Harris confident
he can come up
with $11 million

The source? A refund from
the Employees Retirement System

By Pat Omandam
Star-Bulletin

The City Council is expected to pass a billion-dollar operating budget today that, on paper, will be $11 million short.

But Mayor Jeremy Harris isn't worried because he says he knows exactly where to get the money.

Both the $1.031 billion city operating budget and $267.7 million capital budget for fiscal year 2000 are up for final approval today before the full Council.

As part of the proposed city budget, city officials had counted on an $11 million state grant -- part of a bill passed by the state Legislature that temporarily recalculates employer contributions to the state Employees Retirement System.

The measure takes the ERS fund's excess earnings from fiscal years 1997 and 1998 -- anything over 10 percent -- and uses them to reduce the amount the state and counties pay to the retirement system in fiscal years 2000 and 2001.

The counties would use savings in retirement payments to help fund pay raises.

Honolulu is expected to save $28 million in payments the first year, but that is not enough to cover the $39 million in retroactive and current pay raises the city is committed to.

The Legislature tried to fix that problem by allocating an $11 million grant-in-aid to the city to cover the difference, but Gov. Ben Cayetano yesterday balked at any move that hurts the state's coffers.

The other counties would have received a combined $4 million in grants. Cayetano said he will veto the grant provision in the bill, which becomes law on June 30.

"I think what Mayor Harris -- you notice that none of the other counties are grumbling -- but what Mayor Harris and the City Council needs to do is, is to find or resurrect some of the ideas that they had to raise the money to make up for that $11 million shortfall," the governor said.

Harris yesterday said the grant money is unnecessary. He said a city corporation counsel and private legal counsel reviewed the city's ERS payment calculation to the retirement system for fiscal year 2000, and it shows the city is paying about $11 million more than it should.

Harris said he will argue his point before the ERS board on July 11 and ask it to reconsider the excess payment, which would free up the money needed to cover the budget shortfall.

In the meantime, the city will pay the ERS only what its lawyers say it owes. And Harris is not expected to withhold pay raises for United Public Workers employees, as he stated two weeks ago.

"We will only pay what our attorneys say is required under the law," Harris said. "But the attorneys are quite clear, under the law that was passed, our bill will be $11 million less than what was originally calculated."

Cayetano, however, said the state actuary says the calculation is accurate.

"It is about as fair as you can get. And it is a formula that has been used in the past," Cayetano said.

Meanwhile, the Council can schedule another meeting before next Tuesday's deadline to pass the budget.