Gov. David Ige announced Wednesday he is imposing two-day-per-month furloughs for unionized state workers starting Jan. 1 to balance the budget, which amounts to a pay cut of slightly more than 9%.

In a letter to state workers on Wednesday, Ige said that “I have directed State agencies to prepare to furlough most state employees for two days each month starting January 1, 2021. I and my cabinet members are volunteering to decrease our pay equal to the amount of furlough savings. If the furlough is effective for a year, this will save the state general fund about $300 million.”

However, the public worker unions contend that any furloughs must be negotiated, and the unions dispute Ige’s claim that the state needs to immediately impose furloughs, said Randy Perreira, executive director of the Hawaii Government Employees Association. HGEA is the state’s largest union with about 39,000 active and retiree members.

Governor David Ige during press conference where he mentioned measures he was going to veto. August 31, 2020
Gov. David Ige announced Wednesday that most state workers will be furloughed twice a month beginning Jan. 1. Cory Lum/Civil Beat/2020

Hawaii State Teachers Association President Corey Rosenlee said the HSTA plans to mount a legal challenge against planned furloughs for DOE teachers.

“We are in the middle of a four-year contract and collective bargaining is a right given in Hawaii’s state constitution,” he said. “If at any time the governor can change the contract, why have a contract at all?”

Ige said his furlough instructions to state department heads will affect 10,160 workers in the executive branch, while about 4,600 other employees would not be subject to furlough. The furloughs amount to a 9.2% pay cut, which will show up in employees’ checks on Jan. 20.

Workers at state agencies that operate 24-hours a day, every day of the year — such as nurses, corrections officers and state firefighters — would be exempt from the furlough plan.

Also exempt would be staffers in the Department of Transportation and the Department of Commerce and Consumer Affairs, whose salaries are financed from special funds that are separate from the state general treasury.

Ige told reporters Wednesday that there will be additional furloughs in the University of Hawaii and Department of Education systems, but said details of those plans will be released later by UH and BOE.

That apparently caught DOE Superintendent Christina Kishimoto by surprise. In an email sent to DOE employees after Ige’s announcement, Kishimoto said the department does not have details of the impact to DOE employees because the governor’s Office of Collective Bargaining “is the lead on these active negotiations.”

“We are anxious to get these details to you as soon as possible. We know these are challenging and uncertain times, and our employees need to understand the impact these labor cuts will have,” Kishimoto wrote in her email.

DOE communications director Nanea Kalani said approximately 22,000 salaried general funded DOE employees would be subject to furloughs but it is too soon to announce any time frame because of pending negotiations with the unions. Teachers account for about 13,000 of those employees.

University of Hawaii President David Lassner announced in an online message that Ige provided the UH flexibility to implement the equivalent two furlough days a month “in ways that accommodate our educational schedules and needs. Details on how the furloughs will be implemented within UH are still forthcoming and will be provided as soon as they are finalized.”

“This is a painful message to share, especially given your amazing dedication and hard work through these difficult times while many of you are also strained and stressed by what COVID-19 is doing to you and your ohana,” Lassner wrote. “As Gov. Ige noted, the harsher alternative to furloughs is layoffs, which we have all seen devastate employees in the private sector throughout Hawaii.”

Dealing With A Large Budget Shortfall

Ige said he is imposing the furloughs as part of a larger plan to cope with a budget shortfall of $1.4 billion per year for each of the next four years. “I take this step with a heavy heart, knowing that it will result in hardship for you and your family,” Ige said in his statement.

“I will evaluate the need to continue the furlough on an ongoing basis so we can adjust to economic influences including a more quickly than projected economic recovery and increased tax revenue. The furlough will be rescinded as soon as it is no longer needed,” Ige wrote.

Ige first proposed the idea of furloughs for public workers in April, when he presented union leaders with a furlough plan that would have amounted to the equivalent of 20% pay cuts for many public employees.

The public worker unions strongly opposed that idea, and Ige has repeatedly delayed implementing any furlough plan. However, he warned that public worker pay cuts are inevitable unless the state receives additional federal aid.

For Lease signs along vacant buildings along Saratoga Road in the heart of Waikiki during COVID-19 pandemic. August 12, 2020
For Lease signs in the heart of Waikiki in August. The loss of tourism for so many months during the pandemic has had a major impact on tax revenue. Cory Lum/Civil Beat/2020

Hawaii has received more than $10 billion in federal CARES Act funds to help cope with the pandemic, but that money cannot be used to cover the state’s budget shortfall.

The Ige administration has instructed state departments to make plans for budget cuts of 10%, 15% or 20% from their spending, depending on the department, and informed the public worker unions the target is to cut $600 million from next year’s operating budget.

In a disclosure to bond investors last month, the administration announced that annual state tax collections abruptly dropped from an all-time high of $7.14 billion down to $6.69 billion last fiscal year. Tax collections are expected to slide even further to about $5.96 billion this fiscal year, which ends June 30.

Tax collections are projected to rebound to nearly $6.5 billion in the fiscal year that begins July 1, but nobody can be certain that will happen.

How the Hawaii economy will actually fare next year depends on an array of unknowns such as COVID-19 infection rates on the mainland, the approval and rollout of a vaccine, the response to the crisis by Congress and President-elect Joe Biden, and the willingness of the public to travel.

Ige has already tapped into the state’s “rainy day” budget reserve fund, and sold nearly $750 million in short-term general obligation bonds in October to borrow cash to help finance state government operations in the near term.

He also used his emergency powers to defer a $388 million payment the state was supposed to make this year to pay for future health care obligations for public workers. Looking ahead, Ige plans to ask lawmakers for permission to defer four more years of similar payments for future health care obligations, for a total savings of $1.85 billion.

“I have taken every action possible to avoid furloughs, because I know how hard this will be for employees and their families,” Ige told reporters. “To those who say we can wait to implement these furloughs, I say any new federal stimulus funding we may receive will not make up for the massive budget shortfall we are presented with.”

Ige told reporters the state would have to lay off 4,000 public workers to achieve the same savings as it will realize from furloughs, and said he has the authority to unilaterally impose furloughs. “Certainly we would hope that people agree that implementing furloughs would be better than eliminating and laying off more than 4,000 employees.”

Even so, Ige said his proposed new two-year budget that will be made public later this month will include “some reductions of positions that might involve some layoffs, I don’t remember the full details.”

HGEA’s Perreira countered that the state budgeted enough money to cover the cost of operations through the end of the current fiscal year on June 30, and the public worker unions cited economic research released this spring that found that every $1 reduction in state employees’ salaries results in a $1.50 reduction in overall economic activity in the islands.

A joint news release Wednesday from the HSTA, HGEA, the United Public Workers union, the American  Federation of State, County and Municipal Employees and University of Hawaii Professional Assembly called Ige’s plan to furlough state employees “drastic and rash” and “especially baffling” in light of a potential new stimulus relief package from Congress.

“These drastic cuts will carry devastating, long-lasting consequences, not only for state workers and their families,” the unions wrote in their statement. “Mass pay cuts would throttle a key pillar of Hawaii’s economy — government — at a time when the tourism industry is still extremely weak and construction is slowing.”

“It shouldn’t be just up to Governor Ige,” Rosenlee said of the furloughs. “Let the Hawaii state Legislature look for ways to avoid the impact as well.”

This is a developing story. Check back later for updates. 

Civil Beat Reporter Suevon Lee contributed to this report.

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