Gov. David Ige unveiled a proposed $28.5 billion, two-year state budget Monday that includes money for severance payouts for Maui County hospital workers who will lose their jobs to privatization, funding for new jail space for female offenders, and more money to cope with homelessness in Hawaii.

Ige’s proposed budget also includes more than $3 billion in new construction funding for harbors, airports, correctional facilities and other public infrastructure over the next two years, including $373 million for new schools and classrooms.

Ige said his budget for the two-year period that begins July 1 does not include any new tax increases. The proposed budget will now be submitted to the state Legislature, which will consider the spending plan when it returns to session at the state Capitol on Jan. 18.

The spending plan’s first year is a 4 percent increase over this year, the second of the previous two-year budget.

“This budget proposal aims to balance our state’s current needs with our investments for the future — providing basic needs for our residents such as affordable housing, quality public schools, primary healthcare and essential social services,” Ige said in a statement announcing the budget.

Ige is asking state lawmakers to approve an additional $20.9 million per year for the next two years in assistance for the homeless and also to support people who are at risk of becoming homeless.

State lawmakers appropriated $12 million last year to help cope with homelessness, and Ige has described that as the “blueprint.”

During the past year the state has touched more than 5,000 lives though its efforts to deal with homelessness, Ige said Monday. He said that includes more than 3,000 people who were “on the edge of homelessness” and were offered support so they could stay in their homes. The state also placed more than 3,200 homeless individuals into permanent, supportive housing, Ige said.

In an interview with the Honolulu Star-Advertiser last week, Ige said he’s told state agencies that “this homeless situation is going to be part of our environment moving forward” and the state has to be able to respond, so “let’s fix the processes.”

Ige also has been meeting with developers to create partnerships that he hopes will lead to “fundamental change” in developing affordable housing.

Ige said the state has leveraged $18 million in low-income tax credits into $444 million for private developers to build 2,600 affordable rental units over two years.

“We constantly are working with them to identify areas where the state can be more responsive,” Ige said.

Housing

Ige is proposing that the state devote $123.4 million to promote new housing starts. That includes $50 million to be placed in the Dwelling Unit Revolving Fund to help finance infrastructure for new housing, and $50 million for the Rental Housing Revolving Fund to support affordable rental housing projects, he said.

The proposed budget also includes $15 million to finance an affordable housing project and juvenile services at the Family Court detention facility at 902 Alder St., and $59 million to pay for public housing renovations and improvements, he said.

Hospital staff

Ige also announced his administration has reached an agreement with the Hawaii Government Employees Association and the United Public Workers unions that clears the way for severance payments to hospital workers who will lose their state jobs when three Maui County state medical facilities are privatized.

Those severance payments are expected to cost the state between $27 million and $33 million, according to Wesley Machida, director of the state Department of Budget and Finance.

Lawmakers last year authorized privatization of Maui Memorial Medical Center, Kula Hospital & Clinic and Lanai Community Hospital, and the state reached an agreement in January to have Kaiser Permanente operate all three facilities. Ige predicted the change will save the state $260 million in hospital subsidies over the next decade.

The privatization was opposed by the state’s public worker unions, which represent about 1,400 employees at the Maui County hospitals. Most of the hospital staffers are expected to continue working at the hospitals for Kaiser, but they will no longer be state workers.

State lawmakers approved a bill this year to provide either a lump-sum cash payment or early retirement to workers who lose their state jobs in the Maui privatization effort, regardless of whether they later go to work for Kaiser.

Ige vetoed the measure because he said technical flaws in the measure could threaten the federal tax-exempt status of the Employees’ Retirement System, and because lawmakers had not provided money to fund the severance payments. The Legislature overrode his veto, and the retirement system then sued to block the new law.

Kaiser announced it has delayed its plan to shift the hospitals to private operations until July 1, but Ige said the agreements the state negotiated with the unions, including the deal for severance payments, would allow the privatization effort to happen sooner. However, a spokeswoman for Kaiser said Monday that Kaiser is still aiming for the July 1 transition date.

The state agreed to subsidize the hospital operations during the transition period, and the Ige budget for next fiscal year includes a $38 million subsidy as well as $10 million in working capital for the hospitals, and $9.5 million to cover costs related to the transition delays.

Machida also said the state has also agreed to pay $6 million next year to assist the hospitals with needed construction projects.

Incarceration

Ige also announced his budget includes $9 million to plan and design additional housing at the Women’s Community Correctional Center in Kailua for female jail inmates who are now locked up at Oahu Community Correctional Center.

Nolan Espinda, director of the state Department of Public Safety, said moving the women out of OCCC will make more room at the overcrowded jail for male prisoners. He said there are 148 women at OCCC now, and that moving them to WCCC will give them access to better educational and other programs than they now have at the Kalihi jail.

The jail inmates would be housed separately from the sentenced felons at WCCC, Espinda said.

The new budget also includes a request for $170 million for ticket lobby improvements at Honolulu Airport, and $50 million for a permanent federal inspection station at Kona Airport on Hawaii island. That facility will be used by U.S. Customs and Border Protection officials to process passengers arriving on direct international flights to Kona.

Star-Advertiser staff writer Dan Nakaso contributed to this report.