Editorials
Tuesday, January 12, 1999

Union cronyism in
insurance contract

COMPETITIVE bidding for the lucrative contract to provide life insurance for city and state employees was set aside to make way for self-dealing by union officials. Governor Cayetano has accurately described the action as smacking of favoritism, and the contract should be withdrawn. Trustees of the health fund should not wait for the state Ethics Commission to nullify the impropriety that should have been plain at the outset.

The Public Employees Health Fund board, a seven-member board that includes two representatives of the Hawaii Government Employees Association and United Public Workers, the biggest public employee unions in the state, awarded the contract, worth more than $3 million, to Royal State National Insurance Co. Although Royal State's bid was not the lowest submitted, its board of trustees is headed by Russell Okata, executive director of HGEA, and includes Gary Rodrigues, the UPW's state director. Those connections turned out to be crucial.

Acting at the behest of Okata and Rodrigues on the health fund board were HGEA deputy director Keith Ahue and UPW division director Clifford "Chip" Uwaine, the former state senator who was convicted in 1986 and served three months in prison for election-fraud conspiracy. Uwaine and Ahue obviously recognized the ethical problem, disclosing that their bosses were on the Royal State board before casting their votes for Royal State, which won the contract by a 4-3 vote.

Not only was Royal State's proposal costlier for taxpayers than that of another insurance carrier, its benefits were less attractive to the beneficiaries - 72,000 public employees and retirees. Supporters of Royal State's offer emphasized that it is local, but the overriding consideration obviously was Royal State's connection with the two public employee unions.

"The decision by the board of trustees deeply disturbs me because it smacks of favoritism, at the expense of taxpayers and health fund beneficiaries," Cayetano said in a letter to the health fund. "There appears to be no defensible reason for the board's choice of Royal State over the competing carrier."

The selection of Royal State to provide health insurance to public employees was a clear act of cronyism at the public's expense. The bidding process should not be discarded to assure a comfort zone for union officials.

Questions on prison

CONSTRUCTION of a major prison to relieve overcrowding in the state prison system is long overdue. Governor Cayetano scrapped plans for the project on taking office four years ago, but eventually came to realize that prison expansion was necessary. Unfortunately, that realization has not fully penetrated the Legislature. There is a danger that the administration's request for funding for a 2,300-bed medium-security facility on the Big Island will be blocked.

Andrew Levin, co-chairman of the Senate Ways and Means Committee, wants to explore whether spending $130 million in state funds is "the best approach."

Levin points out that the governor initially proposed using a private developer to build a prison in the Kau district of the Big Island, which Levin represents. Under that plan, the developer would lease the facility to the state. State Budget Director Earl Anzai has said it would be cheaper to borrow money for construction than to pay a developer high rent.

The senator says he sees no need to approve Cayetano's request to borrow money for prison construction in the coming legislative session if the state can continue to send surplus inmates to mainland institutions while other approaches are explored. Currently 1,200 Hawaii inmates are housed in Texas, Tennessee, Oklahoma and Minnesota prisons.

There is nothing wrong with exploring various approaches, but there is considerable urgency to the need to get started on a prison. Vociferous opposition - aided by Levin - forced Cayetano to abandon a Kau district location for the prison. Now, in his new and powerful position as co-chairman of Ways and Means, Levin might be able to block any prison construction anywhere.

Whether financed by floating bonds or leasing from a private developer, a new prison is needed - and as soon as it can be built. The financing question is not so difficult that it should prevent action in the Legislature this year.

Sending inmates to mainland institutions is only a temporary solution, and not a satisfactory one. The cost per day is less than housing inmates in Hawaii prisons, but all the money spent is lost to the state. Paying the cost of incarceration in Hawaii has the advantage of keeping the money in the state and helping the state economy. Moreover, some of it comes back to the state government in the form of taxes paid by prison guards and construction workers and on other expenditures.

ENDING inmates to mainland prisons effectively prevents inmates' families and friends from visiting them, which is detrimental to morale and may make rehabilitation more difficult. Since most inmates are from Oahu, this island would be the best location for a new prison for that reason, but finding a suitable site here is very difficult. The neighbor islands, however, are a much better choice than the mainland.

The administration's latest proposed site is in the Volcano area of the Big Island, seven miles from the Kulani Correctional Facility. An environmental impact statement is under preparation. Some legislators are said to prefer other sites on the Big Island. Having retreated from the Kau proposal, the administration would be reluctant to give up another site.

More important than the method of financing - whether by bonds or leasing from a private developer - or the site is the need to get the prison built somewhere, somehow soon. The Legislature should take a good look at this proposal, but with a view to taking action in the coming session.

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John M. Flanagan, Editor & Publisher

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A.A. Smyser, Contributing Editor