STAND. COM. REP. NO. 1608

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 100
                                        H.D. 1
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B.
No. 100, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO THE STATE BUDGET,"

begs leave to report as follows:

     The purpose of this bill is to appropriate operating and
capital improvements program funds to the executive branch for
the 1999-2001 biennium.

                            OVERVIEW

     Hawaii's voting community, just five months ago, sent their
elected officials a compelling message demanding change -- that
government must be more effective in addressing the State's
declining economy, and that government must change to more
efficiently serve the community.  The public's message is that
government must change to meet the current demands, expectations,
and opportunities in our community and economy.

State of the Economy

     After nine years of economic decline, current economic
indicators can no longer be ignored:  Hawaii has had two per cent
fewer visitors last year than in 1991; bankruptcy filings have
soared in 1998 by 30.6 per cent over the previous year; and

 
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Hawaii is ranked forty-ninth out of fifty states in personal
income growth from 1996 to 1997.

     The Council on Revenues, which projects the State's expected
revenues, confirmed your Committee's assessment of the state
economy by lowering the growth rate for fiscal year 1999 from one
per cent to one-half of one per cent.  This has forced your
Committee to reduce its financial plan projections by $42 million
to accommodate this lowering of the revenue estimates.

     In light of these factors, your Committee believes that
state government's role in economic recovery and improving the
efficiency of government services must change now.  Government
must change its basic focus and functions by:

     (1)  Becoming accountable for delivering services to the
          general public in a more cost-effective manner;

     (2)  Becoming entrepreneurial in how we deliver services to
          the general public; and

     (3)  Facilitating Hawaii's economic recovery by supporting
          businesses to compete in the local and global economic
          marketplace -- mainly through the reduction of taxes.

     First, government must be accountable for cost-effective
expenditure of taxpayer dollars based on quantifiable results.
Where possible, government should eliminate duplicative services,
vacant positions, and statutory mandates that restrict managerial
creativity and flexibility; consolidate agencies; and provide
tools and incentives to reduce the size of government.  Through
such bills as S.B. No. 450, which deals with the State's
accounting, procurement, and budgeting systems, and S.B. No. 4,
which establishes a joint legislative task force to tackle
government restructuring, the Senate believes that all
departments can develop cost accounting tools to better predict
and manage budget costs, and create management systems focused on
departmental outcomes.

     In this Senate draft, other examples of actions to increase
departmental accountability include:

     (1)  Consolidating all Felix-Cayetano consent decree-related
          services under a single program I.D. to provide direct
          tracking of all expenditures and insure full compliance
          with the Felix consent decree;


 
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     (2)  Reducing the costs of state office leases when other
          state-owned space is available; and

     (3)  Deferring second year funding for agencies identified
          for consolidation (i.e., DBEDT's marketing and
          promotion branches, or high technology agencies now
          scattered throughout state government).

     Second, government must be entrepreneurial in pursuing
creative and more cost-efficient ways of providing services.
Government must unleash the creative energies of its state
employees to become entrepreneurial and more customer-oriented in
providing services to the public through increased administrative
responsibility coupled with fiscal autonomy and user fee-based
funding where appropriate.

     This means directly tying the users of particular services
with the costs of the service, thereby increasing program self-
sufficiency, and aligning the program service with customer
desires and satisfaction.  Examples of this approach are
reflected in the Senate's actions to raise fees associated with
traffic violations (H.B. No. 1454, H.D. 2, S.D. 2), or the
Department of Commerce and Consumer Affairs' alignment of program
changes with adequate fee-based revenues to support the service.
Your Committee notes that, with respect to Department of Commerce
and Consumer Affairs, or other state agencies like the State
Health Planning Development Agency (which is pursuing fee-based
support for part of its operations), the Senate is willing to
provide greater flexibility to such agencies to help them attain
greater self-sufficiency.

