Is Government in Hawaii Too Big?
Price of Paradise · Hawaii Public Radio · aired 1996-01-21
Guests: Bill Boyd (labor economist); Paul Lister (former President, Chamber of Commerce of Hawaii)
Duration: 1:08:44

[00:00:03] Randall Roth: Good morning. This is Randy Roth, host of the Price of Paradise radio show. We sometimes call it Pop Radio. Everyone who works on this weekly program is a volunteer who believes in the importance of lively and informed public dialogue. Our sponsor is the Hawaii Community Foundation, an organization that administers charitable funds with efficiency and compassion. Today's topic is the size of state government in Hawaii. Specifically, is it too big? Frankly, until just a few weeks ago, I thought just about everyone in Hawaii agreed that the answer to that question was yes.

[00:00:40] Randall Roth: I had repeatedly invited public worker union officials to come onto the show to discuss the issue. They had declined my invitations, which led me to believe that they felt that was a battle that they simply couldn't win. Then I ran across a copy of a speech that had been written by a fellow who has a PhD in economics, and in that speech he was indicating that he felt a lot of people in Hawaii had the wrong impression about the size of state government.

[00:01:08] Randall Roth: He felt that was because anytime the issue has come up in the past, the media has gone to one of of five specific voices: either Leroy Laney at First Hawaiian Bank, Paul Brewbaker at Bank of Hawaii, Lo Kalapa at the Tax Foundation of Hawaii, Sam Slom at Small Business Hawaii, or Paul Lister, who then was with the Chamber of Commerce. According to this fellow that I'm describing right now, he said all five of those felt strongly that government in Hawaii had grown too big and as a result, all of the people in Hawaii had that impression. Well, this fellow's name that I'm referring to is Bill Boyd. Bill earned his PhD at West Virginia University.

[00:01:48] Randall Roth: His areas of specialization are monetary economics, that is money and banking, also public finance and labor economics. He is currently working on a long-term model of the state's economy in an attempt to measure long-term determinants of growth. He is employed at the Center for Labor Education and Research at the University of Hawaii at Manoa as a labor economist. Well, as I mentioned, one of the five voices that he felt had been heard very much in the past through the media is Paul Lister, and we have Paul with us as well.

[00:02:21] Randall Roth: Paul has a bachelor's degree in mathematics from New Mexico State University, and then three graduate degrees from the University of Hawaii: one in community organization, another in urban planning, and a third in business administration. Until just recently, he was the president of the Chamber of Commerce of Hawaii, and prior to that, he was vice president at the Queen's Medical Center, and then before that, executive director of the Honolulu Medical Group Research and Education Foundation. In 1995, Paul retired as a major general in the US Army Reserve, and prior to that, he had commanded the US Army Reserve in the Pacific. Well Bill and Paul, good morning and welcome to Pop Radio.

[00:03:04] Paul Lister: Good morning Randy.

[00:03:05] Randall Roth: Well, the issue as I indicated is the size of state government in Hawaii, specifically, is it too big? And Paul, your voice is is one of five that Bill has commented. Uh, we the people of Hawaii have have heard on this topic a great deal in the past. Can you very quickly tell us why you think government is too big in Hawaii right now?

[00:03:26] Paul Lister: I think it's too big be actually because of two reasons. Number one, obviously, is cost. Uh, we're in a serious financial situation with our state right now and the size of government directly affects the cost of government and uh, it needs to be reduced for that. But there's also a a much more subtle issue that I would like to get back to later if we could. Uh, I can summarize it though, by a quote from Joseph Wahid, who is the senior economist uh for Wells Fargo Bank.

[00:03:57] Paul Lister: And he was here in 1994 and spoke to a number of community groups and talked about the growth of the economic region in in the Western United States and Hawaii's role in that, and he was very optimistic about what was going to happen in Hawaii's economy. He had one caveat at the end of his speech though. He said, if there's one factor that if you don't get under control in Hawaii, can actually make Hawaii go in the opposite direction from the what the rest of the region, and that one factor is the uncontrolled size of of your state government.

[00:04:27] Randall Roth: Okay. Now are are there some statistics that you look to in supporting your belief that it's too big, and that you assume somebody like this fellow from the mainland was looking to in thinking that that was a major problem in Hawaii?

[00:04:40] Paul Lister: There are a couple of statistics that I look at. I'm I'm fairly simple-minded when it comes to statistics, uh uh, and and one of the ones that I look at is is just numbers of jobs. Uh how many jobs are out there. And that that rocked along pretty steadily until 1990 with some some growth in it, but some years up, some years down. Starting in 1990 though, it just took off. Uh, the Department of Personnel Services publishes every year [unintelligible — audio glitch] set of figures on the last day of the year in New Year's Eve.

[00:05:32] Paul Lister: And the last day of uh 1989 before we entered this decade, the number of jobs in the executive branch of state government alone, just executive branch, were 37,403. According to their figures, on the last day of 1993 that had grown to 52,672.

[00:06:06] Randall Roth: So in a four year period during the early 1990s, it increased by 15,000 and I know from your article in this morning's advertiser, that was a 40% increase.

[00:06:15] Paul Lister: That's right, 15,000 plus uh jobs in the executive branch alone, not counting legislative, not counting judiciary, which also grew during that period of time.

[00:06:21] Randall Roth: And I know from your article in this morning's advertiser, that during that same period of time the number of private sector jobs was actually declining.

[00:06:30] Paul Lister: Decline almost exactly the same amount, interestingly enough. I'm not sure that there's a correlation there, but uh, but certainly uh we saw private sector jobs declining at almost the same gross number of jobs as the public sector went up.

[00:06:45] Randall Roth: So, I know according to that article, this is just one of of actually three what you describe as common sense ways of trying to get a handle on on whether we have too many government workers or not. Well, Bill Boyd, in your piece, you quoted Mark Twain uh about liar's figure, figures don't lie, or something like that, and I've heard the comment about uh there are lies, damn lies, and statistics. But you've got your own statistics. And I think you're suggesting that that Paul's statistics aren't necessarily uh the best indication of whether government in Hawaii is too big. Could you tell us a little bit about that?

