The extra helping of severance benefits heading toward unionized workers now employed in the Maui region’s state-run hospitals, bound for privatization, is irresponsibly rich, and it’s proposed at the worst time possible.
The state’s Employees’ Retirement System (ERS) fund, already in a hole and slowly working its way out, would dig itself in even deeper, at the taxpayers’ expense, if Senate Bill 2077 becomes law. People who will not ultimately lose their jobs will be able to claim the full benefit of severance options that clearly are meant only as compensation for job loss.
There seems no other reason for the big giveaway other than to score points with the public employee unions, an enormous lure to lawmakers who largely will be seeking re-election in the fall.
The measure completely undercuts the Legislature’s own correct and carefully crafted blueprint to responsibly pay down the unfunded liability of the retirement fund and make the ERS sustainable at last. The bill, of course, also would set a terrible precedent for union negotiations going forward, and that amounts to bad policy, plain and simple.
THE overly generous benefits come thanks to the passage of SB 2077, which Gov. David Ige must summon enough political courage to veto. Not a dime has been appropriated to pay for this bounty — estimated at $40 million or more — so spiking it would avoid blowing a hole in the state’s budget, which is always the right thing for any governor to do.
A new wrinkle appeared Tuesday, when the 9th Circuit Court of Appeals temporarily halted the Maui hospitals’ privatization transition, in order to examine the impact on the United Public Workers.
But assuming that gets ironed out, and SB 2077 is not vetoed, all 1,400 employees of Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital will get special severance benefits.
The HHSC system has been fiscally ailing for years: Regional and statewide officials made annual appearances before lawmakers to request bailout funds, especially for the neighbor islands. Due to various facility shortcomings and overall high expenses, the relatively small communities could not generate the revenue needed to sustain the operations.
After years of study and negotiations, HHSC reached a privatization deal with Kaiser Permanente Hawaii. The pact was sanctioned last year with Act 103, enabling the Maui public hospital system to transition to private ownership.
This session, the Hawaii Government Employees Association (HGEA) was at the Capitol, persuading lawmakers to fatten the accord reached with Act 103. SB 2077 offers a choice of either a severance payment of up to half the annual salary of any worker whose position is privatized. This means all of them, whether or not they ultimately keep their position, at comparable pay from Kaiser.
Here are things Ige must consider:
>> Again, this sweetheart deal could cost the state $40 million in payouts. Even if it’s spread over five years, as the measure dictates, that’s still a direct hit on the state general fund — and taxpayers.
>> With 1,400 fewer public employees paying into the ERS fund, the state will lose some $11 million to $15 million in worker contributions the first year. This would mean the state must increase its regular allotment to pay down the liability, which now stands at $8.77 billion.
>> There are many within the benefit class who are eligible to retire: There’s nothing in current law to stop them from retiring with full benefits, claiming the severance payment and being hired back in their old jobs.
The whole thing is patently unfair to the taxpayers underwriting everything. If the state hopes to accrue savings through privatizing other public hospitals, those workers would insist on the same deal.
This is precedent that will lead nowhere good.
Just last January, Ige inked an agreement with Kaiser operate the three hospitals, predicting the privatization would save the state $260 million in hospital subsidies over 10 years. Clasping savings like that in one hand, and then throwing it away with the other, is utterly pointless.
If the governor has the good sense and the guts to deny the unions this bonanza, he’ll spike SB 2077.
As chairman of the Senate Ways and Means Committee, Ige worked hard to enact the long-range plan to put the ERS back in the black. So that suggests he has sense.
We’re about to find out whether he has the guts.
