Historic Privatization, Bargaining Reform Passes Legislature

The regular 60-day session of the 20th State Legislature ended on Thursday, May 3 and while there are few bright spots for a meaningful short term improvement of the business climate, it was a historic session. The entire session focused on public union pay and benefit raises and was consumed by a 3-week teachers strike, but despite this, major structural reforms were enacted in collective bargaining and privatization which will provide long term reform for business and the taxpayers. Major bills were passed over objections of public union bosses

Small Business Hawaii's Legislative Coalition rated the 2001 Session an overall "B" the highest rating ever given a Session previously. It is recognition of the importance of legislation passed and the first defeat handed the public employee unions in recent memory.

However, several bills passed will further increase the cost of doing business including the massive $14 billion budget and other spending bills, a minimum wage increase and other fees. Much needed regulatory reform was missing in action-again.

Tax breaks were enacted for specific industries-high technology for the third consecutive year-Aloha and Hawaiian Airlines (but not for local helicopter companies), and others.

The biggest disappointment for business was the last-minute defeat in the Democrat-controlled conference committee (Co-chaired by Rep. Lei Ahu Isa and Sen. Bob Nakata) of the Professional Employment Organization (PEO) bill, (HB 502), which will result in application of the 4% state Gross Income Tax on all aspects of business payroll and employee services administered by PEOs. This tax will likely be passed along to small business clients, thus raising costs even further.

A bill that did deserve to be defeated and failed, HB 1130, would have made the Unemployment Compensation additional employment and training fund tax (scheduled to sunset in 2003) permanent. Businesses that were receiving tax and training benefits at the expense of other business taxpayers, lobbied for the permanency in league with the State Department of Labor & Industrial Relations. Expect them to be back next Session to again put off the demise of this extra tax.

Two other bad bills that were defeated were SB 1576 which would have eliminated personal income tax rate reductions won just two years ago, and HB 1589 which would have added a $7.25 per day new tax on each room bought by a tour wholesaler.

The Governor had signed more than 100 bills into law by mid-May and has until July to sign or veto those remaining measures; most will likely be signed or become law without his signature. About 50 vetoes total are expected.

The privatization bill, a direct response to the 1997 Hawaii Supreme Court ruling in Konno v. County of Hawaii, which held that neither the state nor the four counties could engage in privatization without permission of the unions since there was no constitutional or statutory authorization to do so, provided that authorization in Senate Bill 1096, CD1 (Act 90). Specifically, the bill clarifies the application of public employment laws. The bill:

1) Addresses and resolved the uncertainty raised by the Hawaii Supreme Court with regard to the government's ability to rely on the private sector for services government needs or is required to provide, by establishing a new chapter on privatization in the HRS that sunsets on June 30, 2005.

2) Provides for ways to minimize the adverse effects on public workers displaced by privatization.

3) Restored the right to strike for all collective bargaining units except firefighters and police officers; and finally,

4) Repealed references to essential employees and essential positions.

SBH has been a champion of privatization for nearly 20 years but has said it is not a panacea or answer to all government problems; merely a financial tool and option that government should have. Further, SBH does not support transferring a government monopoly to a private monopoly; SBH wants full and open competition in the delivery of government services.

Another major bill SB 1044 (Act 88), passed by a single 13-12 Senate vote, puts the brakes on spiraling public union health costs by placing all public employees in a unified medical plan administered by the state. It ends the practice of "porting" a 60% state subsidy of medical premium costs to the unions. The Legislative Auditor called for the single plan and reported nearly $90 million in "ported" funds to the unions were unaccounted for and that the unions refused to cooperate with her office or the state.

The $14 billion biennium budget (HB 200) represents a 12% increase in 2002 and 17% increase in 2003 (over 2001). Other major spending includes $300 million for union salary hikes and $400 million for the federal court mandated Felix special education expenditures and $700 million in G.O. bonds.

