Updated 6:50 p.m., 7/12/2016

Hawaii Gov. David Ige dropped the veto hammer Monday on seven bills, including one that would have allowed vacation-rental companies like Airbnb to collect taxes on behalf of the state.

House Bill 1850 would have allowed transient accommodations brokers to register as tax collection agents on behalf of the state, but the governor said this presented an opportunity for “unintended consequences.” 

“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 provide a mechanism to allow us to achieve this goal,” Ige told reporters at a press conference Tuesday.

“However, the use of an intermediary as a tax accommodations broker as the tax collection agent also provided a shield for owners who do not currently comply with county laws or would choose to not comply with county laws,” he said.

Governor David Ige veto presser3. 12 july 2016
Gov. David Ige explains the rationale behind the bills he vetoed, Tuesday, at the Capitol. Cory Lum/Civil Beat

“This veto is a missed opportunity for the state,” Matt Kiessling, who leads short-term rental policy for the Travel Technology Association, said in a statement.

“Short-term rental platforms have grown in popularity because the consumer demand is there — it is indisputable,” he said. “To reject a viable and reasonable public policy solution like this sends a clear message that travel and technology innovators, as well as the travelers that utilize them, are not welcome in Hawaii. We hope the legislature will act to override this veto and the message it sends.”

Ige also vetoed Senate Bill 2077, which would have given special severance payments or pension bonuses to union members who work at three state-run hospitals on Maui and Lanai that are in the process of being privatized by Kaiser Permanente.

Legislative leaders decided at a special session Tuesday to not override the governor’s veto, but instead look at passing a measure that addresses his concerns about it being overly generous as well as in problem with it impacting the tax status of the Employees’ Retirement System.

Lawmakers are set to reconvene Monday and a final vote is expected Wednesday. This also gives the governor time to negotiate a settlement with the United Public Workers union to resolve a lawsuit that has stalled the transition, according to a news release Tuesday from the Legislature.

House Speaker Joe Souki during special session. 12 july 2016
House Speaker Joe Souki, seen here Tuesday during a special session, is among legislative leaders trying to save a bill that offered pension benefits or severance payments for Maui hospital workers. Cory Lum/Civil Beat

The governor put the measure on his intent-to-veto list last month. Ige said at the time that it impacts the financial decision-making that went into handing the hospitals over to the private sector, and could set a bad precedent for similar deals in the future.

The bill affects some 1,400 unionized workers at the Hawaii Health Systems Corporation’s Maui Memorial Medical Center, Kula Hospital and Lanai Community Hospital.

Some of the most powerful members of the Legislature represent Maui, including House Speaker Joe Souki and Sens. Roz Baker and Gil Keith-Agaran.

Hawaii Government Employees Association Executive Director Randy Perreira, who strongly supports the bill, has said the state is breaching its bargaining unit contracts. He’s worked to rally union members to thwart a veto.

Perreira has also said the bill won’t cause a $212 million increase to the unfunded liability for increases in retiree benefits as critics have alleged. He said that figure is based on 1,500 members taking advantage of the benefits when only 180 are eligible, which would amount to $12.4 million.

He didn’t dispute the $18 million increase to the unfunded liability in health-benefit costs. He downplayed it as a “needle in a haystack” when one considers the $14 billion overall shortfall.

State Rep. Matt LoPresti, left, wants better privacy protections for Hawaii citizens, and is working with the ACLU on several measures to do so.
State Rep. Matt LoPresti, left, and Rep. Cindy Evans, center, had worked earlier this year to pass a bill to boost privacy protections for Hawaii citizens but Gov. Ige vetoed the measure Monday. Cory Lum/Civil Beat

Rep. Matt LoPresti was incensed by Ige’s decision to veto House Bill 1739, which would have prohibited employers from accessing and/or obtaining employees’ social media accounts and passwords via coercion or other means.

He declared “Spy On Your Employees Day” in Hawaii on the House floor.

LoPresti referenced an email chain between himself and administration officials from April as the bill was moving through regular session that shows assurances that the legislation’s language was solid.

In the emails, Bill Kunstman of the Department of Labor and Industrial Relations tells LoPresti that it would be “nice” if the bill had language providing for a private right of action to enforce its provisions, but that this was something lawmakers could revisit next year.

In Ige’s message to lawmakers explaining why he vetoed the bill, the governor says it’s because it lacks an enforcement provision and fails to provide any funding for its implementation.

