Executive Summary

Public pensions and other post-employment benefits in Hawaiʻi are taking up an ever-increasing portion of the state budget.

Public workers and retirees make up 11 percent of the adult population of Hawaiʻi. Nearly one out of every five adults aged 65 and older is a public worker retiree. Hawaiʻi’s state and county governments employ more than 66,000 people who, if they meet eligibility requirements, will eventually receive pension and “other post-employment benefits” (OPEB) such as health insurance coverage in retirement.

Over the years, Hawaiʻi’s public retirement liabilities have grown as current and promised benefits have outpaced contributions and asset growth to cover them. These retirement costs are sometimes referred to as “unfunded liabilities,” which means that our obligations exceed the funds currently available to pay them.

In July 2018, the Hawaiʻi Budget & Policy Center released its “Hawaiʻi Budget Primer,” which pointed out that obligated, or “fixed,” costs are consuming an ever greater portion of the state general fund. These costs are made up of pension and other post-employment benefits, debt service, the state’s share of Medicaid costs, and active employee benefits. In Fiscal Year (FY) 2019, about half of all general funds were budgeted for these obligated costs, and retiree benefits will make up 40 percent of them.

In this report, we examine the public retirement benefits as a budgetary issue of interest to all Hawaiʻi residents, and one that is crucial for policymakers to understand and address effectively. We also identify strategies available to meet public obligations responsibly and equitably.