PBS Hawaii – Insights: Public Employees Pension Fund Crisis

PBS Hawaii – Insights: Public Employees Pension Fund Crisis


TONIGHT ON INSIGHTS ON PBS HAWAII, HOW TO
PAY FOR THE UNFUNDED LIABILITIES OF THE PUBLIC EMPLOYEES RETIREMENT SYSTEM.
WILL STATE TAXPAYERS BE RESPONSIBLE FOR FUNDING THE $8 BILLION SHORTFALL?
NOW, LIVE IN OUR STUDIO, OUR HOST, DAN BOYLAN.>>DAN: ALOHA AND WELCOME TO INSIGHTS ON PBS
HAWAII. IM DAN BOYLAN.
THE HAWAII EMPLOYEE HE IS RETIREMENT SYSTEM ADMINISTERS PENSIONS AND OTHER BENEFITS FOR
ALMOST ALL PUBLIC EMPLOYEES. ITS 113,000 MEMBERSHIP INCLUDES 40,000 RETIREES
AND BENEFICIARIES. YEARS PAST, STATE LAWMAKERS HAVE SKIMMED THE
ERSS INVESTMENT RETURNS TO FUND OTHER STATE PROGRAMS.
SINCE THE ONSET OF THE GREAT RECESSION, NEGATIVE INVESTMENTS HAVE RESULTED IN AN UNFUNDED LIABILITY
THAT HAS BLOOMED TO MORE THAN $8.4 BILLION. WHAT HAVE RECENT REFORMS DONE TO ADDRESS THE
FUNDING CRISIS? HOW DOES THIS LIABILITY IMPACT OUR STATES
CREDIT RATING? ARE THE PROMISED BENEFITS TO FUTURE RETIREES
IN JEOPARDY? WILL WE HAVE TO RAISE TAXES UNLESS WE CUT
OTHER STATE PROGRAMS IN ORDER TO MEET OBLIGATIONS MADE TO OUR RETIREES?
TONIGHT WELL EXPLORE THE ERSS LIABILITY AND WE INVITE TO YOU JOIN THE DISCUSSION.
BY CALLING IN, EMAILING POUR TWEETING YOUR QUESTIONS AND COMMENTS.
OR YOU CAN JOIN OUR LIVE BLOG. THE CONTACT INFORMATION YOU NOW SEE ON YOUR
SCREEN WILL BE SHOWN REGULARLY THROUGHOUT THE PROGRAM.
INSIGHTS IS ALSO STREAMING LIVE ON YOUR COMPUTER WITH CLOSED CAPTIONING AND WILL BE POSTED
ON OUR WEBSITE AFTER THE BROADCAST. NOW, TO OUR PANEL.
COLBERT MATSUMOTO IS THE FORMER CHAIR OF THE BOARD OF TRUSTEES OF THE EMPLOYEES RETIREMENT
SYSTEM AND HAS BEEN A MEMBER OF THE BOARD SINCE 2001.
COLBERT IS ALSO THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF ISLAND INSURANCE.
RANDALL IWASA CHAIRED THE REVIEW COMMISSION FROM 2010 TO 2012.
CONDUCTS SYSTEMATIC REVIEW OF HAWAIIS TAX STRUCTURE EVERY FIVE YEARS.
RANDY HAS ALSO SERVED AS STATE SENATOR, DEPUTY ATTORNEY GENERAL, AND BUDGET CHAIR FOR THE
HONOLULU CITY COUNCIL. RANDY PERREIRA IS THE EXECUTIVE DIRECTOR OF
THE HAWAII GOVERNMENT EMPLOYEE HE IS ASSOCIATION, THE HGEA IS THE STATES LARGEST UNION WITH
MEMBERSHIP OF  42,000 STATEWIDE. 2005, RANDY WAS SELECTED PRESIDENT OF THE
HAWAII STATE AFLCIO, VOLUNTARY FEDERATION OF 73 LOCAL AFFILIATE UNIONS AND COUNCILS
IN HAWAII. LOWELL KALAPA IS PRESIDENT AND EXECUTIVE DIRECTOR
OF THE TAX FOUNDATION OF HAWAII. PRIVATE NONPARTISAN EDUCATIONAL ORGANIZATION
DEDICATED TO INFORMING THE PUBLIC ABOUT THE FINANCES OF STATE AND LOCAL GOVERNMENT.
LOWELL SERVES ON NUMEROUS COMMUNITY BOARDS AND ASSISTED NONPROFIT ORGANIZATIONS IN UNDERSTANDING
THE ROLES AND RESPONSIBILITIES OF ITS BOARD MEMBERS.
I KNOW THAT SEVERAL OF YOU HAVE SERVED ON NUMEROUS COMMUNITY BOARDS BUT YOU GET CREDIT
FOR IT. THE REST OF YOU DONT.
COLBERT, YOU CHAIRED THIS ERS. IS IT IN GREAT FINANCIAL DIFFICULTY AND ARE
THE RETIREES IN DANGER? IS THERE TOO MUCH LIABILITY THERE?
>>WELL, UP UNTIL A COUPLE OF YEARS AGO, THERE WAS A SERIOUS CONCERN BECAUSE BACK IN 2000,
THE ERS WAS FUNDED AT A 94% FUNDED RATIO. AS OF LATE LAST YEAR, IT HAD DECLINED TO 59%
FUNDED. SO THERE WAS THIS DETERIORATION IN THE AMOUNT
OF ASSETS THAT WE NEEDED TO HAVE TO BE ABLE TO PROPERLY FUND THE PENSIONS.
BUT 12 YEARS AGO, WE  2 YEARS AGO, LEGISLATURE ENACTED A NUMBER OF REFORMS THAT HAVE NOW
PUT US ON A TRACK SO THAT I THINK THAT PENSIONERS CAN FEEL VERY COMFORTABLE THAT WE WILL HAVE
ADEQUATE ASSETS TO COVER THEIR PENSIONS.>>DAN: AS A REPRESENTATIVE OF A LOT OF THE
PEOPLE WHO ARE BENEFICIARIES OF THIS, RANDY, ARE YOU AS OPTIMISTIC?
>>CERTAINLY. I WOULD ONE DISAGREE THAT WITH THE CONTENTION
THAT THIS IS A CRISIS SITUATION. THINK COLBERT HIT IT ONTO HEAD, A COUPLE OF
YEARS AGO, WE WERE CLEARLY IN A BAD SITUATION BUT THE TRUSTEES HAVE ACTED PRUDENTLY TO MAKE
SURE THAT SOME CHANGES WERE MADE SO THAT OVER TIME, AS ACTUARIES WERE DETERMINED, THE PLAN
IS SUSTAINABLE AND I THINK PURISTS LIKE ME MIGHT BRISTLE AT SOME OF THE CHANGES BECAUSE
IT SUGGESTS A BENEFIT NOT AS GOOD FOR FUTURE EMPLOYEES PERHAPS MY CHILDREN WHO MAY CHOOSE
STATEMENT EMPLOYMENT. THE PLAN IS ON A SUSTAINABLE PATH AND I THINK
WELL BE FINE OVER TIME. IT PRESENTS A FUNDING CHALLENGE.
THAT THATS WHAT WE FACE AS A COMMUNITY.>>DAN: LOWELL, YOUVE SAID ITS THE BIG ELEPHANT
IN THE ROOM. THATS PROBABLE  PROBLEMS OF THIS LIABILITY
ARE GOING TO FACE US FOR A LONG TIME.>>PART OF THE RECOVERY IS BECAUSE OF THE
CHANGE IN THE MARKET. WE WENT THROUGH A DOWN TURN.
WE DIDNT REALIZE THAT IT WAS COMING. WE SKIMMED THE EARNINGS OF THE SYSTEM IN THE
EARLY 1990S. LATE 1980S.
SOMEWHERE AROUND THERE. AND THAT MONEY SHOULD HAVE STAYED.
THERE WAS A CAP THAT SAID ANYTHING OVER 8% LEGISLATURE COULD TAKE AND THEY TOOK IT.
AND THAT MONEY, IF YOU INVESTED YOUR OWN MONEY, YOU KNOW HOW MUCH IT MEANS TO PUT BACK THE
MONEY YOUR PORTFOLIO HAS EARNED AS A WAY TO SAVE FOR YOUR RETIREMENT.
THATS BASICALLY I THINK THE RUDE AWAKENING THAT WE CAME TO IN THE MID 2000S.
WE SAID, WE SHOULDNT BE TAKING THAT MONEY OUT.
THAT BELONGS TO THE EMPLOYEES. TAXPAYERS HAVE PAID ON INCREMENTAL BASIS AND
THATS THE WAY IT SHOULD BE. HOWEVER, THE LEGISLATURE IN ITS GREAT WHICH
IS COME WHEREBY KISS DOM.>>KEAHI:, SAID WELL JUST TAKE IT OUT REALIZING
THERE ARE A NUMBER OF THINGS CHANGING THE OUTLOOK FOR THE SYSTEM.
ONE OF THE ONES IS THE FACT THAT OUR RETIREES STILL LIVING LONGER.
SO THE LENGTH OF BENEFITS HAS GROWN LONGER WITHOUT US REALIZING THAT WE SHOULD BE STOCKING
MORE MONEY AWAY TO MAKE SURE ITS THERE WHEN THEY NEED IT.
SO THIS HAS BEEN GREAT RUDE AWAKENING BECAUSE THE PROBLEM WAS SO CRUDE AT THE POINT OF CRISIS.
20072008. IT SENDS A WAKEUP CALL TO THE LEGISLATURE
TO REFORM AND DO THINGS DIFFERENTLY AND TO RECOGNIZE THAT THAT MONEY THAT WE PUT ASIDE
FOR OUR PUBLIC EMPLOYEES SHOULD NOT BE TOUCHED.>>DAN: RANDY, YOU HAVE SAID, I THINK YOUVE
USED THE WORD CRISIS IN TALKING ABOUT IT. HAVE YOU NOT?
>>I THINK I SAID IT WAS POTENTIAL FISCAL CRATER.
