Detailed explanation of the calculations in our response to the State’s offer on 4/23

The Negotiating Team created a document and spreadsheet to further explain the numbers referred to in the email sent to the membership on Sunday 4/23 regarding the governor’s offer and our response. The button below goes to Google documents shared to your non-@hawaii.edu account and if you have any technical difficulties please follow these 3 steps.

 

 

Executive Director Kristeen Hanselman interviewed on KHON about our 4/23 rejection of the Governor’s offer

The relevant excerpt from this KHON story: More raises likely following teachers’ contract agreement, but how will the state pay for them?

“The bargaining team is willing and able to meet at any time, but we were quite firm that the offer that is on the table does not satisfactorily meet the needs of our members,” said UHPA executive director Kristeen Hanselman.

Hanselman says the latest offer from the state did not even come close to what the members want, so it seems unlikely that any agreement will be reached before the end of the Legislative session.

Hanselman says the state offered two percent for the first year starting in July, followed by another 1.2 percent in January. With no agreement in sight, any pay raises agreed upon will have to be funded by lawmakers at next year’s session.

Watch the segment on YouTube:

Watch Executive Director Kristeen Hanselman on PBS Insights

On April 21, 2017 INSIGHTS ON PBS HAWAI‘I: “Bargaining Power” show aired and you can watch via YouTube. Our Executive Director Kristeen Hanselman was a guest on the show and  made several important points regarding how the faculty bargain in contract negotiations. We highly recommend you watch.

 

How you will be affected by a lump sum payment

Highlights

  • UHPA recently received the written salary proposal from the Governor.
  • The offer provides a 1% one-time lump sum cash bonus of a faculty members’ base salary.
  • The offer will impact faculty members differently based on your employment date.

If you were hired Before July 1, 2012

Faculty Members hired before July 1, 2012 will have ERS deductions taken from the lump sum cash bonus. The lump sum cash bonus will count toward the “high three” years of salary for purposes of calculating retirement benefits.

If you were hired from July 1, 2012 to the present

Faculty Members hired July 1, 2012 to the present shall have no ERS deduction taken from the lump sum cash bonus. The lump sum cash bonus will not count toward the “high five” years of salary for purposes of calculating retirement benefits.

Other Faculty Compensation

There are no increases in minimum annual salaries; lecturer fee schedule; non-credit fee schedule, and overload rates per credit hour.

UHPA’s view on the Governor’s 1% lump

This is an unacceptable proposal from the Governor and continues to devalue the work of faculty members. UHPA’s bargaining team has been firm in its opposition to this paltry sum and has expressed this directly to the Governor’s representative.

FAQs about the Hawaii ERS Unfunded Liability

In recent weeks, we have seen a great deal of information regarding the dramatic increase in the unfunded liability of the Hawaii ERS (Employeesʻ Retirement System).  We understand the concerns and wanted to provide some perspective on this situation to ensure that you, as beneficiaries, understand what happened and how it is being handled.  Please look through the Q&A below and let me know if you have any questions or concerns.

 

  • What is the Hawaii ERS unfunded liability?

    • The ERS unfunded liability is the amount of money, at any given point in time, in which future retirement payments exceed the amount of funds currently available to pay for them.
  • Why did the Hawaii ERS unfunded liability balloon this year by roughly $3 Billion?

    • According to the ERS actuarial valuation report, there were two main factors contributing to the dramatic increase in the unfunded liability:
      • The ERS Board voted to decrease the investment return assumption from 7.50% to 7.00%, which subsequently increased the unfunded liability by $1.7 billion
      • Increasing life expectancy, because people are living longer in retirement, resulted in an increase of $1.2 billion
    • These changes caused the ERS funding ratio to drop from 61.2% funded to 54.7% funded.
  • What are the implications of the increase in the Hawaii ERS unfunded liability?

    • The roughly $3 Billion increase in the unfunded liability increased the funding period from 27 years to 66 years to full funding.  Statutorily, the employer contribution rates must be reviewed for adjustment once the accrued liability exceeds 30 years.  There is legislation attempting to address new contribution rates during the 2017 legislative session.
  • Did the Hawaii ERS Board know the ramifications of decreasing the investment return assumption from 7.50% to 7.00%?

