So What Will We Do Next for Maui Hospital Workers?
by Tom Yamachika, President Tax Foundation Hawaii
Many of us are familiar with the saga of the state-run hospitals in Maui County, including Maui Memorial Medical Center, Kula Hospital & Clinic, and Lanai Community Hospital. Their operations have been losing vast quantities of money over an extended period of time, including more than $43 million in 2014. Our lawmakers, with the support of the Maui mayor and county council, decided in 2015 that enough was enough. Act 103 of 2015 allowed Maui Memorial’s operations to be privatized.
Kaiser Permanente was selected to run the facilities, and it signed an agreement to do so on Jan. 14, 2016.
The government employees’ union, of course, did not take this lying down. It sued in federal court to stop the transition. The U.S. District Court in Honolulu, however, ruled that the union had “no chance of success on the merits.” It further ruled that the State was “merely complying with the reduction-in-force provisions contained in the Union’s collective bargaining agreements.” The union didn’t stop with that decision, however, and it persuaded the U.S. Court of Appeals for the Ninth Circuit to block implementation of the law through September 30th, giving the court time to weigh in before then.
At the same time, the union was busy lobbying the Legislature for special consideration. The Legislature responded by passing SB 2077, which authorizes employees of the three facilities who are facing position abolishment, reduction in force, or workforce restructuring to get either severance benefits up to half of the employee’s annual salary, or a special increased retirement benefit. This bill is now on the Governor’s desk for consideration.
A veto may be possible because the Department of Budget and Finance “strongly opposes” the bill. Why? Several reasons were cited in the Department’s testimony:
- It costs a lot of money (the Star-Advertiser reports that its estimated cost is $40 million or more).
- The State has done reductions-in-force before and hasn’t offered those employees special retirement benefits or severance. Giving those benefits this time creates a precedent, and not a good one.
- Enhancing any retirement benefit when the Employees’ Retirement System is already underfunded by billions of dollars is not good policy. In fact, HRS section 88-99, enacted in 2011, imposes a moratorium on benefit enhancements until the unfunded liabilities are eliminated.
What is it about this situation that is so special? When our national economy turned sour in 2008, many of us in the private sector had to suffer pay cuts, reductions in paid hours, or outright layoffs. Did we give out public money to those affected? Just the opposite! In 2009 our lawmakers passed multiple tax increases (income tax, tobacco tax, and transient accommodations tax, for example) to help keep the government afloat while the rest of us struggled to make ends meet.
We understand that the unions are looking out for their membership as they are supposed to do. This, however, is not supposed to stop our elected leaders from taking into account the broader picture, meaning the needs of the general population. Maui Memorial’s acting chief medical officer testified in 2015: “I do appreciate that some government employees will be negatively impacted under a public private partnership. However, I also know some will be negatively impacted by service reductions. We must put the patients before ourselves. All patients of all ages will be negatively impacted by service cuts, so please support [privatization].”
These are points worth considering.