Stop Digging Deeper Pension Debt

From Grassroot Institute September 29, 2018

They call it the first law of holes, and the principle is simple: When you’re in a hole, stop digging.

If only we could apply this to Hawaii’s public pension crisis.

When it comes to the state’s unfunded pension liabilities, there’s broad agreement that it’s a problem. And everyone is willing to talk about how to pay down that debt.

What we haven’t done is stop digging. In other words, state policymakers are willing to commit to payments on the unfunded liabilities, but haven’t done much to curb the excessive spending practices that have led us to this point.

That’s where the Grassroot Institute of Hawaii comes in.

Conventional wisdom says there isn’t much we can do about public employee benefits because they are protected by the Hawaii Constitution. But in a recent report, we challenged the idea that lawmakers cannot reduce benefits or change the rules for existing employees. Our state Constitution does not require that we follow a ruinous policy into bankruptcy. By our analysis, changes to benefits can be constitutional, so long as they are not applied retroactively.

This is especially good news for the counties, where overtime spiking and generous benefit packages seriously threaten their fiscal health. In fact, the ideas from the report have gained so much traction that we have been invited to discuss our pension recommendations with various county leaders.

This week, Joe Kent, our vice president of research, presented our pension recommendations to the Kauai County Council. Like all of Hawaii’s counties, Kauai has struggled with problems of pension spiking; it has one of the highest levels of employee overtime expenses.

Joe explained to the councilmembers that the state Constitution does not bar them from curbing pension excesses. He also discussed best practices in pension plans from other states, presenting options that might reduce the burden on county budgets while maintaining benefits for county employees.

The interest from the councilmembers was encouraging, and we have hope that some of our recommendations will find their way into future legislation. It’s possible that — with the aid of the Grassroot Institute of Hawaii — Kauai might help lead the state out of its public pension crisis.

At last, it looks like our leaders are ready to stop digging us into a bigger and deeper public pension debt hole.

E hana kākou! (Let’s work together!)

Keli'i Akina, Ph.D.

President/CEO