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Hawaii maintains
its reputation as
bad for business

THE ISSUE Hawaii business people say they are disappointed with the Legislature.

HAWAII continues to be one of the costliest states in which to run a business, and nothing the Legislature did in this year's session will change that sad predicament. While lawmakers focused on important measures aimed at building a rail transit system on Oahu, providing more housing and combating campaign finance corruption, they made conditions worse for the business community.

Legislators rejected measures that would have made health insurance more affordable, workers compensation more efficient and unemployment insurance taxes more realistic. Some segments of the private sector are pleased with enactment of bills that improve small businesses' ability to compete for government contracts and developers' flexibility in converting business properties to condominium ownership, but those are overshadowed by bills that gouge the business community.

"This session would fit the movie title 'Dumb and Dumber,'" Beverly Harbin, executive director of the Employers Chamber of Commerce, told the Star-Bulletin's Allison Schaefers. "This just shut the doors for business. We came away with worse than nothing."

One bill that passed the Senate but was shelved by the House would have reduced the cap on reserves held by health insurers from 50 percent to 30 percent of annual expenses. It would have required insurers to return the excess reserves to subscribers.

Governor Lingle supported a balanced measure that would have increased the minimum wage while reducing the maximum wage base for the unemployment compensation tax over a three-year period. The effect would have been to reduce the tax payments into a fund that is bulging with $400 million, while Hawaii's jobless rate is the lowest in the country. The reduction would have saved Hawaii employers $196 million.

By the time the bill was enacted, the unemployment compensation tax reduction had been stripped away, while the increase in the minimum wage from $6.25 to $6.75 an hour was settled upon.

A report last week by Economy.com, a forecasting firm, ranked Hawaii third highest in the nation for business costs in 2003, behind Massachusetts and California. The next report is likely to put Hawaii in the dubious runner-up spot because of workers compensation reforms enacted last year in California and rejected by Hawaii legislators.

The California law is expected to result in cost savings of $3.1 billion a year by revamping the method of assigning doctors to treat injured employees and by streamlining the hearings and claims resolution process. Hawaii legislators have rejected the reforms in the last two sessions.

Lingle has signed administrative rule changes that will encompass the streamlining aspects of the reform that don't require legislation, and those changes are to take effect Thursday. However, the Legislature passed legislation aimed at thwarting those rule changes, assuring that Hawaii's reputation as being bad for business will remain intact.

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