INTO THATS PRETTY GOOD. THAT SOUNDS PRETTY CLOSE TO CRISIS TO ME,
RANDY.>>SOUNDS LIKE A METEOR.
>>DAN: DO YOU FEEL WERE GOING TO HAVE TO RAISE TAXES AT SOME POINT BY THE PEOPLE WHO ARE
WORKING TO TAKE CARE OF THIS LIABILITY?>>WELL, YOU KNOW, WE DID NOT RECOMMEND. THE
TAX COMMISSION DID NOT RECOMMEND. WHAT WE DID RECOMMEND WAS
I AGREE WITH COLBERT AND RANDY PERREIRA THAT WITH THE HE RESPECT TO THE PENSION FUND, ACTIONS
HAVE BEEN TAKEN FOR A TRUST FUND THAT WAS REFUNDED.
YOU HAD ASSETS IN IT. SO ITS IN A BETTER STATE.
THE OTHER SIDE OF THAT WE LOOKED AT WHICH WAS THE HEALTH FUND.
ITS NOT PREFUNDED. IT IS THE REASON WHY KALBERT YOUNG TALKED
ABOUT HAVING TO FUND MAYBE $500 MILLION A YEAR.
COMBINED FOR RETIREES, FOR PRESENT DAY WORKERS. HEALTH FUND BENEFIT, PENSION BENEFIT, YEAH,
THATS A BIG, BIG PROBLEM. AND IT HAS TO BE ADDRESSED.
IT CANNOT BE ADDRESSED. THATS WHY WE DID NOT SPECIFICALLY RECOMMEND
PURELY REVENUES. THAT IT IS OF SUCH A MAGNITUDE, THAT I BELIEVE
THAT BOTH EXPENDITURE SIDE OF THE EQUATION AS WELL AS THE REVENUE SIDE OF THE EQUATION
HAS TO BE LOOKED AT.>>DAN: IF IM NOT MISTAKEN, MALE RETIREES HAS
LIFE EXPECTANCY IN THE STATE OF 88? NO.
85.>>85.
>>DAN: ALL RIGHT. SO THAT MEANS IVE GOT 16 MORE YEARS.
AND FEMALES HAVE 88. RIGHT.
>>DAN: THAT MEANS MY WIFE GOT THE 19 MORE YEARS.
MY WIFE RETIRED AT 62. I RETIRED AT 66 I THINK IT WAS.
BEGINNING TO NOT BE ABLE TO REMEMBER THOSE THINGS.
SO THAT MEANS THAT WEVE GOT 19 AND 16 MORE YEARS RECEIVING THESE BENEFITS FROM, THAT
SEEMS LIKE AN AWFUL LONG TIME. IF EVERYBODY IS THE RETIRING AT THOSE AGES,
I DONT SEE HOW THAT WORKS. THERES REALLY THAT MUCH MONEY AVAILABLE?
>>SEE, THATS ONE OF THE TRICKY THINGS ABOUT PENSIONS.
ITS DEPENDENT ON A NUMBER OF DIFFERENT ASSUMPTIONS. ONE OF THE ASSUMPTIONS THAT WAS IN PLACE FOR
A LONG TIME WAS THAT THE MORTALITY, AGE OF MORTALITY FOR THE AVERAGE PENSIONER WAS SOMEWHERE
IN THE 70S. WHEN WE DID A REVIEW OF THAT, SEVERAL YEARS
AGO, IT WAS DETERMINED THAT IT HAD INCREASED. SO THAT INCREASE ALONE INCREASED THE LIABILITY
OF THE PENSION SYSTEM SIGNIFICANTLY. SO THERE ARE A NUMBER OF VARIABLES THAT WE
RELY ON IN TERMS OF WHAT THE INVESTMENT RATE OF RETURN IS GOING TO BE, WHAT THE PAYROLL
LEVEL IS GOING TO BE, AGE OF MORTALITY IS GOING TO BE.
IF THOSE THINGS CHANGE, ITS GOING TO CHANGE THE FUNDED RATIO AND IT COULD CREATE SOME
PROBLEMS. SO WHEN I SAID THAT WERE IN GOOD SHAPE, WERE
IN GOOD SHAPE PROVIDED ALL THE ASSUMPTIONS THAT WEVE BASED OUR CALCULATIONS ON CONTINUE
TO HOLD TRUE.>>DAN: LETS SAY THAT RANDY GETS HIS SIMPSON
BOWLES COMMISSION TO STUDY THIS THING AND THIS CHANGING AGE, THIS LONGEVITY IS PART
OF THE BALLGAME. WOULD ANYBODY BE SATISFIED WITH THE IDEA THAT
MAYBE WE RAISE THE RETIREMENT AGE AT WHICH YOU CAN RETIRE TO SAY 63 AND 67 OR SOMETHING
LIKE THAT? ARE THESE THE KIND OF THINGS 
>>YOU LOOK AT SOCIAL SECURITY, ITS ALREADY HAPPENING.
IN THE OLD DAYS, 20 YEARS AGO MAYBE WHEN YOURE A YOUNG CHICKEN, YOURE 65.
WERE NOW LOOKING AT MY GENERATION AT 66 AND 67.
AND CONGRESS IS LOOKING AT AN AGE OF 70. NOT ONLY  NOT THAT THEY WANT TO PUNISH THE
CURRENT WORK FORCE AS MUCH AS IT IS THE FACT THAT THEY ARE GOING TO LIVE MUCH LONGER.
IN FACT, WASNT THERE JUST TIME MAGAZINE OR ONE OF THOSE MAGAZINES, THIS BABY IS GOING
TO LIVE TO 120 YEARS OLD.>>TIME MAGAZINE.
>>YOU KNOW, ITS HAPPENING. MEDICINE IS PROLONGING OUR LIVES AND THEREFORE,
THE NEED FOR BENEFITS IS GOING TO GET LONGER AND LONGER.
SO WE NEED TO ADDRESS THE SYSTEM AND BENEFITS AS IT IS NOW AND RECOGNITION OF THE FACT THAT
PEOPLE ARE LIVING LONGER.>>DAN: RANDY, HOW WOULD YOU FEEL ABOUT THAT.
>>IT CERTAINLY ONE OF THE CHALLENGES THAT WERE GOING TO BE FACING BECAUSE MORTALITY
HAS CHANGED OVER THE YEARS. YET AT THE SAME TIME, I THINK ITS A REAL SOCIETAL
ISSUE BECAUSE I DONT THINK ANY OF US AT THIS TABLE WANT TO BE WORKING TO ACTUALLY PUT FOOD
ON OUR TABLE AND MAKE A LIVING WHEN WERE 78 YEARS OLD.
SO I THINK THERES A BALANCE THATS GOING TO HAVE TO BE STRUCK.
WE ALSO HAVE TO BE COGNIZANT THAT THERE ARE SOME OCCUPATIONS THAT ARE PHYSICALLY DEMANDING
WHERE LITERALLY, THESE INDIVIDUALS WOULD NOT BE ABLE TO FUNCTION IN THEIR CURRENT JOBS
ONCE YOU GET PAST A CERTAIN AGE. I LEARNED AGE AND GRAVITY ARENT MY FRIENDS.
YOU HAVE TO BE AWARE OF THIS AND ITS GOING TO BE A CHALLENGE AS WE FACE AS WE SHAPE THE
BENEFITS OF THE FUTURE.>>DAN: SIMPSON BOWLS COMMISSION, LETS CALL
IT THE IWASAMATSUMOTO COMMISSION. LET YOU TWO GUYS  WOULD YOU WANT TO SEE THAT
CONSIDERED?>>I THINK EVERYTHING HAS TO BE ON THE TABLE.
THATS WHY ONE OF THE THINGS I WOULD BE LOOKING FOR ON THIS KIND OF COMMISSION IS THAT ALL
OF THE STAKEHOLDERS WHO ARE GOING TO BE IMPACTED, WHETHER YOU ARE A RETIREE, ACTIVE WORKER,
NONPROFIT, BUSINESS, LABORER, THEY ALL HAVE TO BE AT THE TABLE.
I THINK ANOTHER GROUP THAT HAS TO BE AT THE TABLE FOR LACK OF A BETTER TERM IS THE PUBLIC.
WE ALWAYS HAVE THESE KINDS OF TASK FORCES AND YOU HAVE THESE GROUPS REPRESENTED.
THE QUESTION COMES UP IS WHO IS REPRESENTING THE PUBLIC?
I THINK THAT KIND OF REPRESENTATION SHOULD ALSO BE THERE.
BUT EVERYTHING SHOULD BE ON THE TABLE. AS YOU POINTED OUT ABOUT THE MORTALITY, THE
CHANGE, THE EFFECT ON NOT ONLY THE PENSION, BUT THE HEALTH FUND, WHICH IS A BIGGER PROBLEM
FOR THE STATE IN TERMS OF SHORTFALL ON LIABILITIES RIGHT NOW.
HOW DO WE LOOK AT THIS? HOW DO WE DEAL WITH THE QUESTION AS RANDY
POINTS OUT? I COULD BE AT 78, IF MY MIND IS STILL GOING,
I COULD BE A LAWYER. I CANNOT DO WORK PAVING ROADS.
HOW DO WE DEAL WITH THIS? HUMAN ISSUE.
ITS SOMETHING THAT HAS TO BE ADDRESSED. ALL OF THIS SHOULD BE TAKEN IN.
THE A COMMISSION THAT SHOULD BE FUNDED. I THINK SIMPSON BOLLES WAS SUPPOSED TO GET
9 MILLION. I MAY BE WRONG.
FUNDED, STAFFED, EXPERTS. GO OUT THERE AND HOLD HEARINGS.
SAME KIND OF PROCESS. PUT FORWARD A BILL.
GET THE LEGISLATURE TO LOCK AT IT AND GET THE LEGISLATURE TO ACT ON IT.
THE GOT TO BE ACTED ON.>>2011, THE LEGISLATURE PASSED PACKAGE OF
REFORMS TO THE DEFINED BENEFIT PENSION PLAN FOR PUBLIC EMPLOYEES.
