Despite threats of higher property taxes, Gov. Neil Abercrombie signed a bill into law today that will fundamentally change the way Hawaii finances the post-employment benefits for thousands of public workers.

The new policy is expected to end the long-standing pay-as-you-go approach that got the state in such a bind. Hawaii’s credit rating has suffered as a result of the enormous amount of outstanding debt.

House Bill 546 forces the state and all four counties — which owe roughly $3 billion of the $16 billion unfunded liabilities tab — to pay their full contributions to the Employer-Union Trust Fund. If the counties don’t, the state can take their share of the hotel tax money.

Honolulu and other county officials slammed the bill before lawmakers approved it this past session. They said it strips their flexibility in how they spend taxpayer dollars and could force them to raise property taxes as a result.

The governor signed the bill during a ceremony at his office this afternoon, surrounded by his budget directors, state officials and a few choice lawmakers. Interestingly, Rep. Romy Cachola was at Abercrombie’s side, even though the Legislature killed the captive insurance bill Cachola had been pushing to supposedly deal with the same problem. 

Also notable from the event was Finance Director Kalbert Young describing the new policy as a “game-changer.” This is interesting not because it’s untrue, but because it happens to be the same way Rep. Marcus Oshiro, former Finance chair, described the bill in an interview with Civil Beat. (As an aside, Oshiro was not pictured at the signing ceremony even though he introduced the bill.)

At any rate, the bill should, as Young said, send a clear message to financial institutions that Hawaii is serious about building its financial capabilities to meet its obligations.

Read past Civil Beat coverage of the pension problem here. 

— Nathan Eagle

(Photo courtesy of Governor’s Office. Hawaii Finance Director Kalbert Young and Gov. Neil Abercrombie, July 3, 2013.)