     The same entrepreneurial spirit should apply to federal
reimbursements to the State.  States that stay abreast of federal
grants or competitive opportunities have been able to capitalize
on billions of dollars worth of education, health and human
services, environmental and Department of Justice funding
sources.

     During the past three years, the State of Hawaii has
obtained federal reimbursement of selected medicaid expenditures
through its Federal Maximization Project, which generated over
$15 million in additional federal funds.  Recently, Hawaii
successfully increased its Federal Medicaid Assistance Percentage
reimbursement by one per cent per year (equaling $6-7 million
dollars annually), and its Education Impact Aid reimbursement by
an additional $8 million dollars per year (with retroactive

 
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reimbursements of $15 million credited to the state in early
March).

     In order to increase Hawaii's capacity to pursue more
federal revenue opportunities, your Committee is moving the
Office of Community Services from its present Department of Labor
and Industrial Relations location to the Department of Human
Services; and has provided funding in the amount of $200,000 for
grant-writing and related support.  Placement of the office in
the Department of Human Services is intended to promote a
transition towards a "Fed-Max and Community Services" operation
that serves as the hub of a consortium of state agencies seeking
to pursue additional federal grant opportunities.

     Third, government must reduce taxes to spur an economic
rebound.  Your Committee believes that the business community,
not government, is the key player in turning our economy around.
But government can support the private sector by lowering
business expenses through tax reductions; providing tax
exemptions and incentives for targeted industries and enabling
increased access to needed capital; and empowering the visitor
industry to conduct Hawaii's tourism marketing program.

     The rejuvenation of economies after a tax reduction is well-
documented and has been experienced by a number of states.  A
study by a respected research organization found that generally,
the states that cut taxes, as compared with states that have
increased taxes, saw job growth (10.8 per cent), lower
unemployment rates, income growth (32.6 per cent), higher budget
reserves, and higher demand ratings.  For decades, the general
excise tax (GET) has generated billions of dollars in revenue for
the State.  The distinguishing feature of the GET that makes it
so successful is its "pyramiding" effect, which taxes goods and
services at both the consumer and wholesale levels.  This all-
inclusive system of taxation has provided well for the State, but
this has come at a high price for businesses and individual
citizens.

     Your Committee strongly believes that the best solution to
restoring a vibrant economy is to provide significant tax relief
for taxpayers and to all businesses, both large and small, across
all industries.  Your Committee supported the income tax
reductions during the regular session of 1998, and proposes new
relief and incentives this session.

     Most importantly, your Committee supports the exemption of
exported services and the taxation of imported services in S.B.

 
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No. 44, S.D. 1.  This will level the playing field for Hawaii
service providers.  Your Committee also supports the depyramiding
of the GET on services in S.B. No. 638, S.D. 1.  This will
encourage the economy by reducing the tax burden on business and
freeing dollars for reinvestment in Hawaii.

     Your Committee has also proposed tax incentives intended to
stimulate the economy in the areas of investment capital, call
centers, the health industry, and technology.  In addition, your
Committee has provided for revenue assistance to the counties and
incentives for hotel construction and remodeling.

     Your Committee believes that this tax relief package, in
conjunction with the budget proposed by your Committee, will
establish a strong foundation for Hawaii's economic recovery.


                        EXECUTIVE BUDGET

     At the outset, the FY 2000-2001 Executive Request's proposed
expenditure levels of $3.170 and $3.221 billion for each year of
the biennium reflected total new spending of approximately $133.9
million on top of collective bargaining raises of $194.99 million
approved in 1997.  This meant that, in light of lower revenue
levels anticipated in mid-March, new spending designed to address
Felix consent decree compliance issues would require cutting the
Executive Branch request, as well as existing expenditures.

Setting the Direction

     An in-depth review of programs at the lowest level was
undertaken to develop well-informed, appropriate adjustments
while maintaining the integrity of the programs.

     Departments and Senate subject matter committees were also
encouraged to redirect funds toward training and technology
applications which could produce cost savings, and to recommend
statutory or rule changes in order to free themselves from
perceived unnecessary and costly requirements.