Click Here To See Ratings of 2001 Legislators

Senator Hanabusa to Speak at SBH Sunrise

Democratic State Senator Colleen Hanabusa, Waianae Coast legislator, senate vice president, prominent labor attorney and probable candidate for the U.S. Congress, will be the keynote speaker at the June monthly SBH member Sunrise Networking breakfast. The event which is open to all members, their guests, and the public, will be Thursday, June 28, 7 - 8:30 am in the Liberty House Pineapple Room, Ala Moana Shopping Center.

There's easy access and plenty of free parking on the 4th floor of Ala Moana. The popular SBH networking Forums are held the last Thursday of each month. Senator Hanabusa will speak on "Privatization and Structural Changes During the 2001 Legislature." She is lively and informative. You'll enjoy her. Advance registration is a must!

The May 31 speaker was Hawaii Medical Association executive director, Stephanie Alveiro who discussed, "Physicians: Healers and Small Business Owners."

Emphasis at Sunrise is networking. Cost is $15 for SBH members and their guests who pay in advance; $20 for non-members and at the door, provided space is available.

'Business Friendly' Mayor Rams Vision
Down The Throat Of Small Business

By Malia Zimmerman
Managing Editor, Small Business News

Mayor Jeremy Harris has a vision for Oahu and concocted three years ago the idea for "visioning teams," to implement his "vision." These are 19 "community" groups given $2 million each; many which are headed by people who work for the mayor or campaigned for him. Those who win the visioning team consulting or construction contracts, are often former cabinet members or campaign contributors to the Mayor's political campaign. Visioning team members meet under the guise that they are actually thinking for themselves and coming up with their own projects. Well, maybe the concept is working in a community or two, and maybe one or two groups had an original thought. But more often than not the visioning team members are like wild-west bandits with $2 million each, $38 million a year, $114 million to date, with virtually no oversight and no consequences if the money is spent unwisely. Or for that matter, if the money is spent on friends through the allocation of non-bid contracts.

Even more questionable, these visioning teams haven't had to share their apparitions with the public because they have not been mandated to follow Hawaii's sunshine law. Donna Mercado Kim, former Councilwoman elected to the State Senate in 2000, and several other legislators in the House and Senate, recognized the lack of openness in the visioning process, and wanted to do something about it. Kim introduced SB 1487, and State Rep. Eric Hamakawa introduced a companion bill, HB 382, requiring the visioning process be open to the same sunshine law requirements as other government agencies. These bills were strenuously fought by the Mayor, his administrators, and members of the City's Corporation Counsel, and subsequently did not pass this year. The bills will be back, as they are still alive, for the 2002 Session.

The State Office of Information Practices, at legislators' requests, investigated the visioning team process and subsequently issued an advisory opinion that visioning teams should follow the sunshine law. However, there is a question of enforcement, because it is an advisory opinion only.

This cover-up of where the funds are going is so bold that some visioning team members have in the past refused to share financial information with the very city council members who authorized the visioning team funds. You'd think the council would put a stop to the lack of accountability, and hold the mayor and his apparition advocates accountable, but they haven't in three years. Guess they are too consumed with their own political problems, like campaign spending violations, hit and run incidents, illegally-held weddings and other alleged criminal behavior, much yet to be uncovered. Not to mention the non-criminal behavior incidents, like misrepresenting educational achievements and college degrees.

So what if these indifferent clowns flush our $114 million down the city sewer without a second thought? What does that have to do with the average Hawaii family or small business? Well hold on to your wallets with both hands, because the funds come from you - the TAXPAYER. And hold on to your property, because if the visioning team, aka Harris Administration, wants your property, you'd better be ready to give it up with or without fair compensation.

Take Crazy Shirts, a once vibrant booming Hawaii-based T-shirt retailer and manufacturer, now reduced to groveling before its bank, an arrogant self-consumed mayor, and the mayor's Aiea visioning team to stay afloat. It all started when Crazy Shirts bought the 100-year old Aiea Sugar Mill and surrounding 19 acres of property for $19 million in 1994 and subsequently invested $3 million more in hopes of renovating the mill and building a small retail center. The project became too costly because of unexpected environmental cleanup. In 1996, the owner decided to sell the property. The City offered $8 million which the company rejected, saying it was much too low. Crazy Shirts then parceled off the property, selling it to a number of small industrial businesses that then in turn invested up to $50,000 each in design and fees, mortgage costs for their land and office space. The move was approved by the City Council.

