Pay raises could
outweigh tax cuts

Talks with the public worker
unions are going on this month

Tax cuts may take a back seat if public employees win pay raises this year.

While Senate President Robert Bunda and Gov. Linda Lingle have proposed plans to cut taxes to return $60 million to taxpayers, any pay increases resulting from talks with public workers are likely to eat up much of the state's excess earnings.

Negotiations for the state's blue- and white-collar workers, plus firefighters and public school teachers, are going on this month. Contracts for public worker unions, except for the University of Hawaii Professional Assembly, expire June 30.

Bunda (D, Wahiawa-Pupukea) yesterday acknowledged that tax cuts would have to wait if contracts are settled in time to be approved by the Legislature before it adjourns in May.

"Collective bargaining (pay raises) is something we need to take into consideration," Bunda said.

Bunda said he has already discussed with senators working on the state budget to include some extra funds to take care of expected pay raises.

But he held out hope that if taxes cannot be reduced this year, the issue is still open for discussion next year.

"This is not a one-year deal. It is a two-year thing. Whether we do a tax reduction now or later, I think the Legislature should look at tax reduction, whether it is this year or next," Bunda said.

The 23,000-member Hawaii Government Employees Association expects both increased benefits and pay because the economy is expanding, said Russell Okata, executive director of the state's largest public employee union.

"We are asking for a modest salary package, but the amount is still in negotiations," Okata said.

The tax cuts suggested by Bunda and Lingle, Okata says, are "piecemeal legislation."

If the state's economy is strong enough for a tax cut, then the financial situation should be reviewed, Okata said.

"Because of the strong revenue forecasts, if the Legislature is serious about any tax initiative, they should convene a tax-review commission instead of acting on any one proposal," Okata said.

Bunda, however, noted that the tax changes called for in his and Lingle's proposals have been included in past tax-review commissions.

"The tax-review commissions have been very consistent. Whether it was good times or rough times with the economy, (they're) proposing a relaxing of the tax brackets," Bunda said.

Although union negotiations actually started six months ago, Okata said the HGEA has yet to get a wage proposal from the state.

Kenneth Taira, Lingle's chief negotiator, said the state is preparing its first offer to the HGEA that will include some pay increases.

"We hope to be able to offer them something; it will not be zero and zero," Taira said.

Lingle, however, is singling out the public employee pay raises as one of the increasing costs of state government.

In her budget message to the Legislature last month, Lingle noted that the budget plan calls for the state to exceed the state expenditure ceiling in the next fiscal year by $108 million.

"The reasons for this excess are due to the substantial requirements in pay raises and non-discretionary (expenses) such as fringe benefits, debt services, social assistance and mandated programs," Lingle said.

For the Lingle administration, the most critical negotiations are with the HGEA because if agreement isn't reached, state law requires binding arbitration with a neutral arbitrator fashioning a wage settlement.

But Lingle has criticized the binding arbitration law, charging that the results always favor the union.

Last year, the Legislature funded the HGEA's 8 percent, two-year wage increase after Lingle vetoed the arbitrated award legislation.

"I hope we can find a settlement without going to binding arbitration, but you never know," Taira said.

Bunda also urged the state administration to work on a negotiating plan that the HGEA will approve.

"Everything hinges on whether the administration is intent on using their negotiator," he said. "The negotiating team for the state should really try to negotiate without having to go to arbitration."