Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 2718 entitled:

begs leave to report as follows:

The purpose of this measure is to extend the payment period to liquidate the Employees' Retirement System's unfunded accrued liability from fifteen years to twenty-nine years beginning in plan year 2001.

Testimony in support of the measure was received from the Department of Budget and Finance. The Hawaii State Teachers Association – Retired testified in opposition to the measure. The Employees' Retirement System submitted comments.

Your Committee finds that the tragic terrorist attacks in New York City and Washington D.C. have resulted in grim economic effects in the country and in Hawaii. On November 14, 2001, the Council of Revenues amended its previous projections by reducing the fiscal year 2001-2002 projection from 4.1 per cent to -.7 per cent and the fiscal year 2002-2003 projection from 5.2 per cent to 5.1 per cent. These reductions and out-year projections result in a general fund reduction of approximately $1,186.8 million over the planning period.

The contrary situation of reduced revenues and increased funding requirements require an in-depth review of both resources and costs. The magnitude of the State's economic downturn requires that all areas, including non-discretionary expenditures, be reviewed.

Your Committee finds that this measure will reduce the State and counties' annual payments by amortizing the liability over a longer time frame.

Your Committee has amended the measure by making technical, nonsubstantive amendments for the purposes of clarity and style.

As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2718, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2718, S.D. 1, and be referred to the Committee on Ways and Means.