     Your Committee has evaluated all recommendations with great
care and identified the reductions to the Executive Request for
FY 2000-2001 which least disrupt the core mission of government
responsibilities, and which provide for a balanced state budget.


 
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Budget Policies

     The following budgetary policies guided the development of
the Senate's budget.  Your Committee:

     (1)  Denied all new trade-offs and transfers between
          programs, as well as requests to convert temporary
          positions to permanent status unless they were
          necessary to comply with court-ordered consent decrees
          involving the state hospital, the prison system, or in
          education;

     (2)  Eliminated vacant positions that did not provide direct
          services to the public unless they were necessary to
          comply with other court-ordered consent decrees or
          provide services to students in the Department of
          Education or the University of Hawaii;

     (3)  Preserved current funding levels for service providers,
          particularly in health and human services, who serve
          the public directly and provide direct essential public
          services;

     (4)  Selectively increased user fees for public services and
          facilities that were already partially funded through
          varying proportions of user fees and public moneys; and

     (5)  Required agency programs and public facilities that
          have the potential of becoming totally or partially
          self-sufficient in the future to be partially funded
          through user fees for the present.

     With respect to specific subject matter programs, your
Committee makes the following proposals:


Economic Development

     Your Committee recognizes the importance of strategic
investments for support Hawaii's economic development and has
provided funds to support areas such as:  tourism, currently our
State's largest industry; research and new commercial development
for energy, aquaculture, marine biotechnology; high technology
development; and diversified agriculture.

     Your Committee reaffirms its commitment to have the visitor
industry direct tourism marketing moneys under the auspices of

 
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the Hawaii Tourism Authority.  Recognizing that the HTA is just
starting up, your Committee believes that it is premature to
transfer the operations of the Hawaii Convention Center
Authority, and its attendant debt service to the HTA.

     In the area of tourism, your Committee has provided
expenditures of up to $60 million in each fiscal year for the
Hawaii Tourism Authority to plan and coordinate tourism
development.  To support Hawaii's entry in the America's Cup,
$1,000,000 has been provided, to be matched by other sources, to
enhance our State's boat-building industry, promote Hawaii-made
products, and assist in tourism marketing.  And, to assist
visitors who become victims of crime or other adversities,
$113,000 was provided to the Visitor Aloha Society in Hawaii.

     In keeping with its streamlining philosophy, BED 102 was
provided first-year funding only in the biennial and was directed
to report back on how it would streamline its operations,
including the possibility of having services it currently
provides being provided by the private sector.

     Your Committee recognized the development of new research
and commercial development in energy, aquaculture, and marine
biotechnology at the Natural Energy Laboratory of Hawaii facility
by providing additional expenditures to expand its capacity.
Your Committee has also consolidated the State's high technology
agencies under the Special Advisor for Technology Development,
who will be responsible to advise the private sector in
developing the high industry, pursue public-private sector
business partnership,s and promote and market Hawaii's high
technology industry, Hawaii Internet Exchange (S.B. No. 1583,
S.D. 2).  This bill would also establish a Hawaii Internet
Exchange, exempt taxation for Internet commerce, and provide a
tax credit for technology training job creation and investments
in technology businesses.

     Your Committee also funded two capital improvement projects
for film studio production to support film series such as Bay
Watch.

     To support development of diversified agriculture in Hawaii,
your Committee has provided funding of $600,000 for the lower
Hamakua Ditch Irrigation System, almost $1.3 million for the
operation and maintenance of the Waiahole Water System, $75,000
to expand and develop existing and new markets for Hawaiian
papayas, $400,000 for tropical flower and organic farming
research, $180,000 to address declining yield and quality due to

 
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diseases and pests that afflict the taro plant, $100,000 to the
Hawaii Organic Farmers Association to develop local and overseas
markets for Hawaii-grown organic products.


