REPORT TITLE:
Civil Service


DESCRIPTION:
Requires the department of human resources development to work
with stakeholders to design legislation to modernize civil
service.  Establishes voluntary severance.  Establishes reduction
in force parameters.  Proposes to:  (1) require all flexible
spending accounts participant contributions, interest earned, and
forfeited participant balances be held in trust outside the State
Treasury, and (2) requires interest earned on the contributions
and forfeited participant balances to be used to defray the
monthly participant fees and other administrative costs.  (SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        142
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.D. 2
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO PUBLIC EMPLOYMENT.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1                              PART I
 
 2      SECTION 1.  The legislature finds that as the State enters
 
 3 the new millenium, the citizens of Hawaii require, demand, and
 
 4 deserve a government that is responsive, efficient, and flexible
 
 5 in order to address the everchanging needs of a modern society.
 
 6 To effectively provide for the requirements of the twenty-first
 
 7 century, state government must reinvent itself and the way it
 
 8 operates so that it will cost less, work better, and get
 
 9 measurable results.  As such, it is the objective of the
 
10 legislature to restructure state government into an organization
 
11 that provides:
 
12      (1)  The best value for every taxpayer dollar;
 
13      (2)  The best service for each customer and regulated
 
14           business;
 
15      (3)  The best workplace for its employees; and
 
16      (4)  The best legacy for Hawaii's future.
 
17      The purpose of this Act is to provide the tools necessary to
 
18 facilitate the restructuring of state government.  Specifically,
 
19 this Act initiates a collaborative process to begin modernization
 

 
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 1 of the civil service system; establishes a planned workforce
 
 2 reduction program that provides a voluntary severance or a
 
 3 special retirement incentive benefit as well as protections for
 
 4 employees upon transfer; improves workplace conditions for
 
 5 employees by authorizing flexible spending accounts.
 
 6                              PART II
 
 7      SECTION 2.  For several decades, the civil service system
 
 8 has admirably met its mandate to support Hawaii state
 
 9 government's mission to serve the people of Hawaii.  Within the
 
10 past few years, however, with the advancement of digital
 
11 technology, public needs have changed at a constant and ever-
 
12 increasing rate.  Our current civil service system, which was
 
13 created at a time when digital technology was at best, mostly
 
14 theory, has outlived its usefulness.  Therefore, for state
 
15 government to continue to meet the public's needs, the civil
 
16 service system will have to be modernized to provide flexible,
 
17 timely, responsive, and people centered personnel support.
 
18      To create an opportunity that encourages all stakeholders to
 
19 work collaboratively to co-create this modernized civil service,
 
20 it is proposed that a "fresh-start" provision be established for
 
21 civil service laws.  Such a "fresh-start" concept would not only
 
22 serve to "clear-the-deck" but would also capture the public's
 
23 attention and thus provide the drive to seriously engage in the
 

 
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 1 process of co-creating a new statutory framework by all
 
 2 stakeholders.
 
 3      SECTION 3.  The director of human resources development is
 
 4 charged with the responsibility to establish partnerships with
 
 5 all stakeholders, labor and management included, and begin to
 
 6 design and effectuate a process to modernize the civil service
 
 7 system.
 
 8      The director of the department of human resources
 
 9 development shall identify and work collaboratively with the
 
10 various stakeholders governed by the provisions of chapters 76,
 
11 77, 78, 79, 80, 81, and 82, Hawaii Revised Statutes, in order to
 
12 draft replacement legislation if deemed necessary.  The
 
13 stakeholders shall include, but not be limited to, the exclusive
 
14 representatives whose members are covered by these chapters, the
 
15 conference of personnel directors, the personnel director of the
 
16 judiciary, and members of the house of representatives and the
 
17 state senate as designated by the speaker of the house of
 
18 representatives and the president of the senate, respectively.
 
19      It is envisioned that discussions may include but not be
 
20 limited to, such other issues as negotiability of health
 
21 benefits, creation of a new classification system, total
 
22 compensation package which includes pay and benefits, recruitment
 
23 above the first step of the pay range, autonomy of personnel
 

 
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 1 administration systems, and the civil service commission and
 
 2 public employees compensation appeals board.
 
