Unfunded Liabilities are Putting Hawaii Taxpayers in Dire Financial State

OUSTED: Gov. Neil Abercrombie is first Democratic governor to be booted from office. (photo by Mel Ah Ching)
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Lt. Gov. Shan Tsutsui sits behind Gov. Neil Abercrombie at the 2013 state of the state address (photo by Mel Ah Ching)

BY MALIA ZIMMERMAN – Connecticut and Illinois are ranked worst in the nation when it comes to taxpayer burdens from unfunded liabilities, but Hawaii is close behind them, coming in as the third worst “sink hole” state.

An analysis by The Institute for Truth in Accounting shows Hawaii’s financial burden on taxpayers from unfunded liabilities is $38,300 in 2011, an increase from $32,700 in 2010.


The state’s portion of the $18.2 billion owed to Hawaii public employees for their pensions is more than $13.5 billion, according to the state’s latest financial report in the 2011 CAFR.

All combined the state owes public workers more than $20 billion, and state officials estimate that figure will climb to $37 billion in the next 12 years unless lawmakers put an aggressive plan into motion to pay down the debt.

During his 2013 State of the State Address, Gov. Neil Abercrombie admitted it would take an investment of $500 million a year, every year, for 30 years, to pay off what is owed to state workers.

Abercrombie said the $500 million figure was “impossible to meet all at once”, and instead asked lawmakers to start reducing the debt by allocated $100 million a year beginning in the next fiscal year, “with plans to continue to pursue payment in coming years.”

“During the last few years of the recession while staring in the face of obligations to retirees, other states and cities nationwide have blinked and have either slashed retirement benefits that were previously earned or declared bankruptcy.  That is why I am asking the Legislature to start paying toward our Other Post-Employment Benefits. This is the “OPEB” debt,” Abercrombie said.

While some lawmakers don’t want to commit to the annual $100 million payment that the governor suggested, Sheila Weinberg, head of the Institute for Truth in Accounting, said $100 million a year is not nearly enough to tackle the debt.

In a report on the newly launched https://www.statedatalab.org that tracks state finances, Weinberg said unfunded employees’ retirement benefits represent 86 percent of the state’s bills.

“This unfunded liability has accumulated because State employees have been promised $5.9 billion of pension benefits and $13.6 billion of retirees’ health care benefits, but the State has not adequately funded them.

“Because pension and other retirement benefits are not immediately payable in cash, most of these compensation costs were ignored when calculating balanced budgets. Furthermore, the State has set aside only 31 cents to pay for each dollar of retirement benefits promised.”

“Unless these pension and retirees’ health care benefits are renegotiated, future taxpayers will be burdened with paying for these benefits without receiving any corresponding government services or benefits,” Weinberg said.

Hawaii has a balanced budget requirement, but according to the Institute for Accounting’s new web site, https://www.statedatalab.org, Hawaii has accumulated $7.9 billion in bonds and $2.3 billion in other liabilities.

The state has $20.8 billion in assets, including $13.8 billion of capital assets (roads, buildings and land), and $3 billion in assets that are off limits, so just $4 billion is left to cover $22.6 billion in bills.

Courtesy of Institute for Truth in Accounting

Weinberg said the $18.6 billion shortfall is compensation and other costs incurred that should have been paid in years past, but instead is burdening today’s taxpayers. In addition, the debt jumps $4 billion every two years.

Lawmakers cannot claim to have balanced the state budget with such massive outstanding financial obligations, she said.

“That is like saying ‘aren’t I great because I owe $18,000 and the minimum payment is $500 and I am going to pay $100,” Weinberg said. “They are not balancing the budget if they are not paying into these funds adequately.”

Hawaii produces actuarial valuations for its retirees’ health care plans every two years, but reports should be published more frequently, Weinberg said.

“To knowledgeably interact with—and cast informed votes for—their leaders, citizens need transparency and accurate financial information. The antiquated ways the State budget and financial report are calculated do not provide citizens with the financial information needed to determine government accountability,” Weinberg said.

As to whether the legislature will fund the Governor’s proposal, Kalbert Young, director of the Department of Budget and Finance, said: The vast majority of legislators have indicated that they agree that the EUTF OPEB liability is a significant concern and problem.  However, I would also say that legislators generally disagree as to the extent of commitment to fund or begin paying-down the liability this coming fiscal year.  Some cite that the $100 million is not enough to make a difference (especially, when our annual actuarial liability is closer to $520 million/year), others feel that there is a lot of other funding needs that are more immediate, and some don’t believe that pre-funding is the correct strategy.

“I think that both the House Finance Chair Rep. Luke and the Senate Ways and Means Chair Sen. Ige are both familiar enough with the unfunded liability issue that they would want to continue to discuss the options to address OPEB and that pre-funding at least $100 million per year is still in the discussion.  To that extent, I think it is a positive that the Legislature as a whole is more acutely aware of the issue of unfunded liability and the members are thinking about the issue in terms of how to deal with it relative to affording other programs in government.”





  1. I think it's time to go the way of Wisconsin, and Michigan. Unfunded liabilities for unrealistic public sector union requirements are bankrupting every municipality and state in the country.
    Yes, we need cops, teachers and firemen, but do they have to belong to a union? FDR was a huge union guy, and even he strongly advised not to unionize public sector workers. Is a public sector, unionized janitor any better than a private sector janitor? Why cant they have 401-K's like the rest of us paying for their retirements. I've heard of a 50 year old fireman, retired with 70% of his salary.
    Frankly, I still believe the Communists control the unions, and the unions control the governments. We need a governor Scott Walker.

  2. Remember,the public unions want you to believe that paying them high pensions early is an economic boon to the state as they can spend it on restaurants, trips, etc. That would be like saying a cannibal would never go hungry as they would never run out of something to eat.

  3. Neil ADDED state positions too….especially for his friends. Anyone remember this statement?
    “Gov. Neil Abercrombie on Thursday introduced his choice for a new position designed to improve Hawaii's health care and services. The governor chose Beth Giesting for the newly created position of Health care Transformation Coordinator. Giesting's role is to improve the health of Hawaii residents and the health care. “
    THIS position is 50+K per year plus pension.

  4. Dats da kine, da hawaiian way! Politicians create one, two, tree jobs fo da good kine friends dat wen help dem in year past. Help me become Govonah, and i going get you one job at da state!

  5. Nah, let's not pay $100M/year because it won't solve the problem that would require $500+M/year. Who remembers which governor started this mess by raiding the funds set aside for this purpose?

  6. "…To that extent, I think it is a positive that…the members are thinking about the issue in terms of how to deal with it relative to affording other programs in government." And that's why PSM just passed a $200,000 anti-firearms bill in a state that doesn't have a firearms problem, with three supporters and well over 100 opposers (137 when I stopped counting, with 31 pages of testimonies to go).

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