[00:08:24] Bill Boyd: Well, first of all, they don't deal with, as Paul mentioned, uh the ability to pay. And one of one aspect of the ability to pay is the growth of the economy, which is measured by the growth state product. So when you take what public employees cost and you divide that by gross state product, it's been remarkably stable over the last 40 years, including through 1992, and it amounts to about 8% of gross state product.

[00:09:07] Randall Roth: In fact, if that is the right indicator, then we're actually below average. I think your article indicates that the national average is about 10%. The last year that the numbers were available, 1992, were at about nine or at 8%, and like you say, your chart shows that it's been a pretty flat line.

[00:09:44] Bill Boyd: Yeah, it grew a little bit during the '70s, declined a little bit during the '80s, but it's been basically solid. Now, we can also take full-time equivalent employees, and I went back and looked uh

[00:09:55] Randall Roth: Is this going to get technical?

[00:09:56] Bill Boyd: No, no, it's very simple. It's very very simple full-time equivalent employment per population, which is another measure that that Paul wants to use. Uh, I went to the state uh state uh state state of the states uh their data book, not not our data book, but there's a national data book that compares every aspect [unintelligible — audio glitch] state public expenditures. Hawaii is listed 18th right behind Texas which is 17th, far behind Mississippi, Nebraska, Kansas, New York, New Mexico, and Montana in terms of full-time equivalent uh employment per population, and this is for 1992.

[00:11:09] Bill Boyd: So both of these figures tend to indicate that if you're going to take some kind of gross measure of uh public employment that it's not exceptionally large.

[00:11:17] Randall Roth: Okay. So in quoting Mark Twain and and I'm smiling and you're smiling. You're not saying that that these other folks who've who've come down on the other side of this question that they're lying or or misrepresenting anything. You're simply saying, they're really not looking at all of the indicators, and you feel they're not looking at the best indicator.

[00:11:46] Bill Boyd: Well, I don't think that they're looking at the appropriate indicators. Um, if you if you're going to deal with the size of public employment and you're concerned with the size of government, with expenditure on government, and and especially expenditure on public employees, then you should look at what they cost, and and that's found in in the gross state product accounts.

[00:12:06] Randall Roth: Okay. Paul, any comments on what you're hearing from Bill?

[00:12:09] Paul Lister: Well, when you look also at the total cost of state government, not just the cost of employees, because it's not just an employee issue that we're dealing with, certainly not as far as the budget is concerned. If you look at the total cost of state government as a percentage of the gross state product, what you see is that, going back to about 1953, that that was down around the 8% level for the total cost, not just the employees, but but everything. That rose very, very steadily over a period of time up until I think it was 1977 where it peaked out about 17 and a half%.

[00:12:42] Paul Lister: Then it declined uh very gradually until 1990 down to around 15%. But starting in 1990, it just took off like a skyrocket. It started adding a percentage point per year. It topped 19% in 1994. I'm fairly certain that it's probably around 20% in 1995.

[00:12:59] Randall Roth: So you're suggesting the the biggest part of the problem is is really quite recent since the since 1990, that that big increase. And Bill, I know you mentioned your statistics only go to 92. Is it possible that that's part of the source of of our difference of opinion here?

[00:13:17] Bill Boyd: Well, no, it actually goes a little further, which is a function of government as a whole. The statistics that that Paul cites uh includes transfer payments like welfare, uh federal expenditures that pass through the state's hands, uh debt repayment expenditures and things like that.

[00:13:36] Randall Roth: So it doesn't measure the size of government. It's just measuring how much cash is flowing through government.

[00:13:41] Bill Boyd: Right. But then the other problem with that is it's procyclical. When we have bad times, welfare expenditures go up because we have a procyclical constructions policy in the state. Our debt payments go up during slow times. So our bills come due precisely during periods of slow economic growth. So what you would expect if you use Paul's measures is that it would rise during a period of slow economic growth which we're going through right now.

[00:14:21] Randall Roth: So what he's describing you would say is is really quite predictable, and it's not a good indicator of the size of government anyway because it just measures the cash flowing through as opposed to the number of workers and the amount of money that's being paid to the workers, what some people would call the size of state government.

[00:14:41] Paul Lister: Right.

[00:14:44] Randall Roth: Okay. Paul?

[00:14:46] Paul Lister: That I understand the the concept with that. The problem with that is that it actually went down during a period of very high economic growth. Uh, and then it doesn't appear to behave that way. Um, it it took off here before the real downturn began to occur in our state. Uh, so I'm not sure that that there's a direct correlation there. It's uh, you know, we may be looking at something there that's like the old adage that that you know, attendance at burlesque shows causes baldness. It's it's keeping to correlate, but there may not be any cause.

[00:16:04] Randall Roth: Okay. Let's focus just for a minute on on where do we go to from here because it's real clear that Bill is saying the size of government is not a problem. It's not too big. And Paul Lister is saying it is a problem. It is too big. But let's talk about the future. What I see in in your position, Paul, as I read it in the advertiser is that you're saying, because it's too big, we really have to have an intelligent plan of of not just downsizing but rightsizing.

[00:16:51] Randall Roth: And this is going to require courageous leadership and commitment and all those sorts of things and you say there's a model for this and that is the US military, which over recent years has has shrunk, rightsized if you will, the military by about 40%, which is approximately I think what you're suggesting we need in in Hawaii. And Bill, on the other hand, as I read your piece, the message that I get is that there's a lot of cash that the state has right now and whether we call it um uh a special fund or we call it uh appropriated expenditure, I mean, um capital expenditures that that are being held back, that aren't being turned.

[00:17:42] Randall Roth: You're saying the state really ought to start spending some money that it has available to us to get the economy kind of kick started, which would would help us a great deal. Is that a correct statement, uh Bill as I describe your position?

[00:18:05] Bill Boyd: Right. And I I wouldn't think Paul would disagree with that.

[00:18:08] Randall Roth: And and that's I guess where I was headed. Paul, you would more or less agree with what Bill is saying?

[00:18:14] Paul Lister: I about those special funds, I particularly construction funds that need to be uh freed up. In fact, there was a group that I worked with last year that worked uh with the uh with some of the private sector unions, the building trades Council, trying to get that to happen.

[00:18:26] Randall Roth: And from having read your your speech, which was much much longer than what appeared in the newspaper this morning, Bill, I get the impression that you feel there is some some rightsizing that needs to be done because you think even if we don't have too many government workers, they're really not in the right areas. There are some areas where we have too many and there are some areas where we just plain don't have enough. So I think you would support Paul's call for [unintelligible — audio glitch] real close bottom up look at what we really want in the way of employment.

