Spend ‘phantom’ state surplus on government workers, schools
The average Hawaii resident was exhilarated when Gov. Linda Lingle announced a $734 million surplus in her 2007 State of the State address. The constitutionally mandated refund to taxpayers made the news even more appealing: more than $500 in excess revenue for every man, woman and child. But then the hard reality hits.
Before we get too ecstatic about the refund, we should take a step back and use a macroscopic lens to examine the fundamental issues at hand. Population growth coupled with the anticipated retirement of aging baby boomers present a tremendous challenge for the limited resources of the Hawaiian Islands. Is our state able to address existing basic operational needs? As taxpayers, yes, we are happy when our government is attempting to combat the escalating cost of living with a refund. In return, we pay a dear price for ignoring government responsibilities, such as construction and maintenance of needed infrastructure and management of government bureaucracy.
Hawaii's state and county governments have more than 88,000 employees, making them the largest employers in the state. Nearly one in every seven workers is a government employee. Two major features of the employee benefit package are retirement health benefits and pension. The latter is mandated by law; the former is not.
Twenty-two percent of government workers are expected to retire in the next five years. Moreover, government employees live longer than the general population. Accounting for these new developments means it is imperative that we address the unfunded liability of the Employees Retirement System.
The unfunded liability of the ERS amounts to $5.1 billion and is growing. Under the current rules spelling out the state's contribution, it will take an estimated 27 years to fully fund the ERS. One wonders how the state will catch up with its massive liability. From a fiduciary perspective, as well as one of common sense, it would be prudent to change our method of record keeping. We can no longer afford to report a surplus when our unfunded liabilities are ignored or dismissed. There is no better opportunity to close this gap than in the midst of a growing economy generating revenue beyond daily operations.
Second, we must address health benefits granted to government retirees. Unlike the ERS, health benefits are funded with a pay-as-you-go system. Health care costs and the sheer number of retirees are growing -- it is essential that we recognize the potential for shortfalls. When costs are predictable and funds available, money should be set aside to provide for times of scarcity. We should capitalize on the surplus we have now so that we keep our promise to the retirees who are depending on these benefits in the future.
Our transportation infrastructure is of more tangible importance. State government is charged with ensuring adequate infrastructure to promote the flow of people, goods and services. Our growing population's contribution to traffic gridlock means that roads and highways need to be enhanced. Ninety percent of the goods we consume are imported through our harbor system. For years our harbors have not been properly maintained and supported. Continued deferral of infrastructure construction and maintenance has created higher prices and will strangle our ability to expand economically.
Last, and perhaps of gravest importance, we need to improve the quality of our public education system. In 2005 the state appropriated 37 percent of the state budget toward education, yet we are plagued with a building repair and maintenance backlog of $350 million in the Department of Education and a lack of air conditioning in many schools (and we all know about the problems at our flagship university). We need to provide reasonable learning conditions at schools so that we can bring our children up to speed academically and equip them with the necessary skills and knowledge to be competitive here at home and around the world.
These fundamental needs are quickly growing too large to ignore. It is incumbent on public officials to lead with foresight and sound policies for the coming years.
We must change our philosophical direction and start with a different approach to budget methodology that reflects the real economic condition. If basic needs are not met, there is not, in fact, a surplus.
Hawaii taxpayers have their own set of responsibilities, too. Should we take the governor's proposed $100 rebate and allow these problems to percolate, or should we apply the phantom surplus to solve the problems choking the future development of our state?
Ultimately, it is up to you to decide.
Gordon Trimble represents Senate District 12 (Iwilei, Chinatown, Downtown, Kakaako, Ala Moana, Waikiki).