Cayetano advises
mayor to review
retirement funds

Harris says the city is being billed
$11 million more than it should be
for city-state retirement plans

By Mike Yuen
Star-Bulletin

Advice from Gov. Ben Cayetano to Mayor Jeremy Harris: Check with the city corporation counsel and understand state law before you have the city withhold $11 million that should be paid to the Employees Retirement System.

Cayetano yesterday talked with the attorney general's office and interim Budget Director Neal Miyahira, and learned there is a statute that ensures the city pays its fair share to the retirement system, which administers the government pension fund for state and municipal workers.

That discussion came a day after Harris said the city won't need a legislative-approved $11 million grant-in-aid that Cayetano blocked with a line-item veto.

Harris' new position emerged after city and outside counsel, upon reviewing the city's ERS payment calculations for the year 2000, concluded that the city is being billed $11 million more than it should. The city will pay only what it owes and not make what it considers to be excess payments, Harris said.

In a letter to Council Chairman Jon Yoshimura dated yesterday, the mayor continued to hold that position, saying Corporation Counsel David Arakawa has concluded the calculations used to determine the city's contribution "are not legally supportable."

The $11 million is a matter of contention because it is supposed to be part of retroactive pay raises for city workers who are members of the Hawaii Government Employees Association and the United Public Workers unions.

"I don't think the mayor has the power to withhold monies like that," Cayetano said.

"I'm told by some of the (City) Council people that if they make some hard decisions, they can find the monies for the pay raises. I hope Harris reconsiders his position of withholding the money."

Cayetano refused to release the $11 million from the state's cash-strapped general fund, saying those monies can best be used for pressing state needs, such as education and crime prevention.

Miyahira said the state's position hinges on the statute that says if a municipality fails to pay its full share to the ERS, the amount that is still due can be taken out of the city's or county's real property tax revenues.

Up until the early 1980s, the state collected property taxes for the city and the counties. Since it no longer performs that function, the state would have to go to court to get funds still due to the ERS, Miyahira said.

The formula used to calculate payments into the ERS that Harris is challenging has been used for years, Cayetano said.

But a showdown between the state and city may be sidestepped if Harris can convince trustees of the government pension fund of the validity of his arguments.

Harris plans to address the ERS board at its meeting scheduled for July 11.