[00:18:49] Bill Boyd: I classic example, though we're talking about the state is uh local county employment. Um, I've read a number of articles nationally that suggest the social benefit of hiring an additional police officer is $100,000 in excess of his pay. And that and that means that essentially we don't have enough, for example, police officers. I also think that we probably don't have enough teachers.

[00:18:52] Randall Roth: Okay, Paul?

[00:18:53] Paul Lister: I I would agree with that. It's there are many areas of government where we don't have enough employees. We don't have enough child protective service workers taking care of abused and neglected children. We don't have as as Bill pointed out, not enough police officers, we don't have enough corrections officers, uh and I think we don't have enough classroom teachers. If we get get a chance, I would like to address the classroom teacher situation because I think we have plenty of employees in the DOE, I just don't think enough of them are in the classroom.

[00:18:56] Randall Roth: So, even though there is total disagreement on the question of whether the the total number of government workers in Hawaii, state local, uh government workers in Hawaii is too big or too too small, there is a lot of agreement here between the two of you. Uh, Paul, why don't well let's take a couple calls and then I'll I'll come back and and we'll invite your uh your comments on uh uh teachers. First, Richard in IA. Good morning, Richard.

[00:18:59] Richard: Aloha. Good morning, Richard.

[00:19:00] Randall Roth: Yeah, good morning.

[00:19:00] Richard: Yes, uh Randy, Bill Boyd, and Paul Lister, good morning. I'd I'd uh like to expand, if I may, upon Bill Boyd's analysis of of what could be called some of the favored myths of the dominant society in Hawaii and their representatives in the media.

[00:19:00] Randall Roth: Richard, I'm I I'm going to let you do that, but you're going to have to keep it as brief as possible. And we're talking about less than a minute.

[00:19:00] Richard: Yes, Professor. I attended uh a very good conference. One of the highlights of the academic year

[00:19:00] Speaker 1: the ethnic studies conference in May 95 and one of the panels there a group of uh economists and labor leaders and I believe that that Professor Boy and he'd been on the panel as well, Dr. Boyd. And uh one of the things that they said was that rather than uh the media's portrayal that only a couple of hundred or perhaps at the most a few hundred state employees have been released, have been laid off during this present budget cutting that in fact over the last two and a half two or two and a half years however much has been done since then that when you include non-civil service state employees, that the number of workers that the state has lost over that period adds up to more than 5,000 employees. Could you comment on that?

[00:19:52] Bill Boyd: Okay. Let's uh Bill Boyd first. Uh Well, I wasn't on this panel, actually. I was on a panel that dealt with with uh structural unemployment. But um yes, in actual fact, if if uh when these figures are thrown around, um there there's a category called full-time equivalent employees, then there's part-time temporary employees, for example, lectures at the university which Randy knows quite well about. Uh I think about 1,000 of those at the university alone were let go last year. One of them happened to be Paul Brubaker to give you give you one example. So there are thousands of those part-time jobs that were let go. More of more greater concern is between 90 well, equivalent concern is between 93 and 95. 7,000 jobs were lost in the construction industry, I believe, because the state pulled back from construction expenditures. Wasn't spending the money that was there in special funds or already approved construction funds. Correct, right. Okay. Paul, do you have any comments on on Richard's comment?