Transportation

     Your Committee views repair and maintenance as an essential
component of public infrastructure.  Therefore, $57.8 million in
FY 1999-2000 and $55 million in FY 2000-2001 in special funds
were provided to the Department of Transportation exclusively for
the purpose of special repair and maintenance projects.

     Your Committee is aware of the traffic congestion problems
during peak hours on our State highways.  Therefore, your
Committee has provided $200,000 in highway special funds and
$800,000 in federal funds to continue the vanpool pilot project.
This ridesharing strategy will reduce the use of fuel, save wear
and tear on the highways, reduce air pollution, and the need for
parking facilities.


Business Development

     In this biennium, the Department of Commerce and Consumer
Affairs continues in its movement toward fiscal self-sufficiency
and insurance regulation reform.  To support these efforts, your
Committee has included the following initiatives in the budget:

     (1)  Consolidation of special funds to allow the department
          greater flexibility in the management of its funds.
          The budget assumes that the Cable Television Fund, the
          Division of Consumer Advocacy Fund, the Financial
          Institution Examiners' Revolving Fund, the Special
          Handling Fund Special Fund and revenues collected by
          the Business Registration and Professional and
          Vocational Licensing Divisions will be combined into
          the Compliance Resolution Fund;

     (2)  Realignment of positions within the various operating
          programs to facilitate better fiscal management and
          oversight; and

     (3)  Development of new sources of revenue to enable
          regulatory programs to be self-supporting.  Of
          particular note is the Insurance Division's effort to
          strengthen insurance regulation with the implementation

 
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          of the continuing education for insurance agents
          program, the health insurance revolving fund, the long
          term care insurance revolving fund, and the motor
          vehicles revolving fund.


Labor and Employment

     In employment, your Committee has focused its attention on
jobs that will serve our State in the next millenium in small
business and other new employment endeavors.

     Your Committee has provided:

     (1)  Resources for the Commission on Employment and Human
          Services (LBR 135) to ensure statewide implementation
          of the Workforce Investment Act (WIA) of 1998; and

     (2)  For full funding of the Consumer Report Card System as
          required by the Hawaii one-stop implementation grant. 


Health

     In the Senate's draft of the budget, the Department of
Health is positioned to utilize a significant portion of the
State of Hawaii's tobacco settlement for such purposes as the
Healthy Start early intervention fund, for which funding up to
$3.5 million in FY 1999-2000 and up to $8.35 million is
authorized from proceeds of the tobacco settlement.

     To provide broader access to rural health care services,
your Committee has also funded such programs as Molokai General
Hospital, Kahuku Hospital, Hana Medical Center, Waianae Coast
Comprehensive Health Clinic, and other neighbor island health
providers.  An $8 million subsidy to the Hawaii Health Systems
Corporation has been appropriated in the first year of the
biennium to assist HHSC in continuing to provide essential
services to neighbor island residents.  Moreover, additional
funding of $500,000 for each year of the biennium for the
medically underserved has been maintained.

     Given the number of medically uninsured in the State, your
Committee provided increased funding of $750,000 for fiscal
biennium 1999-2001 to meet the growing population of uninsured in
the State.  Current levels of funding provide for the care of
approximately 5,000 medically uninsured.

 
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     Funding for emergency medical services for the County of
Hawaii twenty-four hour aeromedical services in the amount of
$273,342 for fiscal biennium 1999-2001 was also provided.


Environment

     Your Committee also recognizes the importance of natural and
cultural resources for residents and visitors by providing for
additional park interpretation expenditures of $1.2 million over
the biennium.  In order to preserve Hawaii's forest watersheds
your Committee provided $425,000 for Miconia eradication on Maui
and the Big Island.  Your Committee provided funding of $225,000
for the establishment and operation of a natural heritage data
and training center to assist in land use planning and to
identify natural areas deserving of protection.


Social Services

     In the human services area, many of the Senate's priorities
are currently reflected in separate bills covering early
childhood, protecting children from abuse, homeless assistance,
and developmentally disabled.

