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Tuesday, March 10, 2015
Will State Borrow $28M to Fund Insolvent Health Connector?
By Sen. Sam Slom @ 11:57 AM :: 3847 Views :: Health Care


News Release from Office of Senator Sam Slom March 9, 2015

HONOLULU— Tomorrow Hawaii lawmakers are looking to pass SB1028 and companion bill HB1283, which will delegate executive authority to the failing Hawaii Health Connector, enabling it to issue debentures for $28 million in its own name. These "debentures" are just another name for general obligation bonds because the bills provide that the debt will be fully backed by the state. Under HRS 39-11 general obligation bonds are the first charge on the general fund of the state, but the legislature wants also to use Hawaii's emergency funds for security.

The Senate bill initially committed the Hawaii Hurricane Relief Fund to the debt, but the legislature amended bill as an SD2 to use the Hawaii Emergency and Budget Reserve Fund (Hawaii's rainy day fund) to secure the Hawaii Health Connector's debt. (Senate Ways and Means Committee's Standing Committee Report. (SCR889)).

Senator Sam Slom says, "Making the State secure a debt to cover operating expenditures of a private organization that is failing miserably to achieve its purpose and goals is just down right stupidity.  By doing this, legislators are putting Hawaii's reserves at great risk.  Additionally, it should be noted that it is plainly unconstitutional to delegate executive authority to a private entity,[1] and illegal to use the emergency and budget reserve fund to guarantee debt[2] for a non-profit organization. This proposed 10-year general obligation bond issuance of $28 million would saddle future taxpayers with an estimated $8 million in interest payments. If the state wants to fund the Connector, it should do so by making a general fund appropriation.  Either way, giving more money to the connector is just throwing good money after bad."

"I hope the taxpayers realize the repayment of this debt is one of the first places their tax dollars will go.  General obligation bonds are the first charge on the general fund of the state.  In my opinion, it is unlikely that the people know that some legislators want to use our back up emergency funds to secure debt for a highly unpopular Obamacare state exchange that is spending much, but achieving almost nothing," Senator Slom added.

Finally, Senator Slom said, "It might also be argued that the legislature is attempting to usurp executive powers of the Governor by authorizing the Hawaii Health Connector to do something, which is usually a function of the State executive, that is, issue general obligation bonds.  By calling this debt "debentures" it is just an attempt to put lipstick on general obligation bonds and engage in chicanery."

SB1028 and HB1283 also raise a red flag as these types of bonds are usually issued for capital improvement projects, not for operational expenses as in the case of the Connector.

The Connector is set up as a private non-profit organization, and under federal law it is mandated to be self-sustaining by January 1, 2015 (Obamacare s.1311(d)(5)(A)) – note that SB1028, page 3, lines 11-13 indicate HHC will not be self-sufficient for at least 8 years ["if ever" adds Senator Slom].

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