[00:20:55] Paul Lister: I don't have those figures, so I it's it's difficult for me to comment on them. But as I as I pointed out earlier, I I like the mark on the wall as a kid grows. Keep it simple, right? Keep talking. Yeah. And and and that's why I go back to those DPS figures every year and look at what they say at the end of the year on the last day of December, how many people are on the state payroll. If that number continues to grow, it doesn't make any difference how the the other statistics get doctored in this. Well, and I know from talking to the two of you, you also agree that there is no one indicator. There is no one way that everyone accepts as the technique for determining whether there are too many government workers or not. Well, Oh, maybe maybe I overstepped here, Bill. Well, well, there's also there there's one thing that we should agree on but what is unacceptable is when we deal with the question, we should have an indicator that actually measures what the question is asking. So, for example, um And and that's what you were saying earlier that you feel your indicator does that, Paul feels his indicator does that, and and we simply disagree on that one. Well, well, if we could go further, I think the figures that he's talking about measure people that might work as little as one hour a week for the state, it measures, for example, um student help at the university. And I guess this is the the and I'll call it a problem, the problem that we had a few months ago when nobody seemed to be able to pinpoint exactly how many people were working for the government, and I guess it's because some people are part-time, and some people are temporary, and some people are there are all these different classifications, and so sometimes we're we're asking different things. Yes. As a taxpayer, though, it doesn't make any difference to me whether they're temporary or whether they're part-time or whether they're emergency hires. If they're on the payroll, they're on the payroll. Now, I don't think we have very many people out there working one hour a week for the state government of Hawaii. I do know of people out there who have been temporary employees in the state for years. Okay. Well, Richard, your your comment raised I want to quick follow on. Uh real one real quick one, but our lines are filled and we want to get to everyone else. really want to know what the size in the state budget is or in in the state economy of the the subsidies allocated to private enterprise, that that thing that Randy doesn't like to hear about called corporate welfare. Uh Bill Boyd. Well, you know, there's all sorts of subsidies that do go on. Some of them are are um very difficult to calculate. For example, this question out of Debay. Um essentially that that operates as a subsidy for tour bus drivers right now, and to calculate the actual value of that is a very difficult thing. Okay. Richard, thank you for a call. We appreciate it. Uh, Conrad from Honolulu. Good morning, Conrad. Yes, uh my question is directed toward Mr. Boyd and the reality is we we've heard some good statistics between the two, and the and I think the the discussion is being diluted by the statistics when the reality is in the 90s, uh or 89 to 90s, we came in, the state came in with a huge surplus, uh that way, in fact, I think we as taxpayers were promised a refund. I think it was estimated that the uh what, $600,000 uh or $600 per taxpayer as a possible refund. Conrad, I'm going to come back to you, save your thought, but you've touched a nerve. I think in suggesting that the size of government is maybe if not the cause, a cause of where we are right now, Bill Boyd almost jumped up out of his chair. I've got to let him respond and I'll come back to you, Conrad. Thank you. Conrad, let me let me explain something. You know how this why the state runs a surplus? Um basically, yes, it's money that they have that that's not the uh oh what uh not owed or not spent. Oh, okay, that that that's a surplus, but the reason the state runs a surplus is because it made a mistake. The same reason it runs a deficit. The Council on Revenues underestimates or overestimates the amount of tax revenues that are going to be um expended, and therefore it accidentally sometimes runs a surplus, and accidentally sometimes runs a deficit. There's nothing conscious about it, and it's not a measure of frugality or anything else. It's just what happens when they make a mistake. Well, now I'm I'm wondering if if I'm missing something here, but I think Bill, you're assuming that whatever funds government thinks is available to it, it's going to spend. Yes, you bet. I agree with that. And Paul Lister, I think what you're saying in this morning's advertiser is that it shouldn't be that way, that that there should be a ground-up study of just what should be the size of government, and that should be driving the level of taxes and the size of government as opposed to available funds. Absolutely. You ought to look uh, uh, well, I I should back off of that a little bit and say, I think really the way we ought to approach this is approach it from the resources that we have, and then figure out how to leverage those resources to the greatest use of the general population. Now that's a that's a broad statement, but I think that it's you know what I pointed out earlier, we don't have enough police, we don't have enough child protective service workers. At the same time, we have a Department of Agriculture that has grown by something like 20% in the last five years. And while agriculture has has faded away to the fifth most important industry in the state, I you know, I simply don't understand that kind of thing. Okay. Now, when I left, Conrad, Conrad, I think you had suggested that maybe growth in in the size of government was part of the explanation for our current fiscal problems, and Bill Boyd is is taking issue with that. Why don't you finish your thought? I'm sorry, Conrad. That's okay, thank you. My my my point that I think would be that a reallocation of uh of assets, in other words, employees in in lieu of hiring um the the comment of shortage of police and uh uh things. I think government threatens the populist with our primary uh things like safety and fire. This is this is a labor tactic where they attack our primary things that we depend on government, you know, fire safety, police, etc. uh and then meanwhile, we have a bureaucracy like he mentioned uh that but we look at another like the Department of Health that is just growing uh by leaps and bounds. Okay, now And that's my end of my comment, and I thank you for your time. Thank you, Conrad. And Paul, I can see you're nodding that you agree with what Conrad was just saying. Bill, do you agree? Well, the it gets back to what we're talking about about using aggregate numbers as a measure of growth. I have no idea why why this tropical agriculture might have grown or not grown in terms of employees. Um, but what I do know is that even if we take um, if we take a broad measure of full-time equivalent employment, Hawaii ranks 18th, Okay. Let's go to among all the states. Let's go to James in Kaimuki. Good morning, James. Um, good morning. Um, this question is for Mr. Boyd. Um, the question is that um the um surplus as he mentioned in his article, $1.6 billion in the special fund and $200 million in the unexpended construction funds is totally unavailable um um to the general fund to offset the potential um budget deficit because the uh $1.6 billion in special fund, such as the Department of Transportation, harbor Harbor special fund, airport revenue fund, highway fund, are earmarked and are self-generation funds um for these particular um departments. And um let's say the $200 million in the unexpended construction funds. Um let's say for the CIP for the Department of Education, it's either been expended currently or it's being uh awarded to vendors for construction or it's under uh advisement from the governor for approval, so many of many of the two special funds and the unexpected construction construction funds that he mentioned are totally unavailable. Can Mr. Boyd please explain, are there are there sources that he thinks can offset the potential uh budget deficit to the general fund? Good Good question, James. Bill, let's take them one at a time. First, the special funds that that word special suggests that that they have to be used for some sort of special purpose that we've got the airport funds or the highway funds or what have you. How could those be made available to uh operate Okay, there that was a misunderstanding. I essentially I think that what I said was those surpluses should be drawn down and spent. and the airport and the highways or whatever. Okay. What about his other comment about uh the funds that are are there for construction that aren't being spent right now? Well, [unintelligible — audio glitch] question the the question about that is they they are tied up someplace in in outer space or we we have no idea quite where they're at right now. But what I've done is I've checked down um what was appropriated to what has been bid and and the difference is about $600 million. That $600 million would generate some somewhere between 60 and $120 million in tax revenues alone, and would virtually eliminate the deficit for this year. And I can see the Paul Lister is nodding, you agree with that? Right. Okay. James, thank you for your call. Thank you. We have Bill from Kailua. Good morning, Bill. Good morning Randy and to you to your guests. Uh I suppose I'll be considered a victim of over simplification. But as I understand it, on budget, and this is an national, on budget and off budget, uh indebtedness is in excess of $17 trillion. This tells me that we have been the victim of overblown idealism in in expressing our wants and and fine trying to finance them, far in excess of what the government is taking in. So I think we've got to get get be realistic about this and pair things down to be uh appropriate to to what the government's actually going to uh have as income. Okay. Well let's let's take that as a comment Bill and we appreciate your your sharing your thoughts with us. We're going to move on to Malcolm from Manoa and then I want to ask our our guests a few more questions. Malcolm in Manoa, good morning. Okay, I'd like to make one observation and ask Mr. Boyd a question. Um I contend that your gross state of revenue product expenditure in fact understates the size of government since it doesn't include mandates uh such as employer health care or zoning or other command of the economy that the state exerts without putting it on the books. My question for Mr. Boyd is this. He writes um the surplus should be drawn down because it would put money into the economy rather than taking it out. It would also generate large amounts of tax revenues. Uh two paragraphs later, he says, when the state develops a surplus, it must give it back. This drives up inflation and forces down real wages. Why is it uh beneficial for the state to spend the money but uh detriment for the state to give it back? Um Why Why is a check to a state employee or a contractor a benefit, but a check from the Treasury to the taxpayer as a rebate harmful? Why don't they just call us employees and give us the money back? Okay, we we've got two really interesting thoughts and let's take them in reverse order. Bill, why would the state spending my dollar generate more prosperity than my spending my dollar, which I think is is one of Malcolm's points? Okay, the point is is that when the state gives that money back, it gives it the back in such a way that you get 80 cents back rather than a dollar, and I assume you would like to get a dollar back. The the reason for that is that when this it doesn't matter whether the state just gives the money back to you in the form of a rebate or whether it spends it on construction funds, the tendency has been for the state to run a surplus.

