Truth in Accounting Explains Hawaii’s Nightmarish Finances
It is a nightmare.
That is what Sheila Weinberg, from the fiscal watchdog group Truth in Accounting, said when she reviewed the state’s Employee Union Trust Fund figures in the state’s recently release Comprehensive Annual Financial Report (CAFR). She said for every dollar a state employee earns, state actuaries have calculated that an additional 41 cents should be going into the Employer-Union Health Benefits Trust Fund.
Here is her email to Hawaii Reporter:
The Annual Required Contribution that the state’s actuaries calculate should be being made into the Trust Fund to adequate fund retirees’ healthcare benefits. The schedule shows the Annual Required Contribution (ARC) as a % of Payroll. The State’s % is 41%. Technically what does this mean?
The Annual Required Contribution that the state’s actuaries calculate should be being made into the Trust Fund to adequate fund retirees’ healthcare benefits. The ARC has a few components. One is the retirees’ healthcare benefits that are a part of current employees’ compensation. Each employee’s compensation package is made up of salaries plus benefits. A component of the ARC is the retirees’ healthcare part of compensation that current employees’ are earning this year. Second is an amortization of the pre-2008 unfunded liability. In 2008 the state actuaries determined how much unfunded retirees’ healthcare benefits had been earned by employees in the past, but no money had been set aside to pay them. Now the actuaries are amortizing that amount over 30 years. The second component of the ARC is 1/30 of the pre-2008 unfunded liability. In other words the amount that would have to be paid to fund the pre-2008 unfunded balanced over 30 years. The other component is interest on the unfunded amount.
In layman’s terms what does that mean?
The state’s actuaries have determined for the state to pay off its unfunded retirees’ healthcare liability over 30 years and to put enough money away to pay the benefits current employees earned the right to receive in 2010, the state would have to pay into the trust fund an amount equal to 41% of the 2010 compensation costs.
Even simpler terms:
For every dollar a state employee earns the state actuaries have calculated that an additional 41 cents should be going into the Employer-Union Health Benefits Trust Fund.
Honolulu City Council to Approve $1 Million Total for Rail Lawsuit Defense
Carl Smith Ball is lobbying the Honolulu City Council today at 10 a.m. for an additional $400,000. The prominent Honolulu law firm already has received $600,000 to defend the city against a federal lawsuit over the rail project.
Seven plaintiffs are challenging the Environmental Impact Statement prepared by the city and approved by the federal government which promotes the $5.3 billion elevated steel on steel rail project as the best alternative for Oahu.
HonoluluTraffic.com’s Cliff Slater and the well-known plaintiffs that include former Gov. Benjamin Cayetano, Retired Judge Walter Heen, Sen. Sam Slom’s Small Business Hawaii Foundation, and University of Hawaii law professor Randall Roth, have raised more than $200,000 to initiate the lawsuit. They are trying to raise additional funds from private sources, and are upset the city is using their taxpayer funds to hire private attorneys instead of using existing city lawyers
Kim to Young: City Bank Should Be Banned
State Budget and Finance Director Kalbert Young was in the hot seat yesterday at the Senate Ways and Means Budget Hearing.
Sen. Donna Mercado Kim was furious that Young included City Bank’s services in the state’s recent $1.5 billion bond sale.
Sen. Kim has held hearings on City Bank’s ongoing mistreatment of the state since 2008, including a dispute over student loans. Kim, and several other legislators, do not believe City Bank should be awarded any additional state business.
Young testified a three-person panel rated City Bank was the best partner to share the majority of underwriting expenses, and he took their advice.
All of the Senators at the hearing praised Young for the record low interest rate achieved in the recent bond sale, but asked him to consider not conducting any future business with City Bank.
Other Capitol News Highlights:
Yesterday Senate Bill 2012 was formally introduced. The legislation authorizes the state to spend $500 million repair and maintenance of schools.
Today is the final day for bill introduction at the state legislature.
Also at the capitol today, a hearing on the $75 million in Race to the Top funds that the state is now in jeopardy of losing because it is has been placed on high risk status by the U.S. Department of Education.