REPORT TITLE:
Voluntary Separation


DESCRIPTION:
Provides early retirement and voluntary separation incentive
payments to workforce restructuring alternatives. (SB803 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        803
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                H.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO WORKFORCE RESTRUCTURING. 


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

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

 
 
 
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 1      To accomplish this objective, the legislature believes that
 
 2 bold, innovative, and creative approaches must be employed to
 
 3 ensure that a successful transformation occurs.
 
 4      Since 1993, the federal government has piloted innovative
 
 5 personnel management practices to reduce the size of its
 
 6 workforce without adversely affecting public services or
 
 7 detrimental economic effects upon public employees.  By providing
 
 8 incentives to employees to volunteer to leave government
 
 9 employment, agencies have minimized or avoided costly and
 
10 disruptive reductions in workforce actions.
 
11      In October 1993, the Clinton Administration proposed
 
12 legislation to provide employee buyout authority to non-defense
 
13 agencies.  This legislation, which became known as the Federal
 
14 Workforce Restructuring Act of 1994 (Public Law 103-226), and the
 
15 payment authority contained in the Omnibus Spending Bill for
 
16 fiscal year 1997 as the Voluntary Separation Incentive Payment
 
17 Authority (Public Law 103-208), provided agencies with a less
 
18 costly and disruptive tool for workforce restructuring.  The laws
 
19 not only allowed for the use of voluntary employee buyouts, but
 
20 incorporated safeguards which ensured that:
 
21      (1)  Buyouts made real and permanent reductions in the size
 
22           of the federal government; and
 

 
 
 
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 1      (2)  The buyout program not only saved taxpayer dollars, but
 
 2           paid for itself without any additional appropriation of
 
 3           funds.
 
 4      Between March 30, 1994, the date of enactment of the Federal
 
 5 Workforce Restructuring Act of 1994, and March 31, 1997, the date
 
 6 by which all separations were concluded, 39,900 non-defense
 
 7 employees took advantage of the voluntary buyouts, cutting excess
 
 8 layers of management and reducing overall federal employment
 
 9 levels.  By June of 1998, the federal government reported that a
 
10 total of 160,000 employees had voluntarily separated from
 
11 service.
 
12      The United States Government Accounting Office concluded
 
13 that over a five-year period, employee buyout actions that
 
14 minimize bumping by senior employees generated over $60,000 more
 
15 in net savings per each position vacated compared to reduction in
 
16 workforce actions.
 
17      Because of the success and effectiveness of separation
 
18 incentive programs, other agencies and departments have received
 
19 buyout authority to assist with major restructuring in the
 
20 federal workforce.
 
21      The purpose of this Act is to provide for a planned
 
22 reduction in the size of Hawaii's government and a framework for
 
23 the orderly restructuring of government programs.  This shall be
 

 
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 1 accomplished by providing the governor, the chief justice, and
 
 2 the president of the University of Hawaii with the authority and
 
 3 flexibility to effectuate the necessary restructuring and
 
 4 streamlining of government programs, services, and resulting
 
 5 personnel cost reductions under their jurisdictions while
 
 6 concurrently providing affected employees with economic
 
 7 assurances in the near term.  This Act shall be known as the
 
 8 Strategic Workforce Reduction and Government Reorganization Act.
 
 9                              PART II
 
10                     GOVERNMENT REORGANIZATION
 
11      SECTION 2.  Phased strategic workforce reduction plan.  (a)
 
12 Prior to obligating any resources for voluntary separation
 
13 incentive benefits, the respective director or head of all
 
14 departments, the judiciary, and the University of Hawaii, shall
 
15 submit to the legislature a strategic workforce reduction and
 
16 reorganization plan outlining the intended use of the incentive
 
17 benefits and a proposed organizational chart for the department,
 
18 the judiciary, or the University of Hawaii once all incentive
 
19 benefits have been conferred and the reorganization of the
 
20 department, the judiciary, or the university has been completed.
 
21 The strategic plan shall include but not be limited to:
 
22      (1)  The positions and functions to be reduced or
 
23           eliminated, identified by organizational unit,
 

 
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 1           geographic location, occupational category, and salary
 
 2           level;
 
 3      (2)  The number and amounts of voluntary separation
 
 4           incentive payments to be offered;
 
 5      (3)  A description of how the department, the judiciary, or
 
 6           the University of Hawaii will operate without the
 
 7           eliminated positions and functions; and
 
 8      (4)  A review of its mission, programs, and operations for
 
 9           the explicit purpose of restructuring and downsizing
 
10           the workforce in order to achieve the required
 
11           reductions in general funding and positions.
 