>>SO ONE OF THE CHANGES THAT WAS ENACTED AT THAT TIME WAS RAISING THE MINIMUM RETIREMENT
AGE FROM 62 TO 65. AS WELL AS A NUMBER OF OTHER TINGE CHANGES
THAT  OTHER CHANGES THAT REDUCED THE BENEFIT LEVEL FOR PUBLIC EMPLOYEES.
BUT THOSE REFORMS WERE ONLY APPLICABLE TO EMPLOYEES THAT WERE HIRED AS OF JULY 1ST
OF 2012. SO ITS GOING TO HAVE THE A BENEFICIAL EFFECT
ON THE FUNDED LEVEL OF THE SYSTEM IN THE LONG TERM, BUT IN THE NEAR TERM, YOURE NOT GOING
TO SEE A SIGNIFICANT BENEFIT DERIVED. THE LEGISLATURE HAS TAKEN SOME MAJOR STEP
TO TRYING TO FIX THE STRUCTURE OF THE SYSTEM IN A WAY TO ENSURE ITS FINANCIAL VIABILITY
OVER THE TIME.>>DAN: YOURE SATISFIED WITH THIS?
>>WE WERE SUPPORTIVE OF THE CHANGES. CERTAINLY AS I SAID, AS A PURIST, YOURE CONCERNED
ABOUT HOW WE HAVE WHAT EFFECTIVELY WILL BE A 2 TIERED SYSTEM.
REALIZING THE DEMOCRAT OWE GRAPHIC CHANGES WERE FACING.
OTHER ORGANIZATIONS AND OTHERS ARE SUPPORTIVE THIS IS HOW TO MAKE THE PLAN SUSTAINABLE.
>>DAN: IF I LISTEN TO THE TWO OF YOU, SOUNDS TO ME LIKE THE PROBLEM IS NOT NOT GOING TO
GO AWAY. COLBERT, THAT THE ASSUMPTIONS, THERE ARE SO
MANY ASSUMPTIONS THAT THINGS CAN CHANGE ANOTHER, IF WE GO BACK INTO RECESSION FOR EXAMPLE.
IF ALL INVESTMENT INCOME GOES DOWN. WERE IN TROUBLE.
I MEAN, THE SYSTEM IS IN TROUBLE. RIGHT?
SO YOUR COMMISSION IS GOING TO HAVE TO PERHAPS BE AN ONGOING COMMISSION, RIGHT?
OR THAT DEALS WITH THIS.>>WELL, THE TAX COMMISSION BY CONSTITUTION
CONVENES OR IS APPOINTED, CONVENES EVERY FIVE YEARS.
ITS NOT AN ONGOING COMMISSION. IN FACT, I HAPPEN TO THINK PERHAPS IT SHOULD
BE EVERY 10 YEARS INSTEAD OF EVERY FIVE. BECAUSE RECOMMENDATIONS TAKE TIME TO FOR US
TO SEE HOW IT WORKS. COMMISSION LIKE THIS, I DONT THINK IT NEEDS
TO BE PERMANENT. IT SHOULD PROPOSE AS SIMPSON BOLLES WOULD
HAVE DONE, PROPOSE LEGISLATION AND HAVE THE POLICY MAKING BODY ACT ON IT.
BUT IT SHOULD BE ONE OF THE BENEFITS OF A COMMISSION LIKE THIS IS NOT ONLY TO HAVE A
STAKEHOLDER BUT WHAT WAS THE HOPE OF SIMPSON BOLLES NONPARTISAN.
WE LOOK AT THIS ISSUE, WITH PENSION FUND HEALTH FUND, I MEAN, THERE IS REALLY IN MY MIND NO
ROOM FOR IDEOLOGICAL APPROACH. MY WAY OR THE HIGHWAY.
IT CANNOT WORK. SO IF SOMEONE COMES IN AND SAYS, NO, YOU CANT
RAISE REVENUE, WELL, FOR ME, I DONT NEED YOU AT THE TABLE.
IF THE SOMEONE COMES IN AND SAYS, NO, YOU CANNOT RAISE EXPENDITURES I DONT NEED YOU
TEN TABLE. BECAUSE OF THE MAGNITUDE OF THIS PROBLEM,
SHORTFALL WHICH IS A CUMULATED SHORTFALL CASH BASED ACCOUNTING, 3 BILLION BY 2025, OR UNDERACCRUAL
BASIS, JUST HEALTH AND PENSION, 17 BILLION BY 2025.
OR AS DEPARTMENT OF TAXATION STUDY FOUND, BY 2022, $1 BILLION ANNUALLY.
NOW, PUT THAT IN CONTEXT, THE BUDGET IS $11 BILLION. SO WERE TALKING A BILLION DOLLARS.
ANNUALLY. OR MONTHLY, EXCUSE ME.
I THINK OR MAYBE IT WAS ANNUALLY. YOU GOT TO HAVE THIS KIND OF, YOU CANNOT COME
TO THIS AS AN IDEA LOG. YOU NEED THE STAKEHOLDERS.
>>DAN: I THINK ONE OF THE THINGS THAT BOTHERS ME ABOUT IT ALL IS THAT IN THIS OVER THE LAST
FOUR OR FIVE YEARS, SINCE THE ONSET OF THE GREAT RECESSION, IN 2007, THATS A LOT OF PEOPLE
I KNOW IN THE PRIVATE SECTOR HAVE SEEN THEIR RETIREMENT SYSTEMS DISAPPEAR.
DISAPPEAR. NOW, HOW CAN, IM SURE THAT THERE ARE PEOPLE
IN OUR AUDIENCE TONIGHT WHO ARE SAYING, WAIT A MINUTE.
LISTEN TO THESE GUYS TALKING ABOUT THESE PUBLIC EMPLOYEES.
I MEAN, WHY SHOULD THERE BE A REAL  WHY SHOULDNT THOSE OF US WHO LIKE MYSELF, WHO
HAVE NOT HAD TO DEAL WITH THIS YET IN ANY WAY SHAPE, OR FORM, WHY SHOULDNT MY RETIREMENT,
MY PLUSH RETIREMENT, WHY SHOULDNT THAT BE THAT HE HAD BE TAXED?
THE NOT THAT PLUSH. WHY SHOULDNT IT BE TAXED?
WHY SHOULDNT RETIREMENT INCOME BE TAXED TO HELP PAY FOR THESE KIND OF THINGS THAT ARE
SO BIG? SHOULDNT THAT BE ON THE TABLE.
>>CERTAINLY LEGISLATURE HAS LOOKED AT THAT ISSUE OVER THE LAST 2 YEARS.
BUT FOR ONE, I THINK YOU WOULD HEAR FROM ANYBODY PERHAPS LIKE YOURSELF WHO CONTRIBUTED AND
PAID TAXES. YOU CONTRIBUTED TO YOUR RETIREMENT PLAN OVER
THE YEARS AS AN EMPLOYEE. AND YOU PAID TAXES AS AN EMPLOYEE.
SO THEN YOU QUESTION, OKAY, WHY AM I THEN BEING TAXED ON THE RESULT OF THE INVESTMENT
THAT MY RETIREMENT CONTRIBUTIONS RESULTED IN OVER THE 30 OR SO YEARS THAT I WORKED?
BUT IF YOU ARE BEING TO BE APPROACHING THE ISSUE OF TAXATION, ANOTHER CLEAR ISSUE TO
CONCERN YOURSELF WITH IS MEANS TESTING. BECAUSE A NUMBER OF RETIREES TODAY ARE LIVING
IN THEIR TWILIGHT YEARS ON VERY LOW PENSIONS. RELATIVE TO OTHERS WHO RETIRED MORE RECENTLY.
>>DAN: STATE EMPLOYEES COUNTY EMPLOYEES?>>ANYBODY WHO HAPPENS IN BE THE LATE 80S,
90S, THEYRE NOT GETTING PENSIONS OF $10,000 A MONTH.
I CAN ASSURE YOU. MUCH, MUCH LESS.
SO TO JUST BLINDLY SUGGEST THAT YOURE GOING TO TAX INDIVIDUALS, IS PROBLEMATIC BECAUSE
A LOT OF PEOPLE CAN BE ADVERSELY IMPACTED BY THAT.
>>>>DAN: WERE ONE OF ONLY SIX STATES?
IS THAT RIGHT, LOWELL.>>YES.
>>DAN: THAT DOES NOT TAX RETIREMENT. ISSUE GOT PUSHED BACK MAINLY THOSE ON THE
RETIREMENT INCOME ALREADY. SO THE SOLUTION TO THAT IS TO MAKE THE EFFECTIVE
DATE 10, 15, 20 YEARS OUT BECAUSE THE ARGUMENT WAS WE RETIRED ON THE ASSUMPTION THAT IT WOULDNT
BE TAXED AND BLAH, BLAH, BLAH. WELL, IF YOU WARN PEOPLE WHO WONT BE RETIRING
FOR NEAR 10, 15 YEARS OR 20 YEARS, BY THE WAY, THE LAW IS GOING TO CHANGE AND YOU NEED
TO START SETTING MONEY ASIDE, THEN THATS A LITTLE BIT DIFFERENT.
I DONT THINK THE ARGUMENT THAT, WELL, WE PLANNED OUR RETIREMENT BASED ON THE FACT THAT IT WOULD
BE TAX EXEMPT. I DO THINK THAT ITS UNFAIR THAT THE STATE
RETIREES ARE GOING TO BE THE LAST, WHAT WE CALL DEFINED BENEFIT, BENEFICIARIES. ALMOST
EVERY PRIVATE SECTOR CONCERN HAS GONE TO A 401K WHERE THERE IS CONTRIBUTION ON BEHALF
OF THE EMPLOYEE BUT THIS THE EMPLOYEES ALSO ASK TO PUT A CONTRIBUTION IN.
>>BY THE EMPLOYER AND EMPLOYEE.>>SOME, ITS JUST EMPLOYEES DEFERRED INCOME.