 3      The director, with the consensus of the stakeholders shall
 
 4 establish a process for developing as broad-based a series of
 
 5 recommendations as can be agreed upon by the stakeholders in the
 
 6 process.
 
 7      The director shall submit monthly progress reports to the
 
 8 legislature.  The director and the stakeholders shall submit
 
 9 draft model civil service legislation to a joint house and senate
 
10 labor committee meeting on November 15, 1999.  The stakeholders
 
11 shall continue to meet after the joint meeting and make any
 
12 revisions to the proposed legislation based on feedback from the
 
13 joint committee.  The director, with the stakeholders concurring,
 
14 shall present revised legislation for the modernization of civil
 
15 service legislation for consideration by the legislature by
 
16 January 15, 2000.
 
17      SECTION 4.  Notwithstanding any other law to the contrary,
 
18 the legislature shall adopt legislation to be effective June 29,
 
19 2000, to define the employment of persons in the civil service
 
20 system.  Such legislation shall be governed by the merit
 
21 principle.
 
22      SECTION 5.  Effective June 30, 2000, chapters 76, 77, 78,
 
23 79, 80, 81, and 82, Hawaii Revised Statutes, are repealed;
 

 
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 1 provided that the legislature has adopted replacement legislation
 
 2 for them in accordance with section 4 of this Part.
 
 3                             PART III
 
 4      SECTION 6.  Voluntary severance benefits.  (a)  Any employee
 
 5 covered under chapter 88, Hawaii Revised Statutes, whose position
 
 6 is specifically eliminated or eliminated as a result of a
 
 7 reduction-in-force or workforce reduction plan proposed by a
 
 8 department, the judiciary, or the University of Hawaii, may elect
 
 9 to receive a voluntary severance benefit under this Part in lieu
 
10 of exercising the employee's right to any reduction-in-force
 
11 policies, collective bargaining agreements, rules and procedures,
 
12 and placement and bumping under collective bargaining agreements
 
13 provided under chapter 89, Hawaii Revised Statutes, as
 
14 applicable.
 
15      (b)  A voluntary severance benefit equivalent to a one-time,
 
16 lump sum payment of $          shall be paid by the terminated
 
17 employee's department, the judiciary, or the University of
 
18 Hawaii, as applicable.
 
19      (c)  The terminating department, the judiciary, or the
 
20 University of Hawaii, as applicable, shall reduce its personnel
 
21 count by one full-time equivalent per each voluntary severance
 
22 benefit conferred, except as otherwise provided in section 7 of
 
23 this Act.
 

 
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 1      (d)  A voluntary severance benefit shall be in addition to
 
 2 any payment owing to the employee for accumulated unused vacation
 
 3 allowances under section 79-7, Hawaii Revised Statutes.  The
 
 4 right of any employee who receives a voluntary severance benefit
 
 5 to also receive unemployment compensation shall not be denied,
 
 6 abridged, or modified in any way due to receipt of the voluntary
 
 7 severance benefit.
 
 8      (e)  All voluntary severance benefits payable pursuant to
 
 9 this section shall be subject to applicable state income tax laws
 
10 and rules.
 
11      (f)  No voluntary severance benefit shall be payable to a
 
12 state employee terminated for disciplinary reasons or reasons
 
13 other than a reduction in state government workforce.
 
14      (g)  A voluntary severance benefit provided under this Part
 
15 shall not be considered as a part of a terminated employee's
 
16 salary, service credit, or a collectively bargainable cost item
 
17 when calculating retirement benefits, or sick or vacation leave.
 
18      (h)  No employee who has received a voluntary severance
 
19 benefit provided by this Act shall be reemployed by the State
 
20 within five years of receiving the voluntary severance benefit
 
21 unless the gross amount of the voluntary severance benefit is
 
22 returned by the employee to the general fund prior to the
 
23 commencement of reemployment.
 

