No-fault reform bill
to cut rates up to 35%

Cayetano pledges to sign the
measure agreed on by conferees

Star-Bulletin staff and wire

Motorists can expect to see a 20 percent to 35 percent reduction in their auto insurance premiums for basic coverage starting next year, lawmakers said.

Lower-cost premiums are mandated under legislation agreed to last night by House and Senate conferees, ending three years of conference committee attempts at reforms.

The action is expected to extend by two days the 1997 legislative session from its scheduled adjournment today, because the auto insurance reform bill must sit on lawmakers's desks for 48 hours.

"It's been a high profile issue. We've been at it for three years. Now I think we owe it to the people (to reduce premiums on automobile insurance)," said Senate President Norman Mizuguchi.

The measure attempts to merge no-fault insurance with a system that allows lawsuits.

Under the current system, people have been able to sue for compensation by boosting their medical bills with alternative care methods, such as chiropractic care, which makes it easier to reach the $13,900 medical bill threshold that allows them to go to court.

That threshold will be eliminated under the proposal.

It would also require people to buy $10,000 worth of medical coverage, and it would make alternative care and wage loss coverage optional.

Much of the high cost of insurance has been blamed on frivolous lawsuits.

The bill attempts to discourage lawsuits by reducing the amount of injured victims' medical expenses from their court award.

The reductions would start at $5,000 and go up to $10,000.

"It will eliminate or discourage really minor or frivolous claims because ... for someone to be able to sue, that individual will have to have a claim of substantial value," said House Consumer Protection Chairman Ron Menor.

The measure also caps driver's liability -- previously unlimited -- to $40,000 per accident for injuries to people in another car.

The bill also creates a strong anti-insurance fraud law and a fraud unit for enforcement, plus a task force to recommend any additional reforms necessary to improve the system.

It would be effective Jan. 1, 1998.

Gov. Ben Cayetano, who vetoed an auto insurance bill two years ago because he felt it deprived accident victims of just compensation, was present for the formal agreement last night. He said he will sign the bill into law.

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Star-Bulletin reporter Harold Morse and the
Associated Press contributed to this report.

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Cayetano hopes legislators
rethink Kauai tax deferral

By Mike Yuen
Star-Bulletin

Gov. Ben Cayetano says he cannot support a bill that gives Kauai small businesses an 18-month, interest-free deferral from their general excise tax payments, but he stopped short of saying he would veto the measure.

He's hopeful that lawmakers will reconsider the bill, which is up for floor votes today. Perhaps the Senate will agree to the House's administration-sponsored earlier version, which imposed an interest charge on the deferred taxes, Cayetano said yesterday.

Quoting Tax Director Ray Kamikawa, Cayetano said if the bill is approved, it will slow the entry of $25 million into state coffers and cause the state to lose more than $1 million under a nominal interest rate the administration was proposing.

"If I tell you you have an option to pay your taxes or not pay them for an 18-month period and it was without interest, if you were smart you'll put your money in the bank and then pay the state at the end of 18 months without any penalty. It's difficult to support a bill like that," Cayetano lamented.

On other tax-and money-related measures, Cayetano hailed House and Senate conferees for agreeing to his initiatives granting tax breaks for hotel renovations and for Continental Airlines to build and operate a jumbo-jet maintenance hangar near Honolulu Airport.

Cayetano also approved of a $14 million appropriation for the acquisition of the Ka Iwi shoreline, and adding 15 enforcement officers to help protect the state's marine resources.

The governor failed to get a low-income tax credit for people who earn $16,000 or less annually.

Cayetano was happy that recipients of general assistance will be able to get about $340 a month. They once received $418.

Lawmakers vote tomorrow on the state's $11.6 billion operating budget for the fiscal biennium that begins July 1.

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Privatization bill
displeases 3 mayors

By Jim Witty and Mike Yuen
Star-Bulletin

Neighbor-island mayors say that having no bill addressing privatization of public contracts is better than the measure that was hastily drafted by deadline-conscious conferees late Friday.

They were at the state Capitol yesterday urging lawmakers to reconsider the legislation aimed at resolving a dispute over government contracts, which allow private businesses and agencies to deliver public services.

Though House Speaker Joe Souki yesterday afternoon said the issue would not lead to an extended session, last night's breakthrough on auto insurance reform likely will. It was not immediately clear how the likely two-day extension through Thursday will affect the privatization measure.

House and Senate Republicans yesterday had said they intend to offer a floor amendment that would gut the bill and insert language to allow privatization contracts if civil service jobs are not jeopardized.

Gov. Ben Cayetano yesterday said he shares the mayors' concerns and joined them "in asking the Legislature to take a look at the bill again."

He said lawmakers should consider reworking the privatization bill if the Legislature is extended to take care of auto insurance reform.

In present form, the bill calls for a partial moratorium in response to a recent state Supreme Court ruling that voided a Big Island contract with a private landfill, concluding the work should be done by county workers. State and county officials fear the high court's decision throws into question all government service contracts.

Honolulu Mayor Jeremy Harris said the conference draft will fill a need, allowing existing contracts to remain in force and new contracts to be carried out.

But Hawaii County Mayor Stephen Yamashiro said, "This bill does not give us the kind of clear policy expression we need to make decisions to let contracts."

Yamashiro, Maui Mayor Linda Crockett Lingle and Kauai Mayor Maryanne Kusaka balked at a list of contracts that doesn't fall under the bill's purview and a phrase that no new contract can "displace" a public worker.

The mayors fear the term could be interpreted to mean that the county can't transfer workers.

"It's interjected a whole new level of uncertainty," Yamashiro said.

Lingle and Kusaka yesterday reiterated their warning that county contracts may be voided unless the Legislature clarifies the law. And all agreed the draft doesn't do that.

"If this bill is adopted, services would be cut," said Lingle. "We would be given no choice."This bill would be worse than no bill at all."

Lingle, asked if she will go ahead with her threat to cancel her county's privatization contracts if the conference measure is approved, said all the mayors are awaiting a final Supreme Court judgment on Thursday that could clarify the justices' position on private contracting.

But Harris said, "I do not know the motivation of those who claim the moratorium bill will result in dire consequences.

"But this is simply not the case. Without this bill, city services could be thrown into chaos."

Lawmakers expected to cut
local-contractor preference

By Mike Yuen
Star-Bulletin

If House and Senate floor votes go as expected today, the bid preference for local contractors on state public works projects will be slashed in half -- from 15 percent to 7 percent.

That means an isle contractor will automatically be awarded work on a state construction project if its bid is no more than 7 percent above the low bid.

Critics, such as Lowell Kalapa, executive director of the Tax Foundation of Hawaii, say the local preference is an additional burden to taxpayers and contributes to the high cost of doing business in Hawaii.

Senate Government Operations Co-Chairman Marshall Ige (D, Kaneohe), who helped put the measure in its final form during conference negotiations with the House, yesterday said the local preference was lowered "to give mainland people more of a chance. There's this feeling about competition. We're trying to increase competition."

The administration-sponsored bill will also decrease the average cost of state public works contracts, officials acknowledged.

For contracts $5 million or less, the bid preference would go to contractors who have filed and paid state taxes for two successive years; previously, it was four years.

For contracts over $5 million, the preference is for contractors who have filed and paid state taxes for four successive years; previously, it was eight.

There is one area in which the the 15 percent local preference would be kept: for printing, binding and stationery work done within the state.

It was only 10 months ago that Cayetano signed into law the 15 percent local preference, which replaced the preference of 5 percent that had been in place for about five years.

The latest change to the local preference, which would take effect Oct. 1, is contained in a bill making a number of changes to the state procurement code.