STAND. COM. REP. NO. 2768

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2793
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Commerce and Consumer Protection, Labor
and Environment, and Ways and Means, to which was referred
S.B. No. 2793 entitled: 

     "A BILL FOR AN ACT RELATING TO THE EMPLOYEES' RETIREMENT
     SYSTEM,"

beg leave to report as follows:

     The purpose of this measure is to address concerns regarding
the excessive and improper use of overtime compensation intended
solely for the purpose of increasing retirement benefits under
Chapter 88, Hawaii Revised Statutes (HRS).

     Testimony in support of the measure was received from the
Department of Budget and Finance.  The State of Hawaii
Organization of Police Officers, the United Public Workers, the
Hawaii Government Employees Association, the Honolulu Police
Department, and a number of public employees opposed the measure.
The Employees' Retirement System provided comments on the fiscal
impact of the proposal.

     Currently, overtime pay is included in the calculation of
"average final compensation" as defined in section 88-21, HRS.
The assignment of overtime work is left to the discretion of the
public employer and is considered a management right under
section 89-9(d), HRS.  Regretfully, public employers have been
unable to unilaterally curtail the practice among certain
employees of increasing overtime work simply to boost retirement
benefits.

 
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     Your Committees find that any limitations or cap which may
be imposed to curtail this undesirable practice is a joint
concern of public employers and employees, and should be made a
permissive subject of collective bargaining under section 89-9,
HRS.  Accordingly, public employers and exclusive bargaining
agents are encouraged to negotiate over the subject matter.
Collective bargaining provisions limiting or capping the amount
of overtime compensation which may be included in the calculation
of "average final compensation" as defined in section 88-21, HRS,
shall be binding on the Employees' Retirement System.

     Your Committees find that no excluded officer or employee
should be permitted to increase his or her average final
compensation as defined in section 88-21, HRS, by the assignment
of overtime which is intended for the purpose of increasing
retirement benefits.  Appropriate measures to reduce or eliminate
the same practice within bargaining units as defined in section
89-6, HRS, should be a permissive subject of collective
bargaining.  Public employers and exclusive bargaining
representatives are encouraged to negotiate over the subject
matter and overtime compensation which is contrary to such
negotiated provisions should not be included in the calculation
of "average final compensation" as defined in section 88-21, HRS.
A similar prohibition shall be applicable to excluded personnel
under section 89C-2(7), HRS.

     Your Committees have amended the bill by deleting its
substance and inserting therefor, amendments that:

     (1)  Amend the definition of "average final compensation" in
          section 88-21, HRS;

     (2)  Amend section 89-9, HRS, to enable the employer and
          exclusive bargaining representative to negotiate
          methods by which to reduce and eliminate the excessive
          use of overtime;

     (3)  Amend section 89C-2, HRS, to prohibit excluded
          employees from boosting their average final
          compensation calculation through the excessive use of
          overtime;

     (4)  State that the negotiability and exclusion of overtime
          covered in paragraphs (2) and (3) only affect public
          employees who are first hired into public service after
          January 1, 2001;

     (5)  Require the Department of Human Resources Development
          to analyze other public and private sector pension and

 
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          compensation systems and develop alternative
          legislative models that address whether overtime should
          be calculated in determining an employee's retirement
          benefits; and

     (6)  Insert a defective effective date of July 1, 2010, in
          the measure to ensure that discussion on the issue will
          continue into conference.

     Your Committees note that it is not the intent of the
Committees or the measure to in any way impair or inhibit the
provision of necessary services to the public.  Your Committees
strongly believe that important police and fire operations should
not be hindered or diminished in any way as a result of this
measure.  Your Committees also note that there are potentially
many other legislative models that could effectively address the
issue of reducing or eliminating the excessive use of overtime
which is intended to improperly increase an employee's average
final compensation and that your Committees will diligently
consider the options provided by the Department of Human
Resources Development when this measure goes into conference
negotiations.

     With regard to the amendment that requires the Department of
Human Resources Development to develop and submit an analysis of
other public and private sector pension and compensation systems
and develop alternative models addressed in item (5), your
Committees request that the Department of Human Resources
Development submit their findings to the Senate not later than
April 3, 2000 so that the Legislature will have more remedial
options to consider during conference negotiations.

     As affirmed by the records of votes of the members of your
Committees on Commerce and Consumer Protection, Labor and
Environment, and Ways and Means that are attached to this report,
your Committees are in accord with the intent and purpose of
S.B. No. 2793, as amended herein, and recommend that it pass
Second Reading in the form attached hereto as S.B. No. 2793,
S.D. 1, and be placed on the calendar for Third Reading.


 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Commerce and
                                   Consumer Protection, Labor and
                                   Environment, and Ways and
                                   Means,



____________________________       ______________________________
BOB NAKATA, Chair                  BRIAN KANNO, Co-Chair



____________________________       ______________________________
CAROL FUKUNAGA, Co-Chair           BRIAN T. TANIGUCHI, Co-Chair



____________________________
ANDREW LEVIN, Co-Chair

 
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