[00:38:00] Speaker 1: through a mistake in council revenue uh pro projections during a boom. Whether or not it gives the money back during that period or whether or not it spends it on construction expenditures, it drives down unemployment well below the full full employment level, drives up inflation, the cost of living and drives down real wages. I would suggested when the state gives back money, it should give back money during a recession and and set up a surplus a true surplus in the in the form of a special rainy day fund during during an expansionary period.

[00:38:36] Speaker 2: What about Malcolm's other thought having to do with mandates, Paul Lister, having been with the Chamber of Commerce, I know you're sensitive to the private sector's concerns that sometimes government, rather than providing something directly, will simply force businesses to do that.

[00:38:54] Speaker 1: Well, that certainly is a concern, and it and it goes beyond simply the cost of these things. The cost of these is a definitely a cost of government, even though they are not taxed. They are still borne by the businesses and by the individuals in the state. But it even goes beyond that. When you when you get a sufficient number of government workers, the size of government of a certain size, uh then it begins to be so bureaucratic that it adds expenditure just because it is so difficult to do business. And I think we're seeing a lot of that in Hawaii.

[00:39:23] Speaker 2: In fact, I was going to ask Bill, is that a possible explanation as to why these funds that have been set aside for construction are so slow in getting spent. Is it possible because there is so much bureaucracy there that it it becomes a very, very slow process?

[00:39:38] Speaker 1: Now, if you look at uh what it amounts to is that we have layer upon layer uh when when we look at the public finances of the of the state and compare those public finances with private sector finances, what you see is an accounting system that is incredibly Byzantine because the public actually demands incredible safeguards on that money, far beyond what is necessary to cat catch people who are embezzling the funds and things like that. So essentially what we've done is set up safeguards that are completely unnecessary in the permitting process. And and that's what why it's lost in space. Now, there are some other things like on on computer investment and things like that. We're we're pretty antiquated at the state level on that. Okay, but but we, I would like to, at one point comment on the mandates.

[00:40:23] Speaker 2: Okay, go ahead.

[00:40:25] Speaker 1: There you see there's always this focus on the costs without the benefits. Um and and when you do that, it's a fundamental mistake that the the benefit of having wide wide coverage on insurance is a healthier workforce which increases their productivity. And as a net benefit to society, usually these when you look at when you look at either workers comp cost or the insurance cost when anybody's ever done a study of this, this functions something like a backward shifted tax onto the employees. In other words, you're collecting money, but but basically it also comes back in the form of quite frequently lower wages.

[00:41:02] Speaker 2: Okay. Well, I'll remind listeners that this is the price of paradise or pop radio. If you'd like to ask a question or make a brief comment, just call us at 955-8821. We're talking about the size of government in Hawaii specifically. Is it too big? My guests in the studio are Paul Lister, just formally president of the Chamber of Commerce of Hawaii and Lawrence Bill Boyd, who is a labor economist with the Center for Labor Economics and Research at the University of Hawaii, Manoa. Neighbor Islanders are always invited to call us collect and the number again is 955-8821. If you joined us late and you'd like to hear the replay tonight on KIFO 1380 AM, you can hear the whole thing beginning at 8:00.

[00:41:45] Speaker 2: Well, we've got some more callers on the line, but before we go to them, Paul, earlier in the program, you said you had some thoughts to share about the DOE and Teachers Union and how that fits into this equation, and then Bill, there's something I I think you wanted to add as well.

[00:42:01] Speaker 1: Well, the thoughts on the DOE are get back to the issue of how difficult it is to really to figure out how big government ought to be. And this is just an anecdote that I can give you uh last year there was a a brouhaha in the community about the size of the overhead of the DOE. And I went to try to get some statistics on this. And uh I I tried to find out the number of school teachers and the ratio of school teachers to employees in the DOE. Uh first of all, I found it was very difficult to find out the number of school teachers. I took the DOE's annual report and it doesn't say in there anywhere. So you start going district by district and adding up the figures and then you find out that there's more than one way to count school teachers. Sometimes they're counted as people they are in the classroom, sometimes they're counted as people who have a teaching certificate that work for the DOE, whether they're in a classroom or not. But even even giving the the DOE in their annual report the benefit of the doubt, it appears that there's something around 11,000 to 12,000 school teachers in in the DOE. Then you go to Department of Personnel Services and say how many employees does the DOE have. You find out the DOE has over 23,000 employees. So most of the personnel with the DOE are not teachers.

[00:43:09] Speaker 2: Yeah, so you get into this situation then where you say, well, gee, the DOE has too many employees, but doesn't have enough school teachers. Uh that's why I say we need this bottoms up review. Bottoms up review. We need we need to really take a good, hard, honest look at government and the kinds of services that it needs to provide our citizens. I would prefer that we approach us from some sort of a Jeffersonian ideal that says the government governs best, the governs least and and really look at those essential services because there's some services that the government ought to provide and can provide well. There are others that that really ought to be out there in the private sector. And really design a government that's designed for the 21st century and not a government that is structured the way our state government is today, which is in my opinion, it's structured for about the 1950s.

[00:43:52] Speaker 2: Bill, any thoughts on that one?

[00:43:54] Speaker 1: Well, it's funny you mention this thing about school teachers because I've just been going through the accounts for the Department of Education, and I would agree that there's not enough classroom teachers, but but the growth in classroom teachers has been as a result of uh the growth What you're talking about is special Ed basically. There's been a tremendous growth in terms of special ed teachers for learning disabled children. I happen to be on the low high United Way panel for that as well. And No, wait, wait. I want to make sure I understand this. He was saying total personnel is something like 23,000, classroom teachers giving the benefit of the doubt when there's doubt, calling them a classroom teacher was 11,000. And and you're now talking about special Ed education teachers, but you're not suggesting that's the the difference between those two numbers.

[00:44:39] Speaker 1: Well, well, what I'm saying is that what what I was trying to say is that all the growth in classroom teachers, I believe over the last 10 to eight six to eight years has been in special ed teachers, not actual classroom teachers teaching algebra. So you you're basically agreeing with one of Paul's points, which is, we're short of classroom teachers. Right. That and I was trying to explain why. Okay. Okay, which which is largely as a result and I don't necessarily agree with that, disagree that we shouldn't shouldn't have special ed teachers. I'm just Okay. saying that that's been a problem in terms of cost.

