STAND. COM. REP. NO.  1401

Honolulu, Hawaii

                , 2007

RE:   S.B. No. 1284

      S.D. 2

      H.D. 1

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Sir:

     Your Committee on Labor & Public Employment, to which was referred S.B. No. 1284, S.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO THE EMPLOYEES' RETIREMENT SYSTEM,"

begs leave to report as follows:

     The purpose of this bill is to address the Employees' Retirement System's (ERS) ability to eliminate its unfunded liability.  Specifically, this bill:

     (1)  Increases the state and county contributions to the ERS for all their employees;

     (2)  Repeals the provision allowing the employer contribution rates to be reduced even if the period required to amortize the unfunded actuarial liability falls below 25 years; and

     (3)  Allows the ERS Board of Trustees to adopt actuarial recommendations for the salary scale assumptions.

     The Hawaii Government Employees Association and Hawaii State Teachers Association testified in support of this bill.  The Department of Budget and Finance and Board of Trustees of the ERS testified in support of the intent of this measure.

     Currently, the unfunded liability of the ERS stands at $5.1 billion dollars.  Moreover, the recent actuarial report on the ERS found that, at current benefit levels and employer contribution rates, it will take approximately 43 years to amortize the unfunded liability.  In addition, the current statutory salary scale assumptions of approximately four percent fall below actual salary scale assumptions.

     Your Committee has amended this bill by changing its effective date to July 1, 2059, to encourage further discussion.

     As affirmed by the record of votes of the members of your Committee on Labor & Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1284, S.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1284, S.D. 2, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Labor & Public Employment,

____________________________

ALEX M. SONSON, Chair