Wishing We Didn't Have to Pay the Piper

Although most taxpayers are immersed in the daily struggle of trying to make ends meet in a sluggish economy, one of the biggest fears of government observers in Hawaii is the looming elephant in the room which is the unfunded liabilities of the state and county retirement system and the related health benefits for current and future public employee retirees.

The combined unfunded liabilities of both systems could reach as high as $20 billion, not millions but billions of dollars. That is more than the state’s biennial budget and the number will grow larger as more and more benefits are accrued by the state’s and counties’ active employees. But why, you may ask, is the state retirement and health system way underfunded?

Indeed there are a variety of reasons for the chasm that exists between a sound and healthy retirement and health system for public employees and what is lurking in the shadows as the current state of affairs. The problem has its genesis in the fact that when the state constitution was amended, collective bargaining was granted to public employees permitting public employees to bargain for compensation on par with their private sector counterparts. However, the retirement benefits, including health care, were not adjusted to be on par with those granted private sector employees. Instead, the generous benefits granted public employees insofar as retirement benefits were continued even after collective bargaining was granted.

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