The complete mess that state lawmakers left via Senate Bill 2077 was completely predictable and could have been avoided. That’s the bottom line.
The bill was passed to deliver a special set of benefits to the unionized labor force at the Maui region of the state’s public hospital system that is set for turnover to private management. That deal, which the unions have opposed, is needed to stem annual losses that continue to drain the public purse.
The extra benefits were wholly unwarranted, given that virtually all the employees of Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital would have retained their jobs in the privatization deal, which would turn over the reins to Kaiser Permanente.
Regardless, the Legislature passed SB 2077 anyway. An overwhelming majority voted in favor, arguing that it was needed to preserve the privatization deal.
But when weighed in balance against the risk — the danger of further financial losses to the state’s Employees’ Retirement System, already hobbled by unfunded liabilities — protecting the ERS clearly deserved the greater consideration.
The fact that lawmakers charged ahead, despite the irrefutable legal problems identified in the bill, was plainly aimed at satisfying a powerful labor union during an election year. This happened despite the availability of an alternative path forward that achieved a better balance.
Rather than being viewed as a safe election-year decision, SB 2077 should give the taxpayers pause. This act provides a reason for voters at least to consider competing candidates for office when they assess the performance of their lawmakers in the primary election polling booth on Saturday.
SB 2077 gave employees in the Maui-hospitals transition a choice of severance benefits. But that provision would violate a tax regulation governing the state ERS, said the fund’s attorneys, and that breach would endanger the tax-exempt status of the entire retirement fund.
That was the reason Gov. David Ige vetoed the bill, warning legislators in no uncertain terms of the risk. He instead proposed an alternative that could have achieved a compromise with the unions — an alternative that lawmakers ignored. Instead, they overrode the veto, and the bill was enacted.
The ERS administrators this week were left with little choice but to seek relief through the courts, and have sued to protect the fund from potential loss of status and the hefty added tax burden that would result.
The right course of action would have been to shelve from the start any notion of a sweetheart deal with the Hawaii Government Employees Association. The HGEA is one of two unions to be affected by the hospital privatization deal.
The other union, United Public Workers, followed a different course, filing its own lawsuit to stop the hospitals’ transfer, on the grounds that it would take place while the union’s current contract remains in effect.
The UPW challenge drew an injunction that halted the transfer deal, now past its targeted completion date. The governor has been in negotiations with the union to achieve a settlement, an effort that should continue apace.
Ideally, lawmakers would return in special session to repeal the act that threatens the entire retirement fund, but there seems little impetus behind such a drive.
Several legislators had argued forcefully before the vote that the benefits needed to be approved to keep HGEA from joining the UPW suit or pursuing its own challenge.
State Sen. Rosalyn Baker, who represents Maui, spoke on the Senate floor in favor of steering clear of further legal entanglements; Kaiser needs eight weeks to complete the transition, not more delays, Baker said.
Indeed, Maui deserves the health security of a sustainable, local hospital network. But disregarding the obvious flaw in the bill did not achieve that end, either. It merely compounded a chaotic situation.
As for the taxpayers, they should take this opportunity to drill down to the facts. Is their elected representative serving in the best interest of the public? An election year is the optimal time to ask that question.