While the Lingle administration struggles to balance the state's budget, a potential crisis over health care for government employees and retirees lurks in the waiting room. The state and the public employee unions need to find a way to address the issue, even if it eventually departs from a taxpayer-financed health-insurance-for-life system that may be unrealistic to maintain forever.

The state Supreme Court ruled in March that the state must provide health benefits for current state and county retirees on par with active employees. However, the Employee-Union Health Benefits Trust Fund, which covers 161,000 employees, retirees and dependents, is losing more than $1 million a month.

Union leaders see the problem as easy to solve: The state should simply keep the fund solvent by pouring about $53 million into the trust fund. As most taxpayers understand, that is not feasible under current fiscal conditions.

“;The trust fund is insolvent, its governance is untenable and needed cost-cutting measures are either not being made or in danger of being rescinded,”; Gov. Linda Lingle wrote in a letter to heads of the House and Senate labor committees. Union members “;shoulder the responsibility for the collapse of the health care insurance system,”; she added.

Given the state's $1.3 billion projected budget deficit through June 2011, the alternatives are to raise the cost of premiums paid by the beneficiaries by 26 percent or reduce benefits. Those choices are tough, but they must be made.

George Kahoohanohano, chairman of the trust fund board of trustees, understandably wants taxpayers to remedy the problem, especially after last year's 24 percent increase in premiums charged to beneficiaries.

“;The governor had made it clear she doesn't want a penny more spent on the EUTF, but she wants to reduce benefits,”; Kahoohanohano said. “;It's very difficult for me to accept something like that.”;

The conflicting outlook on the systems needs to be resolved, because taxpayers are angry about paying for a health care system about which virtually all private-sector employees can only fantasize.

Randy Perreira, executive director of the white-collar Hawaii Government Employees Association, contends that “;an adjustment of rates”; may be needed, “;but not right now.”; He suggests that bringing teachers into the system would help because they are relatively young and healthy without as many medical claims as other state employees.

But the Hawaii State Teachers Association wants its members to remain in the Volunteer Employee Benefits Association, a separate trust that HSTA president Wil Okabe testified is more cost-effective than EUTF for the state and for teachers, whether working or retired.

Systemic changes need to start with Lingle's proposal to change the EUTF board's makeup, now deadlocked with equal numbers of union and management trustees. In the meantime, unions need to recognize that tax dollars are not available for a bailout.