LETTER: Lava Disaster Could Worsen Hawai‘i Pension CrisisMay 24, 2018, 1:36 PM HST (Updated May 24, 2018, 1:36 PM)
The effect on the state’s economy of recent volcanic activity on Hawaii Island might last longer than many realize, according to Thom Williams, executive director of the state Employees’ Retirement System.
That’s because overtime hours being racked up by state and county emergency responders to the Kilauea eruptions could add to the liabilities of the already-fragile state public pension system, currently estimated to be almost $13 billion, said Williams, speaking Monday at an event at the state Capitol hosted by the Grassroot Institute of Hawaii.
Williams wasn’t arguing that the overtime is unwarranted; the Grassroot Institute, among others, joins him in being grateful for the hard work and sacrifice of Hawaii’s emergency workers. But, still, the volcano-related overtime for the many state and county workers affected, compounded over the duration of the emergency, is an unexpected expense for the state.
“The city and county emergency workers are spending an awful lot of time responding to this emergency,” Williams said. “And because overtime is included in their compensation, it’s going to affect — potentially — the benefit they get from the ERS. So I’m monitoring the level of overtime and the longevity of this eruption because it can show up in our liabilities in time.”
Williams explained that the extra overtime might raise the base pay used for calculating individual pensions.
“We pay benefits on the highest five years earnings, and it matters not when that occurs,” he said. “So for some of these people who are responding to the emergency, because of the inclusion of overtime to their base pay, it may very well mean that they will get an elevated benefit for the remainder of their retirement lifetimes.”
The impossibility of predicting the May 4 eruption and how long it will last served as examples of the difficulties involved in navigating risk for the state’s public pension system, which was the theme of the May 21 event.
As noted by Keli‘i Akina, Grassroot Institute president and moderator of the event, a natural disaster can highlight areas of concern in the current pension model:
“It is well known that Hawaii’s unfunded liabilities are a significant cause for concern, affecting the economic outlook and fiscal health of our state. But when a natural disaster like the Kilauea eruption can create liabilities far into the future, the obvious question is whether we have the proper safeguards in place to ensure that those benefits will be there when the emergency workers retire.”
Akina emphasized that, “The emergency workers on the Big Island are very deserving of their overtime, and we are all grateful for the hard work they do protecting the people of Hawaii. Our concern is not their overtime pay, but rather the long-term stability of the state pension system.”
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