I THINK THAT ONE OF THE THINGS I FOUND ESPECIALLY WITH A LOT OF MY NONPROFIT ORGANIZATIONS THAT
I VOLUNTEER FOR IS THAT THE ASSUMPTION IS THAT IM GOING TO WORK 30, 35 YEARS AND SOMEBODY
IS GOING TO PAY ME FOR HAVING WORKED ALL THESE YEARS.
ITS NOT GOING TO HAPPEN. ONE OF THE THINGS I DO AS A TRUSTEE FOR A
LOT OF 401K PLANS GO IN ON A REGULAR BASIS AND ENCOURAGE ESPECIALLY OUR YOUNGER EMPLOYEES
TO SET SOME LITTLE AMOUNT ASIDE WITH THE UNDERSTANDING THAT OVER A PERIOD OF TIME, WHEN THEY GET
TO THAT GOLDEN GATE, THEYRE GOING TO HAVE A LITTLE NEST EGG.
ONE. THINGS THAT BOTHERS ME IS THE POLITICAL ASPECT OF IT.
YOU PLAYED A LITTLE POLITICS IN YOUR TIME. IT SEEMS TO ME THAT WHENEVER YOU GO AFTER
ELDERLY FOLKS, WHO VOTE LIKE THERES NO TOMORROW, RIGHT?
THEN YOU GET LEGISLATURE THAT IS FRANKLY CHICKEN. THEY DONT WANT TO DEAL WITH THAT.
RIGHT? YOU PLAYED A LITTLE POLITICS IN YOUR TIME.
WHETHER DO YOU WANT TO VOTE AGAINST OLD PEOPLE AND TAX THEM, RIGHT?
SO EVEN THOUGH THEY MAY BE THE PLUSHEST PEOPLE IN SOME WAYS IN THE SOCIETY, HOW ARE YOU GOING
TO TAX RETIREMENT?>>I THINK WHEN YOU THINK ABOUT IT, FIVE YEARS
AGO, NOBODY KNEW WHAT FUNDED LIABILITIES WERE. BUT WHATS HAPPENING IS THATS MAGNITUDE OF
THESE POTENTIAL LIABILITIES IN THE PUBLIC SECTOR ARE SO GREAT, THAT WE CANT LIMIT THE
OPTIONS THAT WERE GOING TO HAVE TO PULL OUT IN ORDER TO DEAL WITH IT.
SO PART IT HAVE IS GOING TO INVOLVE REVENUE GENERATION BECAUSE THE BURDEN ON THE PUBLIC
EMPLOYERS IS GOING TO BE SIGNIFICANT. YOU TAKE THE PENSION SYSTEM, FOR EXAMPLE,
BECAUSE OF THE UNDERFUNDED SITUATION THAT ERS FACES, THE PUBLIC EMPLOYER WITHIN THE
NEXT 2 YEARS IS GOING TO HAVE TO PAY CONTRIBUTE 17% OF PAYROLL TO THE ERS ON AN ANNUAL BASIS
IN ORDER TO ADEQUATELY FUND THE ERS. AND THE CITY & COUNTIES FOR POLICE AND FIRE
ARE GOING TO HAVE TO CONTRIBUTE 25% OF THE POLICE AND FIRE PAYROLL TO THE ERS TO MEET
THEIR FUNDING REQUIREMENT. SO THIS BURDEN IS GOING TO BECOME INCREASINGLY
LARGER OVER TIME AND HOW THE STATE AND THE COUNTIES ARE GOING TO FIND THE REVENUE SOURCES
TO MEET THOSE LIABILITIES IS GOING TO HAVE TO ENTAIL LOOKING AT DIFFERENT OPTIONS AND
IT COULD MEAN LOOKING AT SOME KIND OF A TAX ON PENSIONS OR OTHER KINDS OF TAXES THAT WE
CURRENTLY NOT ACCUSTOMED TO.>>DAN: YOU THINK ITS JUST THE REALITY OF HOW
BIG THIS IS, THIS HUGE PROBLEM, ITS GOING TO STIFFEN THE BACKS OF LEGISLATORS TO DO
WHATEVER THEY HAVE TO DO? WHAT YOU DONT WANT TO HAVE IS A SITUATION
WHERE YOURE BACKED IN A CORNER AND YOU GOT NO CHOICES.
SO THATS WHY ITS KIND OF CRITICAL FOR PEOPLE TO DEAL WITH THIS NOW AS OPPOSED TO WAIT FIVE
YEARS FROM NOW BECAUSE THE CRISIS, NOT JUST WITH RESPECT TO THE PENSION SYSTEM, BUT WITH
THE HEALTH CARE SYSTEM, IS ON OUR DOORSTEP AND IF WE CAN PROACTIVELY DEAL WITH IT NOW,
WE MAY BE ABLE TO MITIGATE THE PAIN AND SUFFERING THAT MIGHT, WE MAY HAVE TO ENCOUNTER IF WE
LET THIS THING FESTER OVER THE NEXT FIVE YEARS.>>TOUCHING ON WHAT LOWELL SAID, 2 PREVIOUS
TAX REVIEW COMMISSIONS HAVE DEALT WITH THAT ISSUE.
2 COMMISSIONINGS AGO, TALKED ABOUT FAIRNESS. NOT ONLY IN THE FAIRNESS IN THE TAX SYSTEM,
HORIZONTAL FAIRNESS, BUT FAIRNESS TO THOSE WHO AT A TIME IN THE PAST, TOOK A CERTAIN
SALARY WITH THE EXPECTATION PERHAPS IT WOULDNT BE TAXED.
SO THEREFORE, WOULDNT BE FAIR TO TAX THEM. SO THAT COMMISSION TALKED ABOUT PERHAPS GRANDFATHERING
IN THOSE WHO ALREADY ARE ON RETIREMENT. LAST TAX REVIEW COMMISSION, AGAIN, DEALT WITH
THE EQUITY ISSUE. BOTH IN TERMS OF FAIRNESS FORKER ALL TAXPAYERS
IN THAT SAME CATEGORY BUT ALSO EQUITY AS TO THE RETIREES WHO MAY HAVE HAD THE EXPECTATION
THAT MY STATE RETIREMENT WOULDNT BE TAXED AND IT COULD AFFECT SALARY NEGOTIATIONS AT
THE TIME THEYRE IN. THAT TAX REVIEW COMMISSION SAID, ALL RIGHT,
IF WE DO TAX IT, THEN IN REGARDS TO FAIRNESS, IN DEFERENCE TO FAIRNESS, MAYBE THERE OUGHT
TO BE A BASELINE. MAYBE A SALARY OF RETIRING SALARY OF $50,000.
THAT WAS THEIR SUGGESTION. SO THOSE ARE TWO SUGGESTIONS THAT HAVE COME
FROM THE TWO PREVIOUS TAX REVIEW COMMISSION. WHAT WE DID WAS WE SAID, THESE WERE THE TWO.
THEY PROVIDE GOOD OPTIONS. ENACT ONE OF THEM IF YOU WANT TO OR LEAVE
IT THE SAME.>>DAN: RANDY, IM SURE THAT THE HGEA WORKER
OR ANY PUBLIC UNION WORKER IN ANY UNION IS GOING TO SAY, WELL, WAIT A MINUTE.
IM NOT  DIDNT MAKE AS MUCH IN MY JOB WORKING IN PART BECAUSE I KNEW THAT MY RETIREMENT
SYSTEM, IM GOING TO HAVE MY RETIREMENT SYSTEM AND ITS NOT GOING TO BE TAXED.
I MEAN, CERTAINLY, WEVE ALL DONE TAXES RECENTLY. I CERTAINLY I GET MONEY BACK FROM THE STATE.
PAY TO THE FEDS. RIGHT?
BUT THAT MAKES IT EASIER. BECAUSE I DONT GET MONEY BACK. BUT I MEAN,
THATS GOING TO HURT YOU FOLKS. RIGHT?
ITS GOING TO HURT YOUR PEOPLE?>>WELL, FIRST, I THINK IT SHOULD BE KNOWN
THAT ACCORDING TO THE RETIREMENT SYSTEM, THE AVERAGE EMPLOYEES THAT WE REPRESENT AT THE
H G.E. A HAVE A PENSION OF ABOUT $23,000 A YEAR.
SO HARDLY ANYBODY MAKING A KINGS RANSOM AS A RETIREE AND CERTAINLY, FOR ANY OF THEM WHO
DID FINANCIAL PLANNING THROUGHOUT THEIR LIFETIMES, THEY BANKED ON A RETIREMENT PLAN.
THEY BANKED ON THE MEDICAL CARE THAT THEY WERE PROVIDED, ET CETERA.
IVE BEEN AN OPEN ADVOCATE OF SUGGESTING THAT WE WILL NEED TO TAKE A LOOK TO FACE SOME OF
THESE CHALLENGES. WE NEED TO LOOK AT PUBLIC EMPLOYMENT IN TOTAL.
WE NEED TO SEE THE KIND OF CHALLENGES THAT PUBLIC EMPLOYEES, ACTIVE EMPLOYEES FACE RELATIVE
TO PRIVATE SECTOR COUNTERPARTS. OFTENTIME PAY LAGS, BUT CERTAINLY, WHEN YOU
COME TO YOUR RETIREMENT, THE PUBLIC EMPLOYEE HAS A MUCH BETTER RETIREMENT PACKAGE THAN
GENERALLY SPEAKING MOST PRIVATE EMPLOYEES. SOMEWHERE THERE HAS TO BE A BALANCE IN TAKING
A LOOK. YOU CANNOT JUST SAY, LOOK AT THINGS IN A VACUUM
SAND SAY THAT RETIREMENT COSTS ARE TOO GREAT WHEN YOU REALIZE THAT THESE EMPLOYEES FOR
40 YEARS MADE WAGES THAT ARE MANY INSTANCES, MUCH LESS THAN THEIR PRIVATE SECTOR PEERS
AND THEY PAY A SUBSTANTIALLY GREATER PORTION OF THEIR MONTHLY WAGE TOWARD THEIR MEDICAL
CARE. WHEN MANY PRIVATE EMPLOYEES PAY VERY LITTLE
IF NOTHING AT ALL TOWARD MEDICAL CARE DURING THEIR ACTIVE WORK YEARS.
