Hawaii’s World

By A.A. Smyser

Tuesday, June 15, 1999

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State auditor’s
disturbing discoveries

FLYING blind is a good way to crash. Government in Hawaii has been flying half-blind for a long time in its spending processes.

Just how blind has been exposed in an eye-opening state auditor's 1998 report on public schools and two downright alarming 1999 reports on the Public Employees Health Fund.

The school audit revealed that in 1995-96 the state spent $11,062 per pupil for 92 pupils at Maunaloa Elementary School on Molokai versus only $4,003 per pupil for 432 pupils at Waikoloa on the Big Island. Special education costs hit a high of $42,509 per pupil for 11 at Pohukaina in Honolulu.

The audit reached beyond the DOE budget to include DOE-related costs in other agency budgets -- retirement and health benefits, student health and transportation, and attorney general services.

A private business would know these costs. Government didn't.

The tool used by State Auditor Marion M. Higa is a pocket-sized computer diskette program called "In$ite." Fordham University developed it and gave it free to all states.

Ours got lost in our bureaucracy. Higa bought her own copy for $2,500. It was fed actual expenditure numbers from 1,400 categories. It then broke them out by location, function and program and spewed out comparisons.

Higa thinks per-school data will be particularly useful as we set up more semi-independent public schools and try to decide how to fund them.

Innumerable cost breakouts are possible with In$ite.

The 1995-96 broad-brush analysis showed nearly $1.2 billion in school spending -- 46.8 percent on classroom teaching, 4.1 percent on classroom materials, 13.4 percent on pupil, teacher and program support, 17.4 percent on operations, 6.5 percent on management, 10.7 percent for capital costs and 1.6 percent on other obligations. In$ite can provide many dozens of comparisons previously unattainable.

Higa finds such fresh information "exciting."

Looking into the Public Employees Health Fund is depressing as well. One aspect got the lowest possible rating a certified public accounting firm can give.

Among the discoveries:

In the 1997-98 year, $294 million in revenues and $203 million in costs were not recorded and reported by the fund.
Insurers like the Hawaii Medical Service Association and Hawaii Dental Services held on to excess income that should have been returned to the state. They paid a low 5 percent interest on it. Even this could not be fully evaluated because contract language was vague and 11 of 13 contracts were unsigned, having been delayed for legal review.
Money diverted to union insurance plans is raising costs for other state employees.
Hawaii is one of only six states paying 100 percent of health costs for retirees and their families.
Without changes, the state's obligations for health care "most likely" will jump from $4.5 billion in 1998 to $11.4 billion in 15 years.

Higa's eight-year term as auditor will expire next year but can continue under a sudden-death threat until a successor is chosen. Her reappointment to eight more years of independence is subject to a majority vote of each house of the Legislature in joint session.

Considering this year's Senate firing of an honest attorney general, reappointment of an equally honest and even tougher auditor may not be assured. Enlightenment should make friends. But in the dungeons of politics it makes enemies, too.

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A.A. Smyser is the contributing editor
and former editor of the the Star-Bulletin
His column runs Tuesday and Thursday.