[00:45:12] Speaker 2: One other point that that I'm I'm pretty sure that that you're interested in in getting to is how government worker unions fit into this whole thing. Paul, I'm I'm under the impression that you feel that that's a negative factor that that's part of the problem rather than part of the solution in terms of the size of state government now and the mismatch [unintelligible — audio glitch] you feel exists in terms of having too many in some areas, not enough in other areas. And and Bill, I know I happen to be watching Olelo last night and I saw you uh as a guest on on the show. I think it was called War on Employees or or something like that. War and I don't think I've been on that particular show. I probably would turn that show down. Well, Last night uh last night it was uh on Olelo between 9:00 and 10:00 and and toward the end of the show um you were asked why it is that Hawaii has enjoyed such a strong economy in the past and your response was directly focused at at unions. You feel that the unions have had a major positive impact on our healthy economy in the past.

[00:46:16] Speaker 1: Well, yeah. One of one of the things to the one of the things is I think the high union density rate, which is very similar to Japan, Korea, um those states has helped it helped in terms of assure of a relatively high standard of living, high high consumption levels here. But I I think there there is when we're trying to find points of agreement and disagreement, where Paul would say the Union, the Public Worker Union in Hawaii has has been part of the problem. I think you're over here saying not really, in fact, they've been part of the reason for for the good times that we've enjoyed.

[00:46:48] Speaker 1: Well, all unions I I in terms of public employee unions, I think you have to understand that they don't have the right contractually or or in any other way to hire and fire.

[00:46:59] Speaker 2: Okay. Well, we've got uh some more callers on the line. Let's start with Mike from Honolulu. Good morning, Mike.

[00:47:04] Speaker 3: Yes, good morning, gentlemen. Enjoying your show.

[00:47:07] Speaker 2: Thank you.

[00:47:08] Speaker 3: Uh, I have a quick observation and a question for Mr. Boyd. The observation is you're both discussing the cost of government, relating it to the size. And from the citizen's standpoint, the cost is a a factor that is should be compared to what you get for what you spend. It's like, you know, you don't mind spending the money if the service is there. And I think most of us see an incompetent government and an extremely untrustworthy government and the type of fraudulent uh purchases that have gone on and the kind of high free types of uh benefits that people receive. As a taxpayer, some of us just don't feel we're getting what we should be getting for the money that we're taxed. My question to Mr. Boyd is if he doesn't feel that right now is the time, uh would he explain why during 1990 to 1994, that was the time to grow the government 40% the government workers. And if if that wasn't the right time to do it because we were in a recession, when is the right time to cut it back?

[00:47:58] Speaker 1: Well, first of all, you're accepting the figures that I don't accept, um just to be quite clear. Um government probably in terms of government in terms of the expenditures on public employees did not grow relative to gross state product during that period.

[00:48:13] Speaker 2: And and Bill, so I understand, I think you're saying that that Paul's numbers may come out of the data book and so the the numbers may actually be accurate, but they're very misleading.

[00:48:22] Speaker 1: Because they don't cover the costs of the public employees involved.

[00:48:25] Speaker 2: They they might include somebody who's working one hour a week at the University of Hawaii or whatever.

[00:48:28] Speaker 1: Right. So I I don't I I simply disagree with that statement. I would suggest that that you go to the data book, um you go to some of these other stores sources and make up your own mind. Um that that's just an erroneous conclusion. Now now on the second thing in terms of efficiency in government, I think that that's a reasonable discussion to have. It's also a reasonable discussion to talk about the size of state government. Uh what I'm saying is that we should not confuse two two problems here. One is is we should not say, oh, state government's too large, we're running a deficit, let's just go out and this gives us a really good opportunity to now get an efficient government, because essentially one aspect of an efficient government should be not to make the economy worse, right?

[00:49:16] Speaker 2: Okay. Uh, Mike, thank you for your call. Let's go to Mary from Kaniaohe. Good morning, Mary.

[00:49:22] Speaker 4: Yes, good morning. Um, I'm a uh an emergency hire at the tax office and what I feel is needed is to give these people decent equipment to work on. They need personal computers instead of doing the work on typewriters. Uh they need um, you know, a a big mainframe computer to to process things efficiently. And you know, if they're given the equipment, they can become more efficient. It doesn't take, you know, they don't have to do everything manually and then that's one way to reduce the cost of government.

[00:49:53] Speaker 2: Mary, I think you're making a good point. Let me see if if Bill and Paul agree or disagree with that. Bill?

[00:49:58] Speaker 1: Well, how can you not disagree with it? But that's one of the things that I've noticed Wait a minute. How can you not disagree or agree? How how can you not how can you not agree with that? Uh I should say, I'm sorry. Uh the the basic point that I've noticed when I go around to government departments is precisely that. I occasionally go into an office and expect to see an abacus on the desk. So uh and maybe a little exaggeration. But not not by much. Not when you're talking of not not when you're talking about uh the the people that handle the money. Mary's laugh sounded like a very knowing laugh on that one. Yeah, because I'm sure one of the people in her office probably does do it with an advocate. No, not quite. Not quite. But but the thing is is that a as part of capital improvement projects and in terms of in increasing the efficiency of government, we have to look into mechanization.

[00:50:46] Speaker 2: Uh, Paul Lister?

[00:50:47] Speaker 1: I would obviously would agree with that, but there's got to be a trade off there. You can't keep the same numbers of employees and simply buy new equipment. There's there has to be the same thing that's happened in the private sector. When you bring in that equipment, you've got to get the productivity increases with that and cut back on the numbers of employees. Yeah, make everyone more efficient. Exactly.

[00:51:05] Speaker 2: Mary, thank you for your call. Okay, thank you. We have Don from Calama Valley. Good morning, Don.