 
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 1      (i)  All positions held by employees who are provided
 
 2 voluntary severance benefits shall be abolished upon the
 
 3 termination of the employee and all funds allocated for the
 
 4 salary of the position shall be returned to the general fund or
 
 5 the special fund from which the position is funded, as
 
 6 applicable, after the deduction of amounts sufficient to cover
 
 7 the voluntary severance benefits and the accumulated vacation
 
 8 leave of the employee who occupied the position.
 
 9      SECTION 7.  Special retirement incentive benefits.  (a)  Any
 
10 employee covered under chapter 88, Hawaii Revised Statutes, whose
 
11 position is specifically eliminated or eliminated as a result of
 
12 a reduction-in-force or workforce reduction plan proposed by a
 
13 department, the judiciary, or the University of Hawaii, may
 
14 elect, if the employee is a vested member of the employees'
 
15 retirement system and meets any of the criteria specified in
 
16 subsection (e), the special retirement benefit provided by this
 
17 section in lieu of exercising any rights to which they may be
 
18 entitled under reduction in workforce policies, collective
 
19 bargaining agreements, rules and procedures, or placement and
 
20 bumping under collective bargaining agreements.  To receive the
 
21 special retirement incentive benefits offered under this section,
 
22 the employee shall comply with the application and time frame
 
23 requirements specified in subsections (b) and (c).
 

 
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 1      (b)  Any employee whose position is eliminated by a
 
 2 reduction-in-force or workforce reduction plan proposed by a
 
 3 department, the judiciary, or the University of Hawaii, who
 
 4 elects to retire and receive the benefit under this section shall
 
 5 notify the employee's employing department, the judiciary, or the
 
 6 University of Hawaii, as applicable, by filing a formal
 
 7 application for retirement not less than thirty days nor more
 
 8 than ninety days prior to the date of retirement.
 
 9      (c)  All employees whose positions are eliminated as a
 
10 result of a reduction-in-force or workforce reduction plan
 
11 proposed by a department, the judiciary, or the University of
 
12 Hawaii, and who file a formal application for retirement under
 
13 subsection (b), shall retire within the biennium period of
 
14 July 1, 1999, through June 30, 2001.
 
15      (d)  A one-time early retirement service credit of two
 
16 additional years under chapter 88, Hawaii Revised Statutes, shall
 
17 be provided to affected employees whose positions are
 
18 specifically eliminated or eliminated as a result of a
 
19 department, the judiciary, or the University of Hawaii's
 
20 compliance with a reduction-in-force or workforce reduction plan.
 
21      (e)  Notwithstanding the age and length of service
 
22 requirements of section 88-73, Hawaii Revised Statutes, a member
 
23 shall qualify for the bonus provided under subsection (d) under
 

 
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 1 one of the following:
 
 2      (1)  The member is at least fifty years of age and has at
 
 3           least ten years of credited service as a contributory
 
 4           class A or B member, exclusive of the bonus provided in
 
 5           subsection (d), prior to filing a formal application
 
 6           for retirement as provided in subsection (b);
 
 7      (2)  Irrespective of age, the member has at least twenty
 
 8           years of credited service as a contributory class A or
 
 9           B member, exclusive of the bonus provided in subsection
 
10           (d), prior to filing a formal application for
 
11           retirement as provided in subsection (b);
 
12      (3)  The member is at least fifty-seven years of age and has
 
13           at least ten years of credited service as a
 
14           noncontributory class C member, exclusive of the bonus
 
15           provided in subsection (d), prior to filing a formal
 
16           application for retirement as provided in subsection
 
17           (b);
 
18      (4)  Irrespective of age, the member has at least
 
19           twenty-five years of credited service as a
 
20           noncontributory class C member, exclusive of the bonus
 
21           provided in subsection (d), prior to filing a formal
 
22           application for retirement as provided in subsection
 
23           (b).
 

 
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 1      (f)  The additional service credit shall not increase the
 
 2 amount of total credited service or retirement allowance of the
 
 3 member beyond any maximum limitation on service credit or
 
 4 retirement allowance established by chapter 88, Hawaii Revised
 
 5 Statutes.
 
 6      (g)  The member shall forfeit the additional service credit
 
 7 and any other benefit provided by chapter 88, Hawaii Revised
 
 8 Statutes, that was based on the early retirement bonus upon
 
 9 subsequent reentry into the employees' retirement system.
 