    • Yes.  Wesley Machida, the State Budget & Finance Director, is an Ex Officio voting ERS Board Member.  He confirmed that the ERS Board was apprised of the impact that decreasing the investment return assumption would have on the unfunded liability, but chose to proceed anyway.  Due to a strong trend of lowering return expectations across the industry, the ERS Board has been slowly decreasing the investment return assumption, beginning at 8.00% and slowly moving down to 7.50% over a five year period.  What had previously taken five years to accomplish, was done all at once by the ERS Board, which had negative implications on the unfunded liability.
  • Did the Hawaii ERS Board have to take this approach and decrease the investment return assumption from 7.50% to 7.00%?

    • No, it was not necessary to decrease the investment return assumption in such a dramatic fashion.  The ERS Board was making progress in decreasing the investment return assumption gradually, ensuring that the accrued liability did not exceed thirty years.  That one action changed the entire ERS landscape and is forcing the legislature to make decisions on how to find the funding.
    • In December 2016, CalPERS, the California Public Employeesʻ Retirement System, took a similar action by decreasing their investment return assumption from 7.50% to 7.00%, but decided to spread that decrease over a three year time period.  This is an approach the ERS Board could have taken.
  • What are the ramifications of the action taken by the Hawaii ERS Board?

    • $385 Million is required to meet the funding obligations for the ERS due in large part to the actions by the ERS Board.  Those actions are forcing the legislature to look at yet another area in need of funding, taking away from competing interests, such as pay raises for public employees.
  • Why is the Hawaii ERS in this fiscal dilemma in the first place?

    • Going back to the 1960ʻs, the Legislature raided roughly $1.6 Billion to help make ends meet in other areas.  If those raids were not made, the ERS would likely be above 90% funded.
  • Should you be concerned about your retirement payments?

    • No, not at this time.  It is foolish to believe that the everyone eligible for retirement benefits would seek payment all at once.  As long as the required payments towards your retirement benefits are made, there should be no issues in meeting the retirement obligations.  Think of the ERS unfunded liability as you would your mortgage payments.  As long as you make the necessary monthly payments, there are no issues and you continue to live in your home.

The Governor’s NEW Offer and your shrinking salary

On Monday, January 23, 2017, the UHPA negotiating team met with the employer once again and received a NEW offer from the Governor…a 1% lump sum payment for the first year, a 1% lump sum payment  for the second year, and a flat rate  for EUTF contributions despite increasing healthcare costs.  As a result, most of you will see your paychecks shrink. Once again, the Governor’s representative was unable to answer any questions regarding the impact of the proposal on our members and the University as a whole.

The fiscal situation of the State was presented by the Budget & Finance Director, Wes Machida who shared that at the Council on Revenues January 4, 2017 meeting, it was reported that although the economy remains strong, due to lower than projected tax revenues, the projected general fund forecast decreased from 5.5% to 3.0% for fiscal year 2017.  This projection, combined with the inflated Employee Retirement System (ERS) unfunded liability, caused by a decrease in the assumed rate  of return from 7.5% to 7.0% and an increase in the life expectancy rate in Hawai‘i is forcing the State to “tighten its belt”.

The Hawaii Employer-Union Health Benefits Trust Fund (EUTF) provided the unions with the approved July 1, 2017 rates for the active plans.  As we expected, the majority of the health plans experienced rate increases, even beyond our expectation of 5%.

To illustrate the impact of the Governor’s offer, we have provided some examples below which take into account the 1% lump sum offer and the actual rate increase in EUTF health care premiums for the HMSA 80/20 and HMSA 90/10 health plans, the two plans that are selected by the majority of our members:

Example #1: over $2,000 in salary shrinkage

Chris is a rank 3 nine month faculty member at the minimum salary of $64,896, with family coverage under HMSA’s 80/20 Medical Plan, with vision, and dental coverage.

2016

  • Salary – $64,896
  • Annual Employee EUTF Premium Contribution – $7,779.12

2017

  • Salary – $64,896
  • 1% lump sum – $648.96 ($486.72)*
  • Annual Employee EUTF Premium Contribution – $10,264.80 (increase of $2,596.80)

If Chris chooses to stay with the same health plan, in one year, Chris’ salary will decrease roughly $2,110.08, even after receiving the 1% lump sum (after taxes).

 

Example #2: over $1,500 in salary shrinkage

Jamie is a rank 4 faculty member at the minimum salary, with two party coverage under HMSA’s 90/10 Medical Plan, with vision, and dental coverage.

