your great grand children will all thank you for your great contributions to the betterment of our islands!

  • How will the fund ever catch up when the salaries paid to top government employees keeps on escalating? It’s like a dog chasing its own tail. The pension fund managers and legislators should take a hard look at pegging pension payouts to the “highest three years.”

  • Collusion between unions and the officials they help get elected – should be illegal to have public employee unions for they will enslave us all with massive debt.

  • The projection is based on a return of 7%. How about a reality check on that. 5% is more in keeping with present market conditions. try figure out the short fall based on a realistic return then check Jill’s pulse.

    • The reason the discount rate is set on the high end is to artificially reduce the amount of the accrued liability. It is classic Hawaiian style shibai. The best time to check her pulse would be after she finds out about the EUTF’s FY 2016 market performance.

  • Attention all non-government workers: Remember to WORK HARD, millions on welfare are depending on you!
    If you have any questions please call the welfare hot-line at 1-900-WELFARE, $20 the first minute and $10 each additional minute!

    Thank you,
    Krook Caldwell!


  • The State and County were too generous in the past. It provided spouses of government workers free medical and Medicare B reimbursement even though they never worked one day for the government. It has changed but should have been done a long time ago.

  • Our elected officials should acknowledge that they were responsible for the shortfall. They continue to underfund the pension fund for years to fund other pet priorities and now they seem to be on the verge of doing it again. We had the chance to make the pension fund whole on several occasions but ignored it. Also, get rid of the ERS’ substandard investment staff and advisors. They seem to be unsuccessful in their investing while other advisors can.

  • We cannot stop the pension payouts currently occurring or owed. Pensions are guaranteed by the Hawaii constitution (and there are other states with similar provisions). These provisions in the state constitution preempt federal bankruptcy laws under our federal system.

  • The greedy mismanagement of the Democrats who has been in control of this State Government, hook line and sinker since Statehood has resulted in this pension shortfall for their government workers. The Democrats in the Legislature has a habit of snatching funds from other programs to fund others…
    Take the Hurricane fund, funded by property owners of this State. Its depleted because the Democrats took all of it. Now there is no Hurricane fund. How about the rail. There was a report that the Democrats took about 150 million dollars for their program. No wonder the rail is short-funded also.
    Since all the Democrat incumbents have been reelected (I voted all those rascals out so I can complain) last November, once again the over-tax burden citizen of this State will suffer more at this year’s legislature session. You will never, never find anything that would lessen the impact of the tax addicted Democrats in the legislature.
    More original locals will move to State of Washington, State of Nevada and State of California because the Democrats are making life hard to survive in this State. Not to mention there will be more homeless on the street once again.
    Look for the Democrats to revive Governor Ito’s gasoline tax increase as well as the vehicle weight tax. My annual bill is $300.00.
    The mismanagement Democrats admit they need to fund the sinking government employee’s pension fund. They need to scratch more money from our wallet. More family head has to work more than one job to survive in this State.
    Last year, Forbes financial magazine rated the State Hawaii as the worst place to make a living because of its high cost. Blame the fat cats Democrats for their selfish greedy attitude.

  • Only the rail can save us. It must be built, no matter what the cost. If it can be built for $34 – 40 billion, that would be ideal along with an annual maintenance/operation cost of at least $20 million. This may be enough to push the entire ERS into bankruptcy and it may be enough to bankrupt Honolulu county. Fingers crossed.

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