YOU HAVE TO LOOK AT THE TOTAL PICTURE BECAUSE I HAVE HEARD SO MANY TIMES PEOPLE SAY THAT
GOVERNMENT MUST BE RUN LIKE A BUSINESS. ANY BUSINESS END IN TOWN WILL TELL YOU I PAY
YOUR EMPLOYEES A COMPETITIVE WAGE AND GOOD BENEFITS IF YOU WISH TO KEEP THEM.
I THINK WE SHOULDNT LOOK AT PUBLIC EMPLOYMENT IN ANY DIFFERENT WAY.
>>DAN: I WANT YOU TO CHANGE YOUR HAT FOR A MINUTE.
PRIVATE EMPLOYER?>>OKAY.
>>DAN: ISLAND INSURANCE, WHAT DO YOU GUYS DO?
401KS?>>WE HAVE A 401K PROGRAM.
MOST PRIVATE EMPLOYERERS HAVE DEFINED CONTRIBUTION PLAN.
WHAT LOWELL TALKED ABOUT. I THINK THAT ITS VERY RARE THAT YOU FIND ANY
EMPLOYER THAT STILL HAS A DEFINED BENEFIT PLAN.
THOSE THAT DO HAVE DEFINED BENEFIT PLANS ARE TRYING TO GET RID OF THEM.
NOW, WEVE LOOKED AT THAT FOR WHETHER OR NOT THERE WOULD BE A WAY TO CONVERT THE STATES
SYSTEM TO A DEFINED CONTRIBUTION PLAN. BUT THE PROBLEM WITH THAT IS THAT IN ORDER
FOR TO US DO THAT, WE NEED TO ADEQUATELY FUND THE EXISTING PLAN BECAUSE YOU NEED TO TERMINATE
THAT PLAN IN ORDER TO START A NEW PLAN. AND THATS THAT $8.4 BILLION HOLE THAT YOU
GOT TO FILL. SO THE STATE IS NOT IN A POSITION TO BASICALLY
FINANCE THAT IN ORDER TO TRY TO CONVERT TO SOME NEW SYSTEM.
>>DAN: BUT 30 YEARS DOWN THE ROAD, THE ARGUMENT IS THAT IT WILL BE ABLE TO DO THAT?
>>RIGHT. ASSUMING EVERYTHING GOES AS PLANNED.
>>AS RANDY P POINTED OUT, MAYBE IT SHOULD BE MEANS TESTED.
IN OTHER WORDS, THERE ARE THOSE THAT ARE GETTING 23,000 OR NOT EVEN $30,000 WORTH OF RETIREMENT
OR PENSION INCOME. BUT THERE ARE OTHER PEOPLE WHO ARE MAKING
SUBSTANTIALLY MORE IN PENSION INCOME WHO DONT PAY ANY TAXES.
YOU HAVE TO ASK YOURSELF IS THAT FAIR WHEN EVEN IN THE PRIVATE SECTOR, YOU HAVE PEOPLE
WHO ARE MAKING ONLY 20, $30,000 OF PENSION INCOME OUT OF THEIR 401K.
SO FOR THOSE, I GUESS ADMINISTRATION KIND OF DIDNT HANDLE IT CORRECTLY BECAUSE TALKED
ABOUT TAXES PENSIONS AND MAYBE THEY SHOULD HAVE STARTED WITH A THRESHOLD.
ANYBODY GETTING PENSION INCOME OVER $50,000. OR WHATEVER.
I MEAN, I REMEMBER WHEN GOVERNOR ARIYOSHI WAS THE HIGHEST PAID EMPLOYEE IN THE STATE
AT $50,000. WE THOUGHT, WOW, THATS A LOT OF MONEY.
TODAY T. ISNT. SO $50,000 PENSION INCOME IS THAT A THRESHOLD.
SO PEOPLE, YOUR RETIREES IN THE PUBLIC SECTOR WHO LOOK AT THEIR PENSION PAYCHECK OR STATEMENT
AT THE END OF THE YEAR AND SAY, IM ONLY GETTING $29,000, I WONT BE AFFECTED BY THIS PROPOSAL,
I THINK YOULL HAVE LESS RESISTANCE IN MAKING THAT TRANSITION.
SOONER OR LATER, YOURE GOING TO HAVE TO MAKE IT.
>>DAN: AGREED?>>IM NOT GOING TO BE LOBBYING WITH MR. KALAPA
HERE. ILL SAVE MY TIME FOR THE LEGISLATURE.
I UNDERSTAND THE POINT. I THINK THE GREATEST FEAR IS THAT WE WOULD
HAVE TO ADOPT WOULD BE A FAIR STANDARD I SUPPOSE, BUT THE FEAR FOR ANY RETIREE IN HAWAIIS
HISTORY HAS BEEN ONCE YOU OPEN THE DOOR, THEN THERES ALL BETS ARE OFF.
THERE HAS TO BE SOME REALISTIC ASSURANCES THAT IF IN FACT THERE IS AN EFFORT AS HAS
BEEN DONE A COUPLE OF YEARS AGO RAISING THE RATES ON THE HIGHEST INCOME, INCOME TAXES
ON THE HIGHEST EARNERES, YOUVE GOT SOME ASSURANCE BUILT IN THAT THIS ISNT GOING TO BEGIN TO
CREEP DOWN TO THE LEVEL OF INDIVIDUALS WHO TRULY WOULD BE BURDENED.
ONE THING THAT WE SHOULD KEEP IN MIND AND NOT LOSE SIGHT OF IS THAT THE UNFUNDED LIABILITY
IS NOT THE FAULT OF THE PUBLIC EMPLOYEES OR THE RETIREES.
>>ITS LIABILITY THAT HAS ACCRUED OVER THE YEARS BECAUSE THE EMPLOYER HAS NOT ADEQUATELY
CONTRIBUTED TO THE TRUST FUND FOR THE PENSION. OR LOWELL SAID, LEGISLATURE SKIN.
>>TOM SAYS, BIG ISLAND, SMART GUY, HOW WILL WE GET THE BEST EMPLOYEES IF THEY WONT BE
GETTING THEIR RETIREMENT? $2 BILLION ARE USED TO FUND OTHER PROJECTS.
WHY NOT PAY BACK WITH INTEREST FROM THE STATE? ISNT THAT WHATS GOING ON?
IN BOTH BUDGETS, SENATE AND HOUSE, 100 MILLION?>>THATS FOR THE HEALTH FUND.
>>DAN: BUT THERES NOTHING FOR THE STATE, RETIREMENT?>>THEY GET CONTRIBUTIONS FROM THE EMPLOYERS.
>>DAN: THATS ALREADY GOING ON. IM SORRY.
MAIN WEVE GOT TO DO THAT. LETS DO THAT A MINUTE.
THE STATE IS PAYING A CERTAIN AMOUNT OF MONEY FOR AND THE COUNTIES ARE PAYING A CERTAIN
PERCENTAGE OF THEIR BUDGET IS GOING DIRECTLY INTO THE RETIREMENT.
>>ITS LIKE WHAT I SAID. ITS BASED ON A PERCENTAGE OF PAYROLL.
SO THE STATE IS PAYING A MUCH BIGGER SHARE NOW BECAUSE OF THE UNFUNDED LIABILITY THAN
OTHERWISE WOULD HAVE HAD TO IF THE SYSTEM WAS PROPERLY FUNDED.
SO YOU TAKE FOR EXAMPLE, GENERAL EMPLOYEES, MOST OF THE EMPLOYEES THAT RANDY REPRESENTS,
THIS YEAR, 15% OF THEIR PAYROLL HAS TO BE CONTRIBUTED BY THE STATE TO THE ERS.
BECAUSE OF THE DEFICIENCY IN THE FUNDED RATIO, WHATS HAPPENED IS THAT THAT AMOUNT HAS INCREASED
TO 17% NEXT YEAR. SO THE EMPLOYER IS BEING PENALIZED FOR THE
FACT THAT THIS UNFUND ADD LIABILITY IS GROWING. NOW, AT ONE TIME THAT, WAS 6%.
SO OVER THE YEARS, ITS INCREASINGLY GROWN SO THAT ITS BECOMING A HEAVIER BURDEN ON THE
PUBLIC EMPLOYERS.>>WHAT ABOUT 2 BILLION WERE USED TO FUND
OTHER PROJECTS. WHY NOT PAY IT BACK WITH INTEREST?
>>WHAT 2 BILLION IS HE TALKING ABOUT?>>DAN: I THINK HES TALKING ABOUT THE SKIMMING.
>>HE MAY I BE REFERRING TO THAT. WHAT IM SAYING IS THAT THERE IS A FORM OF
INTEREST. BECAUSE THE AMOUNT THEY HAVE TO CONTRIBUTE
CONTINUES TO INCREASE AS THE LIABILITY INCREASES.>>THINK THE OTHER POINT THAT SHOULD BE MADE
IS THAT $2 BILLION WAS SPENT ON PROGRAMS AND SERVICES THATS CONSTITUENTS WANTED.
THATS WHY WE HAVE THE PROBLEM. THAT WE NEED SOME FISCAL DISCIPLINE IN THE
LEGISLATIVE BODY TO SAY WE HAVE TO SET SO MUCH ASIDE EVERY YEAR AS OUR OBLIGATION TO
FUND THESE BENEFITS. NOT SPEND IT ON BRAND NEW PROGRAMS.
THIS YEARS LEGISLATURE THE LAST VERSION OF BUDGET $250 MILLION, GOVERNOR HAD REQUESTED,
BEGINNING TO GET A LITTLE FISCAL DISCIPLINE BACK IN SAYING MAYBE WE CANT SPEND AS MUCH
BECAUSE WE HAVE THESE OTHER OBLIGATIONS.>>CAN I SPEAK UP ON THIS POINT?
NOT TRYING TO DEFEND THE LEGISLATURE. IT HAS TO BE PUT IN CONTEXT. TALKING ABOUT
THE EARLY 90S. LATE 1980S.