[00:51:11] Speaker 5: Good morning everyone. Uh I I'm a retired federal employee 30 years. I came out of California where they passed Prop 13 and the government employees and unions, etc. had all these dire predictions what was going to happen to the state, and none of the dire predictions came true. And after working for the government for 30 years, the only thing that the government understands is when you cut their funds, otherwise, they'll excuse away their needs and one comment for Mr. Boyd, he has a lot of non-rational excuses for the pyramiding bureaucracy, and you can never debate with government people because they used to play the game of building the bureaucracy, so they cut their money, I've seen it and they understand. Debating is waste of time.

[00:51:55] Speaker 2: Well, let's let Bill Boyd debate that that point with you briefly. Uh Well, I mean there's there's two things. One is is I I do know that what happened in to the higher education system in California was a complete and total disaster and it's dropped to one of the It was because of Prop 13. Well, that was one of the property way wait, yeah. The NEA want that did that. No, no, wait a minute. That's That's who runs the government the educational system is the NEA. That's who That's an assumption and and not a fact. Yes, it is. I'm sorry. [unintelligible — audio glitch] but but the the fact of the matter is the expenditures on on public education in California dropped tremendously and it has nothing to do with efficiency. You can give give fewer people fewer dollars. But but I also want to make one other point. I would like to make one other point, please. I'm not a member of the bureaucracy. I'm an academic. I mean for Christ's sake, I mean this comes up I'm not representing a public employee union. I'm not in [unintelligible — audio glitch] not a member of a public employee union. I'm simply trying to avoid a train wreck here.

[00:53:01] Speaker 2: Okay. And and I think Don and and sitting here, I know you are very well intentioned. I know uh Bill is very well intentioned. You have different ways of looking at this, but I personally feel it it's it's important that that everyone out there hear these different points of view, think about it themselves and then try to the extent they can get involved even if it's just casting their vote more intelligently than the other ones would have to get involved. Correct, the only thing that's going to happen is cut the funds, you gotta vote vote them out.

[00:53:25] Speaker 2: Well, we need we need to hear everybody's thoughts and Don, you've you've shared yours and and we we appreciate that. Thank you very much. Uh well gentlemen, we're getting down to just the last 10 minutes or so. Um we've got some lines open. If anyone would like to to call in at 955-8821, we're talking to Paul Lister and Bill Boyd about the size of government in Hawaii. Is there anything that we haven't yet gotten to that you feel needs to be added to this conversation? Or is there anything that we have covered too quickly that needs to be elaborated on? First, Paul Lister?

[00:54:00] Speaker 1: Well, I I just want to go back uh to I think it was uh one of your earlier callers knew I think it was Bill who called in and was talking about the public sector unions uh and their role in all of this. I think one thing that everyone should keep in mind is is to ask yourself the question, who stands to directly benefit economically from more government employees? And and to me, clearly the public sector unions stand to benefit economically from that. There are the more public sector employees you have, the more union dues they're that are collected uh involuntarily I might add from those employees. And uh the richer those unions become. So uh when they begin to make that argument, I think you have [unintelligible — audio glitch] certainly put the uh if not a grain of salt, maybe an entire salt shaker on the table and say these folks are operating from a uh a a direct vested economic interest.

[00:54:53] Speaker 2: Uh Bill Boyd?

[00:54:54] Speaker 1: Well, I would like to point out that I'm not a representative of public employee unions. I get I almost feel like I have to get up there up here and say I am not now nor have have ever been. But but it's simply not true that I'm speaking for labor here. It's simply but but you acknowledge that that a lot of people have that perception, just as a lot of people say, well, Paul Lister and Paul Paul and Paul Brubaker and Lee Roy Laney etc. are are spokespersons on behalf of the business point of view. There's the impression out there, rightly or wrongly, that you are a voice for the the union. Yeah, and the the point I want to get [unintelligible — audio glitch] underlying point of this is um there there's there should be some standard of objective truth when we're making policy decisions like this that are going to affect thousands of lives and and potential bankruptcy of hundreds of businesses. And and the problem with this sort of dialogue that we've been having is it's not a good dialogue. I [unintelligible — audio glitch] a lot of these figures are thrown around without much thought.

[00:55:54] Speaker 2: So you're saying the dialogue before this morning?

[00:55:58] Speaker 1: [unintelligible — audio glitch] think in general, in general, um what we're having is a very poor dialogue on how to how to deal with the current deficit and financial problems of the state. How do we elevate that dialogue? What what's missing from the dialogue in order for it to become constructive and healthy? Well, we start have to what we start have to doing is do is rather than operate in a polarized fashion, say Paul Lester is a business representative, and I'm a labor representative somehow and and the what we have to do is operate from some social consensus that says this is an accurate measure of government, this is an accurate measure of the problems that we're having with expenditures, this is an accurate measure of what we can Why hasn't that why hasn't that happened?

[00:56:40] Speaker 2: Because obviously what you're describing is the political process. And in theory, politics is the art of taking these many, many, many voices all into account and then working out some sort of of compromise or consensus that is going to to benefit all of society. Let me get Paul Lister's thoughts on that and then come back to you, Bill.

[00:57:00] Bill Boyd: it's erroneous to say that that hasn't happened because I think in certain arenas that it has happened. Uh we mentioned earlier in the show, private sector economic coalition, which was business and and private sector labor, particularly the uh ILWU and the Buildings Trades Council, that got together uh several times last year, over the last 18 months, to try to work together to figure out how we could get some of these capital expenditure funds released and getting them out there in the economy.

[00:57:26] Randall Roth: You know, I attended one of those meetings and it was a very constructive conversation, I think.

[00:57:29] Bill Boyd: So so I think some of that positive dialogue is occurring in the community. It's not occurring at the government level. We're not seeing the leadership at the government level that's making it occur.

[00:57:38] Randall Roth: And and it's not occurring, Bill, with with the public worker unions. Why is it that that I can't get public worker union officials to engage in a in a dialogue here, or why they won't engage in in dialogues generally in in public? Isn't it to isn't it to their advantage? And and and I don't I don't mean that to sound as critical as it did. Isn't it to their advantage to do what you're doing, to step forward and to to make the argument that there aren't too many government workers?

[00:58:09] Bill Boyd: I I don't I have nobody, I don't know why why they don't participate in this sort of a dialogue, but I do know that what's happening is that what what is happening, I mean I have to look over here because somebody's waving a sign in the window.

[00:58:22] Randall Roth: It says five minutes, five minutes. Okay.

