REPORT FROM GOV CAYETANO’S CAMPAIGN FOR MAYOR – During Wednesday night’s KITV debate, Mayoral candidate Kirk Caldwell used a quote from Wes Machida, Administrator of the Employee Retirement Fund, to blame Governor Ben Cayetano for a “raid” on the ERS fund of $350 million which Caldwell claims has resulted in its current $8 billion unfunded liability.
“The head of the ERS clearly stated,” said Caldwell, “that if that money had not been taken, the system would be almost fully funded today.”
Machida, who was watching the debate, emailed Governor Cayetano the following message:
“I saw the debate last night and was disappointed to hear how my quote was being used. First and foremost, you should not be blamed for the ERS unfunded liability. The excess earnings provision was enacted into law in 1965 and effective for 1967, so it was permitted by law. Thus, this law began well before you became Governor.
“My quote was meant to be applied to the following:
“Over a 36-year period since 1967 through 2003, excess earnings of approximately $1.7 billion was used to credit the employers’ contributions.
“Our Actuary had indicated a few years ago that had we been able to keep the excess earnings, we would be close to fully funded as long as it wasn’t used to increase benefits. Over the years since 1967 until this past fiscal year, the ERS averaged over 8 percent in investment earnings … While public pension funds and other investors have recently experienced two significant down years over the past decade, the excess earning could have cushioned these down years and enabled the ERS to be at a better funded status. Another reason for the increase in the unfunded liability over the past decade is the reflection of longer life expectancies. Hawaii members have been living longer, in fact, the median life expectancy age for female teachers is 90.”
“As a result, in my opinion, you are not responsible for the ERS’ large unfunded liability.”
Thus, every governor from John A. Burns, George R. Ariyoshi, John D. Waihee and Ben Cayetano rightfully treated the ERS excess earnings as revenues for state government services. To boost his campaign, Kirk Caldwell knowingly manipulated the facts to blame Governor Cayetano for the unfunded liability.
“It’s sad,” Governor Cayetano replied, “Kirk should have known better but I guess he wants to win no matter what the cost to his personal integrity.”