Ige vetoes seven bills

Gov. David Ige announced the vetoes of seven bills Tuesday, including one that prompted the state Legislature to call for a special session.

The legislation in question, SB2077, provides state benefits to workers displaced by an agreement between Hawaii and Kaiser Permanente to privatize control of operations at Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital.

Ige listed several reasons for the veto, chief among them concerns voiced by the Employees Retirement System.

“The governor indicated just a couple days before the veto message that the ERS informed him they were advised by their tax counsel that the bill might jeopardize the ERS tax qualified status, which is one of the main reasons he notes for vetoing the bill,” said Rep. Mark Nakashima, D-North and South Kohala, Hamakua, North and South Hilo, who was part of the legislative group that introduced the bill.

Also listed as a reason for the veto was a lack of appropriated funds to pay lump-sum cash payments to workers after being dismissed from state employment. The bill also failed to allow for Hawaii Health Systems to make those payments, according to a press release from the governor’s office.

The last concern revolved around an unfunded liability of $17.2 million on the ERS and $18.4 million on the Employer Union Benefits Trust fund to cover employees displaced from state service.

Those liabilities would jeopardize Hawaii’s long-term financial plan by lowering its financial position in the estimation of bond rating agencies, which consider outstanding unfunded liabilities.

The governor’s veto leaves the Legislature with two options: call a special session to amend the bill or attempt to override the veto with a two-thirds vote in both chambers. Rep. Nicole Lowen, D-Kailua-Kona, Holualoa, Kalaoa, Honokohau, said the Legislature opted for the former and will not pursue an override vote.

Ige proposed an amended bill that includes stipulations to negotiate for separation benefits for affected employees, authorizes employee purchase of retirement credits and affords an appropriation of $25 million in general funds to cover separation benefits and related fringe costs.

“The governor has been given additional time to try and negotiate the issue and come to a resolution with the unions,” Nakashima said. “If a compromise has been reached (by Monday), then we will amend the bill at that point in time with the new compromise language. If not, then we will have to get back together as a caucus and decide what the next step will be.”

The legislature will reconvene at 11 a.m. Monday and a final vote is expected July 20.

Transient Brokers

Ige also vetoed a bill that would have allowed online lodging services to collect taxes, delving into a debate about whether websites should be kept responsible for the listings people post on their sites.

The bill was pushed by Airbnb, which estimated it could collect about $15 million annually on behalf of the people using its website to rent out rooms in their homes.

But as it moved through the Legislature, lawmakers frustrated with a rash of ads for illegal campsite rentals pushed to require Airbnb and others to verify the legality of their listings, a proposal that ultimately failed.

“When you look at this bill from purely the state’s perspective and the state’s desire to collect state taxes owed, this measure would have provided a mechanism to allow us to achieve this goal,” Ige said during a news conference Tuesday. “However, the use of an intermediary … as the tax collection agent also provided a shield for owners who do not currently comply with county laws.”

Right now, Hawaii law says ads for short-term rentals or timeshares must include information such as registration identification numbers. Otherwise, the rental operator or broker could face fines, said former state attorney general David Louie.

That violates the federal Communications Decency Act, which says an internet platform can’t be liable for its users’ posts, said Louie, who now represents the Internet Association.

“At heart, the internet is about the free flow of information,” Louie said. “I think and the Internet Association agrees that we should have regulation in this area. That’s a conversation. How do you regulate this?”

The bill would have decreased illegal activity by giving the people renting out their homes a way to pay taxes, Louie said.

Tourism officials say it’s unfair to collect taxes only from hotels and not from others that are in the same business. They hoped the revenue stream from the state would prompt counties to act on issues such as illegal rentals, said Mufi Hannemann, president and CEO of the Hawaii Lodging and Tourism Association.

Airbnb is collecting taxes in nearly 200 jurisdictions around the world and says dozens more want to do the same.

Email Max Dible at mdible@westhawaiitoday.com.