But Harris was determined to get the property, priced fairly or not, or sold off but not to small business. "It was our plan all along to acquire the Crazy Shirts property for community use," Harris admitted at the May 2001 Aiea-Pearl City Business Association meeting. "Crazy Shirts knew that and shouldn't have sold it off to begin with," Harris said.

So, Harris bullied his way through the process, putting his porky foot down in the midst of the transaction to the small businesses. He had the help of Aiea visioning team project leader, Gary Okino, who was an employee of Harris in the City's Planning and Permitting Department, and today is a Councilman, thanks in part to help from Harris' cronies. Okino's visioning committee decided to take the land forcibly from Crazy Shirts at a much lower price than Crazy Shirts was willing to accept by condemning it.

Mayor Jeremy Harris defends the Aiea team's plan for land condemnation, saying that even before the visioning process began, the City was negotiating to buy the property. Unfortunately, he says, negotiations had "hit a stone wall," and the City was unable to make the purchase because it could not even come up with the $8 million it originally offered.

But Crazy Shirts' board members say the City should not have approved building permits for the land if this were the case. Fortunately for Crazy Shirts, the Bank of Hawaii took over the property, allowing the retailer to walk away from a $38 million loan. What is to become of the small businesses that invested around $50,000 each in land development and purchase is still unsure, as some of them are considering legal action. But it is likely their money will also be flushed down the City sewer. Criticize the mayor about his visioning teams or the way he treats businesses and be prepared for him to attack back.

"Well we could go back to old government and let the government decide what happens in your community, rather than letting the people decide. Do you want that?" Harris asks his audience agitatedly.

Well, Mr. Mayor who wants to be Governor in 2002, we ARE doing things the old fashion way, the old boys way, just with a lemon twist to alter slightly the appearance and smell of kukai.

Malia Zimmerman is a free-lance writer based in Hawaii and a co-founder of the Grassroot Institute of Hawaii. She is also Managing Editor for Small Business News. This article originally appeared on The Wall Street Journal website, OpinionJournal.com. Copyright © 2001 Dow Jones & Company, Inc. All Rights Reserved.

Reapportionment Commission Members Named

Daron Akiona, Rick Clifton, Jill Frierson, Lori Hoo, Lynn Kinney, Kenny Lum, Harold Matsumoto and David Rae have been named by the leaders of the State Legislature to serve on the 2001 Reapportionment Commission.

Hoo and Matsumoto were appointed by the House Majority; Kinney and Rae by the Senate Majority.

Clifton and Lum were appointed by the Senate Minority; Akiona and Frierson by the House Minority.

The eight appointees have 30 days - or until May 31, 2001 - to select a ninth member to serve as the reapportionment commission's chair. Once a chair is selected, the commission is expected to develop and adopt a final reapportionment plan within 150 days.

Friends of the Library To Hold Book Sale

The Friends of the Library are in preparation for their 54th Annual Book Sale, which will be held this year from July 7 - 14th at McKinley High School Cafeteria. The Friends of the Library of Hawaii help to recycle books to readers of all ages in an effort to promote the joys of reading and life long learning.

The Friends of the Library of Hawaii is a tax exempt, nonprofit organization whose purpose is to promote and support public libraries. As always, the proceeds of our sale go to support public libraries. As a result of last year's sale, over $108,900 has been distributed to our 50 public libraries to fund equipment, books and programs. Since 1952, the Friends of the Library of Hawaii have distributed over five million dollars to the Hawaii State Public Library System.

Our annual used book sale is the largest of its kind in the United States. Originally founded in 1879, ours is one of the oldest and most active Friends of the Library groups in the country. In 2001 we are celebrating 122 years of service to the people of Hawaii. Volunteers ae always welcome! This year is our 54th annual sale, and in this time of fiscal constraints for state agencies, this tradition of support is even more important.

For more information call 536-4174.