[00:58:24] Bill Boyd: No, but but unfortunately one of the things that that is not happening is is the sort of dialogue that for example, should happen over a collective bargaining table. Um, a collective bargaining agreement essentially allows all of these things to be aired and what's unfortunately happening on that level with public employee unions is that entire process is just being short-circuited and people are lobbying things into the state legislature with no Okay. no agreement. And that's a disaster. That's a train wreck.

[00:58:50] Randall Roth: Okay. Well, as the sign indicated, we've got five minutes to go and we've got some people who've been waiting patiently on the line. Let's take them and then we'll wrap this show up. It's first John from Kailua. Good morning, John.

[00:59:00] John: Hi, this question is for uh Dr. Boyd. I'm rather fascinated by the idea of an economic model for the state, and I'd like to know uh what economic model, if you can do this in all of uh few minutes, has been used in the past uh in the state, what does your model do to improve it, is it predictive or historic? And uh will this model uh help the state uh spend its money more wisely? That's all.

[00:59:23] Randall Roth: And John, that that's a great question. And so folks who tuned in a little bit late know what we're talking about, at the top of the hour when I was introducing Bill, I said he's currently working on a long-term model of the state's economy in an attempt to measure long-term determinants of growth. Bill?

[00:59:40] Bill Boyd: Oh, well well essentially what I'm doing with this, there's already a uh uh a a good economic model that that has fairly strong predictive powers. It's operated by DBED, it's a state input-output model.

[00:59:52] Bill Boyd: Um, this model looks at the future. What I'm trying to do is go back uh say to the 1940s, even earlier if I can get put together the data to the 1900s, and put together a long-term model that analyze that analyzes what are the determinants of growth for the Hawaiian economy. Cuz frankly I, when I look at growth rates in Hawaii, um, it's far more it's far more comparable to Singapore, Taiwan, Korea, and Japan than it has been to the mainland US, and I'm and I'm curious if there are certain institutional factors that haven't contributed to that.

[01:00:26] Randall Roth: That sounds like it'd be very interesting to a lot of people. Let's move to Dick from Honolulu. Good morning, Dick.

[01:00:32] Dick: Good morning. Uh I'd just like the uh panel to address the issue of the uh university uh cutbacks and the relative size of the administration staff there to the faculty. I've been here since uh well for over 20 years and uh I've seen uh there was a time when and we had inflation of around 14% in the early 70s and uh we were in retrenchment and during that same period, at least according to Calio, we added about 175 new full-time um administration. Okay.

[01:01:04] Randall Roth: Dick, [unintelligible — audio glitch] running out of time, and so I want to get a response to that right away. And and and we're all smiling because Bill and I are directly associated with the university now, and Paul's been associated various times in the past in various ways. Paul, quick reaction.

[01:01:17] Paul Lister: I would wouldn't even try to address the the relative cost of the administration versus the faculty at UH, but what I would say is, I think that we're making a serious mistake if we don't fund our university to the point that we can have there a a the ability to grow jobs in the future around uh knowledge and information because that's how enterprise is going to grow in in the next century in the information age. And we need to fund our university.

[01:01:21] Speaker 1: versus the faculty at UH, but what I would say is, I think that we're making a serious mistake if we don't fund our university to the point that we can have there a the ability to grow jobs in the future around knowledge and information, because that's how enterprise is going to grow in in the next century in the information age. And we need to fund our university.

[01:01:41] Speaker 2: Okay. Well, I what I would add to that is, [unintelligible — audio glitch] is it very quickly. The university did manage to put on 3,000 employees in five years without adding any faculty.

[01:01:41] Bill Boyd: Well, I what I would add to that is and and is very quickly, the university did manage to put on 3,000 employees in five years without adding any faculty. And uh uh right. Okay, so we're kind of agreeing with Okay, so but but the reason is, is is uh if you look at it it's directly related to construction expenditures that the university has. We developed a sporting complex there that's a a pro sports palace, and we added 3,000 employees to basically take care of it. Okay. Well, thank you. A lot of good it does intro bio classes. Okay. Or I saw a class there with 250 students crammed to the wall in Spalding auditorium last week, and uh only one faculty member and no teaching assistance. and we're out of time. and we're out of time. Thank you very much, and I want to thank our our guests, Paul Lister, who until recently was president of the Chamber of Commerce of Hawaii, and Bill Boyd, who's a labor economist with the Center for Labor Economics and Research at the University of Hawaii at Manoa. Bill and Paul, I really feel this has been a an interesting conversation, and I appreciate you coming here to engage in it this morning. Our producer is Susie Roth, our Director of Operations, Jeff Ailadi. Next week, we're going to be talking about legalizing prostitution. There are bills in the legislature right now that would legalize it. We've got some real interesting voices in the community, and I I think you're going to uh uh enjoy hearing the arguments pro and con, and there are a number of arguments in between as well. You've been listening to Pop Radio. I'm Randy Roth. Aloha.

[01:01:52] Speaker 1: Mm-hm.

[01:01:54] Speaker 2: Okay. So, but but the reason [unintelligible — audio glitch] uh if you look at it, it's directly related to construction expenditures that the university has. We developed a sporting complex there that's a pro-sports palace, and we added 3,000 employees to basically take care of it.

[01:02:11] Speaker 1: Well, thanks.

[01:02:12] Speaker 2: A lot of good, it does intro bio classes.

[01:02:15] Speaker 1: Okay. I saw a class there that was 250 students crammed to the wall in Spalding auditorium last week. And only one faculty member and no teaching assistance.

[01:02:24] Speaker 2: And we're out of time. We're out of time. Thank you very much. And I want to thank our our guest, Paul Lister, who until recently was president of the Chamber of Commerce of Hawaii, and Bill Boyd, who's a labor economist with the Center for Labor Economics and Research at the University of Hawaii at Manoa. Bill and Paul, I really feel this has been an interesting conversation, and I appreciate you coming here to engage in it this morning. Our producer is Susie Roth, our Director of Operations, Jeff Ailardi. Next week, we're going to be talking about legalizing prostitution. There are bills in the legislature right now that would legalize it. We've got some real interesting voices in the community, and I I think you're going to uh uh enjoy hearing the arguments pro and con, and there are a number of arguments in between as well. You've been listening to Pop Radio. I'm Randy Roth. Aloha.

[01:02:23] [music outro 381 s]