STAND. COM. REP. NO.  342

Honolulu, Hawaii

                , 2011

RE:   H.B. No. 1037

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committee on Labor & Public Employment, to which was referred H.B. No. 1037 entitled:

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

begs leave to report as follows:

     The purpose of this bill is to stabilize the Employees' Retirement System (ERS) and work to address its current accrued unfunded liability by specifically increasing the contribution rates for employer contributions to the ERS beginning in fiscal year 2013.

     The ERS Board of Trustees and Hawaii Government Employees Association testified in support of this bill.  The Department of Budget and Finance supported the intent of this measure.  The City and County of Honolulu provided comments.

     Currently, the ERS has an Unfunded Actuarial Accrued Liability (UAAL) of $7.1 billion.  Under Hawaii law, contribution rates to the ERS are subject to adjustment if the period required to amortize the UAAL of the ERS exceeds 30 years.  According to the ERS's actuary, present contribution rates are not sufficient to amortize the UAAL in 30 years and the ERS faces a significant funding shortfall that must be made up with either increasing employer contributions, increasing employee contributions, decreasing employee benefits, or a combination of all three.  This measure provides for moderate increases to the employer contribution rates over the next several years to address part of this issue.

     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 H.B. No. 1037 and recommends that it pass Second Reading and be referred to the Committee on Finance.

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

____________________________

KARL RHOADS, Chair