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The Honolulu Advertiser
Posted on: Wednesday, January 24, 2007

VOLCANIC ASH
The tug-o-war over budget surplus begins

By David Shapiro

You'll hear a lot of posturing between Gov. Linda Lingle and the Legislature about whether the bulk of the state's $732 million budget surplus should go to tax relief or public needs such as education, housing and healthcare.

But as public workers go after the lion's share of the surplus for pay raises with the apparent blessing of Democratic legislators there might not be much left for either tax reductions or major spending initiatives.

While their priorities may differ, proposals advanced so far by Lingle and lawmakers come to approximately the same amount of spending for public welfare. The fundamental difference is over how the rest will divide between tax cuts and pay raises.

Lingle wants nearly half of the deficit, $346 million, returned to financially pressed residents in the form of tax relief.

Her other big-ticket proposals include $150 million for housing programs and $30 million for economic and educational innovation, which would leave about $200 million from the surplus for public employee pay raises approximately the same amount workers received from fairly good raises in 2005.

House Democrats, who owe the Hawai'i Government Employees Association and other public unions for their success in wresting 11 seats from Republicans in the last three elections, would cut the pie differently.

They're floating much smaller numbers for tax relief of $25 million to $50 million and far bigger numbers of up to $500 million for public worker pay raises, leaving essentially the same amount Lingle proposes for education, housing and healthcare.

The $500 million figure came out when House Majority Leader Kirk Caldwell said HGEA and the other unions should demand the same 7- to 9-percent raises that University of Hawai'i professors will receive in the next two years.

But that comparison doesn't take into account that UH raises are so high because faculty back-loaded their six-year contract and took smaller raises than the other public unions in the first four years.

Democrats duck charges of pandering to union supporters by protesting that they have no role in collective bargaining other than to sign off on agreements reached by the administration and unions, which is technically true.

But as a practical matter, negotiations are driven by the binding arbitration law for HGEA that lawmakers passed over the objections of Lingle and her Democratic predecessor, Ben Cayetano. The HGEA arbitrations, which historically favor the union, set the tone for settlements with other unions.

Legislators greatly influence the course of arbitrations and undermine the administration's ability to negotiate on even terms with the unions when they publicly throw out big numbers like $500 million in advance of bargaining, essentially saying they think the state can afford to pay twice as much as the governor is negotiating for. Such statements become Exhibit A in the union's arbitration case.

After the 2005 HGEA arbitration, Lingle complained that virtually every cent of the state's $1 billion in revenue growth in the previous 10 years went to public employee pay raises, and virtually none to the general public welfare.

She said then, "The absorption of virtually all revenue growth by these pay and benefit increases has diminished the state's ability to provide for its people as a whole. We won't have the money we should to help those of our citizens who do not work for the State of Hawai'i."

But Lingle never pressed the issue with lawmakers or voters and now she's even backing away from her annual request that the Legislature restore true collective bargaining by repealing binding arbitration for HGEA.

Too bad. It's an argument that goes to the heart of the purpose of government and needs to be aired.

David Shapiro, a veteran Hawai'i journalist, can be reached by e-mail at dave@volcanicash.net. Read his daily blog at blogs.honoluluadvertiser.com.