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Hawaii Faces a Showdown over a Payroll Slowdown

A payroll dispute between University of Hawaii faculty and the state that has dragged on for two years is before the courts again. Whatever the outcome, the situation highlights the difficulties in using an accounting gimmick--delaying state employee paychecks--to manage fiscal problems.

A payroll dispute between University of Hawaii faculty and the state that has dragged on for two years is before the courts again. Whatever the outcome, the situation highlights the difficulties in using an accounting gimmick--delaying state employee paychecks--to manage fiscal problems.

In this case, Hawaii imposed a five-day payroll lag for state employee paychecks. Pushing payroll into another fiscal period is commonly used in the private sector and, occasionally, in the public sector. Financially troubled Nassau County, New York, for instance, last year imposed a 10-day payroll lag on its employees.

Hawaii, which has been suffering through a long-term fiscal downturn, used the ploy in 1998 to achieve a one-time savings of $51 million. All the various state employees' unions agreed to the lag except the University of Hawaii Professional Association, which represents 3,100 faculty members. A federal judge ruled that the state did not have the power to unilaterally change the terms of the faculty contract and blocked the state's move. When the contract ran out in 1999, the state tried again to impose the lag and was blocked again, this time by a state court.

Governor Ben Cayetano has refused to enter into collective bargaining with the union unless it gives way on the lag issue. J.N. Musto, executive director of the union, is optimistic that his side will prevail in court and notes that the union won the legal right to strike as of January 29. The union not only wants the state to come to terms regarding the payroll lag but wants a long-delayed pay raise as well.

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