10      (h)  The heads of the affected department, the judiciary,
 
11 and the University of Hawaii shall transmit a list of
 
12 participants whose positions are eliminated to the board of
 
13 trustees of the employees' retirement system by October 31, of
 
14 the years 1999, 2000, and 2001.
 
15      (i)  Any employee who exercises the option of early
 
16 retirement pursuant to this section but who does not qualify with
 
17 respect to the age and length of service requirements under
 
18 section 88-73, Hawaii Revised Statutes, to receive a retirement
 
19 benefit without penalty, shall not have their retirement benefit
 
20 reduced in accordance with the actuarial formula normally used by
 
21 the employees' retirement system for the calculation of early
 
22 retirement benefits.
 
23      (j)  All positions affected by the retirement of an employee
 

 
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 1 pursuant to this section shall be abolished.  All amounts
 
 2 allocated for positions vacated and abolished pursuant to this
 
 3 section shall be returned to the general fund or to the special
 
 4 fund from which the employee's position is funded, as applicable,
 
 5 upon the retirement of the employee and after the deduction of
 
 6 amounts sufficient to cover the department, the judiciary, or the
 
 7 University of Hawaii's costs associated with the retiring
 
 8 employee's special retirement benefit and accumulated vacation
 
 9 leave.  Each department affected by the special retirement
 
10 program authorized by this section, the judiciary, and the
 
11 University of Hawaii shall reduce its general funded personnel
 
12 count by one full-time equivalent per each special retirement
 
13 benefit conferred.  Each department, the judiciary, and the
 
14 University of Hawaii shall forward a report on the positions
 
15 affected to the directors of finance and human resources
 
16 development.  The governor shall report this information to the
 
17 legislature no later than fifty days prior to the convening of
 
18 the regular session of 2000 and each regular session thereafter.
 
19      SECTION 8.  During each regular session, the legislature
 
20 shall set parameters as to the number of positions to be
 
21 identified for elimination in the succeeding fiscal year.
 
22      SECTION 9.  The board of trustees of the employees'
 
23 retirement system shall make payments with respect to all
 

 
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 1 eligible employees who retire pursuant to section 7 of this Act.
 
 2      The board shall determine the amount equal to the actuarial
 
 3 present value of the difference between allowances members
 
 4 receive after the receipt of service credit under section 7 of
 
 5 this Part and the allowances members would have received without
 
 6 two years of additional service credit.  The board shall also
 
 7 determine the portion of the additional actuarial present value
 
 8 of benefits to be charged to the State and to each county, based
 
 9 on retirements during the early retirement incentive bonus
 
10 period.  The State shall make additional payments to the
 
11 employees' retirement system in the amounts required to liquidate
 
12 the additional actuarial present value of benefits over a period
 
13 of five years beginning January 1, 2001.
 
14      SECTION 10.  The department of human resources development,
 
15 in cooperation with the employees' retirement system, shall
 
16 provide briefings prior to the implementation of any strategic
 
17 workforce reduction plan to educate the employees whose positions
 
18 have been eliminated.
 
19      SECTION 11.  Employees of the Hawaii public broadcasting
 
20 authority shall not be laid off or separated from service as a
 
21 consequence of a transfer of the licenses, assets,
 
22 responsibilities, and functions of the Hawaii public broadcasting
 
23 authority to the Hawaii public television foundation; provided
 

 
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 1 that an employee of the Hawaii public broadcasting authority may
 
 2 elect to participate in the special severance or retirement
 
 3 benefits provided under this Part.  Employees of the Hawaii
 
 4 public broadcasting authority shall remain in the employment of
 
 5 the State without any loss or reduction in salary, seniority,
 
 6 prior service credit, vacation, sick leave, or other employment
 
 7 benefit or privilege as a consequence of a transfer of the
 
 8 licenses, assets, responsibilities and functions of the Hawaii
 
 9 public broadcasting authority to the Hawaii public television
 
10 foundation.  If required as a consequence of a transfer of the
 
11 licenses, assets, responsibilities and functions of the Hawaii
 
12 public broadcasting authority to the Hawaii public television
 
13 foundation, an employee of the Hawaii public broadcasting
 
14 authority may be transferred to another position for which the
 
15 employee is qualified or may be offered retraining as necessary
 
16 to qualify for or perform the duties or responsibilities of
 
17 another position.
 
