Hawaii lawmakers pounding out the state’s $12 billion operating budget can only estimate how much money a dozen new union contract agreements will cost taxpayers over the next few years.

The plan was to just restore the 5 percent pay cuts thousands of public employees took in 2011 due to the economic downturn. But a tentative agreement with the teachers union and an arbitration award for health and correctional workers is changing the labor landscape.

If any raises come out of the other ongoing collective bargaining talks, there’s little time left to account for it this legislative session. Instead, it will have to be handled retroactively as often happens through the current process.

While contracts for most public workers are in negotiations or arbitration, the state can pencil in some numbers for two unions.

A tentative four-year contract agreement reached over the weekend between the state and teachers union calls for the restoration of the 5 percent pay cuts, plus 3 percent annual raises and better medical benefits. Teachers would only have to pay 40 percent of their health care premiums instead of 50 percent under the new deal.

The Hawaii State Teachers Association’s 13,500 members will decide if they want to ratify the agreement April 17. The pay raises and medical benefits in the new package are estimated to cost $332.5 million over four years, HSTA President Wil Okabe said Monday.

Gov. Neil Abercrombie said Sunday that the agreement is particularly good news for the Legislature as it works to approve the biennium state budget over the next few weeks. Knowing how much to plan for teacher personnel costs should give lawmakers “aid and comfort,” he said.

If the HSTA contract is approved, it will cost the state some $43 million in fiscal year 2014 and roughly $73 million the following year, according to state Finance Director Kalbert Young.

The raises included in HSTA’s tentative contract agreement mirror the award an arbitration panel gave the United Public Workers’ Unit 10 in January.

Lawmakers are slated to vote Wednesday on House Bill 833, which would fund 3.2 percent pay raises for 2,700 health and correctional employees. But it only applies to the last six months of the union’s current contract, which ends June 30.

The UPW pay raises will cost the state $8 million, officials said, but there’s an effort to essentially recoup half of that by cutting their health benefits.

Senate Bill 1057 would force Unit 10 members to pay for half of their health care premiums. They currently only pay 40 percent and the state pays the rest.

Young said a 50-50 split would generate roughly $4 million in savings and be in line with agreements the state has with other unions. But UPW Director Dayton Nakanelua said in his testimony that the state can’t retroactively reduce the contribution ratio because it would break their agreement.

Young said since the state and union were unable to agree on health benefit contributions, the law allows for the administration to recommend a rate for the Legislature to approve.

Lawmakers will likely have to make a similar emergency appropriation for another arbitration award that’s expected soon.

The state was unable to reach an agreement for the current two-year contract with the Hawaii Government Employees Association’s Unit 9, which represents some 1,500 registered nurses. Arbitration proceedings were held in November and a decision is expected in March.

Lawmakers are advancing House Bill 832 as the vehicle to handle paying for this eventual settlement. But they won’t be able to plug in any numbers for pay raises or other costs this year until the award is made — and only if it comes before legislative deadlines.

The 3 Percent Precedent

Sen. David Ige, who chairs the Ways and Means Committee, said lawmakers keep tabs on contract negotiations, but since they aren’t privy to the inner dealings there isn’t too much they can do to plan for potential settlements.

He said the conservative state budget the House passed to the Senate earlier this month only accounts for the governor’s executive budget request to restore the 5 percent labor savings for public employees. The budget bill is up for decision-making in the Ways and Means Committee Wednesday.

The 5 percent pay restoration amounts to roughly $80 million over the entire year, Ige said, which isn’t a whole lot compared to the $2.48 billion for the total general fund payroll.

Lawmakers and unions are looking at the arbitration award for UPW Unit 10 as well as HSTA’s tentative contract deal as a likely benchmark for the coming years.

“Clearly, all the other bargaining units are looking at the arbitration awards and kind of use that as a measuring stick,” Ige said.

House Finance Chair Sylvia Luke said Monday that the tentative agreement with HSTA will be a precedent for negotiations with other bargaining units.

She said giving all the unions 3 percent pay raises would cost roughly $100 million a year. And increasing health benefits from a 50-50 split to 60-40 split would cost the state $45 million annually for all the unions.

The Council on Revenues upgraded Hawaii’s fiscal forecast this month, but only slightly.

The state can expect to haul in almost $100 million more than expected for the rest of the current year, and a few percent more in each of the next few years, but it’s not exactly a windfall.

Aside from pending union contracts, the state is trying to figure out how to afford billions of dollars in unfunded liabilities for health and retirement benefits while dealing with the uncertain impacts of automatic federal budget cuts.

Several other bargaining units are in some stage of negotiations with the state for their next two-year contracts. The University of Hawaii Professional Assembly, which is in the midst of a six-year contract, is one of the few that the state can already budget for this session.

Fire fighters, who as a 3,100-member union comprise Unit 11, could be the next settlement. They enter arbitration in March. Hawaii Fire Fighters Association President Robert Lee said the union hopes to have an award from the arbitration panel shortly thereafter.

Planning for the Unknown

Lawmakers have a vehicle bill for each bargaining unit in case an agreement is reached before session ends, but this rarely happens.

“All of those bills are purely procedural,” Young said, adding that it is very rare that a settlement is reached before the expiration of the current contract. “Usually what happens is it gets worked out after session, then it’s up to the next Legislature to fund it. There’s a lot of retroactive work.”

The finance director said it would be great if everyone would reach an agreement before the end of the session because it would allow for better planning on all sides, but it just isn’t the reality of how the process works.

“Does it complicate matters? Yes, from a financial planning perspective,” Young said. “If some or all the unions should reach an agreement — depending on what that agreement is — it could disrupt the process in the Legislature. It’s a difficult balance.”

Luke said the tentative agreement between the state and HSTA is a “substantial amount” higher than what the administration and Legislature anticipated.

“In the end, we are going to be looking at this and how we balance the budget in light of a very good tentative agreement with HSTA,” she said.

Luke said there are no significant revenue bills, such as increasing the general excise tax, moving forward this session so it will come down to a balancing of priorities.

Some big initiatives have been proposed, such as a publicly funded early education system that’s not included in the House budget.

State of the Unions

The percent of Hawaii workers who are members of unions has been double the national average for the past decade, making it one of the nation’s top three most unionized states.

Hawaii’s union membership rate was 22 percent in 2012, down from its peak of 30 percent in 1989, according to the Bureau of Labor Statistics.

Union membership rose for the third straight year in 2012 to 116,000 workers. That’s still down from the highest point over the past 10 years, 141,000 members in 2005.

There are 13 collective bargaining units in Hawaii.

HGEA, the state’s largest union with more than 42,000 members, represents seven units. These include scientific employees, educational officers, supervisory workers in blue-collar jobs and technical staff at UH.

UPW has two units that together represent 14,000 public employees. In addition to the nurses, the union’s members include 8,000 non-supervisory employees in blue-collar positions.

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