The saying goes that numbers never lie. But when it comes to the state’s operating budget, things aren’t so black and white.

Case in point: trying to figure out whether Hawaii taxpayers will be paying more next year for public employees’ health insurance and retirement benefits.

These two so-called fixed costs have been singled out as the state’s largest growing liabilities. The Hawaii Employees’ Retirement System is facing a $9 billion unfunded liability. The Hawaii Employer-Union Health Benefits Trust Fund is facing a $14 billion unfunded liability.

The short answer: Both costs will ultimately go up next year.

But if you look at the line items in the budget, the state’s costs for health insurance and retirement benefits are going down, giving the average taxpayer a false impression.

In the budget approved by lawmakers in May, there’s a temporary decrease in the EUTF budget of $50 million. It’s a lump saving that has yet to be distributed across state departments at the governor’s discretion — savings that are not tied to health benefit costs. Lawmakers described this cut in the budget as “Administration to allocate reduction to state programs in concert with efforts to reprioritize state government.”

There’s also a temporary decrease in the ERS budget of $88.2 million. That’s another amount that has yet to be distributed across state departments for assumed labor savings.

The projected labor savings would be realized if the 5-percent pay cuts that Hawaii Government Employees Association members agreed to were spread across all unions. Members of the Hawaii State Teachers Association and the United Public Workers union have yet to ratify a new contract.

The directors of the Department of Budget and Finance, where the EUTF and ERS benefit costs are housed, say it’s not an accounting trick.

“Due to the size of the amounts, the Legislature, in order to minimize the impact to the rest of budget, chose these program IDs as having large budgets that could handle the reductions,” Budget and Finance Deputy Director Dean Hirata explained, “with the understanding that the amounts will be allocated out to the different departments and agencies.”

If you read the bottom-line budget for the EUTF, which includes the $50 million reduction, “health premium payments” are going down 8.8 percent next fiscal year to $452,522,513 from $496,540,233 in the current fiscal year.

If you read the bottom-line budget for the ERS, which includes the $88.2 million reduction, “retirement benefits payments” are going down almost 3 percent to $593,252,115 from $611,413,320 in the current fiscal year.

But if you take out those “savings,” which will eventually be divvied up across departments, here’s what the EUTF and ERS budgets actually look like:

Program Fiscal 2011 Fiscal 2012 $ Change
EUTF $469.5 million $502.5 million $33 million
ERS $611.4 million $681.5 million $70.1 million

That means the benefit costs for the state will increase in the next budget year by $103.1 million.

“It’s not an accounting trick in that it is going to be allocated out,” Hirata said of the cuts. “The final budget is going to reflect the proper amounts for EUTF and ERS … It’s a timing thing because at the time that the budget was approved, these allocations are yet to be made.”

Hirata said his department has had several meetings with state departments “to come up with the criteria to do the cuts, and we’re continuing to have these meetings.” He said it’s “more than likely” the cuts will not be imposed by the start of the new fiscal year on July 1.

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