Friday, December 14, 2001

Hawaii State Seal

Hurricane funds stuck
in tug of war

By Richard Borreca

As Gov. Ben Cayetano and state legislators eye the $213 million left in the Hurricane Relief Fund, officials with the fund are fighting back, saying the money must remain.

Lloyd Lim, acting executive director for the fund, says it never had shareholders, has no equity owners, and its policyholders "are not entitled to the surplus."

"The fund is not a bank account into which moneys were deposited, grew and are now subject to withdrawal," Lim said.

But faced with a recession economy and a small budget surplus, legislators and the governor are considering the $213 million as a one-time financial windfall.

Cayetano, who is preparing his changes to the 2002 budget this week, already has said his new version will not work without spending the hurricane relief money.

Senate President Robert Bunda agrees that the Hurricane Relief Fund money is a tempting target.

"I wouldn't mind using the HRF to balance the budget," said Bunda (D, Wahiawa-North Shore). "But will it get approval from the whole Legislature? I don't see it."

The worry is that some homeowners who have paid into the fund now want the money returned.

The HRF board members recently sent lawmakers a paper briefing them on how the fund worked and urging them not to raid it.

"The fund's reserves should not be refunded to policyholders because these reserves are made up of a mortgage recording fee and assessments on property and casualty premiums," Lim stated in the paper.

"Premiums should not be refunded because all premium revenues of the funds were spent on the purchase of reinsurance," he added.

Reinsurance is what insurance companies buy to protect themselves.

The last insurance policies that were maintained through the fund ended in November, according to Lim.

Since then the public has been able to buy hurricane insurance from other vendors, but the fund managers want to keep the $213 million left in the fund, to be able to restart it quickly and purchase reinsurance in case another devastating hurricane hits Hawaii.

Republicans are questioning why the money cannot be returned.

Rep. Galen Fox (R, Waikiki-Ala Wai), GOP house leader, said the issue is the state using a one-time fund to balance the ongoing expense of running state government.

"I am so sick of the state solving its problems by raiding another one-time pot of money. If the money is no longer needed, it should be returned to the people," Fox said.

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