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Tuesday, January 25, 2000

Legislature 2000

Cayetano would
trim future benefits

He also proposes a reworking
of the state's health-insurance plan

Confident Cayetano: Now's the time for reform
Educators want accountability for everyone
Mayors laud home-rule bargaining idea

By Rob Perez


The line has been drawn.

In his proposals to overhaul how government operates, Gov. Ben Cayetano has all but ruled out cutting benefits to existing government workers and retirees.

His prescription: Cut certain benefits to future workers and revamp the way the state provides and pays for health benefits, one of the biggest financial challenges facing government today.

Cayetano says the state essentially has struck a deal about benefits with current workers and retirees and doesn't want to renege on that. As for prospective hires, that's another story.

"New workers coming in, we're saying it's a new day. We've got to make changes," Cayetano told reporters yesterday after unveiling his civil service reform proposals.

But some legislators questioned whether dealing with benefits prospectively goes far enough in tackling what they see as a looming financial crisis.

Especially worrisome is the cost of providing health benefits, which one independent study said would grow from $240 million to nearly $1 billion annually for the state and counties by 2013. The unfunded liability -- essentially what the government would owe to cover health benefits for all employees and retirees in the system at that time -- is projected to grow to $11.4 billion.

"We think the problem is so serious it needs attention now" and not just dealing with future hires, said Rep. Nathan Suzuki (D, Salt Lake, Moanalua), one of the most knowledgeable legislators in the health benefits area.

In fact, the House Democratic majority package includes a bill that would, among other things, cut dental care, vision and group life insurance benefits for employees and retirees.

But Cayetano, while stressing the need to make government more affordable, clearly staked out his position.

"We will not propose anything that compromises the benefits promised to current state employees," he said in his State of the State address.

Health insurance

Regarding health insurance, Cayetano proposed replacing the Public Employees Health Fund with a union-employer trust, basically turning the administration of the program, including negotiating rates with insurers, to the unions.

Currently, employees can choose between state and unions plans, and in recent years the unions -- partly because they have more flexibility and are attracting the healthier, younger workers -- have negotiated better rates.

Under the Cayetano proposal, the government would contribute a flat amount -- as yet unspecified -- for health premiums for employees and retirees.

The government now picks up roughly 60 percent of the cost for employees and 100 percent for retirees hired before July 1996.

Cayetano said he believes the unions will be able to negotiate better deals than the state. But administration officials said the level of benefits would be determined by how much the state contributes and what the unions can negotiate.

They refused to rule out the possibility of benefit reductions, though that's not Cayetano's intent.

"It's too soon to say," said Wayne Kimura, deputy director of Budget and Finance. "We can't promise that the benefits will be exactly like they are now."

Changes for new hires

For future hires, Cayetano is proposing that the state stop paying for dependent coverage when those workers retire. He also wants to delete survivors' benefits for new hires and limit to 10 days each their annual vacation and sick leave, up to a maximum of 14 days depending on years of service.

State and county workers now get 21 days each of sick leave and vacation after one year's service -- the most generous policy in the nation, according to a 1998 survey of government benefits.

When those amounts are added to the 13 paid holidays -- the second-most generous holiday policy in the nation -- Cayetano noted that government employees could only work 9 months a year.

"That's not good for productivity," he said.

Union officials said they were disappointed that benefits -- even if limited to future hires -- are being targeted.

"It's troubling to see because it reflects going backward," said Randy Perreira, deputy executive director of the Hawaii Government Employees Association, the state's largest public-sector union.

John Radcliffe of the University of Hawaii faculty union questioned whether cutting benefits for future hires would hurt recruiting efforts.

But Cayetano coupled his benefits proposals with measures designed to make government more accountable and efficient, such as adopting performance-based pay incentives.

Gov. Cayetano's key proposals

Some highlights of Gov. Ben Cayetano's civil service reform proposals:

Bullet Set a flat amount for government contributions for employee/retiree health benefits and have the unions take over administering the system, including negotiating rates with insurers.
Bullet Stop paying for dependent coverage for new hires when those employees retire.
Bullet Delete survivors' dependent benefits for new hires.
Bullet Limit new employees to 10 days vacation and 10 days sick leave annually and permit the amounts to grow to 14 days maximum, based on years of service. The current maximum is 21 days, respectively.
Bullet Eliminate overtime pay in calculating retirement benefits.
Bullet Create a more timely and flexible recruitment and job classification system.
Bullet Eliminate binding arbitration and give public employees except police and firefighters the right to strike.
Bullet Grant counties power to negotiate their own union contracts and establish separate personnel systems.
Bullet Create incentives such as cash buyouts or early retirement packages for employees whose positions will be abolished via government restructuring.
Bullet Adopt a performance-based pay system.

Source: Governor's office

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