Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Labor and Public Employment, to which was referred H.B. No. 50 entitled:

begs leave to report as follows:

The purpose of this bill is to restore health fund benefits to retired public employees.

The Hawaii State Teachers Association and the Retirees Unit, HGEA-AFSCME Local 152, testified in support of this measure. The Hawaii State Retired Teachers Association, Oahu Retired Teachers Association, and a retired citizen testified in support of the intent of the measure. The Department of Budget and Finance testified in opposition to this measure.

When most public employee retirees were first hired, it was with the understanding that the State would provide them with free health benefits for the employee and the employee's family upon retirement. Act 88, Session Laws of Hawaii 2001, changed this situation when the plan changed from a defined benefits plan to a defined contribution plan.

Your Committee finds that retirees had the expectation that their health plan would pay for voluntary medical insurance coverage under federal Medicare. To ensure that retirees receive this voluntary medical insurance coverage under Medicare at no charge, payment by the Hawaii Public Employees Health Fund (HPEHF) should be required.

Your Committee is aware that HPEHF is scheduled to be replaced by the Hawaii Employer-Union Health Benefits Trust Fund (EUTF) on July 1, 2003. If the requirements necessary to transfer the functions of HPEHF are not in place by March 1, 2003, EUTF will not be ready to begin operations. This will leave HPEHF in limbo and result in thousands of public employees temporarily losing health benefits. This presents a serious problem, and it is your Committee's intention to pass another measure, which extends HPEHF for an additional year.

Taking into consideration all of these concerns, your Committee has amended this measure by:

Other technical, nonsubstantive amendments were also made for purposes of clarity, conformity, and style.

Your Committee recognizes the complexity of the current situation involving HPEHF and EUTF and that this measure will have an impact on the State's obligation to its retirees. Currently, there are 30,000 public employee retirees, 20,000 of whom are over the age of 65. These retirees also have 7,000 dependents.

The financial impacts of this measure fall beyond the purview of the Committee on Labor and Public Employment. Therefore, your Committee respectfully requests the Committee on Finance to examine the financial implications of this measure and requests the Director of Finance, who is also a member of the HPEHF Board of Trustees, to provide the Committee on Finance with additional data regarding the cost components related to retiree health benefits.

As affirmed by the record of votes of the members of your Committee on Labor and Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 50, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 50, H.D. 1, and be referred to the Committee on Finance.