Here’s a complete list of bills Ige vetoed, with descriptions and rationale provided by the governor’s office:

  • HB1739, relating to employment
    • This measure prohibits employers from accessing and/or obtaining employees’ social media accounts and passwords via coercion or other means.
    • Rationale: In reviewing testimony on this measure, it remains unclear if this practice is occurring in workplaces at a level that requires state intervention at this time. Also, the Department of Labor and Industrial Relations was not provided with any additional financial resources to undertake enforcement. DLIR will need both time and resources to establish an enforcement mechanism.
  • HB1747, relating to motor vehicles
    • This measure authorizes police officers to request towing of motor vehicles if a driver is arrested for driving under the influence (DUI).
    • Rationale: Current enforcement does not allow drivers to operate their vehicles anyway, once they’ve been arrested or cited for DUI. Also, there are other motor vehicle violations where police should be authorized to request towing. We suggest that this bill be expanded to include the other violations for consistency across the state.
  • HB1850, relating to taxation
    • The intent of this measure is to allow transient accommodations brokers to register as tax collection agents with the state. This would allow companies such as Airbnb to collect and remit general excise and transient accommodations taxes on behalf of the hosts and visitors who use their services.
    • Rationale: We believe there could be unintended consequences of this proposed measure. Vacation rentals fall under the city’s jurisdiction. In order for this bill to work as intended, counties must more actively enforce their own laws on vacation rentals before they claim additional tax revenues.
  • HB2016, relating to public employees
    • This measure requires the Employees’ Retirement System to transfer contributions by retirees and beneficiaries to the Hawaii Employer-Union Benefits Trust Fund for health insurance payments.
    • Rationale: While we understand the practical reasons for this bill, the ERS would be required to comply with the Health Insurance Portability and Accountability Act, which protects health insurance information. Additionally, the ERS would need sufficient time and resources to make modifications to information technology sytems to process such payments.
  • HB2277, relating to the King Kamehameha Celebration Commission
    • The intent of this measure is to clarify the membership and mission of the King  Kamehameha Celebration Commission.
    • Rationale: Unfortunately, the amendments proposed in this measure create an ambiguity in the law on how the commission will make decisions. The specific number of commission members was deleted from the bill. Consequently, the commission will not be able to determine a quorum for the purpose of conducting business.
  • SB2077, relating to separation benefits
    • This measure offers benefits to Hawaii Health Systems Corporation employees facing position abolishment, reduction-in-force or workforce restructuring.
    • Rationale: This measure is still undergoing fiscal, legal, and policy review at this time.
  • SB3102, relating to the Department of Business, Economic Development and Tourism
    • This measure mandates that DBEDT develop — and state agencies enter into — inter-agency agreements with the department rather than memoranda of agreements or memoranda of understanding. This measure also establishes a state grant program to fund business development  for qualified businesses.
    • Rationale: It is not clear from the testimony why state agency inter-departmental agreements are more efficient or effective in directing resource allocation.

Here’s a look at two bills that Ige had intended to veto, along with his initial explanations as to why, but that ultimately survived the cut. He ended up signing House Bill 1370 and letting Senate Bill 2542 become law without his signature.

  • HB1370, relating to divorce
    • This measure authorizes the Employees’ Retirement System to make direct payments to a divorced spouse of an ERS member or retired ERS member upon order of the court.
    • Rationale: The ERS must modify its information technology systems before direct payments can be made. It will need state resources to do so. The ERS trust fund cannot be used to pay for its work.
  • SB2542, relating to repair and maintenance
    • This measure establishes a full funding policy and budgetary procedures for routine repair and maintenance of state-owned buildings, including judiciary-owned facilities.
    • Rationale: This measure is still undergoing fiscal, legal, and policy review at this time. 

Ige had already vetoed one other bill, a measure that would have let terminally ill patients try investigational drugs before the federal Food and Drug Administration approved them.

The Legislature approved Senate Bill 2181 in April, but the governor decided to make it his first veto of the year in May.

“While admirably seeking to increase access to potentially life-saving drugs, this measure unreasonably compromises the consumer protections provided by the FDA’s expanded access program,” Ige said in a statement explaining his objections.

Check out Civil Beat’s data visualization of the vetoes Ige has made in his first two years in office compared to those of former Govs. Neil Abercrombie and Linda Lingle here.

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