BY MALIA ZIMMERMAN – HONOLULU — How vibrant Hawaii’s fiscal health is depends on who you ask.
Gov. Neil Abercrombie maintains the government is on strong financial footing, but fiscal watchdogs say because Hawaii’s unfunded liabilities are in the billions of dollars, the governor’s claims are grossly inaccurate.
The governor, now in his fourth year and up for re-election, credits himself and his administration with a $1.1 billion turnaround in the past three years that generated an $844 million dollar surplus.
He points to Hawaii’s Comprehensive Annual Financial Report for the fiscal year ending June 30, 2013, that “shows Hawaii’s asset growth has outpaced liability growth for the first time in seven years,” with the state’s “assets less liabilities” for primary activities, increasing for the first time since 2006 by $307.1 million, from $4.5 billion to $4.8 billion.
The report, prepared by two state agencies and the legislative auditor, showed assets increased by $1.1 billion, outpacing an increase in liabilities of $807 million. Essentially, revenue is growing and expenses are down.
“The report measures the state’s net worth and overall fiscal health, which clearly shows strong positive fiscal growth over fiscal year 2012,” Abercrombie said.
Hawaii’s CAFR reports have been notoriously late in previous years, something the governor’s administration noted when announcing that, for the first time in five years, the state received the Award of Achievement of Excellence in Financial Reporting from the Government Finance Officers Association for its 2012 CAFR for publishing financial reports that are “clear, accurate, and delivered in a timely manner.
However, Sheila Weinberg, founder and CEO of Truth in Accounting, said whether Hawaii truly has a surplus and a strong financial position all depends on how you count.
Weinberg, who reviewed the state’s audited financial records at Watchdog’s request, said the state’s audited financial statements tell a different story than the governor’s — largely that Hawaii has an accumulated deficit of $1.7 billion.
State Comptroller Dean Seki reported a surplus of $310 million in 2013, but Weinberg said this pales in comparison to prior year reported deficits.
The difference? Retirement costs, including pension benefits, and other post employment benefits, such as retirees’ health care, life insurance, dental care and eye care, were not included in the budget, Weinberg said.
In 2012, Hawaii’s unfunded pension number was $6.16 billion and the unfunded OPEB number was $14.29 billion, she said.
Kalbert Young, director of the state Department of Budget and Finance, said Hawaii has been paying down those unfunded liabilities at the direction of the governor and the Legislature.
“The report illustrates the importance of pre-paying annual required contribution for OPEB liabilities, as Gov. Abercrombie has been advocating over the last three years,” Young said.
He said $100 million that will go toward those liabilities this fiscal year, as required by the passage of Act 268 in 2013, will “further improve our asset ratio.”
But Weinberg maintains Hawaii’s politicians shouldn’t claim a “surplus” when billions of dollars in unfunded liabilities are still outstanding.
“In simple terms, would you consider your personal financial condition to be in surplus if you still had a large credit card debt?” Weinberg asked.