A proposal that would allow public unions to negotiate with employers for better retirement benefits is still alive despite strong opposition by state agencies.
Current state collective bargaining statutes dictate that certain things are beyond the scope of negotiations between the state and the 15 bargaining units representing state and county workers. While “all matters affecting employee relations” are up for debate during negotiations, other matters such as employee recruitment and jobs classifications are not.
House Bill 1655 would make a small but significant change to those statutes: retirement benefits would no longer be one of the prohibited topics.
This proposal has, predictably, been popular among many of the bargaining units, which have urged lawmakers to pass the measure. Randy Perreira, executive director of the Hawai‘i Government Employees Association, told the House Labor Committee earlier this month that the measure will help attract much-needed new workers to the state.
“Our state’s retirement benefits used to be one of the primary reasons why individuals sought a career in public service,” Perreira wrote. “For the state to become a competitive employer, they must take a holistic approach in respect to an employee’s retirement plan, particularly for future employees and generations.”
However, state agencies have warned that the bill will unnecessarily complicate management of the Employees’ Retirement System, the system by which retirement benefits are disbursed to state and county employees.
The state Department of Budget and Finance predicted that allowing the 15 public bargaining units to negotiate their own unique benefits package would “essentially create 15 different pools of employees.”
“That would be an administrative nightmare,” Kalbert Young, executive director of the Employees’ Retirement System, told Aloha State Daily. “I think that would be financially fatal.”
Young said the ERS has 118 employees statewide to administer a system that directly impacts some 140,000 people — about 55,000 public workers, 50,000 retirees, and some 30,000 other pensioners, along with beneficiaries and households.
Beyond the administrative overload, Young explained that the state’s pension and collective bargaining statutes are relatively delicate and can’t easily be altered without potential side effects. For example, he said, any change that could cut promised payments to public pension programs would likely result in legal challenges.
Lawmakers can still alter state pension laws, Young said, such as in 2011 when the state adopted a tiered system, whereby people who become enrolled in the pension system before or after specific dates receive different benefits.
“But that applies to everyone in the system,” Young said. “We’re not saying that Bargaining Unit 8 gets their own unique benefits.”
And if any significant changes are made to the state’s retirement laws, Young said that could draw the ire of the Internal Revenue Service.
The IRS has certified the state pension system and granted it tax qualified status, which allows beneficiaries to receive certain tax breaks on their pensions, Young explained. Should the IRS determine a change to the system violates its own rules, it could rescind that tax qualified status, which would lead to ripple effects throughout the entire system.
The Hawai‘i State Constitution guarantees public pension payments, Young said. In a worst-case scenario where the state pension fund is no longer sufficient to pay out the necessary benefits, then the state is obligated to find those funds elsewhere.
“And then, that affects every taxpayer in the state,” Young said. “So, I think it’s worth keeping an eye on.”
While Young said he understands why the state’s bargaining units are attracted to the proposal, he said he hopes the bill fails.
“But I do have to acknowledge that it has continued to move,” Young said. The bill passed second reading in the House on Feb. 17 and has been referred to the House Finance Committee.
On the other hand, a corresponding Senate measure is officially dead, with the Senate Committee on Labor and Technology voting in January to defer it.
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