Fiscal Matters Dominate State of the State Address

Unfunded liabilities took center stage this morning as Gov. Neil Abercrombie gave his third State of the State address.

Those and other fiscal issues need to be addressed as the state continues toward economic recovery, Abercrombie said.

Budget surpluses totaling more than $400 million over the past two years, achieved partly through sacrifices made by public workers, means Hawaii has “now turned a fiscal corner,” the governor said, noting that those came despite the state facing a $1.3 billion budget shortfall when he took office.

But rising health care and pension costs for current and future retirees are looming, Abercrombie said, to the tune of $500 million annually for 30 years. To address that he is proposing that the state pay $100 million during the next fiscal year toward the “Open Post-Employment Benefits,” or OPEB debt, with additional payments in the future.

And although the 5% pay reduction for state workers will end on July 1, “good faith collective bargaining negotiations” will be essential, he said.

“For the record: This is not Wisconsin. This is not Michigan,” Abercrombie said, alluding to states which have stripped state employee unions of most collective bargaining rights.

“This administration is not going to abandon collective bargaining, but neither will it bankrupt the future for all by buying some temporary solution that does not address the fundamental fiscal issues we cannot escape,” he said.

Abercrombie said he has asked Lt. Gov. Shan Tsutsui to take a lead role in restoring school and other public infrastructure.

Abercrombie also referred to the need for increased “public-private ventures,” which are the cornerstone of the controversial Public Land Development Corp. The governor recently said that the law establishing the PLDC likely needed at least fine-tuning by the Legislature, but signaled today that the agency remains a viable option.

“The Public Land Development Corporation is but one example of an attempt to answer the struggle to come out of the worst recession in memory,” he said.

Abercrombie also said that protecting the state’s watersheds “remains a top priority.”

Noting that Hawaii has lost more than half of its forests in the past 200 years, he said the state needs a sustainable and ongoing source of funding for watershed initiatives. Toward that, Abercrombie said he will ask the Legislature to consider an increase in the conveyance tax limited to transactions involving properties valued at more than $2 million as well as a 10-cent fee for single-use checkout bags.

However, it’s not clear how the latter would impact Hawaii County where a law would phase out the use of such bags in January 2014.

But the Big Island stands to benefit significantly from watershed initiatives as nearly 70% of public forest reserve land is located there.

The full text of the State of the State speech is available here.