IT IT WAS PROBABLY A TIME WHEN THE STATE WAS IN ECONOMIC DOWN TURN.
LEGISLATURE BACK THEN AS IT IT IS TODAY PROBABLY CONFRONTED THE ARGUMENT NO NEW TAXES.
SO IN ORDER NOT TO RAISE TAXES, THEY DID WHAT WAS EASY.
WHICH WAS IM NOT GOING TO GIVE OUR CONTRIBUTION TOTAL 100% TO THE EMPLOYEES RETIREMENT SYSTEM.
IM GOING TO TAKE THAT MONEY AND FUND THESE PROGRAMS.
WHETHER THEYRE NEW OR ONGOING. I DONT KNOW.
THATS A WHILE BACK. BUT ITS GOT TO BE PUT IN THAT CONTEXT.
PROBABLY IN A SITUATION WHERE RAISE REVENUES, CUT PROGRAMS, OR SKIM FROM THE ERS.
AND WE CAN JUDGE TODAY WHETHER THAT WAS GOOD OR BAD BUT I THINK WE OUGHT TO KNOW THE FACTS
ABOUT WHAT HAPPENED BACK THEN SO THAT WE CAN GET A BETTER IDEA OF WHY THIS HAD OCCURRED.
IM NOT JUSTIFYING IT. I AGREE WITH COLBERT FOR THE EMPLOYEE WHO
SOMETIMES GETS HIT OUT THERE IN PUBLIC. RETIREE NOW.
HEY, YOU GUYS, WE PAID INTO THAT SYSTEM. EVERY SINGLE CENT THAT WAS ASKED OF US.
AND WHERE THE DEFICIENCY OCCURRED IS BECAUSE THE EMPLOYER DID NOT LIVE UP TO ITS PART OF
THE BARGAIN. INTO RETIREE, HIRING HIM AS A LAWYER.
>>1980S WAS, WE WERE FLUSH WITH MONEY. FLUSH WITH MONEY BECAUSE THAT WAS IF YOU RECALL,
DAN, WHEN WE HAD MORE THAN A HALF BILLION DOLLARS GENERALLY FUND SURPLUS.
$649 MILLION SITTING IN THE STATE TREASURY AND IF YOU RECALL, DEE JAYS ALL THE RADIOS
STAYED GIVE ME BACK MY $400 OR WHATEVER IT WAS.
IT WAS THAT EUPHORIA THAT THEY THOUGHT THERES GOING TO BE LOTS OF MONEY SO WELL JUST TAKE
THE EXCESS OVER 8% AND EVEN SPEND MORE MONEY. YOULL REMEMBER NOW THAT IS WHEN THE LEGISLATURE
STARTED TO CREATE SPECIAL FUNDS SO SHE COULD HIDE THEM BARISING SURPLUS INCLUDING $90 MILLION
FOR SCHOOL. WHICH CAME OUT, RIGHT OUT OF THE GENERAL EXCISE
TAX. SO IT WAS EUPHORIA OF THINKING THEY HAD SO
MUCH MONEY THAT THEY COULD SPEND IT. COULD TAKE THE EXCESS AND WOULDNT HURT THE
FUTURE OF THE ERS. BUT IT DO.
I CAN AGREE WITH HIM ABOUT THE EIGHTIES. I REMEMBER BEING ON THE CITY COUNCIL ASKING
FOR THE STATE FOR MONEY AND BEING TOLD WE GOT NO MONEY.
BUT THEY BOUGHT IN CASH A THEATRE ON A NEIGHBOR ISLAND.
SO I STAND CORRECTED. THE 90S, WE HAD THE GULF WAR.
WE HAD ERTF. ECONOMIC REVITALIZATION TASK FORCE.
WE WERE IN A VERY DIFFICULT TIME. WE HAD TO RETRENCH.
YEAH, EUPHORIA OF 1980S, TOUGH ASKING THE STATE FOR MONEY BEING TOLD NO MONEY AND WATCH
THE STATE BUY A THEATRE IN CASH.>>IF YOU RECALL, LATE 1980S IS ONE OF OUR
COMPANIES WAS BEING BOUGHT OUT. STOCK PRICE WAS SO HIGH.
THE STATE MADE SO MUCH MONEY OFF OF THAT DEAL. MONEY JUST DISAPPEARED.
>>DAN: YOU HAVE TO REMEMBER, RANDY IS TOO YOUNG TO REMEMBER ALL OF THIS STUFF.
>>I WISH.>>DAN: WERE TALKING ABOUT IT.
PAST LEGISLATURE DIPPED INTO THE FUND, HOW ACCOUNT THIS BE PREVENTED IN THE FUTURE?
STOPPED BY LAW NOW, RIGHT? WHEN, 2007?
>>ACTUALLY,.>>DAN: JUST LAST YEAR?
>>2003, THE TRUSTEES FILED A LAWSUIT AGAINST THE STATE.
THE SUPREME COURT RULED THAT THE STATE WASNT ALLOWED TO SKIM.
SO THE LEGISLATURE AMENDED THE LAW SUBSEQUENTLY TO ENSURE THEY WOULDNT DO THAT ANY MORE.
>>THIS WAS THE KAHOHANOHANO CASE.>>PENSION FINANCING IS A HARD THING FOR MOST
PEOPLE TO UNDERSTAND. I THINK THAT IN THE PAST, BECAUSE IT WAS A
DEFERRED LIABILITY, PEOPLE DIDNT PAY ATTENTION TO WHAT DO WE NEED TO DO TO MAKE SURE THAT
ITS PROPERLY FUNDED. BACK THEN, YOU DIDNT HAVE 40,000 RETIREES.
SO OVER THE YEARS, THE NUMBER OF RETIREES HAVE GROWN AND THEN I THINK THAT ALL OF A
SUDDEN, YOUVE GOT TO PAY THE PIPER. AND THE REALITY IS HITTING HOME.
BUT OTHER THING THATS CHANGED, DAN, IS THAT BACK THEN, IN THE FIFTIES, SIXTIES, 70S, HAWAII
WAS GOING THROUGH THIS PHENOMENAL GROWTH BOOM. WE HAD DOUBLE DIGIT GROWTH RATES IN TERMS
OF OUR GDP. SINCE THEN, THE DROPPED TO SINGLE DIGIT RATES
AND WEVE GONE THROUGH RECESSIONS. AND SO THE ROBUST ECONOMIC ENVIRONMENT THAT
MADE US FEEL CONFIDENT IN PROVIDING THE RICH BENEFITS TO EMPLOYEES NO LONGER EXISTS.
SO THATS ONE OF THE ADJUSTMENTS THAT WE HAVE TO GET OUR MINDS AROUND.
>>DAN: WHY SHOULD TAXPAYERS MAKE UP THE INVESTMENT LOSSES FOR THE STATE RETIREMENT SYSTEM?
ITS LIKE GAMBLING. THEY HAVE TO TAKE THEIR LOSSES LIKE ANYONE
ELSE. THERE IS AN ASPECT OF THIS WITH THE WHOLE
INVESTMENT BUSINESS. I CANT IMAGINE A MORE DIFFICULT JOB AT BEING
THE INVESTMENT GURU AU FOR THE STATE RETIREMENT SYSTEM.
LAU DO YOU DO THAT IN THE CRAPSHOOT? YOULL EXCUSE ME, OF GLOBAL 
>>ITS NOT A CRAPSHOOT BECAUSE IF YOU READ THE JOURNAL INSERT INTO THE STAR ADVERTISER,
THIS SUNDAY, THE POINT THEY MADE WAS THE RICH GOT RICHER, BECAUSE THEY WERE IN THE MARKET
AND THEY SAT ON THEIR INVESTMENTS. AND EVEN THOUGH IT DIPPED DOWN AND 08, STARTING
IN 07, GOING DOWN IN 08, THAT IT HAS COME BACK AND THE RICH ARE EVEN MORE BETTER OFF
TODAY BECAUSE THEY JUST SAT ON THEIR INVESTMENTS. I THINK ONE OF THE THINGS THAT I WOULD SAY
WITH ERS HAPPENED IS THEY HAVE NOT HAD VERY GOOD MANAGERS OF THE CORPUS.
AND THAT THEY REACTED INSTEAD OF HAVING VERY STEADY HANDS BEHIND THE INVESTMENT PORTFOLIO.
>>DAN: IS THAT THE MOST EXPENSIVE HIRE YOU MAKE AT THE
TRUSTEES.>>OUR MANAGEMENT FEES ARE QUITE SUBSTANTIAL.
WE DO HAVE A $12 BILLION PORTFOLIO THAT HAS TO BE PROFESSIONALLY MANAGED.
I WOULD DISAGREE WITH LOWELL ABOUT OUR INVESTMENTS PERFORMANCE.
I THINK, THE TRUST IS MANAGED PROPERLY IN TERMS OF THE INVESTMENTS.
BUT THE THING ABOUT THE PENSION SYSTEM IS THAT RANDY IS CORRECT.
THAT EMPLOYEES HAVE TO CONTRIBUTE. THEY CONTRIBUTE EITHER 6% OR 8% AND IN SOME
CASES, 12% OF THEIR PAYROLL TO THE PENSION FUND.
SO THAT COMES OUT OF THEIR PAY. BUT THATS ALL.
ITS FIXED. SO IF THE CORPUS DIPS, THE EMPLOYER HAS TO
MAKE UP THE DIFFERENCE. IF THE INVESTMENTINGS DONT PERFORM AT THE
ASSUMED RATE, THE EMPLOYER HAS TO MAKE UP THE DIFFERENCE.
SO THATS ONE OF THE CHALLENGESES WITH THE DEFINED BENEFIT PLAN.
IS THAT THE RISK OF INVESTMENT RETURN IS SHIFTED TO THE EMPLOYER.