12      The strategic plan shall be designed to maximize the
 
13 continuation of direct services to department, the judiciary, or
 
14 University of Hawaii clients and the public and to reduce middle
 
15 management and supervisory layers of state government.
 
16 Departments and the University of Hawaii shall use the voluntary
 
17 separation incentives provided in this Act, subject to guidelines
 
18 issued by the departments of budget and finance and human
 
19 resources development, to the maximum extent possible.  The
 
20 judiciary shall use the voluntary separation incentives provided
 
21 in this Act and shall develop its own guidelines.
 
22      (b)  To determine the positions, locations, and
 
23 organizational units to cover, the affected departments, the
 
24 judiciary, and the University of Hawaii shall consider:
 

 
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 1      (1)  The overall objective of reducing supervisory layers,
 
 2           reducing overhead positions and administrative jobs,
 
 3           and other actions to improve productivity;
 
 4      (2)  Which positions in a particular organization or
 
 5           occupation are essential to accomplishing the
 
 6           department's, the judiciary's, or the University of
 
 7           Hawaii's mission;
 
 8      (3)  Whether replacing employees in positions in certain
 
 9           geographic and organizational locations would be
 
10           difficult or costly;
 
11      (4)  Whether the resulting vacancies would provide an
 
12           opportunity for placement of other employees in surplus
 
13           positions;
 
14      (5)  Whether reassigned employees would be capable of
 
15           assuming the duties of vacated positions without
 
16           significant loss of productivity or the need for
 
17           extensive retraining; and
 
18      (6)  Whether the organization can afford the overall loss of
 
19           experience and the resulting adverse effect on mission
 
20           accomplishment that would result from the loss of
 
21           employees in certain occupational series and grade
 
22           levels or organizational/program components.
 

 
 
 
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 1      (c)  By September 30, 1999, each department shall submit its
 
 2 draft strategic plan to the departments of budget and finance and
 
 3 human resources development for review.  The judiciary shall
 
 4 submit its draft strategic plan to the chief justice for review.
 
 5 The University of Hawaii shall submit its draft strategic plan to
 
 6 the president of the University of Hawaii for review.  The
 
 7 president of the University of Hawaii may utilize the services
 
 8 and personnel of the departments of budget and finance and human
 
 9 resources development when reviewing the draft strategic plans
 
10 under the president's jurisdiction.
 
11      (d)  By October 31, 1999, each department shall submit its
 
12 revised draft strategic plans to the governor for final review
 
13 and approval.  The judiciary shall submit its revised draft
 
14 strategic plan to the chief justice for final review and
 
15 approval.  The University of Hawaii shall submit its revised
 
16 draft strategic plan to the president of the University of Hawaii
 
17 for final review and approval.  Upon the approval by the
 
18 governor, the chief justice, or the president of the University
 
19 of Hawaii, as applicable, of each agency's plan, the governor,
 
20 the chief justice, or the president of the University of Hawaii,
 
21 as applicable, shall transmit the final strategic plans, draft
 
22 legislation to approve the strategic plans, and draft legislation
 
23 to implement any recommended statutory amendments, to the
 

 
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 1 legislature not later than November 30, 1999.  If no legislation
 
 2 is required to implement changes recommended in any final
 
 3 strategic plan, then the legislature at a minimum, shall solicit
 
 4 public input and comment prior to acting on any final strategic
 
 5 plan.
 
 6      (e)  Any strategic plan or portion thereof shall be subject
 
 7 to disapproval by the legislature by a majority vote of either
 
 8 the senate or the house of representatives or by majority vote of
 
 9 both in the 2000 regular session.  If no action to disapprove a
 
10 strategic plan or portion thereof is taken by March 1, 2000, the
 
11 strategic plan shall be deemed approved.
 