     In the Department of Human Services budget, however, your
Committee has included funding of $506,050 in FY 1999-2000 and
$1,076,035 in FY 2000-2001 to implement the Children's Health
Insurance Program (CHIP).  This program, which will provide
access to health care for uninsured children, requires state
matching funds to draw upon $574,329 in FY 1999-2000 and
$3,169,396 in FY 2000-2001 (almost a full 1:3 match).

     As the State seeks new federal funding sources, one area of
particular promise has been in the Department of Humans Services'
receipt of a higher Federal Medical Adjustment Percentage,
against which Hawaii's level of federal/state match has risen one
per cent to fifty-one percent (federal) against Hawaii's forty-
nine per cent share.  This federal reimbursement will yield
approximately $6 million in additional federal funds per year.

     To help other health and social services agencies pursue
federal funding, your Committee has moved the Office of Community
Services (LBR 903), to the Department of Human Services with
$200,000 for additional technical staff.  It will serve as the
"Fed-MAX" clearinghouse for all state programs seeking to pursue
new federal funding sources, and provide the technical, grant-

 
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writing, and logistical support to programs willing to initiate
new requests for federal funding.

     Your Committee has also created new program I.D., Child Care
Payments (HMS 305) to consolidate the childcare payment portion
for greater efficiencies of operation and responsiveness.  To
increase the number of children in subsidized childcare, the
program the program is using Temporary Assistance to Needy
Families funds that are available for childcare.  Funding of
$11,406,466 in general funds and $16,809,954 in federal funds was
provided for FY-1999 and $16,824,607 in general funds and
$22,409,954 in federal funds for FY-2000.

     Your Committee has provided an additional $1,073,998 in
general funds in FY 1999-2000 and $1,453,879 in FY 2000-20001 for
Payments to Assist the Aged, Blind and Disabled (HMS 202).  These
funds will allow the program to address the projected increase in
the elderly population as well as the increased cost of the
Supplemental Security Income processing fee.


Felix v. Cayetano Consent Decree

     Compliance with the Felix v. Cayetano consent decree has
taken center stage.  Although the consent decree was approved on
October 25, 1994, the State has been slow and ineffectual in
meeting its requirements.  The State, on several occasions, has
admitted to the Court that it was not in compliance.  With the
implementation deadline of June 30, 2000 just fourteen months
away, your Committee finds that the legislature must take
immediate and decisive action.

     The Auditor found in her December 1998 report, that lack of
effective leadership continues to hamper State efforts to comply
with the Felix consent decree.  Additionally, the State does not
clearly and accurately identify funding related to the consent
decree and the DOE's identification of Felix-related expenditures
is unreliable.  Your Committee believes that changes are required
in the way that compliance with the consent decree is managed.

     Your Committee is committed to full compliance with the law,
and providing students with special needs, especially those in
the Felix class, with quality health and educational services.
All executive requests associated with compliance with the Felix
consent decree have been included in the Senate's draft of the
budget.


 
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     In order to improve fiscal accountability and encourage a
leadership mechanism to create a single direction and a clear
chain of operational command, your Committee has consolidated all
funding for services for children with disabilities to the
Governor's office.  Thus, $239.6 million in fiscal year 1999-2000
and $252.8 million in fiscal year 2000-20001 have been
appropriated to GOV 200.  This amount includes all Felix-related
expenditures and all of the DOE's special education programs
since they are not identified separately.

     Additionally, your Committee believes that those closest to
the students, teachers, and administrators in the schools and the
district offices, are in the best position to design and
implement a program to comply with the consent decree.  Your
Committee has provided a mechanism to empower schools and
accelerate implementation within the DOE by allocating funds
directly to school districts on a per-pupil basis.  Finally, your
Committee has provided funds to develop an integrated management
information system as required by the implementation plan.


Lower Education

     The public schools provide the foundation of our democracy.
Raising student achievement is always the top priority.  Your
Committee has provided funding for new facilities, for increased
utilities costs, and the seven additional instructional days,
among other things.

