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AVALON GROUP in the Media

From the November 29, 2002 print edition
Business leaders prepare legislative agenda
Ben DiPietro

As Hawaii's first Republican governor in four decades prepares to take office, the business community is preparing its lists of issues to place on her desk.

Taxes, health costs and workers' compensation are certain to be at or near the top of most of those lists.

"These are seen as the make-or-break issues that weigh heavily on the backs of businesses in Hawaii," said Jim Tollefson, president of the Chamber of Commerce of Hawaii.

Those three issues received top priority in a chamber survey of 1,100 of its members. Armed with that survey, chamber members met last week to discuss how best to achieve their main goals heading into a 2003 legislative session in which Republican Gov.-elect Linda Lingle will have to contend with majority Democrats controlling both the House and Senate. Tollefson said the agenda will be completed in January, just before the Legislature convenes.

Taxes

Regarding tax cuts and incentives, it's important to look past specific bills to what the overall effect of the sum total of legislative action is on the business community, says AIG Hawaii Insurance Co. CEO Robin Campaniano. Chamber members have a responsibility to educate lawmakers and their staffs on the importance of a healthy business environment so that they are less inclined to introduce or support bills that are bad for business, he says.

Having to defend against such harmful bills takes up too much time and energy of the usinesspeople and business lobbyists at the state Capitol, preventing the business community from working cohesively to advance positive legislation, Campaniano says.

"The vast majority of our elected officials and staff are wonderful people and trying to do the right thing, but a lot of them have had little or no experience in the private sector," he said. "What we've got to do is tell them how the system works, explain to them economic theory, the theories we face from day to day. This, perhaps, is one of the most important functions that we can provide."

Chamber members discussed how business can work with the new governor and legislators to identify areas of government that are too cumbersome, and taxes or fees that can be eliminated or replaced by other existing assessments to help reduce paperwork, such as having public utilities and transportation companies pay the 4 percent general excise tax instead of the 4 percent public services tax.

The chamber also may consider asking Lingle to push for a reduction in the G.E.T. to 3 percent, instead of her advocating elimination of the G.E.T. on medical services. Campaniano says that would spread the benefit further throughout the community and not just to one or two segments.

"This would help more consumers and it certainly would help all businesses," he said. "With a reduction of the G.E.T. just for medical and food services, we're helping only certain sectors of business."

Business also must be willing to identify areas that could be cut to help make up for the $300 million that would be lost through such a G.E.T. reduction, Campaniano says.

"When we're talking tax relief, we're talking less state tax revenue," he said. "[The state is] going to have to offset that somehow."

Privatization

Another area of chamber interest is privatization, or managed competition, of government services. The chamber needs to work with government to identify areas where private companies can provide services better and at lower cost, and then work to make those potential opportunities known to chamber members, Campaniano says.

The same also can be done with the military, which accounts for $9 billion of economic activity in Hawaii and which also is looking to privatize many of its services, from housing to aircraft aintenance, he says.

Mandated benefits

Another issue is mandated benefits. Legislators have enacted laws creating 15 such mandated benefits since 1987, including benefits for newborn babies and reimbursements for certain dental procedures, among others. Chamber members need to look at these benefits, including the Pre-Paid Health Act of 1974, says Gregg Yamanaka, president of TeraBiz and chairman of the chamber's Small Business Council.

To do that requires looking at old problems in new ways, and that must involve greater collaboration between the various stakeholders, including business, government, insurers, employees and health plans, Yamanaka says, adding that efforts must focus on quality of health care, structure of health plans and the cost of providing quality care without blaming any one group for the present problems.

"Health-care costs need to be solved by an alliance of partners," he said. "This is shared responsibility. We're trying to look at all perspectives, look at all proposals, put them all on the table and see which ones make sense."

A mandated-benefits task force last year recommended several changes, including creation of a new review process, and that will be one of the key areas of attention at the Legislature, Yamanaka says.

Health care

Regarding the Pre-Paid Health Act, Yamanaka says businesses also must become more aware of the law's provisions and be willing to change how they approach health care. He pointed out that most of the businesspeople attending the chamber meeting said they still pay 100 percent of their employees' health-insurance costs, even though the law allows for employees to pay up to 1.5 percent of those costs.

To help provide buying power and lower costs for employers, the chamber is in discussions with the Hawaiian Business Health Council to provide a health- care plan for its members, Yamanaka says. The council represents the major employers in Honolulu and, when combined with the chamber's membership, creates a work force of nearly 200,000 people. That collective power could be leveraged to get reduced rates and other benefits, Yamanaka says.

Tollefson says talks are ongoing and declined further comment on the idea.

Workers' compensation

There is a looming train wreck coming in the area of workers' compensation unless changes are enacted, says Christine Camp, managing director of Avalon Development and vice-chairwoman of the chamber's board of directors.

Concerns for businesses include increasing medical costs, increased longevity, including people receiving lifetime disability benefits, use of alternate care, inflation, a weak economy and the inability of insurers to increase company premiums to match payouts, Camp says.

Chamber members need to lobby for more-equitable laws that set limits on how long and how much treatment injured workers can receive, and push for more money for state agencies so they can acquire sufficient staff and equipment to quickly process claims, Camp says. She pointed out that the state of Wisconsin settles claims for workers on temporary total disability in an average time of 2 1/2 weeks, while 15 percent of Hawaii's claims remain unsettled for between one and two years, and 9
percent longer than two years.

It's vital, she says, that businesses begin a dialogue on these matters now, since it may take years for changes to be enacted. "Drunk driving, it's a no-brainer … but it took seven years to pass," Camp said. "Workers' comp may take just as long, but we feel this is the right time to start."

Reach Ben DiPietro at 955-8039 or bdipietro@bizjournals.com