12      (f)  If the legislature does not disapprove of a
 
13 department's, the judiciary's, or the University of Hawaii's
 
14 strategic plan, each department, the judiciary, and the
 
15 University of Hawaii shall begin the implementation of its
 
16 strategic plan within one month after final approval by the
 
17 legislature and may restructure and reorganize programs, redeploy
 
18 employees in accordance with the approved strategic plan, and
 
19 offer the benefits provided by this Act in order to expedite
 
20 downsizing, eliminate redundancies, and streamline operations.
 
21 The voluntary separation incentives for employees who occupy the
 
22 positions identified in a department, the judiciary, or the
 

 
 
 
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 1 University of Hawaii's strategic plan that are mandated under
 
 2 this section shall be initiated by April 1, 2000, and completed
 
 3 by June 30, 2000.
 
 4      (g)  Each department, the judiciary, and the University of
 
 5 Hawaii shall prepare an annual status report on the
 
 6 implementation of its strategic plan, the actions taken and to be
 
 7 taken, and shall include in the report the planned savings for
 
 8 each position eliminated, the cost associated with each
 
 9 separation, and any vacation payouts and traditional severance
 
10 benefits conferred, until the reorganization required under the
 
11 strategic plan has been completed.  If any other costs are
 
12 associated with the implementation of the strategic plan,
 
13 information on these costs shall also be included.
 
14      (h)  Departments and the University of Hawaii shall retain,
 
15 to the extent practicable, positions providing direct services in
 
16 adult corrections officer positions, or shortage category
 
17 positions in the department of public safety so as to not disrupt
 
18 necessary or mandated public health and safety services.
 
19                             PART III
 
20              VOLUNTARY SEPARATION INCENTIVE PROGRAMS
 
21      SECTION 3.  Transitional severance benefits.  (a)  A
 
22 permanent full-time employee who is subject to a reduction-in-
 
23 force action or whose position is specifically eliminated or
 

 
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 1 eliminated as a result of any restructuring plan proposed by a
 
 2 department, the judiciary, or the University of Hawaii in
 
 3 compliance with section 2 of this Act and not disapproved by the
 
 4 2000 legislature, shall be offered the opportunity to receive
 
 5 transitional severance benefits under section 4 of this Act.
 
 6 Transitional severance benefits shall be $25,000.
 
 7      (b)  Transitional severance benefits shall be computed and
 
 8 paid for by the terminating employee's department, the judiciary,
 
 9 or the University of Hawaii, as applicable.  The terminating
 
10 department, the judiciary, or the University of Hawaii, as
 
11 applicable, shall reduce its general funded personnel count by
 
12 one full-time equivalent per each transitional severance benefit
 
13 conferred, except as otherwise provided in section 4 of this Act.
 
14      (c)  Transitional severance benefits shall be in addition to
 
15 any payment owing to the employee for accumulated unused vacation
 
16 allowances under section 79-7, Hawaii Revised Statutes.  The
 
17 right of any employee who receives a transitional severance
 
18 benefit to also receive unemployment compensation shall not be
 
19 denied, abridged, or modified in any way due to receipt of the
 
20 transitional severance benefit.  Transitional severance benefits
 
21 shall be computed as of the employee's last day of service and
 
22 paid upon the employee's termination.
 

 
 
 
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 1      (d)  All transitional severance benefits payable pursuant to
 
 2 this section shall be subject to applicable state laws and rules.
 
 3      (e)  No transitional severance benefits shall be payable to
 
 4 a state employee terminated for disciplinary reasons or reasons
 
 5 other than a reduction in state government workforce.
 
 6      (f)  Transitional severance benefits provided under this Act
 
 7 shall not be considered as a part of a terminated employee's
 
 8 salary, service credit, or a collectively bargainable cost item
 
 9 when calculating retirement benefits, or sick or vacation leave.
 
10      (g)  No employee who has received transitional severance
 
11 benefits provided by this Act shall be reemployed by the State
 
12 within five years of receiving the transitional severance
 
13 benefits unless the gross amount of the transitional severance
 
14 benefit is returned by the employee to the general fund prior to
 
15 the commencement of reemployment.  Exceptions for the temporary
 
16 hire of former employees without repayment of the transitional
 
17 severance benefit may be made on a case-by-case basis with the
 
18 prior approval of the governor, the chief justice, or the
 
19 president of the University of Hawaii, as applicable, for undue
 
20 economic hardship reasons only.
 