     Due to budgetary constraints, however, funding of all DOE
programs was scrutinized.  Your Committee notes that the BOE/DOE
had recommended elimination of 970 school-based positions or
positions providing direct services to schools, while protecting
all positions in its administrative bureaucracy.  The BOE/DOE
recommendations did not include elimination of a single position
in the State office.  Your Committee has rejected these
recommendations, and instead eliminated vacant positions in the
State office.

     Your Committee also finds that a problem exists in the
State's schools, whereby students who receive free or reduced-
price meals are overtly identified through the current meal
purchase process used by most schools.  In order to provide
greater socio-economic anonymity to students, eliminate many
problems associated with students' handling of money, and
increase the number of students eating, with the belief that
"hungry students cannot learn", your Committee has provided

 
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$511,500 in FY 1999-20000 to accelerate the installation of
electronic point-of-sale meal purchase systems in all of the
Department's schools.  This investment is estimated not only to
provide more students with nutritional lunches, but also yield $2
million per year in increased federal school lunch funding.

Higher Education

     Recent advances in telecommunications, information
technology and the explosive growth of the Internet present
significant new opportunities for the State to develop and
diversify its economy, opening the global market to Hawaii
businesses.  As the University of Hawaii begins its first full
year of autonomy, it too must change as business and workers
alike demand new skills and rapid-response delivery of these
skills.

     Since a number of the Senate's University initiatives are in
separate bills, your Committee's focus has been primarily on
capital improvements and enhancements to new technology areas.
For example, your Committee has:

     (1)  Added funding of $4.9 million for construction of the
          University of Hawaii Institute of Reproductive Biology
          to provide new laboratory research space and over $2.3
          million in repair and maintenance funds for the
          University's systemwide infrastructure;

     (2)  Supported other campuses and outreach centers, with
          major expansion for the four-year campus in Hilo, and
          the University Center in West Hawaii, to enhance the
          University's status as a truly statewide institution;
          and

     (3)  Funded Honolulu Community College's commercial aviation
          training program for $254,079 in FY 1999-2000 and
          $252,976 in FY 2000-2001 recognizing that the
          University has a strong role to play in our economy in
          addition to its obvious contribution in academia; and 

     (4)  Funded the Small Business Development Program by $1.4
          million in FY 1999-2000 to provide increased support to
          small businesses statewide in obtaining technical
          assistance for growth.


 
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Public Safety

     Your Committee recognizes that the prison overcrowding
situation is serious, and has fully funded staffing and
operations for the 20-bed expansion at Maui Community
Correctional and the 168-bed expansion at Oahu Community
Correctional Center.  However, while prison overcrowding and
inmate needs are at the forefront, the Department of Public
Safety must also address other personnel and management issues
that prevent the prison system from achieving all of its intended
results.  Your Committee appreciates the candor with which the
department has reported a significant number of vacancies in the
department.  However, your Committee is concerned that the
existence of the high vacancy count reflects an unworkable
system, and has deleted both the vacancies and funding for the
positions to insure that the legislature and the department
pursue corrective remedies without delay.


Government-wide Support

     An entrepreneurial spirit is only as good as the ability to
communicate and gather relevant information easily and quickly.
A successful government entrepreneur must be technologically
sophisticated to conduct business efficiently and effectively
thereby reducing costs and maximizing taxpayer dollars.  Hawaii
is headed in the right direction with the Tax Department's soon
to be installed Integrated Tax Information System and Department
of Human Resources Development's electronic database.

     The Department of Taxation's focus in FY 1999-2000 is the
implementation of the Integrated Tax Information Management
System (ITIMS), which is a complete overhaul of the department's
computer systems.  When the $53 million project is fully phased,
the Department expects to collect over $25 million in new tax
revenues, starting as early as FY 1999-2000 and FY 2000-2001.
Funding in this biennium's budget includes $6.39 million in FY
1999-2000 and $1.58 million in FY 2000-2001 for staff resources,
computer hardware, software infrastructure, and vendor contract
payments to support the implementation of the system.

