It is amusing to see many former legislators thought by voters to have been put out to pasture, after a hiatus jumping back into the foray and running for election.
These former elected officials want to get back into the policy-making arena when all of the chickens they created in the past are coming home to roost. It makes voters wonder why they are back running for office. Is it they want to correct the wrongs they contributed to in the past, or is it they again want to feed at the trough and take taxpayers for another ride?
By far the most challenging issue current lawmakers have continued to duck in recent sessions is the looming unfunded liabilities of the state retirement system and the public employees’ health fund. The unfunded liabilities don’t come as a surprise to current lawmakers — it was their predecessors who contributed to the problem. In 1983, a task force was convened to study the problem and returned with a recommendation the state retirement system be converted from a contributory to a noncontributory system and health fund benefits apply only to active employees, warning lawmakers of the impending calamity if the systems were not reformed.
But lawmakers believed, if they made a few tweaks to the system they could claim they saved it, while still currying the favor of public employees. What those lawmakers refused to admit was that demographics were changing and the defined benefit plan of the state public employees retirement system could not be sustained given the fact retirees would be living longer and their retirement benefits are and will be calculated from a much more generous wage base.
The denial of the possible calamity was overshadowed by an ebullient Japanese bubble of the late 1980s and a rising fervor of the dot com bubble of the 1990s. Coupled with a weak general fund financial condition during the 1990s, lawmakers took to raiding the excess earnings of the state retirement system. They also continued to ignore that the health benefits provided public employees and their dependents were beyond being affordable. But it kept the public employees and their unions in their corner when it came to being re-elected.
What came as a surprise to many taxpayers, who are not beneficiaries of the public employees retirement and health care system, is that coverage — until recently — was extended to the spouses of public employees and continued after the death of the employee. Further, the state health care plan for public employees reimburses retirees on Medicare the cost of their Medicare premium. Where a private sector retiree would see his monthly Social Security benefit check shrink by the amount of his Medicare premium (currently about $104 per month — rising to nearly $250 a month by 2014) in order to pay for the Medicare premium, public employee retirees are reimbursed this amount by the state’s health care plan. Thus, while other retirees have to do with that much less per month in their Social Security checks, the public retiree is made whole. Taxpayers, including private sector retirees, end up paying not only for their Medicare premiums, but also those of public employee retirees.
Hawaii taxpayers can no longer afford such a generous benefit, because the rising cost of living in Hawaii squeezes all taxpayers, public employees and public employee retirees. However, it appears only a handful of lawmakers are willing to initiate reforms to curb the rising cost of these benefits, and even fewer are willing to bite the bullet to begin paying down these unfunded liabilities. For years, the current Speaker of the House has warned colleagues the day of doom is upon us, as taxpayers and lawmakers, if certain reforms are not adopted. For years his colleagues have refused to deal with the problem, instead wanting to continue spending on more programs and services instead of dealing with the harsh reality of meeting past obligations. If these unfunded liabilities are not addressed soon, Hawaii may find itself on a growing list of governments having to declare bankruptcy.
While public employees and their unions push to elect or re-elect lawmakers who will maintain the status quo and who are unwilling to initiate reform, in the long run, they may find their own futures at stake when lawmakers will no longer be able to squeeze juice from the taxpayer apple.
Lowell Kalapa is president of the Tax Foundation of Hawaii.