Special to Hawai`i's H4 | Volume 21, No. 7 | July 1996

The World Wide Web Edition

Small Business News € Table of Contents

Check out the Monthly SBH Calendar of Events!

Cost of Government Day is July 3
New Mutual Insurance Company Replaces Assigned Risk Pool
Legislative Incumbants Now Campaigning
Friends of the Libray Book Sale Announced
Hui Ana Government Workshop
Pulama Ohana Awards Sought

Small Business Views by Sam Slom

Guest Commentaries by SBH Members

GTE Hawaiian Tel Should Be in Hall of Shame
Rich Bashing and Blaming
No Secret To Solving Hawaii's Economic Woes
Small Business - A Tough Business
Are You A Tinkertoy?

Small Business Profile: Helen Rapoza

In 1996, small business owners in America can begin their celebrations a day early. That's because July 3rd marks the date by which they have finally paid for all federal, state and local government spending and the cost of regulation.

Cost of Government Day, an annual project run by the Washington-based Americans for Tax Reform Foundation, is the calendar day, counting from January 1, by which the average American has earned enough in gross income to finance the huge cost of government. The Foundation estimates that in 1996, Americans will work 184.6 days (50.4 percent of the year) for the government and only 181.4 days for themselves and their families.

Just how big has government become? ATRF estimates that Uncle Sam is worth $3.38 trillion in 1996 - that is $13,000 for every man, woman and child in the United States. Of this astronomical total, $1 trillion results from federal and state regulation.

But it is often the overly onerous and sometimes ludicrous array of government regulations that riles small business around the country. The federal government is responsible for more than $739 billion in hidden regulatory taxes this year alone. That translates into $2,800 for every man, woman and child in the United States.

According to Thomas Hopkins, an economist at the Rochester Institute of Technology and Cost of Government Day Advisor, it costs American business $600 billion a year to comply with government regulations. Hopkins also found that because large firms have greater economies of scale, they are able to spread out the cost of compliance, while smaller firms pay these costs much more directly.

The regulatory relief agenda now being pursued in the Republican Congress bodes well for small business. Common sense regulation with cost constraints, as well as some much needed tax relief, may just be the way to ensure we do not have to wait until July 3 next year to enjoy the fruits of our labor.

Michael Kamburowski is Director of Cost of Government Day at the Americans for Tax Reform Foundation, Washington, D.C.

NEW MUTUAL INSURANCE COMPANY REPLACES ASSIGNED RISK POOL

By Lt. Governor Mazie K. Hirono

Whether you're a large or small business in Hawaii, workers' compensation reform is probably one of your top business concerns. This year, a major workers' compensation reform bill passed the legislature with relatively little fanfare and acrimony. Why? Because from the bill's inception, major players such as small businesses and unions, kept an open mind. And, as the bill progressed, it garnered more and more support.

Last month, Governor Cayetano signed this bill into law to create the Hawaii Employers' Mutual Insurance Company (HEMIC) HEMIC will replace the current costly workers' compensation residual market with a private, non-profit, domestic mutual insurance company owned and governed by its policyholder members. HEMIC will begin providing workers' compensation coverage to Hawaii employers on January 1, 1997.

Hawaii's businesses pay among the highest premiums in the country for workers' compensation insurance and the residual market burden is substantial. The residual market, or the assigned risk pool, has increased steadily for the past 10 years from a market share of 3% for policy year 1985 to approximately 35% for 1994. Many local businesses who are unable to self-insure or purchase insurance elsewhere are stuck in the assigned risk pool, where rates tend to be substantially higher.

Under HEMIC, there will be major incentives to keep costs down through loss control and case management because HEMIC must stand on its own to make it. HEMIC will not be able to make up its deficiencies by assessing the other private carriers, as happens under the current residual market program. States like Maine are showing that not only can a non-profit mutual insurance company stand on its own, but that it can flourish.

HEMIC's success will lie in a committed, focused management and with the member businesses who pay the premiums. These businesses will have a large stake in keeping costs down while protecting employees. They will be responsible for verifying that their employees are classified correctly, for establishing a safe workplace and for helping injured workers return to work as quickly as possible. HEMIC also has a fraud prevention program to minimize abuses of the system.

The Lieutenant Governor's Office, on behalf of the administration, has taken an active role in raising public awareness about HEMIC. We worked closely with the House and Senate labor committees, and testified in support of HEMIC at public hearings. A work group was formed to research concerns raised during the hearings.

Within 60 days of signing the bill, the Governor will appoint the initial board of directors, who will serve a one year term. They will hire an administrator who will be responsible for the day-to-day operations of HEMIC. Subsequent board members will be elected by HEMIC's policyholders.

With the right management, HEMIC will not only help small business or businesses in the assigned risk pool, but all businesses. I encourage you to participate in starting this new company off on a solid foundation. We welcome your commitment to making HEMIC work. If you have any questions or want to know how you can get involved, call my office at 586-0274.

