Ka Wai Ola - Office of Hawaiian Affairs, Volume 21, Number 11, 1 November 2004 — Decision on trustee retirement bill was based on prudence and fairness, not political "payback" [ARTICLE+ILLUSTRATION]

Decision on trustee retirement bill was based on prudence and fairness, not political "payback"

Iwas troubled to read Trustee Rowena Akana's recent accusations regarding the Democrats in the House of Representatives (KWO, Sept. 2004). Ms. Akana alleged that SB 1155, a bill that would have specifically benefited OHA trustees, failed to pass due to political considerations. Specifically, she claimed that the failure of SB 1155 was "payback" for the trustees' endorsement of Governor Lingle's unsuccessful education reform plan. Unfortunately, Ms. Akana's essay provided few details regarding the legislation and its implications. I would, therefore, like to take this opportunity to provide some of the facts. In 2002, the Legislature passed a law that provided OHA trustees the same retirement benefits afforded to other elected salaried officials. As a result, OHA trustees who were in office on July 1, 2002 were given the option of becoming contributory plan members of the Employees' Retirement System (ERS) effective October 1, 2002. In addition, the trustees were allowed to elaim credit for any service

retroactive to July 1, 1993 by making after-the-fact retirement contributions for their earlier years of service in order to obtain a larger retirement benefit. Under current law, ERS members in this category may do this by either payroll deduction or making a lump sum payment. However, the lump sum method is available only if an individual has at least five years of membership service in a qualified position. SB 1155 would have created a special exemption for the trustees by allowing them to use either method, regardless of their years of service. This bears reiterating. If we had chosen to pass SB 1 155, it would have given special treatment to a select few - treatment no other employee of the state or counties enjoys. So the question becomes, if other members of the ERS - including many who have worked for decades - must follow these rules; why would the OHA trustees deserve special treatment? Passing SB 1155 would have been precedent setting and could have caused other ERS members to demand the same privilege. And why not? More credited years as a contributory member means more money at retirement. And while this may work out well for the employee, it means greater costs for the employer. Eaeh state and county agency pays into the ERS

fund for its employees' retirement benefits, so when the trustees were given the ability to become ERS members, it meant an additional cost to OHA. If a trustee then chooses to build up his or her retirement benefits by making retirement contributions to elaim past service, it also means there must be greater contribution into the ERS by the OHA trust funds over time. And as Governor Lingle herself pointed out, State ERS payments are a significant expense that must be reckoned with. In a speech given to the Honolulu Rotary Club luneheon in August, the governor identified the ERS fund as a significant source of future-year expenses. Following her logic, the larger payments called for in SB 1155 would have meant even greater costs in the years to eome. The decision not to pass SB 1155 was based on three criteria: • Equity and fairness for different groups of state and county employees; • Preservation of OHA's trust funds; and • Maintenance of fiscal responsibility. In other words, the failure to pass SB 1155 was a decision based on prudence. It most certainly was not based on positions the trustees might have taken on other issues. Rep. Dwight īakamine Chair, House Committee on Finance

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