Hawai'i unions take hits as privatization bill nears approval
By Scott Ishikawa, Ronna Bolante and Kevin Dayton
Advertiser Capitol Bureau
Hawai'i's public employee unions took it on the chin yesterday as a measure that would allow the privatization of certain government services and another to change the state employee health fund made it through a Senate-House conference committee.
Senate Bill 1096 would allow the governor and county mayors to privatize any services they choose, an idea that public worker unions have fought bitterly for years. Legislators say the bill, if approved, would allow the state to lay off government employees during privatization.
Lawmakers acknowledged the bill would tip the balance of negotiating power well toward the employers — state and county government — and away from the public unions.
"This year House and Senate leadership really felt that we needed to look at some government reform issues, and privatization was one of those," said Scott Saiki, vice-chairman of the House Labor and Public Employment Committee. "We just want to make sure that we deliver services effectively to the public and we save taxpayer dollars in the process."
Gov. Ben Cayetano is expected to sign the privatization measure if the Legislature approves it. Meeting with Senate and House leaders, Cayetano asked both sides to "not let differences be a deal-breaker in terms of the privatization bill."
A 1997 Hawai'i Supreme Court decision virtually crippled the state and counties' ability to privatize. That decision said the state and counties needed special permission from the Legislature before they could hire private companies to perform work that was traditionally handled by civil servants.
Public union officials railed against the measure, saying they would have preferred "managed competition" to allow public unions and private companies to compete for state and county contracts.
Russell Okata, executive director of the 23,000-member Hawai'i Government Employees Association said he was "disappointed" that the bill moved forward.
"It's the very people that we've worked with — the Democratic Party — that's now making this major change in government policy," Okata said. "And my union has been working to meet the changing needs of our community to become more efficient and more productive.
"We felt that one of the best ways to do it would've been through managed competition," Okata said.
Okata predicted problems if the state and counties impose layoffs after contracting with private companies for services. Among other things, public workers would exercise their "bumping" rights as more senior workers move to new jobs and displace junior workers.
The same bill would eliminate binding arbitration as a way of resolving stalled contract negotiations between the HGEA and the state and counties. Cayetano has long complained the state has fared poorly in binding arbitration, including a decision last year that awarded the HGEA raises averaging 14.5 percent.
Cayetano himself approved arbitration for the HGEA after the union's 1994 strike, but later called it one of his biggest mistakes as governor.
Senate Bill 1044, which also won approval yesterday, would change the way public employees receive health benefits. Lawmakers believe the new system would save the state $65 million the first year.
The state currently sets health benefits for public workers and retirees by law, and the Public Employees Health Fund buys coverage that meets the legal requirements. The state and public workers then pay for the benefits.
The cost of that system has escalated so rapidly that the state auditor predicts state health premiums could cost $1 billion or more by 2013.
Under the proposed Hawai'i Employer-Union Health Benefits Trust Fund, the state and counties would negotiate with the unions to determine how much the state must contribute each year in premiums. The trust fund would then buy the best coverage it could afford with that money.
Currently, the state and counties give the public worker unions the amount of money they would have spent on a workers' coverage. The unions then provide coverage through their own plans.
Lawmakers project the changes would save more than $900 million by 2013.
"We wanted to make some very significant changes that would basically allow the state to remain solvent over the long run," Saiki said.
Cayetano said: "What we're looking at under the present system is disparate plans, where the union programs tend to be more attractive and they get to cherry pick (beneficiaries). We (the state) get left with segments of the population which are not able to qualify for those plans and whose expenses are very costly; the retirees, for example."
United Public Workers state director Gary Rodrigues was livid over the health fund measure, particularly because his union since 1994 has accepted lower wages in exchange for larger health fund contributions.
"This wipes us out," Rodrigues said. "All what we gave up all of these years will now be used against us because that money will not be used to pay for our plans.
"Without an election, (the Legislature's) been changed to a majority Republican party because every Democrat will have abandoned the philosophy of the Democrats to protect the workers of the state of Hawai'i."
The two bills face final votes in the House and Senate next week. Cayetano and House members say the vote in the Senate on the health fund bill will be close.
Advertiser Staff Writer Lynda Arakawa and The Associated Press contributed to this report.
