HONOLULU — A report by a fiscal watchdog deems Hawaii one of the worst “sinkhole” states for its growing debt burden to taxpayers.
Chicago-based Truth in Accounting reviewed the finances of every state, focusing on unfunded liabilities such as pension and health care obligations to current and retired public-sector workers, for its annual “State of the States” report.
Only Massachusetts, New Jersey, Illinois and Connecticut are in worse fiscal condition that Hawaii.
Donna Rook, president of StateDataLab.org, a division of Truth in Accounting, said Hawaii has been one of the five worst states since this annual study was started in 2009.
“The average Hawaii taxpayer’s share of the state’s debt is $27,000 after available assets are tapped. Since we set aside both capital assets and debt related to capital, the remaining debt is primarily unfunded pensions and retirement health,” Rook said.
The $27,000 per taxpayer is about 57 percent of the average resident’s annual income, Rook said.
Sheila Weinberg, founder and CEO of Truth in Accounting, said Hawaii financial statements show $4 billion in retirement liabilities, but the state actually has nearly $15 billion of unfunded retirement promises.
Hawaii has only $5 billion to pay the state’s bills, which total $18 billion, Weinberg said.
Despite these financial realities, Gov. Neil Abercrombie’s administration has touted its fiscal prudence since being elected governor in 2010, and continued to do so through his primary re-election campaign.
Both Abercrombie and his primary challenger, Senate Ways and Means Chair David Ige, exchanged barbs leading up to the election over who was responsible for Hawaii’s fiscal “turnaround.”
Ige beat Aberrombie by 36 percentage points in the primary, constituting the largest primary loss by a governor in U.S. history and represented the first time a sitting Democratic governor in Hawaii was defeated in a bid for re-election.
Abercrombie’s administration claimed credit for the state depositing $100 million to the Hawaii Employer-Union Health Benefits Trust Fund in late June to “prefund” the cost of the state’s unfunded liabilities, including health insurance premiums and life insurance for state retirees.
Abercrombie said, in the past, the state opted to pay only the required minimum annual premiums, but is now working to pay down the $11 billion debt ahead of schedule.
Gov. Neil Abercrombie touted his fiscal prudence during his final 2014 State of the State Address
Under Abercrombie, Hawaii also enacted Act 268 in 2013, mandating state and county governments pay at least 20 percent of the annual amount needed to fund promised benefits to current and retired workers by fiscal 2015. That percentage bumps up 20 percent annually until 2019, when the funding mandate reaches 100 percent, and continues for at least 30 more years.
At least Hawaii made progress in the speed of its fiscal reporting: the state was listed earlier this year as one of Truth in Accounting’s most improved states for timeliness releasing 2013 year-end financial reports.
Despite some progress, Weinberg has continued to criticiz Hawaii for “ignoring related employee compensation cost.”
She said the administration claimed it met the state’s constitutional balanced budget requirement, while putting off more than $600 million of compensation costs related to retiree benefits.
Hawaii’s next governor will have to deal with taxpayers’ substantial debt, but Abercrombie won’t have that responsibility.
I think I ran over one of these holes on Kapiolani Blvd. a few months ago and my shocks have never been the same! Hold on to your wallets.
That's because the State refuses to fund the shortfall. A $100 million token amount touted by Abercrombie is clearly insufficient to pay down an $11 billion deficit. The Sta and counties are directly responsible for intrntionally causing the shortfall by taking some of the annual funding required to waste on pet projects to curry political favor with the public.
I want to know why the government employee unions' top officials are not held accountable by their members for allowing the shortfall. If union officials have any duty at all to their members, it is to make sure the pension and retiree health benefit funds are fully funded. They have been silent for year after year. When asked in member meetings, the response has apparently been along the lines of "We take that issue very seriously, and are studying it. Now shut up. Next question." Repeat the following year. And the year after, et cetera.
As for the politicians, the Democratic Party has controlled state government for half a century. The Democratic Party owns the financial shortfalls. Period.
One of the five worst states in the country: Why aren't the Republicans or Libertarians making that a campaign issue? The utter irresponsibility of the Democrats is matched only by the supineness of the competition.
The liability of the state is one thing, reality is another. State retirees will be paid benefits based upon what is actually available in the retirement funds. If state employee unions and pension fund managers have been totally derelict in their legal fiduciary responsibilities to their constituents over a period of decades, that is not going to be fixed by suddenly telling every taxpayer in Hawaii to mortgage their home to the state to support retiree benefits. People who have been made promises have a responsibility to watchdog the system making the promises to ensure they can be kept. This has never happened and persons bear responsibility for this. For state employees to expect 100 cents on the dollar that has been 'promised' in this dysfunctional environment at this late date is delusional.
Probably 90% of NON-PUBLIC sector folks will NEVER see a PENSION. Even among say School teachers, their pensions should have been been taxed for pensions over $37,500.(meaning they still get a sweet sweet deal and only the dollars OVER 37.5k get taxed) That was the VERY REASONABLE proposal put forth by GOV. NEIL ABERCROMBIE but used as a WEDGE ISSUE by IGE who wanted an increase in the general excise tax that would have futher hurt the lower and middle class as well as the economy as a whole-WRONG, eventually they agreed to tax the rich but left in tact the major problem of the pension hole. IRONICALLY, it is people like ABERCROMBIE- people who LEAST NEED IT who get the best deal on the TAX FREE PENSIONS-laughing to the BANK-but in the case of Neil, in this case he did what was best for the PEOPLE Not his own BANK account.
[…] Hawaii isn’t always on that list. But according to one watchdog group, Truth in Accounting, the state’s pension burden is among the worst in the country. The Hawaii Reporter recaps: […]
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