SO THE EMPLOYER SLOWLY HAS TO BEAR THAT. AND IN OUR CASE, FOR YEARS, WEVE HAD TO PRODUCE
8% RETURN IN ORDER TO MEET THE ACTUARIAL ASSUMPTION. AND THATS BECOME A VERY DIFFICULT INVESTMENT
RETURN HURDLE TO ACHIEVE.>>DAN: ITS BEEN ONLY 3% THE LAST FEW YEARS.
>>AS A RESULT, LAST YEAR, WE REDUCED OUR THE ASSUMPTION TO 7 AND 3 QUARTERS%.
SOME WOULD CONTEND THAT EVEN THAT IS TOO HIGH. BUT FOR EVERY 25 BASIS POINTS, QUARTER% THAT
WE REDUCED THAT,ER INCREASES THE UNFUNDED LIABILITY BY HALF A BILLION DOLLARS.
SO WERE CHALLENGED IN TERMS OF MAKING SURE THAT WE CAN GENERATE AN ADEQUATE RETURN TO
MAINTAIN THE PROPER FUNDING RATIO FOR THE SYSTEM.
>>DAN: A COMMENT FROM LES FROM MAUI. IN REGARDS TO THE SKIMMING IN THE 90S, FUND
DIDNT JUST LOSE WHAT WAS TAKEN. IT LOST FUTURE GROWTH.
>>IT LOST FUTURE GROWTH. IF IN FACT THE YOU HAD A MORE OF AN EMOTIONAL
REACTION TO THE MARKET SWINGS. IM NOT SAYING THAT THE PORTFOLIO WASNT HANDLED
CORRECTLY. IM SAYING THAT BASICALLY, THE WAY THE MONEY
WAS HANDLED, PERIOD, I.E., WHEN THE LEGISLATURE GOT ITS GRIMY HANDS ALL OVER IT, REALLY REDUCED
THE FUTURE GROWTH OF THAT PORTFOLIO. SO WHEN YOU DONT  ITS LIKE WHEN YOU HAVE
A LIKE IF YOURE A STEADY INVESTOR AND YOU DO WHAT THEY CALL THE REINVESTMENT OF DIVIDENDS,
PUT THEM ALL BACK, DONT TOUCH THE MONEY, YOU DO GROW THE THING, THE CORPUS.
AND THAT I THINK THAT WHAT I SAY YOU NEED A STEADY HAND, YOU NEED SOMEBODY THATS NOT
GOING TO SAY, HEY, LETS JUST DIP INTO IT BECAUSE THE NOT LOTS OF MONEY NOW AND TAKE IT OUT.
YOUVE GOT TO HAVE A STEADY HAND TO SAY, WERE GOING TO NEED THAT MONEY EVEN THOUGH ITS MAKING
LOT OF MONEY NOW, BECAUSE OVER THE LONG RUN, THE NEXT 30 YEARS, WERE GOING IS TO SEE THE
CYCLES GO UP AND DOWN. YOU SPEAK ABOUT WE HAD EXTENSIVE GROWTH.
AFTER STATEHOOD. WE ALSO HAD A NUMBER MUCH DOWN TIMES.
I CAN REMEMBER IN 1973, 74, WE HAD A TERRIFIC HIT TO THE STATE BUDGET AND THE STATE ECONOMY.
WE WENT INTO CONSTRUCTION SLUMP. 73 WAS WHEN PROPOSED INCREASES TAX AS CROSS
THE BOARD BECAUSE WE DIDNT HAVE ENOUGH MONEY. I THINK THAT INCREASE WAS KILLED IN THE HOUSE
I THINK IT WAS, SENATE WANTED TO VOTE  LOST THE VOTE FOR IT.
BOTH HOUSES TAXES WOULD HAVE GONE UP AND WHO KNOWS WHAT THE ECONOMY WOULD HAVE REACTED
TO THAT. ITS CYCLICAL.
WE NEED TO HAVE WHEN I SAY STEADY HAND, WE NEED TO CLOSE OUR EYES AND LIKE I TOLD A LOT
OF PEOPLE IN THOSE 07, 8, PUT YOUR STATEMENT IN THE DRAWER AND IGNORE IT.
JUST LEAVE IT. DONT SELL.
DONT PANIC. JUST STEADY HAND.
I THINK THATS WHAT IM TALKING ABOUT.>>DAN: RANDY, WHAT DOES THE UNION DO WITH
ITS EMPLOYEES TO EDUCATE THEM ABOUT THE NATURE OF THIS PROBLEM?
ARE THEY AWARE OF THE KIND OF VARIABLES, ARE MOST OF THE FOLKS WORKING IN PUBLIC SECTOR?
ARE THEY AWARE OF THE KIND OF VARIABLES AND THE KIND OF, I DONT WANT TO SAY UNCERTAIN,
I TRUST GUYS LIKE COLBERT, THE WAY ITS A BIG, BIG PROBLEM AND ITS GOING TO BE THERE FOR
A LONG, LONG TIME AND.>>I THINK EMPLOYEES ARE GENERALLY AWARE OF
CERTAINLY. I THINK CERTAINLY, I WOULD BE THE FIRST TO
ADMIT THAT A LOT OF THIS ACTUARIAL BUSINESS CAN SAIL OVER MY HEAD PERSONALLY.
HOW THAT GETS DONE. AND AS COLBERT AND OTHERS HAVE POINTED OUT,
ITS REALLY A MISHMASH OF A NUMBER OF FACTORS THAT WILL CONTRIBUTE TO WHAT THE FUNDED STATUS
IS FOR ANY DEFINED BENEFIT PLAN. BUT I THINK EMPLOYEES CAN REACT BECAUSE THEY
CAN REACT TO THE MAGNITUDE OF A LARGE NUMBER LIKE 8.4 BILLION LIKE THE REST OF US.
AT A CERTAIN POINT IT GETS SURREAL BECAUSE THATS MONEY BEYOND ANY OF OUR INDIVIDUAL COMPREHENSION.
FRANKLY. SO THERE IS A GENERAL AWARENESS.
BUT AT THE SAME TIME, I THINK A LOT OF THE EMPLOYEES REACT WITH SOME ANXIETY AND CONCERN
BECAUSE OF AS HAS BEEN MENTIONED, THE PROMISE, IF YOU WILL, AND THE WORKING CONDITIONS AND
PROMISES THAT HAVE BEEN MADE TO THEM UPON TAKING GOVERNMENT EMPLOYMENT.
SO THEY LOOK AT IT WITH FEAR, YET THERES AN AWARENESS, BUT ALSO SOME ANXIETY ABOUT WHAT
THE FUTURE WILL BE.>>DAN: YOUR MEMBERSHIP HAS TO GET VERY ANGRY
DURING ELECTION CYCLES PARTICULARLY RECENT ELECTION CYCLES WHEN SO MUCH BLAME IS PUT
ON PUBLIC EMPLOYEES AND YOUVE GOT TO CONTEND WITH THAT.
ITS THERE ALL THE TIME. I READ YOU SAYING THAT THEY BOUGHT INTO THE
RHETORIC, OR PEOPLE BOUGHT INTO THE RHETORIC OF THE THING.
ITS NOTTEN TEARY RHETORIC, IS IT? I MEAN, THERE IS A HUGE PROBLEM HERE.
ITS NOT ENTIRELY RHETORIC.>>THERES NO DISPUTE THERE ARE PROBLEMS.
I WAS AT LEAST PLEASED TO HEAR THIS EVENING THAT THERE IS AN ACKNOWLEDGEMENT THAT THE
FACT THAT THE FUNDED  FUNDED STATUS OF THE PLAN IS NOT THE RESULT OF EMPLOYEES.
THATS SO TRUE. FAR TOO OFTEN PEOPLE WHO ARENT INFORMED, WILL
TAKE A BROAD BRUSH APPROACH, IF WERE 8 ABOUTEL IN THE HOLE, BENEFITS ARE GETTING TOO RICH.
NOT ENTIRELY TRUE. NUMBER MUCH FACTS LED TO THE FUNDED STATUS
WERE FACING TODAY. DECISIONS MADE 20, 30 YEARS AGO.
IM ALWAYS REACTING TO PEOPLE WHO JUST WOULD BROADLY SUGGEST THAT GOVERNMENT EMPLOYMENT
IS TOO LUCRATIVE FOR WE TAXPAYERS TO BEAR YET ALL OF US WHEN WE TURN THE FAUCET ON IN
THE MORNING, EXPECT WATER TO COME OUT AND THAT WATER BETTER BE GOOD ENOUGH FOR ME TO
DRINK. THEY DONT TAKE FOR GRANTED THE FACT THAT THERES
A PUBLIC EMPLOYEE MAKING SURE THAT THAT WATER FAUCET IS GOING TO GO ON AND THAT WATER IS
CLEAN.>>DAN: TOM AGAIN FROM LAUPAHOEHOE.
GOT KIND OF A THING GOING WITH US HERE TONIGHT. HE WITH WANT TOE NO, BACK IN THE EIGHTIES,
WHEN WE WERE FLUSH WITH MONEY, WHY WASNT RAIN YEAH DAY FUND SET UP?
WHEN THE DEE JAYS AND STUFF WERE SAYING, WE SHOULD GET OUR $400 BACK.
WHATEVER. TAX REBATES AND SO FORTH.
HAVENT WE MADE IT PART OF THE LAW NOW, IF WE RUN 
>>ACTUALLY, RAIN YEAH DAY CONCEPT WAS FORWARD THE BY THE 1989 TAX REVIEW COMMISSION.
AS A WAY TO MITIGATE THIS WILD SWINGS IF YOU WILL.
IT WASNT UNTIL LATE 1990S, THAT WE DID ACTUALLY SET UP RAIN YEAH DAY FUND.
ITS A RATHER RECENT ADDITION TO OUR FISCAL TOOLBOX, IF YOU WILL.
>>DAN: ITS THERE BUT HASNT BEEN ANY SURPLUSES TO PUT IN IT.
>>THERE HASNT BEEN THE DISCIPLINE TO PUT MONEY AWAY.
JUST AS MUCH AS IM SAYING THIS YEAR, THIS LEGISLATURE HAS A LITTLE BIT MORE PHYSICAL
DISCIPLINE. DECIDE SIDED NOT TO BUY INTO THE TOTAL PROPOSALS
MADE BY ADMINISTRATION. CUT IT BACK BY 250 MILLION.