21      (h)  All positions held by employees who are provided
 
22 transitional severance benefits shall be abolished upon the
 
23 termination of the employee and all funds allocated for the
 

 
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 1 salary of the position shall be returned to the general fund or
 
 2 the special fund from which the position is funded, as
 
 3 applicable, after the deduction of amounts sufficient to cover
 
 4 the transitional severance benefits and the accumulated vacation
 
 5 leave of the employee who occupied the position.
 
 6      SECTION 4.  Retirement program.  (a)  An employee whose
 
 7 position is specifically eliminated or eliminated as a result of
 
 8 any restructuring plan proposed by a department, the judiciary,
 
 9 or the University of Hawaii in compliance with section 2 of this
 
10 Act and not disapproved by the 2000 legislature, if the employee
 
11 is a vested member of the employees retirement system and meets
 
12 any of the criteria specified in subsection (e), may elect the
 
13 special retirement benefits provided by this section in lieu of
 
14 exercising any rights to which they may be entitled under
 
15 reduction in workforce policies, collective bargaining
 
16 agreements, rules and procedures, placement and bumping under
 
17 collective bargaining agreements, and shall receive the
 
18 transitional severance pay benefits provided in section 3 of this
 
19 Act.  To receive the special retirement benefits offered under
 
20 this section, the employee must comply with the notice and
 
21 effective date requirements specified in subsections (b) and (c).
 
22      (b)  All employees whose positions are eliminated by section
 
23 2 of this Act who elect to retire and receive the benefits of
 

 
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 1 this Act shall notify their employing departments, the judiciary,
 
 2 or the University of Hawaii, as applicable, by May 1, 2000, and
 
 3 file formal applications for retirement that will commence not
 
 4 less than thirty days nor more than ninety days prior to the date
 
 5 of retirement.
 
 6      (c)  All employees whose positions are eliminated pursuant
 
 7 to section 2 of this Act and who elect to retire pursuant to this
 
 8 Act, except those in bargaining units 5 and 7, shall retire on or
 
 9 prior to December 31, 2000.  Employees whose positions are
 
10 eliminated by a department or the University of Hawaii's
 
11 compliance with section 2 of this Act, and those employees who
 
12 are in bargaining units 5 and 7, shall have until June 30, 2001,
 
13 to retire.
 
14      (d)  A one-time early retirement service credit of two
 
15 additional years under chapter 88, Hawaii Revised Statutes, shall
 
16 be provided to affected employees whose positions are
 
17 specifically eliminated or eliminated as a result of a
 
18 department, the judiciary, or the University of Hawaii's
 
19 compliance with section 2 of this Act.
 
20      (e)  Notwithstanding the age and length of service
 
21 requirements of section 88-73, Hawaii Revised Statutes, a member
 
22 shall qualify under subsection (d), exclusive of the bonus
 
23 provided in subsection (d), under one of the following:
 

 
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 1      (1)  The member is at least fifty years of age and has at
 
 2           least ten years of credited service as a contributory
 
 3           class A or B member as of December 31, 1999;
 
 4      (2)  Irrespective of age, the member has at least twenty
 
 5           years of credited service as a contributory class A or
 
 6           B member as of December 31, 1999;
 
 7      (3)  The member is at least fifty-seven years of age and has
 
 8           at least ten years of credited service as a
 
 9           noncontributory class C member as of December 31, 1999;
 
10      (4)  Irrespective of age, the member has at least
 
11           twenty-five years of credited service as a
 
12           noncontributory class C member as of December 31, 1999.
 
13      (f)  The additional service credit shall not increase the
 
14 amount of total credited service or retirement allowance of the
 
15 member beyond any maximum limitation on service credit or
 
16 retirement allowance established by chapter 88, Hawaii Revised
 
17 Statutes.
 
18      (g)  The member shall forfeit the additional service credit
 
19 and any other benefit provided by chapter 88, Hawaii Revised
 
20 Statutes, that was based on the early retirement bonus upon
 
21 subsequent reentry into the employees retirement system.
 
22      (h)  The heads of the affected department, the judiciary,
 
23 and the University of Hawaii shall transmit a list to the board
 

 
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 1 of trustees of the employees retirement system by June 1, 2000,
 
 2 of participants whose positions are eliminated by section 2 of
 
 3 this Act.  Agencies that employ members of units 5 or 7 who wish
 
 4 to participate in the retirement program provided under this
 
 5 section shall transmit a list of participants to the board of
 
 6 trustees of the employees retirement system by September 30,
 
 7 2000, for participants whose positions are eliminated by section
 
 8 2 of this Act.
 