2016

  • Salary – $75,720
  • Annual EUTF Premium Contribution – $8,903.76

2017

  • Salary – $75,720
  • 1% lump sum – $757.20 ($567.90)*
  • Annual EUTF Premium Contribution – $11,393.68 (increase of $2,489.72)

If Jamie chooses to stay with the same health plan, in one year, Jamie’s salary will decrease roughly $1,732.52, even after receiving the 1% lump sum (after taxes).

* This assumes a tax rate of 25%

Please note that these examples do not include any cost of living adjustments, which are projected at close to 3%, further shrinking your purchasing power.

Governor says no salary increase for faculty

On October 31 UHPA and UH engaged in negotiations on a successor contract. The Governor presented his “apparent” opening offer of a 0% salary increase the first year of the new contract, a 0% increase in the second year, and an EUTF flat rate that will not increase with rising premium costs by the health insurance carriers.This is a significant change from the current practice of the employers’ contribution being established through a % of the total premium cost.

The Governor’s proposal negatively impacts all faculty by diminishing your buying power for at least a two year time period. It devalues the work of faculty members and is a break from the recent past where Governors, both Republican and Democrat, gave wage increases to faculty and other public employees.

The UHPA bargaining team expressed their concerns regarding the failure to support faculty members and the probable consequence of faculty leaving the University and the difficulty in recruiting quality employees. The State is not without appropriate resources to increase the compensation of faculty members.  It is a willful decision by the Governor to deny wage and benefits increases.

The Governor’s representative indicated they had not fully determined how to balance funds and faculty members needed to be patient. UHPA informed the Governors’ representative that they are doing damage to the reputation of the University as a desirable place to work.

The next negotiations session is December 1.

How the Governor’s EUTF offer may affect you

The True Impact of the Governor’s Offer

State law does not allow UHPA or any bargaining unit to negotiate health plan benefits or health plan offerings.  The plan benefits and offerings are determined by the Hawaii Employer-Union Health Benefits Trust Fund (EUTF), which includes 5 representatives from the employer, and 5 representatives from labor, one of which represents the retirees.  UHPA and all bargaining units can only negotiate the amount of health care premiums paid by the employer.   

The Governor’s opening offer of a 0% salary increase for the first year, a 0% increase for the second year, and an EUTF flat rate that will not increase with increasing healthcare costs has dire implications for our faculty members.  The Governor’s representative was unable to answer any questions regarding the impact of the proposal.

The employer currently pays 60% of the health care premiums costs for the plan offerings under the EUTF, you pay 40% of the health care premiums.  The Governor’s offer is changing  from a percentage to a fixed dollar amount at the level it is today, which means that any health care increase will pass directly on to you.   

The economy remains strong, but with Inflation/CPI projections of up to 3% in 2017, this offer will have a negative impact on your purchasing power.  Healthcare inflationary trends, although lower than in the past, are still slightly above 5%, with prescription drug costs running closer to 10%.  The projected CPI with rising healthcare costs, combined with no increase for your EUTF healthcare premiums, compound the impact of no pay increase.

To illustrate the impact of the Governor’s offer, we have provided some examples below which take into account an increased CPI of 3% and an increase of 5% in EUTF healthcare premiums.

Example #1

Chris is a R3 nine month faculty member at the minimum salary of $64,896, with family coverage under HMSA’s 80/20 Medical Plan, with vision, and dental coverage.

2016

  • Salary – $64,896
  • Annual Employee EUTF Premium Contribution – $7,892.16

2017

  • Salary – $64,896
  • Annual Employee EUTF Premium Contribution – $8,818.49 (increase of $926.33)
  • CPI Impact – $1,946.88

In one year, Chris’ salary will be decreasing by $2,873.21 or a decrease of 4.4%, erasing the 4% pay increase received in 2016.  

Example #2

Jamie is a rank 4 faculty member at the minimum salary, with two party coverage under HMSA’s 90/10 Medical Plan, with vision, and dental coverage.  

2016

  • Salary – $75,720
  • Annual EUTF Premium Contribution – $8,990.16

2017

  • Salary – $75,720
  • Annual EUTF Premium Contribution – $9,850.75 (increase of $946.99)
  • CPI Impact – $2,271.60

In one year, Jamie’s salary will be decreasing by $3,218.59, or 4.2%, erasing the 4% pay increase received in 2016.  

