By Chad Blair; Civil Beat; July 12, 2016
UPDATED 7/13/2016: Hawaii lawmakers convened a special session Tuesday to revive a bill providing financial assistance to public employees at three hospitals in Maui County that was vetoed by Gov. David Ige on Monday.
The Legislature plans to reconvene next week to amend Senate Bill 2077, which currently calls for providing tens of millions of dollars in lump-sum cash severance payments and special retirement benefits to unionized hospital workers who could lose their jobs.
The hospitals are transitioning from public status under state control to private ownership.
In separate press conferences Tuesday — including one by Ige that was rescheduled twice — the governor and House and Senate leaders expressed confidence that a compromise could be reached.
Ige’s proposed amendments include a call for negotiating a new separation package and less money that SB 2077 called for. The Legislature’s proposals are still being drafted and there are few details available.
The saga of SB 2077 has been an unusual turn of events presenting a “challenging dilemma,” as Speaker Joe Souki characterized it.
Ige had said late last month that SB 2077 was one of nine bills he was considering vetoing. He said he worried that the payout was too much money and would set a bad precedent regarding public-sector union contracts. Legislative leaders said Friday that they were mobilizing to go into special session this week.
That same day, Ige was informed that the bill might jeopardize the tax-exempt status of the state’s Employees’ Retirement System plan “because it allows the affected employees to choose between a lump-sum cash payment that is taxable as wages and a special employer subsidized early retirement benefit.”
The Internal Revenue Service does not allow that, he said.
‘Substantial’ Costs To The State
In a Friday letter to Ige’s budget director, Wes Machida, ERS Executive Director Thomas Williams cautioned that SB 2077 also ignores a state law that precludes any enhancement of retirement benefits until the pension system is fully funded. The system currently has an $8.77 billion unfunded liability.
The ERS estimates the bill’s special retirement benefit would cost $17.2 million and the severance benefit would cost $30.5 million, but the legislation does not provide funding for either.
In his message to lawmakers Monday, Ige also raised concerns about what he termed “substantial” costs to the state should SB 2077 become law — more than $60 million, by his estimate.
Ige, a former chair of the Senate Ways and Means Committee who has worked to shore up the state’s unfunded liabilities, proposed his own amendments to SB 2077, which he acknowledged was an “unusual step.”
Instead of providing the worker benefits, Ige wants to negotiate the separation package. An estimated $25 million would come from the state’s general fund to pay for the packages.
“It is unfortunate that this information became available so late in the game,” Ige told reporters at a press conference Tuesday.
Randy Perreira, executive director of the Hawaii Government Employees Association, had this to say about Ige’s veto and explanation for it: “The governor’s actions and words at this point are insulting to the hard working employees at the Maui region hospitals.”
Update: Perreira later offered a more detailed comment:
HGEA is disappointed with the governor’s decision to veto Senate Bill 2077 which was intended to assist Maui region hospital workers affected by the largest privatization in the state’s history. The version of SB 2077 that passed unanimously out of the legislature was fair and based on civil service reform legislation passed during Gov. Ben Cayetano’s administration.
We are dismayed at the insensitivity the governor displayed by cavalierly suggesting that since impacted employees were given the option to remain with Kaiser Permanente, it now makes everything alright. That attitude is insulting to any career employee, government or private, whose pension will be frozen, as we all acknowledge that two halves of a pension do not make a whole. The adverse impact to the lives of more than 1,400 workers is real and should not be so carelessly brushed aside.
Over a year has gone by since the passage of Act 103 which authorized the transition of the Maui hospitals to private operation and the Ige Administration has done nothing to ensure the well-being of the affected employees.
This is but one in a series of bad decisions made by this administration, whose actions have been disingenuous or incompetent, if not both.
The United Public Workers, another powerful public-sector union — and one that usually backs Hawaii Democrats, as does the HGEA — represents many of those employees. It sued over the transfer of the three hospitals to private control underKaiser Permanente. Settlement negotiations between the state and UPW continue.
The state’s largest union mobilized over the past several days to support SB 2077. There are an estimated 1,400 unionized workers at the Hawaii Health Systems Corp.‘s Maui Region hospitals — Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital.
Ige also raised questions about the financial severity facing the hospital workers.
He noted that Kaiser had offered jobs to 1,538 HHSC Maui Region civil service and exempt employees “irrespective of whether they were included in a collective bargaining unit or worked for the state for less than a year.”
Ige said 95 percent of the employees had accepted Kaiser’s job offer and that he believes that Kaiser will pay most employees salaries or wages equal to what they are currently paid by HHSC.
“This suggests to me that a substantial number if not majority of HHSC’s Maui Region employees might not have to face the economic hardships to the degree that prompted the Legislature to consider and pass the current bill,” he wrote.
‘People Are Losing Their Jobs’
But House and Senate leaders said they believe the hospital employees will face dire circumstances, and they suggested there could be some risk to public health. The three hospitals are the only such facilities of their kind in the Maui region.
At Tuesday’s press conference, all three of Maui’s state senators were on hand, including Senate Majority Leader Kalani English.
“People are losing their jobs, looking for some separation benefits, and so this is a way to provide some way to mitigate the pain that’s going on right now,” said Souki, who represents Maui.
Senate President Ron Kouchi said, “We are here to work with the House and the governor to ensure that the residents of Maui are not impacted in the delivery of health care and services, and to ensure that we treat fairly our employees as the transition goes forward.”
Souki described Ige’s bill amendments as having “some merit, and he’s worked very hard on it. But we don’t believe it has gone far enough, so we want to do a little bit more work on that.”
As for the concern about the pension system, Souki said experts were being consulted to work on appropriate language in the bill to address the matter.
What the governor and legislative leaders agree on is that the state must honor union contracts with the workers since the state is the employer. Souki said negotiations between UPW and the state were ongoing and he believed that most of the contractual concerns with Kaiser’s takeover had been resolved.
“There is a duty, I believe, to provide a fair separation as these employees are leaving state service,” Ige said.
Asked if HGEA was involved in amending SB 2077, Souki said, “We have not been talking to HGEA at all.”
Cost To Taxpayers
Reporters also asked about the cost to taxpayers to take care of a possible settlement. Kouchi pointed out that leaving the matter to the courts would also cost taxpayers.
What comes next, said House Majority Leader Scott Saiki, is for lawmakers to reconvene in special session at 11 a.m. Monday when the equivalent of a floor amendment will be introduced. State law requires 48 hours before an amended bill can then be voted on, so lawmakers will convene again Wednesday, also at 11 a.m.
Kouchi said the public can use that time through phone calls, emails and faxes to let legislators know what they think about the measure.
This special-session process bypasses the normal bill process, which involves opportunities for the public to provide direct testimony to lawmakers on the measure.
If it passes Wednesday, the bill then goes to the governor, who can approve it or veto it. If Ige kills it again — he has 10 days to consider what to do — the Legislature cannot come back into session to override him.
The passage, veto and amendment of SB 2077 has been a learning experience for those involved.
When asked about all the bumps that state officials have experienced in the effort to transition the three Maui hospitals from being publicly run to privately run, Ige said, “It’s the first time we’ve done anything of this magnitude in the history of the state of Hawaii.”
Read Ige’s objections to the bill, the concerns from the pension system and the proposed amendments below.