STAND. COM. REP. NO. 2941

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 2458
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred H.B. No. 2458 entitled: 

     "A BILL FOR AN ACT RELATING TO THE EMPLOYEES' RETIREMENT
     SYSTEM,"

begs leave to report as follows:

     The purpose of this measure is to reduce the State's and
counties' employer contributions to the Employees' Retirement
System (ERS) by extending the payment schedule for the actuarial
present value cost of the early retirement incentive bonus from
five years to nineteen years beginning July 1, 1997.

     The Department of Budget and Finance testified in support of
the measure.  The City and County of Honolulu, and the Employees'
Retirement System testified in opposition to the measure.

     Your Committee finds that in 1994, in order to reduce the
payroll costs incurred by the State and county governments, the
Legislature enacted Act 212, Session Laws of Hawaii 1994.  Act
212 provided an early retirement incentive for public employees
with twenty-five or more years of credited service.  Act 212 also
required the State and counties to liquidate the additional
actuarial cost of providing the early retirement incentives over
a five year period.  This measure would extend that liquidation
timeframe from five to nineteen years.

     Your Committee believes that extending the timeframe in
which the State and the counties may liquidate the additional

 
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                                   STAND. COM. REP. NO. 2941
                                   Page 2


actuarial cost of providing the early retirement incentives would
enable the State to reallocate its limited resources to higher
priority cost items in the near term without significantly
impacting the solvency of the Employees' Retirement System.
However, at the same time it would increase the cost of the
overall retirement incentive program to both the State and the
counties because additional interest payments would be incurred.

     Your Committee has amended the measure by making the
effective date of the measure defective to ensure further
discussion on the issue and to consider deferring any action
until the total cost of extending the timeframe for liquidation
has been determined.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of H.B. No. 2458, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as H.B.
No. 2458, S.D. 1, and be referred to the Committee on Ways and
Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
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