Project Labor Agreements: Costly for Hawaii

By State Senator Sam Slom
Originally published in HawaiiReporter.com

Two months ago, on May 22, 2012, Hawaii Governor Neil Abercrombie issued an administrative directive for use of Project Labor Agreements (PLA) for state construction projects. Most residents are not aware of this action or the enormous future impact PLAs can have here.

Abercrombie explained, “ the State of Hawai’i will use PLAs on a variety of construction projects in order to address obstacles that might arise due to a lack of labor coordination.” The Governor added, “A Project Labor Agreement provides a mechanism for collaboration on certain projects to prevent potential conflicts among labor unions. Our local economy has shown signs of improvement, but we cannot afford to lose this momentum by prolonging projects from getting done in a timely manner.”

Those “obstacles,” and “lack of labor coordination,” is code for: we don’t want a free, competitive government project process; we want union-only guarantees.

Five specific and costly ($519.9 million total) state projects were identified for PLAs by the Governor:

(1) University of Hawai’i – Hilo College of Pharmacy; a $38 million project
(2) Princess Victoria Kamamalu Building: Total project estimated cost is $32.9 million
(3) Maui Regional Public Safety Complex: Total project estimated cost is $225 million.
(4) Ewa Elementary School: This $11 million project
(5) Honolulu International Airport Mauka Concourse Project: Estimated project cost is $213 million.

As expected, Hawaii unions applauded the Governor’s action. PLAs provide the compulsory building and trades unions even more of a stranglehold on public projects at the expense of non-union, merit shops.

Actually, unions have tried for decades to get legislative approval of PLAs. Former State Senator Cal Kawamoto, was a champion of unions and union shops. During his Senate tenure, he annually introduced bills, resolutions and riders to other bills to sneak in Project Labor Agreements. He was an outspoken and passionate PLA supporter. He came close but did not succeed. Now, the Governor basically has trumped the legislature and did what they wouldn’t do.

But are PLAs good for Hawaii?

Beverage Container Tax Set to Increase

Hawaii Beverage Consumers Will Soon Be Paying More

Originally published in HawaiiReporter.com July 18, 2012.

It’s a hot summer here in the islands, but those seeking relief from a cool beverage will soon be paying more.

The state Department of Health, the agency that manages the fund, plans to increase the controversial 6 cent beverage container tax by a half cent starting September 1.

The tax is charged to manufacturers, distributors and importers of beverages in Hawaii, and that tax is then passed on to consumers.

The Department of Health does not need additional approval from the legislature, because the increase was already written as an option into the law. The way the law was structured, the more the public cooperates and recycles, the more the chance of the tax being increased.

“State law requires the container fee to increase from one cent to 1 1/2 cents per container if the redemption rate exceeds 70 percent, unless the director of health, in consultation with the state auditor, determines that a fee increase is not needed. The statewide redemption rate from July 1, 2011, to June 30, 2012, remained strong at 77 percent; the rate for the previous year was 76 percent,” the health department said in a press release.

Health Director Loretta Fuddy said: “The half-cent fee increase was written into the bottle law from its inception to ensure the recycling program could sustain itself and continue to pay back deposits to consumers. We were able to hold off a fee increase for four years by using existing funds; however, the special fund is now too low to continue the program through 2014, and the current fee is not enough to build critical program reserves necessary to conduct essential operations.”

But the increase does not come without controversy – or questions from the law’s critics.

The fund has been raided multiple times by the Hawaii state Legislature for a total of $9.7 million between Fiscal Years 2009 and 2011 to balance the state operating budget.

“An additional $9.6 million decrease in the program’s funds during FY2009-11 was primarily due to legislative impacts that removed the exemption from the Central Services Fees ($2.7M per year), two raids (Act 124 (11) and Act 192(10)) ($1.3M total) and the transfer of interest earned ($1.2M per year),” said Janice Okubo, spokesperson for the Department of Health.

Even without the raids, Okubo said, “the container fee would eventually need to be increased a half cent to sustain the program because of the high redemption rates each year.”

The department has continued to expand its bureaucracy, leaving the department spending $3.4 million more than its annual revenue for this program.

Sen. Sam Slom, (R-Hawaii Kai to Diamond Head), said: “I have been opposed to and voted against every piece of this legislation that amounts to a power grab for the state Department of Health. I have warned that the tax will continue to increase without any legislative oversight. This is a perfect example of government out of control by punishing people for what it said had to be done for recycling. In other words, the more people recycle and are responsible, the more they will be penalized. The fact that the legislature also uses the beverage container special fund as a cash cow amply demonstrates that this scheme is more about money and taxation and less about the environment. Finally if re-elected I will again introduce legislation to abolish this program and make all recycling a county function as is done in the Mainland.”

The Health Department determined this year “the current fee structure and special fund balance would leave the HI-5 program underfunded in 2014 and unable to continue operations.”

The Health Department estimates the increase will bring in $4.5 million annually.

“As a result of the fee increase imposed on beverage distributors, consumers will likely see the additional half-cent fee added to their retail purchases of HI-5 labeled containers beginning September 1. This means that the deposit plus container fee will increase to 6 1/2 cents – a 5 cent deposit to be returned to the consumer when the container is recycled and a non-refundable 1 1/2 cent container fee to cover administrative costs,” the health department said.

