Gov. David Ige plans to impose furloughs for members of “most bargaining units” starting in November and borrow $750 million to help the state navigate the budget crisis triggered by the pandemic, according to the administration’s new financial plan.
The document does not provide specifics, but it notes that the spending plan incorporates “estimated labor cost savings from an approximately 10% furlough from fiscal years 2021 to 2024.” That generally translates to one unpaid day off every two weeks.
The outline of Ige’s latest spending plan also defers hundreds of millions of dollars in payments the state was scheduled to make to the Employer-Union Health Benefits Trust fund this year.
The state will pay the health insurance premiums for public worker and retiree coverage, but does not plan to set aside $388 million it was supposed to bank this year to cover the cost of future public worker health benefits, according to the new budget plan.
The new financial plan is an attempt to cope with a budget crisis triggered by the collapse in state tax collections as the tourism industry and other segments of the economy shut down last spring. The administration must close a budget shortfall that was estimated to total $2.3 billion for last year and the current fiscal year that began July 1.
Ige has said very little publicly about how he plans to navigate the fiscal crisis, but new details were included in an official statement the administration provided in support of a $995 million bond issuance earlier this month.
The governor has said he hopes the federal government will step in to provide cash support to state and local governments so that pay cuts or furloughs won’t be necessary, but that hasn’t happened yet. Negotiations between Republicans and Democrats over a new COVID-19 relief package have stalled in Congress.
The furloughs are an extremely sensitive subject, particularly in an election year. Ige told representatives of the politically powerful state public worker unions in April that he planned to impose public worker pay cuts or furloughs, but later walked back that proposal by announcing there was no “immediate” need for pay reductions.
There has been little public discussion about furloughs since then, and state lawmakers went so far as to appropriate more than $200 million in general and special funds in the midst of the pandemic this year to fund raises for tens of thousands of public workers.
Ige’s plan for furloughs that would begin in November comes to light just a week after the primary election, and suggests the state will claw back some of the money that was appropriated for raises. Ige is in the middle of his second and final term as governor but the entire 51-member House and roughly half the Senate are up for election.
Ige was unavailable Monday to discuss the specifics of the furlough plan or explain which public worker unions would be affected, but issued a statement through a spokeswoman noting that “the state is facing a $2.3 billion revenue shortfall, and we continue to look at all options for managing the significant gap. Reducing labor expenses remains the option of last resort.”
Representatives of the Hawaii State Teachers Association and the Hawaii Government Employees Association did not immediately respond to requests for comment Monday.
Lawmakers authorized the Ige administration to spend up to $183 million from the Hawaii Hurricane Relief Fund to help balance the budget, but the outline of the financial plan explains that Ige does not plan to spend that money yet.
“However, this is subject to change, and use of the funds in the HHRF may be required in the future,” according to the plan.
Senate Ways and Means Chairman Donovan Dela Cruz said it is “probably wise” for Ige to assume that there will be no major federal aid forthcoming to bail out state and local governments.
“It’s better to be more conservative than to assume it’s coming, and (then) it doesn’t,” he said.
However, Dela Cruz said across-the-board cuts such as large-scale furloughs may limit the state’s ability to address Hawaii’s social service needs in the months ahead.
“You don’t want human services, child protective services, senior services, health care services — that’s not where you want to cut,” he said. “I think the stress is going to be extremely high, it already is. … That’s why it has to be strategic cuts.”
“I still think we should be pushing economic development to supplant tourism dollars,” Dela Cruz said, including development of the agriculture, technology and health care industries.
“It’s not the fact that it’s going to help us now, but we don’t know how long this is going to last, and we’ve got to create revenue somehow,” Dela Cruz said.
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