Privatization, Managed Competition, Right to Strike

Senate Bill 1096 represents a structural change in government and provides important new tools for the governor and county mayors to deliver government services more efficiently and at lower cost. The privatization option enables the governor and mayors to contract with the private sector to provide government services.

The managed process option authorizes the governor and mayors to offer unionized public workers the opportunity to match the private sector's bid.

The bill also prevails over the Konno v. Hawaii County decision by the Hawaii Supreme Court blocking government's ability to use the private sector to do work traditionally handled by civil servants.

S.B. 1096 also repeals binding arbitration and restores the right to strike for all collective bargaining units except firefighters, police officers, and institutional, health, and correctional workers. The measure also repeals references to essential employees and essential positions.

"This measure places substantial trust in the integrity of our chief executives to do the right thing. But we must all guard against a return to the spoils system, where political favorites receive special consideration in the award of contracts. Future legislators must be vigilant in their oversight of the Executive Branch and the counties," Oshiro said.

The bill addresses those concerns, Oshiro said, through an annual reporting requirement and a sunset date of 2007.

In the House, the measure passed by a 44 to 7 vote; in the Senate, the measure was approved 22 to 3.

Hawaii Employer-Union Health Benefits Trust Fund

Senate Bill 1044, clearly the more controversial of the two reform bills, reforms the Public Employees Health Fund to address the rapidly escalating costs of providing health benefits to active and retired government employees and their dependents. The measure creates the Hawaii Employer-Union Health Benefits Trust Fund that will replace the existing Public Employees Health Fund and the various individual union plans.

"Future costs that threatened the State's ability to continue providing health benefits were the primary motivating factor," Oshiro said, adding that a 1999 study by the State Auditor found that if the State maintains the current PEHF system, the cost of employer contributions would exceed $1 billion in 2013.

Under S.B. 1044, the trust fund will be governed by a board made up of employer, employee and retiree representatives. The bill gives the governing board complete discretion, authority, and flexibility to devise and maximize the levels and types of benefits available for public employees and retirees. The amount of the employers' contribution will be determined through collective bargaining.

Oshiro said the potential savings in tax dollars are estimated at $65 million by 2004 and by the year 2013, cumulative savings could be as high as $903 million.

While the House voted 38-13 in favor of the bill, the Senate vote was a whisker close 13-12.

Oshiro applauded the effort of the Senate in supporting systemic change. "I really believe those who opposed the measure underestimate the public's desire for real reforms," he said.

Other measures passed that complement S.B. 1044 include:

• Senate Bill 1046, which caps the employers' contribution for voluntary medical insurance coverage under Medicare to the lesser of $50 per month or the federal plan rate, and provides the Health Fund with greater flexibility to determine the types of plans, the design of plans, and the delivery of plan services; and

• Senate Bill 1058 which reduces public employer costs by requiring that the amount ported by the PEHF to employee organizations for health benefit plans, dental plans, and group life insurance be based on a negotiated percentage of the fund's most cost effective plan, or the actual cost of the plan or program selected by the employee-beneficiary, whichever is less. It also requires, unless otherwise specified by the Health Fund, that all excess ported amounts be returned by the employee organizations to the PEHF.

Other reform-minded measures adopted by the Legislature include House Bill 168, which ensures the integrity and certainty of the State's electoral process by establishing a bipartisan task force to comprehensively review, evaluate, and recommend changes to Hawaii's election laws regarding vote tabulation.

"House Democrats actually favored more aggressive reforms to campaign finance laws and wanted to explore, in real terms, a publicly financed election in the 2002 Honolulu City Council races," Oshiro said. "But we were unable to persuade key Senators to agree, so we'll probably have to revisit this issue next session."

General fund appropriations total $3.5 billion in fiscal year 2002 and $3.6 billion in fiscal year 2003. These represent cuts of 23 percent and 21 percent, respectively, from the requests submitted by the Governor. In dollar terms, it translates to cuts in the Administration's proposed budget of over $107 million in 2002, and nearly $135 million in 2003.

"We are still concerned that this budget amounts to yet another slight increase, but we are satisfied in that we did not have to raise taxes, halt previously approved tax relief, nor raid any special or other funds to balance the budget," Oshiro said.

Capital improvements funding through general obligation bonds total $301 million in 2002 and $173 million in 2003, or roughly half of what the Governor originally requested, Oshiro said. He also noted that the bulk of these general obligation bond issues are aimed at improvements to public school facilities and the University of Hawaii system.

Meeting court-ordered payments was a considerable limitation to the fiscal committees latitude, Oshiro said, singling out the federal Felix Consent Decree to provide special education and mental health services to children and adolescents.

For fiscal years 2002 and 2003, the total Felix funding request is nearly $700 million, not counting emergency requests. While the State claims the amounts fall short of their requests to meet the court's compliance deadline, Oshiro said the House is open to convening a special session to consider additional funding needs.

In his remarks on the floor of the House, Finance Committee Chair Dwight Takamine said the Legislature has no desire to put the state at risk with regard to the federal court. But Takamine underscored the prevailing House-Senate sentiment that the Legislature cannot simply ignore its duty to justify the expenditure of every tax dollar.

A separate measure, House Bill 1678, establishes a definition of a "Felix" child, and Oshiro said that should be a great help in fiscal planning.

The budget also restores funding to a number of critical human and social services, which suffered huge cuts in the recent lean years. The State Department of Human Services budget is being increased by $84 million over the next two fiscal years. Additional millions are being appropriated to help families make the transition from federal welfare assistance.

Takamine characterized the budget as a "people's budget" because of its support for children, the elderly and the disadvantaged. Child Welfare Services will receive $12 million over the next two years to help neglected and abused children. Elderly care services will receive over $1 million and over $12 million is being provided to help stem the rising cost of prescription drugs under the State's Medicare program, mainly to help uninsured or underinsured seniors.

The Hawaii Health Care System Corporation, which operates the State's hospitals, will receive $18 million over the biennium mainly to ensure delivery of quality health care to Hawaii's rural communities. An additional $5.7 million is targeted for State health care facilities serving areas such as Hana, Molokai, Waianae and Kahuku.

The majority of discretionary funding, however, is targeted to help education. In fiscal year 2002, the Department of Education's operating budget is increased by $172 million to be followed by an increase the next year of $54 million.

The University of Hawaii system's operating budget in fiscal years 2002 and 2003, are being increased by $40 million and $18 million, respectively. There is a special emphasis on the UH Community Colleges in the budget. Kauai, Maui, and Windward community colleges will receive nearly $2 million over the biennium for new facilities, in addition to an appropriation of more than $500,000 to address replacement and modernization of equipment over the next two years.

"I believe that these measures alone would qualify this as a productive session," Oshiro said. "However, we are also moving to transform the State's energy policies away from our dependence on fossil fuels and we strengthened laws to protect our young people, our senior citizens and those least able to help themselves."