Turns out that most Hawaii state departments will be spared the brunt of the $50 million in “restructuring” cuts lawmakers charged Gov. Neil Abercrombie to find for the current fiscal year.
Instead, the bulk of the savings will come from two areas: cheaper-than-expected health costs for public employees ($20 million savings) and holding off on issuing new debt ($10 million in interest payment savings). Both these expenses come out of the operating budget for the Department of Budget and Finance.
The remaining $20 million in savings will come out the budgets of 11 state departments, including $8 million from the Department of Human Services, $5.4 million from the Department of Health and $3 million from the University of Hawaii for the current budget year. Several departments emerged with budgets intact, including the Department of Public Safety and state hospitals.
“Just because it’s a $50 million exercise, the list of departments and what restructuring there is, that’s not finite,” Budget and Finance Director Kalbert Young told Civil Beat. “Restructuring is a long-term horizon. Over the next fiscal year, the next biennium, there’s going to be a need to continually implement a number of restructurings for a number of programs that are out there to try and get them to be more efficient, right-placed, right-sized. Probably the biggest changes have yet to be made.”
As part of the state budget lawmakers approved in May, legislators built in two separate lump-sum savings of $50 million for fiscal 2012 and 2013. At the time, lawmakers said they were giving the Abercrombie administration the flexibility to come up with those cuts to “reprioritize state government.”
Across-the-Board Cuts Avoided
Abercrombie announced his plan in June for the first $50 million, asking all departments to achieve cuts equal to 5 percent of their general fund appropriations for the year — even after taking out estimated 5-percent labor cuts, debt service, health benefits payments and pension contributions. Additionally, the University of Hawaii and the state-run community hospitals were asked to come up with cuts at three levels: $10 million, $15 million and $20 million.
Abercrombie instructed departments to make “honest and discerning assessments of its programs and services as compared to its primary mission.” They were asked to find programs and services that can be eliminated even if they may be “well-intentioned, (but) are of marginal benefit, low performing or of lesser priority.” They also were instructed to find ways to cut core program costs through either “tightening program eligibility, reducing program benefits or cost shifting.”
A revised budget the governor released Wednesday spelled out how the $50 million in savings would be achieved in both fiscal 2012 and 2013.
Here’s a breakdown of the savings by department:
Accounting and General Services: $1 million
Attorney General: $570,242
Budget and Finance: $30.5 million
Education, Public libraries: $16,690
Human Services: $8.02 million
Health: $5.39 million
Land and Natural Resources: $460,429
University of Hawaii: $3 million
Some of the $20 million in health benefits savings will be achieved through previously announced savings tied to new contracts with health providers for public employee coverage. Earlier this month, the Hawaii Employer-Union Health Benefits Trust Fund said that new contracts would save the state $24 million over the next calendar year. Those new contracts with providers for medical, dental, vision and life insurance for public employees will be effective Jan. 1, 2012.
The state will also see EUTF savings because it reduced its share of premiums from a 60-40 split to an even 50-50 split.
In addition to the EUTF savings, the state expects to save $10 million this year by holding off on issuing new debt. Young said the state did not issue bonds last fiscal year and so far this year, which is saving the state on interest payments. But the move would only result in a one-time savings, Young said, as he plans to issue bonds before December.
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