State’s use of contractors just a hint of what could be

by Joe Kent, Grassroot Institute, Mar 8, 2019 

At least 11 of Hawaii’s state agencies have each saved thousands of dollars a year by privatizing some of their janitor positions, giving a rare glimpse of the savings that could be possible if more state and county agencies followed this approach.

The private partnerships seem to be helping the state agencies save money, while also providing opportunities for private-sector workers.

For example, a state worker working half-time in 2018 would have required a $20,088 annual salary [1], but a private janitor working half-time that same year at the Lahaina District Court did the same work for $15,156, a 25 percent savings. [2]

For more than 20 years now, Hawaii’s state and county governments have generally been unable to hire private-sector workers because of a 1997 Hawaii Supreme Court ruling known as the “Konno decision,” which barred government agencies from privatizing “services that have been customarily and historically provided by civil servants.” [3]

Indeed, the Judiciary made a point to mention that its request to hire the private-sector janitors in Lahaina was being made “in response to the Hawaii Supreme Court Konno vs Hawaii ruling regarding privatization of services ‘customarily and historically’ provided by civil servants.” [4]

However, the decision did allow for privatization of public-sector positions when “personnel to perform the service cannot be obtained through normal civil service recruitment procedures.” [5]

This exemption, known as Exemption 2, allows state agencies to contract with private janitorial service providers, so long as they cannot find public sector employees to do the work. [6]

In addition, Exemption 13 allows agencies to hire private workers with disabilities who are participating in work-experience training programs. [7]

And Exemption 15 allows an agency to contract “if it is impracticable to ascertain or anticipate the portion of time to be devoted to the service of the State.” [8]

Many state agencies have used these exemptions to contract out some of their janitorial needs, as shown in Figure 1.

Figure 1 -- State agency private-sector janitorial contracts and likely exemptions

Source: Budget testimonies of Hawaii state departments for 2017, 2018 and 2019, available at http://tinyurl.com/yyd6m5b7.

The Judiciary’s use of private-sector janitors was brought to light during public hearings at the state Legislature in January, when state Sen. Kurt Fevella said to Judiciary representatives, “I see you guys hiring, like, custodians and janitors to do the work, but you guys contracting it out. You guys never looked into hiring government workers to fulfill these areas where you guys having waste and janitorial work?” [9]

Rod Maile, administrative director of the courts responded, “For the Big Island, the space that we currently occupy is the old Kona hospital. And the work is actually done by a contracted entity, who, by statute, is allowed to do that.”

That statute is likely Exemption 13, since the janitorial work at the old Kona Hospital is contracted with the Arc of Kona, a nonprofit that provides work opportunities for people with disabilities. [10]

Maile added, “For the last two years, the Legislature, and specifically the House Finance Committee, has asked us to make sure that our contracts for, like, rubbish pickup or the kinds of things that traditionally would have been done by state workers, that we make sure that those services, if they are currently provided by state or even county folks, that we utilize that. And so for us, we’ve gone checked every single contract for facilities, or the kind of maintenance stuff, janitorial services and rubbish pickup, to make sure that there are no available state resources, or even county resources, to do that before contracting.”

The fact that the Judiciary attempts to find state resources before contracting with private entities demonstrates that it is satisfying the exemption to the Konno decision, which legally allows any state agency to privatize, if no state workers are available for the job.

The experience of the Hawaii Judiciary and of other state agencies suggests the magnitude of savings that could be possible if more state and county agencies could partner with private contractors.

Moreover, the option to do so shouldn’t have to rely on that narrow exemption from the Konno decision. Rather, state legislators should tweak Hawaii law so that all state and county government agencies can contract with private providers, without having to check if civil service employees are available to do the work.

Such a change would help the state and counties save millions, rather than thousands, of dollars; create more employment opportunities; provide training for people with disabilities; and improve the delivery of government services.

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Related: After Konno: How Hawaii Can revive contracting as policy option

Footnotes:

[1] “Compensation Plans for the State of Hawaii,” Hawaii Department of Human Resources Development, Employee Classification and Compensation Division, Oct. 1, 2018, p. 65, https://dhrd.hawaii.gov/wp-content/uploads/2018/10/Compensation-Plan-October-2018.pdf; “State of Hawaii Department of Human Resources Development, Salary Schedule,” Hawaii Department of Human Resources, Development, July, 1, 2017, https://dhrd.hawaii.gov/wp-content/uploads/2017/10/BU01_SalarySchedule_07012017.pdf; and “Salary Schedules,” Hawaii Department of Human Resources Development, http://dhrd.hawaii.gov/state-hr-professionals/class-and-comp/salary-schedules/.

[2] “Judiciary Overview,” Hawaii State Judiciary, Jan. 9, 2018, p. 13, https://www.capitol.hawaii.gov/session2018/testimony/INFO_TESTIMONY_01-09-18_JDC.pdf. See also, “Legislative Budget System, Budget Comparison Worksheet,” 2018 Budget Worksheets, page 5, https://www.capitol.hawaii.gov/session2018/worksheets/SB2150-JUD-Agrees.pdf.

[3] Konno v. County of Hawaii, 1997, 937 P.2d 397, https://www.scribd.com/document/391205087/Konno-Decision-Feb-28-1997-13-MB. See also https://law.justia.com/cases/hawaii/supreme-court/1997/18203-2.html.

[4] “Testimony to the Senate Committee on Judiciary,” Hawaii State Judiciary, Feb. 13, 2018, p. 4, https://www.capitol.hawaii.gov/session2018/testimony/SB2150_TESTIMONY_JDC_02-13-18_.PDF.

[5] Hawaii Revised Statutes 76-16, Hawaii State Legislature, https://www.capitol.hawaii.gov/hrscurrent/Vol02_Ch0046-0115/HRS0076/HRS_0076-0016.htm: “Positions filled by persons employed by contract where the director of human resources development has certified that the service is special or unique or is essential to the public interest and that, because of circumstances surrounding its fulfillment, personnel to perform the service cannot be obtained through normal civil service recruitment procedures.  Any such contract may be for any period not exceeding one year.”

[6] Ibid.

[7] Hawaii Revised Statutes 76-16(b)(15), Hawaii State Legislature.

[8] Ibid.

[9] “Hawaii Judiciary and Attorney General Hearing 1-4-19,” YouTube video, Jan. 4, 2019, from 44:48 to 46:33, https://www.youtube.com/watch?v=2UbMIRUJY8I&feature=youtu.be&t=2687.

[10] “Senate Committee on Ways and Means and Senate Committee on Government Operations, Biennium Budget Requests for Fiscal Biennium 2019-2021,” Hawaii Department of Accounting and General Services, Jan. 14, 2019, p. 44, https://www.capitol.hawaii.gov/session2019/testimony/Info_Testimony_WAM-GVO_01-14-19_AGS.pdf.