Kenoi likely to veto funding for retiree benefits

By PETER SUR

Tribune-Herald staff writer

Mayor Billy Kenoi ripped into a bill that would require a minimum prepayment of millions of dollars into the county’s retiree benefit fund as “political grandstanding” and promised a “highly likely” veto.

“We believe it’s an ill-conceived, poorly thought out and last-minute piece of legislation that doesn’t address effectively fiscal management of the county of Hawaii,” Kenoi said.

Lawmakers late Tuesday night approved by a 5-4 vote a bill requiring the county to put any leftover fund balance in excess of $5 million into the account for GASB-45 payments until 50 percent of the actuary recommended payment has been made, or the full fund balance in excess of $5 million has been appropriated.

But the fight over GASB goes beyond county retiree benefits. It allows Council Chairman Dominic Yagong to highlight his differences with the Kenoi administration as Yagong kicks his own campaign into gear.

Yagong introduced the bill to avoid a repeat of last year’s lengthy budget battle, when the chairman saw millions of dollars in budget amendments defeated because he was unable to muster the six votes required to overcome Kenoi’s veto.

Because Yagong still lacks the six votes needed to override Kenoi’s veto, the bill is likely dead.

Those voting in favor of the bill were council members Yagong, Brenda Ford, Angel Pilago, Brittany Smart and Pete Hoffmann. Those opposing it were Fred Blas, Donald Ikeda, J Yoshimoto and Dennis Onishi.

Kenoi praised the budget that was approved 8-1 (Yagong was the only dissenter), which was “affirmed as a good management decision by our bond rating agencies just two weeks ago.”

“I don’t think you’ll find a single financial expert anywhere in the country that will agree with this legislation (the GASB bill) being a good one, a sound one, and in the best interest of the taxpayers of the county of Hawaii,” Kenoi said. “I don’t see how we could possibly sign a piece of legislation like that, that is shortsighted, that threatens the excellent credit rating that we have, that is clearly more political grandstanding than sound fiscal management.”

“I think a veto is highly likely,” he added.

Finance Director Nancy Crawford did not return a call for comment Wednesday, although Crawford has expressed serious concerns with the bill.

Yagong said the bill was introduced in response to citizens’ concerns that the county should take “whatever steps they can” to make payments to GASB 45.

“Everywhere I go, people, they understand we are in difficult economic times, but at the same time they feel that if we continue to take the path of deferment the hole gets deeper and deeper, and people prefer that we make an effort to address the needs of our future liabilities,” Yagong said. “All the bill did was put in motion an action that would force the county to at least pay 50 percent of the recommended amount by the actuary within the given budget.”

The Kenoi administration has deferred a $20 million payment to the fund for the fiscal year ending June 30, and will defer payments for a second year of about $14 million, according to Yagong. Experts are mixed on the effect of these deferrals, although they agree the payments must be made someday.

If Kenoi approves the bill, it would mean his office would come up with $7 million from the fund balance.

Ikeda, one of the council members who voted against the bill, said his concerns were based on the fund balance, which is the unencumbered money left over from the previous fiscal year.

“We use the fund balance to balance next year’s budget. It’s an estimate. It’s not real accurate,” Ikeda said. “You won’t know what the fund balance is until about October, right around there, maybe November.

Ikeda said the impact of any bill to take away the fund balance, which is usually rolled into the following year’s budget, would be a hit similar to the loss of the Transient Accommodations Tax.

This year’s fund balance is about $18 million, meaning that the amount that would be sent to GASB could be between $7 million (according to Yagong) and $13 million (according to Ikeda).

“What you’re going to do is, how are you going to make up the shortfall?” Ikeda asked. “You either have to lay off warm bodies or you have to raise your tax. And nine times out of 10, they’re going to raise the tax, and that’s why I was against it.”

Ikeda said Crawford concurred with him, “and she had concerns too. She was more concerned about … not knowing what it (the fund balance) is and having the fund balance in October, November, how you’re going to adjust also.”

Yagong was more dismissive of Crawford’s comments.

“You got to remember that if the administration takes a stance, which was, ‘We are going to defer over the next two years $34 million in payments,’ they’ve made that assertion. They’ve made that stance. They’re not going to support any notion that conflicts that stance,” Yagong said. He argued it was more prudent to make some minimum payment toward GASB.

“Honestly, it’s irrelevant in my estimation as to what the administration will say, because they will always say not support it, because they will have already taken a stance that deferral of expenses is OK, and obviously I disagree.”

Email Peter Sur at psur@hawaiitribune-herald.com.