HOUSE POISED TO MOVE ON PRIVATIZATION, OTHER REFORMS

HONOLULU -- As tonight's midnight deadline approaches for passage of measures received from the State Senate, House Democrats have amended several bills that accelerate the pace of governmental reforms, including privatization.

Majority Leader Marcus Oshiro said, " If you look at these measures as a package, it becomes quite clear that House Democrats are quite serious about improving government efficiency and reducing costs."

Privatization and Collective Bargaining

The House's long-range goals are to improve government efficiency and reduce costs, Oshiro said. One area where House Democrats feel the State is ready for a major change was in privatizing government services, he added.

Senate Bill 1096 establishes a new chapter on privatization in the Hawaii Revised Statutes. The House's amendments include:

1. Restoring the right to strike for all collective bargaining units, except firefighters and police officers;

2. Repealing statutory references to essential employees and essential positions; and

3. Minimizes the adverse effects on public workers displaced by privatization.

Another measure, S. B. 120, would further the privatization effort by allowing the Governor to contract for the private operation of a minimum security prison facility within the State, and establishes criteria with respect to an acceptable contract for a privately operated prison. Another part of the bill provides State matching funds for the continued development of a sentencing simulation model.

S. B. 24 enables government agencies to conduct experimental modernization projects this year instead of waiting for the Civil Service Reform Act (Act 253) to go into effect in July of 2002. Under the proposed measure, agencies who conduct modernization projects would be exempt from state and county personnel laws. Oshiro said one agency who appears ready to move on this is the Honolulu Board of Water Supply.

The right to strike was restored for all public workers except firefighters and police officers, who will still be under binding arbitration. Oshiro said the House amended S. B. 849 to provide additional criteria arbitrators must use to determine wage and salary adjustments under collective bargaining, including:

1. Consider federal restrictions on the use of moneys in special funds;

2. Consider the ramifications on remaining collective bargaining agreements not yet agreed to, including consideration of costs for contributions to the health fund;

3. Not assess the employer's ability to fund cost items based on the premise that the employer may impose new taxes, fees, or charges, or develop other sources of revenue;

4. Not consider revenue estimates exceeding the latest Council of Revenues report; and

5. No longer consider other factors not specified that are "normally or traditionally" taken into consideration.

Oshiro said these changes should result in more realistic decisions by arbitrators with respect to the State's ability to finance pay raises.

Public Employees Health Fund (PEHF)

By the end of the decade, if no changes are made, the State's payout for health and medical benefits for its active employees and retirees under PEHF will approach $1 billion per year, Oshiro said. House Democrats amended several bills to address the situation, beginning with S. B. 1044, which would establish a new, more flexible structure for public employee health benefits. The key points of S. B. 1044 include:

1. Replace the current Hawaii Public Employees Health Fund (PEHF) with the Hawaii Employer-Union Trust Fund (Trust Fund);

2. Schedule the repeal of PEHF, as found in chapter 87, Hawaii Revised Statutes (HRS), on July 1, 2003;

3. Increase the membership of the Trust Fund's Board of Trustees (Board) from 10 to 11, by adding a public trustee representing the interests of both the general public and the Trust Fund beneficiaries;

4. Amend Trust Fund voting procedures so that the three groups of trustees, representing public employers, employee-beneficiaries, and the general public and beneficiaries, each have one vote to ensure timely resolution of issues before the Board; and

5. Establish base monthly Medicare and non-Medicare employer contribution rates for retirees, effective July 1, 2003.

To cap the State's contribution to the fund, Oshiro said the House deleted the provisions of S. B. 1046 and replaced it with the contents of House Bill 1058, H. D. 1, which would:

1. Limit State and county contributions for public employees health benefits expenditures to the amount appropriated in fiscal year 2001-2002; and

2. Provide that the amounts subject to a collective bargaining agreement in effect on July 1, 2001, would be appropriated until the expiration of the collective bargaining agreement.

We think that these two bills combined would provide a more cost-effective health benefits system for members of the fund, check the spiraling costs, and put the decision-making regarding health benefits where it should be, on the trustees of the fund, Oshiro said.

The House also moved to reduce public employers' costs to various union health benefit plans and group life insurance plans by amending S. B. 1058, which proposes to:

1. Require the amount ported to employee organizations for health benefit plans and group life insurance be based on the most cost effective plan that provides the same level of benefits for participants in the plans of the (PEHF) and employee organizations;

2. Confirm the employer's authority to audit employee organization health benefits and group life insurance plans; and

3. Require employee organizations to return to PEHF the employer's share of refunds from their insurance carriers; and

4. Appropriates $200,000 in each year of fiscal biennium 2002-2003 for B&F to audit employee organization plans.

Incentives for School Principals, Employment Training Fund

Oshiro also highlighted two other areas he said the House was addressing critical needs maintaining a competitive workforce and recruiting and retaining school principals.

"We are facing a serious shortage of principals and vice principals in a few years. Our traditional base for filling these positions, the teaching ranks, is also facing shortages," he said.

Under S. B. 530, principals and vice principals would receive salary incentives, based on performance, and for outstanding principals who accept long-term assignments with schools that have difficulties with staffing or special needs. Oshiro said the measure would ease requirements for hiring principals and vice principals.

Another measure, which addresses the State's workforce needs as Hawaii transitions from an agricultural and service economy into the information/technology age, would reduce the contributions by employers into the Employment and Training Fund to .05 percent of an employer's payroll taxes. One of the main targets of S. B. 733 is small businesses that often cannot afford training costs for its workers.

Oshiro acknowledged that many businesses would like to end the training fund, but that would put the entire State at risk. "In the 21^st Century, new demands in health care, personal services and even mature services like tourism, require workers who have a technology background," Oshiro said. "Small businesses, especially, would be hard-pressed to find qualified workers to help them compete in the New Economy, and they are the very ones who can least afford expensive training programs. We need to keep the fund viable."

There are hundreds of other measures up for passage today. All bills that fail to meet today's midnight deadline for passage on third reading are dead for the session. Beginning next week, House and Senate conferees will be named and the process of working out differences in conference committees will begin.

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