18                              PART IV
 
19      SECTION 12.  Chapter 78, Hawaii Revised Statutes, is amended
 
20 by adding to part II a new section to be appropriately designated
 
21 and to read as follows:
 
22      "§78-    Flexible spending accounts.  (a)  As used in this
 
23 section:
 

 
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 1      "Flexible spending accounts" and the "plan" mean a flexible
 
 2 spending accounts plan authorized by section 125 of the Internal
 
 3 Revenue Code of 1986, as amended, and established in accordance
 
 4 with this part.
 
 5      "Contributions" means the employee pretax compensation
 
 6 reductions contributed to the plan.
 
 7      (b)  In addition to any other powers and duties authorized
 
 8 by law, the department or agency charged with the administration
 
 9 of the flexible spending accounts may enter into all contracts
 
10 necessary to establish, administer, or maintain the plan.
 
11      (c)  The contributions, interest earned, and forfeited
 
12 participant balances shall be held in trust for the exclusive
 
13 benefit of the participants and the plan.  The department or
 
14 agency charged with administration of the plan shall have the
 
15 authority to hold these funds in trust outside the state
 
16 treasury.
 
17      (d)  The interest earned and forfeited participant balances
 
18 shall be used to defray participant fees and other administrative
 
19 costs as determined by the department or agency charged with
 
20 administration of the plan.
 
21      (e)  The contributions, interest earned, and forfeited
 
22 participant balances shall not be subject to the general
 
23 creditors of the State."
 

 
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 1                              PART V
 
 2      SECTION 13.  Demonstration projects.(a)  The department of
 
 3 human resources development, with the approval of the governor,
 
 4 may conduct demonstration projects to determine whether a
 
 5 specific change in human resource management procedures, methods,
 
 6 policies, or statutes would result in improved human resource
 
 7 management within the State.
 
 8      (b)  Prior to implementing any demonstration project, the
 
 9 department of human resources development shall develop a plan
 
10 that identifies the purposes of the project, the methodology to
 
11 be used, the duration of the project, the methodology and
 
12 criteria for evaluation of the project, and, if applicable, the
 
13 cost of the project.
 
14      (c)  The conduct of demonstration projects pursuant to this
 
15 section shall not be limited by chapters 76 and 77, Hawaii
 
16 Revised Statutes, and existing civil service rules and
 
17 procedures, except that no project shall waive or abridge equal
 
18 employment opportunity rights or those rules prohibiting
 
19 discrimination based on race, sex, age, religion, color,
 
20 ancestry, politics, physical or mental disability, marital
 
21 status, or sexual orientation.
 
22      (d)  If any demonstration project will have a significant
 
23 impact on existing employees, the consent of appropriate
 

 
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 1 exclusive representatives prior to implementation of the project
 
 2 shall be required.  If any demonstration project involves the
 
 3 modification of any terms and conditions of a valid collective
 
 4 bargaining agreement, an agreement amending those specific terms
 
 5 and conditions shall be negotiated with the exclusive
 
 6 representative prior to implementation of the project.
 
 7      (e)  The department of human resources development, through
 
 8 the governor, shall submit an annual report to the legislature on
 
 9 any approved demonstration projects, including the plan, status,
 
10 and, as applicable, results of the project for the legislature's
 
11 information.
 
12      SECTION 14.  If any provision of this Act, or the
 
13 application thereof to any person or circumstance is held
 
14 invalid, the invalidity does not affect other provisions or
 
15 applications of the Act which can be given effect without the
 
16 invalid provision or application, and to this end the provisions
 
17 of this Act are severable.
 
18      SECTION 15.  Statutory material to be repealed is bracketed.
 
19 New statutory material is underscored.
 
20      SECTION 16.  This Act shall take effect upon its approval.