     Funding the federal Office of Personnel Management database
system (OMP) with $235,019 in FY 1999-2000 will give the
Department of Human Resources Development, and all users, access
to an electronic nationwide database of occupations and skill
levels.  This database represents the first step toward building
electronic career training and retraining programs, online skills

 
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assessments and online job banks tailored to the needs of Hawaii
employees and job seekers.


                      CAPITAL IMPROVEMENTS

     Your Committee took an extremely conservative approach to
the Senate's Capital Improvements Budget.  With the proposed
issuance of bonds by the Executive Branch, the amount of the
State's debt service would constitute fifteen and one-half per
cent of total general fund expenditures by the year 2003.  This
course of action is unacceptable if the State is to maintain a
strong credit rating.  Consequently, your Committee has reduced
the Executive Budget Request for Capital Improvement Projects
expenditures by approximately $200 million for the biennium.

     Although your Committee has proposed lower expenditures for
Capital Improvement Projects, your Committee notes that important
projects in higher and lower education, health, human services,
and the statewide parks system have been funded.

     In light of increasing demands for school improvements,
repairs, and related needs identified by the Senate, your
Committee has adopted a more regionally-based approach for
authorizing educational construction projects than has been
utilized in recent years.

     Under the Department of Education's present priority matrix
system, construction of approximately $180-200 million per
biennium for new classrooms and related buildings has been the
DOE's most immediate priority.  Another $25 million per biennium
of lump sum funding has been allocated for handicapped access,
portable classrooms, air conditioning, electrical upgrades,
telecommunications wiring, and other miscellaneous expenditures.

     However, as recent news reports pointed out, urgently needed
school repairs often cannot be met within existing repair and
maintenance (R&M) budgets, and the present allocation between new
classroom construction (CIP) and improvements to existing schools
does not adequately meet the needs of these schools.

     Accordingly, your Committee has initiated an approach in
S.D. 1 of the budget which funds $133 million of new schools
construction priorities identified on the DOE priority matrix
system, and then allocates the next $36.7 million toward projects
identified and priority needs from all regions -- including
windward, central, and Honolulu districts -- whose projects merit

 
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equal consideration.  Finally, $23.6 million has been allocated
over FB 1999-2001 for lump sum funding for priority handicapped
access and related needs.

     Since taxpayers from all communities contribute their tax
dollars to pay for educational facilities, the Senate believes
that it is critical to strike a balance between the need for new
classrooms versus existing schools so that older schools are not
shortchanged.  While new schools are generally fully-wired for
computers in the classroom, accompanied by air conditioning and
all of the amenities designed for students' technology needs of
the future, many other schools must struggle to purchase
technology equipment, air conditioning, and make facility
renovations from the schools' own funds.  This shows us that the
current system cannot keep up with meeting the needs of all
schools.  A broader dialogue is necessary to determine how best
to achieve a more equitable distribution of resources.

     Your Committee has further authorized $50 million in revenue
bonds for the Department of Hawaiian Home Lands to allow them to
explore the most innovative ways of utilizing this means of
financing.  Thirty million dollars in revenue bonds has also been
provided to help the Hawaii Health Systems Corporation meet the
demand for badly needed repairs, and aid in expanding revenue-
producing facilities.


                           CONCLUSION

     Your Committee firmly believes that now is the time for
action.  The Senate's position is one of change.  The
accompanying budget and bills will provide the means to
rejuvenate the economy and restructure government to ultimately
prepare Hawaii and its citizens to compete with the rest of the
world in the twenty-first century.
     As affirmed by the record of votes of the members of your
Committee on Ways and Means that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
100, H.D. 1, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as H.B. No. 100, H.D.
1, S.D. 1, and be placed on the calendar for Third Reading.


 
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                                   STAND. COM. REP. NO. 1608
                                   Page 17


                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair


                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
a                                                       HB100 SD1