LEGISLATIVE INCUMBENTS CAMPAIGN WHILE VOTERS BURN
Could A Special Session Be Possible?

While the public is still fuming about the lack of action by the '96 State Legislative Session which adjourned April 29, most incumbent lawmakers are either on the campaign trail or are vacationing. All 51 members of the House and 12 of the 25 Senators are up for reelection in November.

The Governor wants a limited Special Session to reach a solution to the "no-fault" auto insurance problem, but the Senate and House leadership seem no closer to resolution now than in April. (The Senate version favored the insurance industry, while the House position coddled trial lawyers). Most lawmakers believe that the voters generally have short memories and will not recall the inaction come November.

The Governor may decide to veto some controversial bills by this month's veto deadline. If he does, this could trigger Legislative action for a Special Session this month which might include an override attempt for pet legislation.

Somebody willfully lied to the Governor regarding the 5-year extension of the Employee Payroll Training Tax-which is tacked onto your Unemployment Compensation tax-saying that Hawaii's small business organizations supported it. EVERY business organization opposed the tax initially, five years ago, and EVERY one opposed its extension during the '96 Session. The .005 added tax on payroll was scheduled to sunset at the end of the year. As previously reported in SB NEWS, the bill introduced this year by the Department of Labor, was "killed;" however, it emerged late in the Session as an amendment to an existing house bill and passed. The Governor and DBED&T stood against the tax increase at the beginning of the Session, and it is hoped the Chief executive will veto this measure.

Meanwhile, some hearings do continue at the Capitol. And the new HEMIC work comp option (see story beginning on page 1) requires business-experienced Directors for the mutual corporation.

SBH's Legislative Action Committee is expected to be called back into session late this month to consider current issues as well as to prepare for the '97 Session.

HUI HANA GOVERNMENT PURCHASE CARD WORKSHOP JULY 31

The Directorate of Contracting, U.S. Army Garrison, Hawaii, is presenting a Purchase Card Networking Workshop, as part of its HUI ANA (working together) program, on Wednesday, July 31, 8 am-12 noon, Army Reserve Center, Fort Shafter Flats.

Who Should Attend?

Small businesses with the potential and desire to sell or improve sales to the U.S. Army in Hawaii by accepting Government Purchase Cards, and the government officials with Purchase Cards.

What Is The Purpose?

The goal is to provide an opportunity for both the government officials (purchase cardholders and approving officials) and small businesses to meet and exchange information. This is an excellent chance for businesses to advertise their products and/or services directly to the government officials who purchase them. In addition, the purchase cardholders will have an opportunity to find additional sources for their requirements.

Why?

U.S. Army in Hawaii desires to increase efficiency in procurement process by expanding the Purchase Card Program. The goal is to buy at least 80% of all requirements under $2,500 via purchase cards.

* Seating is limited-on the first come first serve basis. * Coffee and juices will be available on a pay as you go basis. * There is no registration fee for this workshop.

To reserve seats call SBH at (808) 396-1724 to request a copy of the application form.

FRIENDS OF THE LIBRARY BOOK SALE TO BE HELD AUGUST 3 TO 10

The Friends of the Library of Hawaii will hold their 49th Annual Book Sale August 3 - 10th at McKinley High School Cafeteria. The Friends of the Library of Hawaii helps to recycle books to readers of all ages in an effort to promote the joys of reading and life long learning.

The Friends of the Library of Hawaii is a tax exempt, nonprofit organization whose purpose is to promote and support public libraries. The proceeds of the sale go to support public libraries. Since 1952 the "Big Friends" have distributed over $2,518,000 to the Hawaii State Public Library System.

The annual used book sale is the largest of it's kind in the United States. Originally founded in 1879, Hawaii's is one of the oldest and most active Friends of Library groups in the country. Volunteers are always welcome!

If you need additional information, please don't hesitate to contact Caroline B. Dvojacki, Executive Director at 536-4174.

PULAMA OHANA AWARDS SOUGHT

Nomination forms are now being accepted for the 1996 Pulama 'Ohana Awards. This Award recognizes organizations that have developed innovative workplace policies that support employees and their families.

"We hope this award will continue to demonstrate to CEP's in Hawaii the value of family-friendly programs in the workplace," said Dee Jay Mailer, senior vice president and regional manager of Kaiser Foundation Health Plan and Pulama 'Ohana committee chair. "Many companies here have implemented creative programs and have seen positive results such as lower turnover, improved employee morale and fewer absences. Pulama 'Ohana is an opportunity to publicly recognize those organizations."

Both large and small companies are eligible in the State of Hawaii. Nomination forms are available by calling ASK-2000. The awards lunch to honor the winners will be held September 25 at the Ala Moana Hotel. Deadline for application is July 30.