THE QUESTION IS ARE THEY GOING TO BE WILLING TO PUT SOME OF THAT MONEY, MORE OF THAT MONEY
INTO THE RAINY DAY FUND. SOME OF THE MONEY IS GOING BACK TO THE HURRICANE
FUND AS REQUIRED BY LAW. AGAIN, ITS FISCAL DISCIPLINE, STEADY HAND.
THATS WHAT IM TALKING ABOUT. NOT SAYING THAT LACK OF GOOD MANAGEMENT.
I THINK THE A STEADY HAND, GOOD DISCIPLINE, JUST AS MUCH AS YOUR FAMILY SHOULD HAVE DISCIPLINE
TO PUT AWAY $25 A WEEK OR WHATEVER. AS PART OF YOUR RETIREMENT PLANNING.
IT IT TAKES GOOD DISCIPLINE WITHIN THE LEGISLATIVE BODY AS WELL AS WITH ADMINISTRATION TO SET
THE MONEY ASIDE FOR THE PUBLIC EMPLOYEES RETIREMENT SYSTEM AND THE HEALTH FUND AND WE JUST DIDNT
HAVE IT.>>DAN: IN REGARDS TO WHAT LOWELL SAID, I THINK
THE ADMINISTRATION AND THE AT LEAST THIS YEARS LEGISLATURE HAS TO BE COMMENDED FOR SETTING
ASIDE $217 MILLION OVER THE BIENNIUM FOR THE HEALTH FUND WHICH WERE NOT DISCUSSING
TONIGHT BECAUSE I THINK THE A VERY, VERY IMPORTANT STATEMENT FROM BOTH GOVERNOR ABERCROMBIES
ADMINISTRATION AND THE LEGISLATURE, THAT THEY RECOGNIZE THAT THIS IS REALLY A PROBLEM.
AND SECONDLY, THEY GOT TO DO THE WALK. SO THEY PUT IN $217 MILLION.
FAR BELOW WHAT KALBERT YOUNG IS SUGGESTING THAT WE HAVE TO ITS A START.
WERE LOOKING AT ACCORDING TO HIS FIGURES,  ITS A START, DAN.
10 YEARS AGO, WE PUT ZERO. FIVE YEARS AGO, WE PUT ZERO.
WE DIDNT EVEN ESTABLISH A TRUST FUND FOR THE HEALTH FUND UNTIL JUST RECENTLY.
SO WERE STARTING TO PREFUND AS WE ARE WITH THE PENSION FUND AND PENSION FUND IS IN BETTER
SHAPE THAN THE HEALTH FUND. BECAUSE THEY ARE PREFUNDED.
HEALTH FUND ISNT. SO NOW IT STARTED.
>>DAN: MR. ANONYMOUS, VERY IMPORTANT. VERY IMPORTANT VIEWER WE HAVE CALLS IN OFTEN.
WE KNOW WHAT MISTAKES WEVE ALREADY MADE. LETS MOVE FORWARD AND DO SO WISELY.
SAVE. DONT BORROW OR DIP.
I AM WILLING TO PAY HIGHER TAXES TO MEET THE DEFICIT.
I CANT REMEMBER WHAT THE ISSUE BROUGHT UP HERE A FEW WEEKS AGO, WE HAVENT RAISED THE
EXCISE TAX.>>EXCEPT OAHU FOR THE RAIL.
>>DAN: EXCEPT OAHU FOR THE RAIL. 16 YEARS?
>>40 YEARS.>>DAN: ITS BEEN A LONG TIME.
IT SEEMS TO ME DURING THE WORST OF THIS GREAT RECESSION, COUPLE YEARS AGO, AROUND A LOT
OF WATER COOLERS AFTER THE WHOLE SESSION WAS OVER, PEOPLE WOULD SAY, WHY DIDNT THEY JUST
RAISE IT HALF A%? DID YOU LOOK AT THAT?
>>YES, WE DID. LOWELL CAN EXPLAIN THE OTHER SIDE ABOUT THE
WHAT HE BELIEVES IS NEGATIVE EFFECTIVE THE G. E.T.
YES, WE DID. IF WE DEALT WITH HEALTH FUND PENSION FUND
SHORTFALL, TO THE ADDRESS THAT SHORTFALL, BY THE YEAR 2025, THE CASH BASIS ACCOUNTING,
$3 BILLION ACCUMULATED SHORTFALL, AT LEAST PFM DID, DID SUGGEST, WE DID NOT ADOPT IT
LIKE I SAID. THE CONSULTANTS, WE ASKED HIM, OKAY, YOU GO
THE THIS PROBLEM. LOOKING AT IT PURELY FROM A REVENUE STANDPOINT,
WHICH IS WHAT ALL WE CAN DO, TELL US WHAT THE TAX RAMIFICATIONS ARE.
THEY DID LOOK AT IT. THEY CALLED FOR INCREASE IN THE G. E.T. OF
.5%. SO THEN WE SAID, ALL RIGHT, THEN YOU HAVE
THE ACCRUAL BASIS ACCOUNTING. YEAR 2025.
$17 BILLION SHORTFALL. WHAT WOULD YOU HAVE TO RAISE THE G.E.T.?
IN ORDER TO ADDRESS THAT SHORTFALL? ITS 1.16% INCREASE IN THE G.E.T.
CLEARLY, THAT THE RAISES SOME RED FLAGS FOR A LOT OF TIME.
IT CANNOT BE SUSTAINED SOLELY BY BUMPING UP THE G. E.T. WHICH IS WHY THE COMMISSION IS
TALKING ABOUT THE SIMPSON BOLLES. COMMISSION BELIEVES YOU ADDRESS THESE ISSUES
TO HELP FUND PENSION FUND FROM BOTH HE EXPENDITURE AND REVENUE SIDE.
>>I THINK, DAN, ONE OF THE THINGS THAT YOUR VIEWERS ARE A LITTLE BIT CONFUSED ABOUT, THEY
LOOK AT THE 4%, THEY GO, I PAID 8.39/4 IN CALIFORNIA.
WE DONT HAVE A RETAIL SALES TAX LIKE THEY DO IN 40 SOME OTHER STATES.
RETAIL SALES TAX. ITS A GROSS INCOME TAX ON BOTH GOODS AND SERVICES.
ITS AT EVERY TRANSACTION.>>DAN: EVERYTHING THAT MOVES.
EVERYTHING THAT MOVES. PROBABLY EVEN THE COST TO CROW.
WHEN YOU TRANSLATE IT BACK INTO RETAIL SALES TAX STRUCTURE, YOU WOULD NEED SOMEWHERE BETWEEN
11 OR 12% RATE WHICH WOULD MAKE IT THE HIGHEST STATE SALES TAX RATE IN THE NATION.
THATS WHATS SCARY. THE EFFECT IT WOULD HAVE ON ECONOMY AND DOING
BUSINESS IN THE STATE. WE ALREADY HAVE AS YOU MAY OR MAY NOT KNOW
AT THIS POINT, TEMPORARILY AT LEAST, THE HIGHEST INCOME TAX RATES IN THE NATION PROBABLY PAST
ONLY BY CALIFORNIA BY 3/10 OF A%. HIGHEST IF YOU TRANSLATE GET AND SALES TAX,
WED HAVE THE HIGHEST SALE ITS TAX RATE RETAIL SALES TAX RATE IN THE NATION.
A LOT OF PEOPLE, SAY, WHY DONT WE RAISE THE PROPERTY TAX.
IM SORRY. THE PROPERTY TAX DOESNT SUPPORT THE KIND OF
FUNCTIONS THEY DO AT THE COUNTY LEVEL ON THE MAINLAND.
>>DAN: WERE ALMOST OUT OF TIME. VERY QUICKLY.
I MEAN REALLY QUICKLY. CAN WE DEAL WITH THIS PROBLEM?
>>YES. WE CAN.
>>DAN: IT CAN BE SOLVED? ITS SOLVABLE.
>>YES. ITS SOLVABLE.
>>YES, IT IS.>>DAN: EASILY?
>>YOU KNOW, JUST WAS READING A BOOK TODAY. THERES A QUOTE.
THE DIFFICULTY CAN BE DONE IMMEDIATELY. IMPOSSIBLE WILL TAKE A LITTLE MORE TIME.
YES, WE CAN DO IT.>>DAN: IS THAT SOUNDS LIKE WHAT A MARINE WOULD
SAY.>>SEE BEAST.
ABSOLUTELY. DIFFICULT CHOICES.
>>WE CAN FIX THIS. BUT WERE GOING TO HAVE TO ALL COME TOGETHER
TO SOLVE IT IN A WAY THAT LEADS TO THE LEAST AMOUNT OF ACRIMONY AND GRIEF.
BECAUSE WE DONT WANT TO TEAR THE COMMUNITY APART.
BUT ITS NOT GOING TO BE FIXED BY JUST LOOKING AT TAX INCREASES.
WEVE GOT TO GROW OUR ECONOMY. WEVE GOT TO GET BACK TO MORE ROW BUST  ROBUST
ECONOMIC GROWTH RATE.>>DAN: WERE DONE.
THANKS A LOT. I REALLY APPRECIATE IT.
DIFFICULT SUBJECT AND I THINK YOUVE HELPED A GREAT DEAL.
NEXT WEEK, IS THE FIFTH 20TH ANNIVERSARY OF THE HAWAII SUPREME COURT DECISION THAT LAUNCHED
OUR NATIONAL DEBATE OVER SAME SEX MARRIAGE. THE JUSTICE WHO WROTE THAT DECISION WILL BE
HERE TO HELP US ALONG WITH OTHERS EXPLORE THE LONG ROAD FROM CASES CURRENTLY PENNING
AT THE UNITED SUPREME COURT. NEXT TIME ON INSIGHTS ON PBS HAWAII.
IM DAN BOYLAN. A HUI HO

Leave a Reply

Your email address will not be published. Required fields are marked *