UHPA formally issues Demand to Bargain over Letters of Hire

On Thursday, October 27, UHPA sent the below letter via certified mail to President Lassner to address the unresolved issue over letters of hire which we have previously discussed.

Kristeen Hanselman, Executive Director for UHPA, explained the rationale behind this Demand to Bargain:

“UHPA is committed to ensuring that faculty members are not subject to the arbitrary whims of administrators who fail to meet their commitments contained within letters of hire. There has not been a constructive outcome that advances the rights of faculty members to expect their letter of hire be honored. The position of the University is that letters of hire are private contracts with individual employees and  enforceable only through a lawsuit brought by the injured faculty member. The absurdity of this means that a faculty member’s contractual rights to grieve are being challenged by the employer on key issues such as wages.”

Faculty members hired within the last three to five years are especially vulnerable. If you have provisions of your letter of hire not being honored, please contact UHPA.


Copy of letter sent on Thursday, October 27, 2016:

(formatting will vary from original letter due to HTML differences)

David Lassner, President
University of Hawaii System
2444 Dole Street, Bachman 202
Honolulu, HI  96822

Dear President Lassner:

After months of attempting to find a mutually agreed upon resolution that letters of hire would be subject to collective bargaining and enforced through the collective bargaining agreement, University of Hawaii Professional Assembly (UHPA) is submitting this demand to bargain.

UHPA will not remain silent while the University of Hawaii (University) imposes letters of hire and supplemental agreements to individual faculty members that establish private terms and conditions of employment that circumvent collective bargaining with the recognized union representative.  The arguments advanced by the University undermine not only the traditional academic practice, but substantially diminish its credibility and appeal to any faculty member considering employment with the University.  To adhere to a practice that the employer may unilaterally change compensation and conditions of work established by a letter of hire breeds distrust and creates a coercive environment for new faculty members.

UHPA demands the following:

1)  Effective immediately, the University will cease and desist from issuing any letter of hire, purporting to hire any person into bargaining unit 07, that states, contains, infers, promises, cross-references, or alludes to any of the following, unless that letter of hire is countersigned and approved by UHPA in advance:

a. wage rate;
b. compensation package;
c. incentive package;
d. startup package;
e. commitment of resources;
f. timeline to or conditions for tenure;
g. workload, hours; and
h. any other bargainable term or condition of employment, whether inside or outside the letter of hire.

2) Effective immediately, the University will meet and bargain over and present written proposals for language to be promptly incorporated into a Memorandum of Understanding effective for the current academic year and the next Collective Bargaining Agreement that will:

a. recognize and validate, both retroactively and prospectively, the traditional academic hiring procedure, as practiced for decades at the University, through explicit language subjecting all bargainable topics contained in letters of hire to enforcement under the collective bargaining agreement; and/or
b. provide minimum standards of initial employment for all incoming faculty through explicit matrices or charts or language establishing floors for all terms contained in typical letters of hire and as to all disciplines, ranks, and categories of incoming faculty on all campuses; and/or
c. provide a routine by which UHPA can, in the future, review any and all unit 07 letters of hire and effectively reject them, and by which the parties can accept and adopt previously-issued letters of hire.

If item 2) is achieved, item 1) will be unnecessary; but item 1) shall be in effect until item 2) is achieved.

The actions contained in items 1) and 2) must be implemented by October 31, 2016 with notice of such action received by UHPA by the close of business on October 31.  If notice of compliance is not received, UHPA reserves the right to take any and all corrective action without further notice.

Sincerely,

Kristeen Hanselman

Executive Director

cc:  John Morton, VP for Community Colleges

 

Update on contract negotiations

On August 26th UHPA and the University of Hawaii and Governor’s Representatives met in a session to discuss contract negotiations.
Mr. Wesley Machida, Director of Finance for the State of Hawaii, presented the State’s outlook on the budget. It included a discussion of the $1 billion in excess revenue. The budget projection covered up to fiscal year 2021. And emphasized stress on any given budget that included a disaster and deep recession along with increasing reserve funds for retirement and health care for public employees.
The presentation was unsatisfactory because it ignored the needs of public employees in being granted any increase in compensation. The budget projections did not include employee increases in salary nor benefit premiums. Neither the state nor the University of Hawaii was willing to discuss any compensation for public employees.
The legislature will have their responsibilities in responding to this $1 billion surplus and the Governor’s intentions on how it should be expended.
Stay tuned. Much more to come.