Hawaii leads nation in per-capita debt for unfunded union benefits

Source: Truth in Accounting

By Malia Zimmerman, Hawaii Reporter, WatchDog.org, May 15, 2013 

HONOLULU — Hawaii taxpayers have a heavy burden to bear when it comes to covering “other post-employment retirement benefits” for their public employees.

In a newly released analysis, the Washington, D.C.-based Truth in Accounting reports Hawaii’s OPEB — those “other post-employment retirement benefits” — is more than $9,800 per capita. That’s more than any other state. The 50-state average is less than $2,000 per capita.

“Such levels of unfunded OPEB liability will result in higher taxes, cuts in other services, or broken promises,” said Sheila Weinberg, founder of the Institute for Truth in Accounting.

The other post-employment retirement benefits owed to the Hawaii Government Employees Association, the United Public Workers union, and the Hawaii State Teachers Association, stood at $13.6 billion in 2011.

Much of the debt is attributed to health care for employees, retirees and their families, managed through the Hawaii Employer-Union Health Benefits Trust Fund.

Sheila Weinberg of Truth in Accounting

The Hawaii Employer-Union Health Benefits Trust Fund debt far exceeds Hawaii’s unfunded liability for pensions, which was $5.9 billion during that same year.

“While Hawaii’s has not fully fund its pensions, that is only half of the story — actually less than half. As these unfunded liabilities grow, Hawaii risks encountering a double whammy of pension and OPEB liabilities,” Weinberg said.

“The OPEB numbers are overlooked because people too often look only at a state’s unfunded pension liability,” she added.

Kalbert Young, director of the state Department of Budget and Finance, said the Hawaii Employer-Union Health Benefits Trust Fund unfunded liability exceeds $18 billion.

Hawaii is responsible for covering $15 billion of the debt to the EUTF, while the four counties and the University of Hawaii must cover the remaining $3 billion owed, Young said.

Hawaii lawmakers deposited $217 million into the state’s Hawaii Employer-Union Health Benefits Trust Fund during the 2013 session. The money is to be used over the next two years to pay health care bills for state employees, their families and retirees and their spouses. The fund balance is $300 million.

Gov. Neil Abercrombie with State Budget & Finance Director Kalbert Young (photo by Mel Ah Ching Productions)

“The amount the state needs to contribute each year is over $500 million based on the last actuarial study. And, the state would have to do so for the next 30 years,” Young said.

The legislation, House Bill 546 CD1, also establishes a trust fund task force; requires the annual public employer contribution to be determined by an actuary, not the Legislature, beginning in FY 2018-2019; and takes revenue from state General Excise Taxes and hotel room taxes.

While a positive step in the right direction, Weinberg said there is a long way to go to get Hawaii’s liabilities funded and back on track.

“Hawaii’s unfunded retirement health care promises are twice as much as its unfunded pension promises,” Weinberg said.

“In our analysis, Hawaii is the third worst state in the Union overall for unfunded liabilities, due in large part to these unfunded OPEB liabilities,” Weinberg added.

Though the state is required by law to have a balanced budget, Weinberg said Hawaii is far from being truly balanced because of its outstanding debt.

The Legislature recently approved  $24 billion for the state’s biennium operating and capital budgets for fiscal years 2014 and 2015.

“As in prior years, the Legislature passed a ‘balanced’ budget, but it does not account for the fiscal reality of the unfunded pension and OPEB liabilities,” Weinberg said.

Truth in Accounting has launched a State Data Lab for all 50 states, featuring a database of census and CAFR numbers from comprehensive annual financial reports as well as descriptions of the states’ current fiscal position.

The organization includes in this database a comparison chart of pension and OPEB unfunded liabilities.

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