 9      (i)  Any employee who exercises the option of early
 
10 retirement pursuant to this section but who does not qualify with
 
11 respect to the age and length of service requirements under
 
12 section 88-73, Hawaii Revised Statutes, to receive a retirement
 
13 benefit without penalty, shall not have their retirement benefit
 
14 reduced in accordance with the actuarial formula normally used by
 
15 the employees retirement system for the calculation of early
 
16 retirement benefits.
 
17      (j)  All positions affected by the retirement of an employee
 
18 pursuant to this section shall be abolished.  All amounts
 
19 allocated for positions vacated and abolished pursuant to this
 
20 section shall be returned to the general fund or to the special
 
21 fund from which the employee's position is funded, as applicable,
 
22 upon the retirement of the employee and after the deduction of
 
23 amounts sufficient to cover the department, the judiciary, or the
 

 
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 1 University of Hawaii's costs associated with the retiring
 
 2 employee's special retirement benefits and accumulated vacation
 
 3 leave.  Each department affected by the special retirement
 
 4 program authorized by this section, the judiciary, and the
 
 5 University of Hawaii shall reduce its general funded personnel
 
 6 count by one full-time equivalent per each special retirement
 
 7 benefit conferred.  Each department and the University of Hawaii
 
 8 shall forward a report on the positions affected to the directors
 
 9 of finance and human resources development.  The director of
 
10 finance shall report this information to the legislature no later
 
11 than twenty days prior to the convening of the regular session of
 
12 2001.  The administrative director of the judiciary shall forward
 
13 a report on the positions affected to the legislature no later
 
14 than twenty days prior to the convening of the regular session of
 
15 2001.
 
16                              PART IV
 
17                     MISCELLANEOUS PROVISIONS
 
18      SECTION 5.  The board of trustees of the employees
 
19 retirement system shall make payments with respect to all
 
20 eligible employees who retire pursuant to section 4 of this Act.
 
21      The board shall determine the amount equal to the actuarial
 
22 present value of the difference between allowances members
 
23 receive after the receipt of service credit under section 4 of
 

 
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 1 this Act and the allowances members would have received without
 
 2 two years of additional service credit.  The board shall also
 
 3 determine the portion of the additional actuarial present value
 
 4 of benefits to be charged to the State and to each county, if
 
 5 applicable, based on retirements during the early retirement
 
 6 incentive bonus period.  The State and each participating county,
 
 7 if applicable, shall make additional payments to the employees
 
 8 retirement system in the amounts required to liquidate the
 
 9 additional actuarial present value of benefits over a period of
 
10 five years beginning January 1, 2001.
 
11      SECTION 6.  (a)  The department of human resources
 
12 development and the judiciary, in cooperation with the employees
 
13 retirement system, shall provide briefings prior to the
 
14 implementation of any strategic workforce reduction plan to
 
15 educate the employees whose positions have been eliminated
 
16 pursuant to section 2 of this Act.
 
17      (b)  The department of human resources development shall
 
18 develop and coordinate a career transition program that shall
 
19 include but not be limited to vocational training, financial and
 
20 career planning, and career options for employees who may be
 
21 affected by this Act.
 
22      SECTION 7.  The mayor of a county with the approval of the
 
23 county council, may exercise discretion with respect to
 

 
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 1 participation in the retirement program set forth in section 4 of
 
 2 this Act if a voluntary separation program is initiated in that
 
 3 county; provided that a list of special retirement participants
 
 4 shall be transmitted to the board of trustees of the employees
 
 5 retirement system by May 1, 2000.  Each participating county
 
 6 shall be charged its portion of additional actuarial present
 
 7 value of benefits as determined by the board.
 
 8      SECTION 8.  If any provision of this Act, or the application
 
 9 thereof to any person or circumstance is held invalid, the
 
10 invalidity does not affect other provisions or applications of
 
11 the Act which can be given effect without the invalid provision
 
12 or application, and to this end the provisions of this Act are
 
13 severable.
 
14      SECTION 9.  This Act shall take effect upon its approval.