Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Higher Education and Labor, to which was referred S.B. No. 900 entitled:

beg leave to report as follows:

The purpose of this measure is to prohibit the State's annual contribution for any employee who elects to be a member of the University of Hawaii's optional retirement system from exceeding six per cent of the Internal Revenue Code federal tax limit on annual compensation, rather than six per cent of $100,000. This measure also repeals the optional retirement system's sunset date.

Your Committees received favorable testimony from the University of Hawaii.

The University of Hawaii’s testimony likened the increase in the maximum amount that the State would contribute for an employee under the optional retirement system as being on par with the contribution limit applied under the Employee Retirement System.

While this is true in words, this is false in its impact. Your Committees are concerned that requiring the State to contribute up to the federal tax limit has a much more significant impact due to the significant number of university employees making more than $100,000 as compared with the rest of state government. For example, while the Governor of the State of Hawaii is paid $94,780 the President of the University of Hawaii is paid over $300,000.

Your Committees believes that while the application of the policy of using the federal tax limit sounds fair, its implementation will be much more costly than when applied to a typical state department. For instance, the University of Hawaii's report to the 2005 Legislature on "Salaries Paid to Executive/Managerial and Faculty Employees" reports that there are over four hundred forty employees whose annual compensation is over $100,000.

Your Committees further believe that the University of Hawaii has sought and received a level of autonomy unparalleled with that of any executive branch agency. However, throughout the 2005 legislative session, it has become apparent that the University has used autonomy as an excuse not to be accountable for state funds appropriated in the past and reallocated over time. As such, university officials are unable to detail to the Legislature where general funds for various vacant positions have gone and for what reasons.

In light of this lack of accountability, your Committees have chosen to exercise caution and choose to maintain the maximum contribution the State will make to six per cent of $100,000. It should be noted that current law requires the University to pay for any difference between the State’s contribution and that to which the employee is entitled.

Finally, your Committees believe that more discussion is warranted to determine the financial impact to the State and the negative, if any, impact from maintaining the State’s maximum contribution at six per cent of $100,000. Therefore, your Committees have amended the effective date of this bill to be July 1, 2020.

As affirmed by the records of votes of the members of your Committees on Higher Education and Labor with reservations that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 900, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 900, S.D. 1, and be referred to the Committee on Ways and Means.