Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Labor and Public Employment, to which was referred S.C.R. No. 118, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this Concurrent Resolution is to disapprove the recommended salaries submitted by the 2004 Executive Salary Commission as set forth in their report dated February 17, 2004.

Testimony in opposition was received from the Executive Salary Commission.

Your Committee finds that the present Executive Branch officials' salaries have not been modified since 1990, resulting in grossly outdated salaries. However, your Committee feels that while these salaries may be low, entering into public service is a conscious commitment that has its own non-monetary rewards.

Your Committee also points out that the salary increases, if implemented, would be provided without any performance appraisal, position justification, or further review. There is also uncertainty as to whether the state is in a fiscal position to fund the increases, especially with the ever looming possibility of global events adversely affecting Hawaii's economy.

From a fairness perspective, it is also unclear how the state is in a position to authorize pay increases for executive branch officials who receive the highest salaries, while the administration is advocating against salary increases for the rank and file.

As for the recommendations of the Executive Salary Commission, your Committee finds that there are issues that should be fleshed out. First, the rationale used to determine the various tiers that would apply to salary increases for executive department officials seems to be subjective and not necessarily based on the responsibilities of the positions.

As an example, the Director of Human Services administers an operating budget of $1.34 billion, by far the largest of all executive departments. Yet, this director's salary increase is placed in the third tier, behind the Departments of the Attorney General, Health, Transportation, Accounting and General Services, Commerce and Consumer Affairs, Taxation, and Budget and Finance.

As another example, the Director of the Department of Public Safety, who oversees an operation that must operate twenty-four hours a day, seven days a week, is also placed in the third tier of salary increases.

Second, the Executive Salary Commission did not consider the fiscal impacts to the Employees' Retirement System (ERS) and Employer-Union Health Benefits Trust Fund (EUTF) to be significant factors in their recommendations. While it is believed that these impacts would not apply to very many individuals, given the large annual salaries for these officials in comparison with other government positions, the actual effects could be substantial.

As an example of the effects of the Commission's recommendations on the ERS, two of the current directors who are vested members in the ERS would experience increases in their "high three" average salaries from $85,000 to $94,000 and $96,000 if they serve out this administration's current term. If they serve another four year term, these directors' "high three" average salaries jump to $103,000 and $108,000. These average salaries will be used to calculate annual pension payments to these directors, and the increases in the average salaries will result in higher payments required of the ERS.

Third, the Executive Salary Commission's recommendations do not indicate whether the full compensation packages of executive branch officials were considered. No mention was made as to the resulting increase in pension or health benefits that these officials would receive, nor was the value of their vacation and sick leave and state vehicle or automobile allowance mentioned. Your Committee finds that the Legislature would be better equipped to thoroughly review the recommendations of the Executive Salary Commission if it has this information.

However, most importantly, your Committee considered whether current salaries for executive branch officials are commensurate with their responsibilities and are fair. Your Committee finds that they are not.

As such, your Committee has amended this Concurrent Resolution by:

(2) Adding language requesting information:

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 concurs with the intent and purpose of S.C.R. No. 118, S.D. 1, as amended herein, and recommends its adoption in the form attached hereto as S.C.R. No. 118, S.D. 1, H.D. 1.