Since its inception, the HI-5 program has recycled more than 4.71 billion containers. In the last fiscal year, more than 690 million containers were recycled, helping to significantly reduce litter and conserve resources.

Original Story Link:

http://www.hawaiireporter.com/?p=52297

HB 1054 Becomes Law as Act 308

Senator Sam Slom with the Friends of the Aina Haina Public Library, Governor Neil Abercrombie and Rep. Mark Hashem commemorating the passage of HB 1054 into law as Act 308. The new act allows private, non profit library groups to hold fundraisers on state library property in support of the library. Photo by Michael Palcic.

HB 1054 / Act 308

Auditor Blasts State Special Funds Proliferation; Vindicates Opponents

By State Senator Sam Slom

For the 16 years that I have been privileged to serve in the Hawaii State Senate, I have consistently spoken and voted against every tax increase, and the creation of every new State Special Fund. The only exceptions have been for those mandated Federal Special Funds where no monies would accrue to the State unless the separate fund was established, matching federal-state funds and those federal funds where the State Legislature is absolutely blocked from raiding or misusing the funds. (An example would be the Unemployment Compensation Reserve Trust Fund.)

My rationale has always been that the over use and misuse of “Special” Funds is a convenient way of hiding funds from regular budgeting techniques, fooling taxpayers into thinking their extra tax is “special” and will only be used for the purpose they are told. In fact, history has shown that there is no way of protecting or guaranteeing the use of any special fund for the purpose advanced. Further, one Legislature cannot bind a future Legislature. The sorry fact is that when a Special Fund increases in size, spending hungry lawmakers see that as a new revenue source for the General Fund and a way of balancing an unbalanced budget.

The transfer or “raid” of these Special Funds has been outrageous. The Highway Fund, Employee Retirement System, Hurricane Relief Fund and Rainy Day Funds are just the most recent high profile funds to be raided and monies used for entirely different purposes than described in the original Special Fund authorization.

Lowell Kalapa, the respected President of the Tax Foundation of Hawaii, has also been a long time and consistent critic of Special Funds.

In past years most of my colleagues—including minority party members—dismissed, ignored or chuckled at my opposition and warnings about the proliferation of Special Funds. Dozens have been added annually.

Then, something happened. Last year, a growing number of Senators and Representatives became concerned about the unwieldy number of Special Funds, the amounts hidden within the funds, and the inability of many state agency heads to identify the number and balances in their departmental Special Funds.

The 2011 legislative session passed House Concurrent Resolution No. 166 requesting the State Auditor to conduct a study regarding the transfer of non-general funds to the general fund. The result is this week’s Auditor’s Report No. 12-04, “Study of the Transfer of Non-general Funds to the General Fund.”

The 153-page report examines and analyzes Special Funds in detail. It makes recommendations for corrections and improvements. The Auditor’s Summary:

“Fund growth raises concerns about budget flexibility

Non-general funds, such as special, revolving, federal, and trust funds, exist outside the State’s main financial account, or general fund. Over the past 30 years, the number of non-general funds and the amount of money contained in them have substantially increased. In FY2011, non-general funds accounted for about half of the State’s $10.4 billion operating budget, up from one-third in 1992.

This proliferation of non-general funds has hampered the Legislature’s ability to direct general fund spending. For example, the Legislature typically seeks money in special and revolving funds when general fund budget shortfalls occur. We found that the transfer, or “raid,” process is cumbersome, involving a review of hundreds of funds in addition to a legal review and committee hearings.

We also found:

• At least 729 non-general funds and accounts hold an estimated unencumbered cash balance of $2.47 billion.
• Between 1980 and 2010, the number of special and revolving funds almost tripled to 313 funds.
• Fund raids authorized by the Legislature in FY2009, FY2010, and FY2011 totaled $161 million.
• Not all annual, non-general fund reports are filed as required by law.
• No regular reviews of special funds are conducted to determine if they meet criteria set in Hawai‘i law.
• Of the 47 special and revolving funds we tested, six failed to meet criteria for continuance. We recommend these be repealed and the $49.7 million they hold be deposited into the general fund.”

The Auditor also called for a “more structured legal review process.” The report criticizes the Attorney General for its non-documented legal review process involved with proposed fund transfers and cites a 2008 Hawai‘i Supreme Court decision that eliminates certain types of money that can be transferred.

In 2009, the Hawaii Legislature “mistakenly” authorized transfers of $16.5 million from two funds, in possible violation of federal law.

Finally, the Auditor notes that while the State Department of Budget & Finance generally agrees with the Auditor’s recommendations, the Attorney General’s office balked at some conclusions and suggested changes.

What does this mean? It means that vocal critics of the Special Fund process over many years have been correct. Cautions and warnings have generally been ignored.

Hopefully, it also means that the Legislature — and taxpayers—will now look more closely at the use of existing Special Funds and creation of new funds.

The Auditor has done all taxpayers a great service if we demand implementation. Just because these off budget funds are called “special” doesn’t mean they are special, or should be exempt from sound accounting and review procedures.

Download the Auditor’s Report # 12-04