HILO — The County Council’s attempts to add more transparency and exert more control over the annual operating budget were mostly blocked Friday by East Hawaii council members, who said the budget is the purview of the administration.
A proposed amendment to the Hawaii County Charter allowing the council to modify the operating budget midyear failed on a 5-2 vote, with a minimum of six votes required. Hilo Councilman Donald Ikeda and Puna Councilman Fred Blas were the dissenting voters, and Hilo Councilmen Dennis Onishi and J Yoshimoto were absent.
A proposed charter amendment requiring all new county positions be approved by council resolution before they are put in the budget also failed by a 5-2 vote. Voting no were Ikeda and Yoshimoto, with Onishi and Blas absent.
A bill embedding a payment mechanism into the annual budget requiring the county to pay at least half of its annual requirement into the GASB 45 retirement fund passed first reading on a 5-2 vote, enough to move it forward but not enough to override what is almost certain to be a veto after it hits Mayor Billy Kenoi’s desk. Voting no were Ikeda and Yoshimoto, with Onishi and Blas absent.
The council was continuing a meeting that ran into overtime Wednesday.
The overarching debate on the three bills is how the County Council, required by the charter to be the policy-making branch of government, can set budgetary policy when it has no authority over the budget except at the very beginning of the budget year, which begins July 1 each year. At that point it has the authority to amend the annual spending plan submitted by the mayor, as long as it has the six votes to override a veto.
“We cannot be the policy-making body of this county if we don’t have the tools to make that policy,” said Kohala Councilman Pete Hoffmann, sponsor of the charter amendment that would allow the council to amend the budget during the year.
The annual budget is of particular concern to West Hawaii, where just three of the county’s nine council districts account for more than two-thirds of all property taxes collected. The county administration, where employees account for more than 60 percent of the operating budget, is primarily centered in East Hawaii.
“This council has chosen to be proactive; this council has chosen not to be a rubber-stamp council,” said Council Chairman Dominic Yagong of Hamakua, who sponsored the other two bills.
County administrators and Corporation Counsel opposed the bills, saying they tread dangerously close to violating the separation of powers doctrine.
The council is supposed to set policy, and the executive branch is supposed to implement the policy, under the charter.
A 23-page memo supporting Corporation Counsel’s stance on one of the bills was released to the public Friday, after council members waived their attorney-client privilege based on a public records request from West Hawaii Today.
Finance Director Nancy Crawford also cautioned against the bills, especially Hoffmann’s bill that would allow voters to decide if the council can amend the operating budget and Yagong’s bill requiring automatic GASB 45 payments. She said bond rating agencies and investors rely on stability and predictability, and adding uncertainty into the process could hurt the county’s bond rating.
Yoshimoto agreed.
“The process we have now is clear — it’s understandable and it’s predictable,” Yoshimoto said.
Coincidentally, Fitch ratings on Friday sent out a news release affirming the county’s AA- rating, saying the outlook is stable for the county’s $276.7 million in general obligation bonds because of the county’s sound financial position, low debt burden and “strong management actions including spending cuts and tax rate increases.”
The Fitch news release, however, notes that the county’s unfunded liability in GASB 45 remains “sizeable” at $332.7 million.
Kenoi last year deferred a $20 million payment into the GASB 45 fund, and this year plans to defer another $14 million. He has continued to emphasize that the county has already put $60 million into the fund, which is an advance fund to care for retirees’ benefits in the future. Current retiree costs are being paid, Kenoi said.
Kenoi last year vetoed a budget that took money from programs to put toward the retiree benefits fund. This year, Yagong threw in the towel on his budget amendments, saying he knew he didn’t have the six votes to override a veto.
Instead, he took another tack.
Bill 262 bill amends county code so that any fund balance of more than $5 million will automatically be applied to the GASB 45 account, if the administration hasn’t made a payment of at least half of the actuary’s recommended payment into the account. The fund balance at the end of the 2011-2012 fiscal year is about $14 million, with about $18 million expected to be left over by June 30, 2013, according to Fitch.
“If we have excess funds, we should make payments,” Yagong said. “Instead of stealing from the future, we should do what we can today.”
Hilo testifier Tim Rees jokingly called Yagong an “honorary Irishman,” always staying two steps ahead of his opposition. He called the GASB bill “politically brilliant.”
“The more cynical might accuse you of shamelessly going after the more intelligent sector of the public union vote, those who don’t vote exactly as their union reps tell them,” Rees said.
