Funding Nonexistent People

by Tom Yamachika, President Tax Foundation Hawaii

At the end of October 2015, it was revealed that our state government paid half a million dollars in pension payments to people who were already dead. Well, then, what do you think of budgeting many times that amount for people who don’t even exist?

Take a bow, Hawaii Department of Agriculture! As recently reported by the Star-Advertiser, that department put in a budget request this year for 360 positions, but 122 of those positions are vacant. Most have been vacant for several years. “As far as vacancies, this is the fifth year I have been chair of this committee and this is the fifth year that we talked about the vacancies,” House Finance Chair Sylvia Luke is quoted as saying during a recent budget briefing. The Department of Agriculture tried to congratulate itself on hiring a record-setting 55 people this past year, although 52 other employees left, many due to retirement, giving the Department a net gain of three (3).

In the state budgeting process, money is set aside for personnel positions whether vacant or filled. Thus, if the department hires a person to fill a vacancy, then money is available to pay that person.

But what happens when the vacancy exists for the whole year or most of it? Then there is a little pot of money in the budget that perhaps could be used for something else! (The sound of evil laughter echoes in the background.) And when there are lots of vacancies, then the pot of money is not so little.

Many departments had been using the money from vacancies to pay accrued vacation pay to an employee who is retiring or leaving. Suppose, for example, that Mr. Abe retires at the end of the year, and in doing so wants to cash out two months of vacation pay. Mr. Abe has been paid for the entire year, so there is no money left under his position. His department would typically use the money saved from position vacancies to pay him the accrued vacation that he is cashing out. A Honolulu Advertiser article dating back to 2002 describes the practice. Apparently, it continues today.

Certainly, some vacancies are a fact of life. Some folks retire. Some get ill. Some move on to other opportunities. But the agency lives on, and there needs to be money to pay a replacement worker so the job of the agency can get done.

But relying on vacancies to cover vacation pay, or some other unspecified costs? Wait a minute. If we need to do this, then our budgeting system is less than completely honest.

And what do we do about a department which has 360 positions, a third of which are vacant and have been so for many years?

First, as Rep. Luke mentioned in the budget hearing, we need to figure out if the department really needs all those positions. Apparently, most of the positions aren’t really needed; otherwise, how could the department possibly function now? The positions that aren’t needed should be cut so the money can be deployed elsewhere and not used as a slush fund. If the positions are needed, then we either need to hire the bodies or, if we can’t, decide how best to use that money to get the work done.

Second, we need to realize that those vacancies equated to quite a wad of money. What happened to that money? Did it just sit in a bank account somewhere, or did it get spent? And what did it get spent on? Once we get that answer, we should be able to determine what the agency’s real budget should be.

That sounds better than setting aside taxpayer money every year for people who don’t exist.