State wants surplus from teachers union fund
By Kevin Dayton
Advertiser Capitol Bureau Chief
A trust fund set up by the state teachers union to provide health and other benefits to union members has a cash surplus of more than $13 million, and some legislators want some or all of that money returned to the state.
Ray Sodetani, administrator of the trust for the teachers union, confirmed that the trust set up by the Hawaii State Teachers Association had received money from the state to provide health coverage for union members, then received a series of rebates from health insurers when the coverage cost less than expected.
The rebates allowed the trust to build up a reserve of about $13.5 million. That money is now attracting the attention of lawmakers searching for ways to help balance the state budget.
Senate Vice President Colleen Hanabusa said the union-sponsored trust is not entitled to keep the money, because at least some of it was contributed by taxpayers.
"That's the state's money, and when we are in difficult economic times like this and trying to balance the budget, those monies are critical to us as to making sure that other services can be bought and paid for," said Hanabusa, D-21st (Barbers Point, Makaha).
But Sodetani said the teachers' trust had spent all contributions from the state and counties, and the reserve is strictly union members' money. About 12,000 teachers are covered by the union trust plan.
He added that "not one red cent" of the reserve had gone to the Hawaii State Teachers Association, which sponsored the trust, because federal law prohibits such a transfer.
HSTA Executive Director Joan Husted also said none of the reserve had gone to the union.
Many public workers and all retirees receive health coverage from the Public Employees Health Fund, which is run by the state. The fund collects money from public workers and the state and counties, then buys coverage for the workers and retirees.
Since the mid-1990s, however, the Public Employees Health Fund has transferred about $500 million to the public worker unions, which were legally authorized to use the money to buy health coverage for their members, said state deputy attorney general Hugh Jones.
The state comptroller this year hired the auditing and consulting company Ernst & Young to scrutinize how the transferred money was spent. A draft version of that audit revealed the trust received considerably more money than it needed for health coverage.
The full audit by the state comptroller has not yet been released, and it is unclear how much more money the other union-sponsored plans may hold, if any.
HSTA's voluntary employees beneficiary association trust is strictly regulated under federal law, and has used leftover money to provide additional coverage for the teachers, Sodetani said.
At times the reserve was used to subsidize premiums, as a cushion to protect HSTA members from sudden premium increases, and in other cases was used to purchase additional benefits, such as long-term care coverage and better coverage for dependents, he said.
Sodetani said the federal law that governs such trusts allows the money to be used that way, although state law is silent on the subject.
Hanabusa acknowledged that the law that created the health fund does not spell out that union trusts must refund to the state any money not needed to provide health coverage. But she said state law does require that when the Public Employees Health Fund runs into a similar situation, it must refund any excess money to employers and employees who paid in.
"It's difficult to imagine why we would pass that kind of law, where we're reimbursing whatever money the state health fund gets back, and we're not saying that that's applicable to these respective unions as well," she said.
House Majority Whip Brian Schatz said the state never agreed to an arrangement where the union health plans could simply keep any leftover money.
"The amount that was provided by the state was provided for the purpose of buying health insurance," said Schatz, D-24th (Makiki, Tantalus). "If it costs less than that, there's just no good reason for an organization to be able to keep the difference. That's what this is about, the organization wanting to keep the difference."
The practice of transferring money to union-sponsored health plans has caused concern at the Legislature before, and lawmakers voted last year to abolish the system. Instead, they approved a new statewide trust fund that would cover all public workers.
Under that new law, the transfers to the unions would end. The teachers are lobbying heavily this year to have an exception written into the law to allow them to continue their trust fund arrangement.
The Young audit already triggered a dispute between the state and two public worker unions, when the union plans resisted state efforts to scrutinize their spending.
Last month, Attorney General Earl Anzai sued the Hawaii Government Employees Association and the United Public Workers union, alleging the union plans refused to open their books to Ernst & Young.
In the case of the UPW, problems with union-sponsored benefit plans also have led to criminal charges. A federal grand jury indicted UPW state director Gary Rodrigues and his daughter, Robin Haunani Rodrigues Sabatini, alleging the union official got kickbacks from a life insurance agent who sold group policies to his union.
Rodrigues, who has denied any wrongdoing, is also accused of instructing healthcare companies that provided benefits to union members to issue checks for consultant services to companies owned by his daughter.
Reach Kevin Dayton at kdayton@honoluluadvertiser.com or 525-8070.
