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The Honolulu Advertiser
Posted on: Friday, March 19, 2010

Hawaii state workers face more pay cuts under 6-year plan

By Derrick DePledge
Advertiser Government Writer

Hawaii news photo - The Honolulu Advertiser

Georgina Kawamura, director of the Department of Budget and Finance, testifies about the state budget to legislators as Gov. Linda Lingle listens.

GREGORY YAMAMOTO | The Honolulu Advertiser

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Gov. Linda Lingle presented an updated six-year financial plan to the Legislature yesterday that presumes another round of pay cuts for state workers and reduces benefits for people in Quest, the state's health plan for the poor and disabled.

Without the projected labor savings and health care cuts, Lingle would not have a balanced state budget over the life of the financial plan, as she is required by state law.

Lingle's financial plan would leave the next governor with the task of negotiating pay cuts with public-sector labor unions and stripping benefits from Quest. The governor will complete her second four-year term and leave office later this year.

Some lawmakers have been frustrated that Lingle has chosen to delay state obligations, such as income tax refunds and payments for insurers in Quest, and put off other potentially difficult spending decisions to get through the immediate budget crisis. The state is facing a $1.2 billion deficit through June 2011.

The stated strategy is to delay until the economy improves, but some lawmakers say they believe Lingle is sidestepping hard choices and leaving a deeper hole for the next governor.

"The alternative to doing something like pushing off those refunds until the next fiscal year would have been massive cuts in education and human services and other key programs," Lingle said at an informational briefing before the state Senate Ways and Means Committee.

Lingle's financial plan presumes new 5.5 percent pay cuts for state workers in fiscal years 2012 and 2013, which would be lower than the roughly 8 percent pay cuts that many state workers are now taking to help with the deficit.

State Sen. Donna Mercado Kim, D-14th (Hālawa, Moanalua, Kamehameha Heights), the committee's chairwoman, said she could not rely on elements of Lingle's plan like the pay cuts.

"It's easy to say that we're anticipating a 5 1/4 percent cut in salaries when you're not going to be here," she told reporters.

Public-sector union leaders called the governor's plan irrelevant and irresponsible, since the pay cuts would be subject to collective bargaining with the next governor.

"We understand that the governor is obligated by law to do a financial plan, but her plan calling for continued cuts is irrelevant, as she will no longer be in office," said Randy Perreira, the executive director of the Hawai'i Government Employees Association. "It's irresponsible for her to presume that her successor will undertake her plan."


Wil Okabe, the president of the Hawai'i State Teachers Association, said Lingle's plan is contrary to assessments by several economists that further cuts would worsen the state's economy.

The teachers union, like the HGEA, has called for a temporary increase in the state's general-excise tax to help with the deficit. Two Senate committees this week approved a 1 percentage point increase in the GET through December 2012.

"With no tax increase, we are looking at five more years of furloughs, salary cuts and layoffs. In addition to the pain caused to workers personally and to their families, cutting salaries means state employees will have less money to spend on goods and services provided by local companies. This will worsen, not improve our economy and accelerate the downward spiral," Okabe said in a statement.

"It's time to take a stand against ideologically driven state finance and economic policies."

Lingle rejected the idea of a GET increase. "I think any increase in the excise tax of the amount that they were talking about certainly would cause thousands of additional job losses across the state," she told reporters, urging lawmakers to consider job-creation initiatives. "It would be devastating. It's the absolutely wrong thing to do at the wrong time."

Lingle told senators that the state is unable to sustain existing spending on Quest, the state's version of the federal Medicaid program, which is funded by about $1.5 billion in federal and state money annually. The governor has described Quest as a "Cadillac plan" that provides the poor with more generous benefits than public and private-sector workers.

The state has an immediate $84 million shortfall in Quest, which has triggered the potential delay in payments to insurers for the last quarter of this fiscal year. The state projects a $146 million shortfall in Quest next fiscal year.


The state Department of Human Services is exploring several possible adjustments, such as moving all adults in Quest except pregnant women to a reduced benefit package, eliminating non-emergency transportation, and scrapping organ transplant coverage.

"The fact is, over time, you can't sustain this level of benefits. It's not possible financially, in our opinion," the governor said.

Alex Santiago, executive director of PHOCUSED, a group that advocates for the poor, children, the elderly and disabled, said there was no acknowledgement by Lingle of the effect state budget cuts have had on the poor and on reducing jobs in the social-service sector.

Her presentation, he said, appeared to focus more on the bottom line rather than the human consequences.

"I would have really preferred a more balanced approach ... than what was presented," he said.