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The Honolulu Advertiser
Posted on: Thursday, May 7, 2009

Labor sacrifice still crucial to fiscal health

The curtain may be about to drop on the regular session of the state Legislature, but the drama is far from over.

Today Gov. Linda Lingle will ceremonially and publicly veto key pieces of legislation — a set of tax increases — that lawmakers passed to balance the state budget.

The two sides have assumed an all-too-familiar stance at this point: They are at loggerheads. The governor correctly argues against tax increases in a weak economy, but lawmakers could not base their plan on the assumption that Lingle could carve a large chunk out of labor contracts. That's where the most savings could be reaped, but agreements with public unions still lie some distance away.

Although many predicted this outcome and the almost-certain votes to override the governor's vetoes, Lingle does have a message to deliver — again — while she's got the microphone: In this economy, labor simply cannot continue to take its usual bite from state revenues; without concessions, the budget will be in tatters again once new revenue projections come in.

Once that's said, it's time to move past political theater to the negotiating table, to resolve this difficult problem.

Despite some hopeful signs of recovery in financial markets, the national and local economies are still fragile, and more bad news may be coming. Specifically, the next projections of state revenues, due in a few weeks, are likely to show tax receipts continuing to lag.

This means there would be another budgetary gap to fill, regardless of tax hikes.

The public employer representatives — the governor, the mayors, the Board of Education and the Board of Regents — need to come together behind proposals that can save taxpayers a substantial amount of money, whether or not it reaches the $278 million bar set by Lingle.

And the unions' negotiators would do well for their members if they move early to strike an accord, before economic prospects continue their downward spiral.

There's a delicate balance to be reached. Cuts that are too disabling, even over the short term, can slow economic recovery by sapping the ability of Hawai'i's large public workforce to spend. And many are not highly paid to begin with.

But labor leaders need to take a hard look at the generous benefits members do receive. Some savings could accrue by reducing medical benefits — increasing the employee share of the costs. Workers are due to bear the brunt of a premium increase that's already in the works.

Randy Perreira, Hawaii Government Employees Association president, said unions are already discussing plans ways of coping with rising healthcare costs by curtailing what would be covered. Sensible costs savings must be made; benefits in the private sector have already given way.

Today's fiery exchange at the Capitol over the vetoes will be laced with political invective. But there are hard economic facts to be faced. Is it too much to hope for a clear-headed confrontation of the new reality?