STAND. COM. REP. NO. 1134

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1198
                                        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 Education and Technology, to which was
referred H.B. No. 1198, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO THE INTEGRATED TAX
     INFORMATION MANAGEMENT SYSTEMS ACQUISITION BY THE DEPARTMENT
     OF TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to create the Integrated Tax
Information Management Systems Special Fund for the operation,
maintenance, monitoring, and improvement of related automated tax
systems.

     Testimony in support of the intent of this measure was
submitted by the Department of Taxation.  The Tax Foundation of
Hawaii submitted comments on this measure.

     Your Committee finds that the contract for an integrated tax
information management system, which has been negotiated by the
Department of Taxation, specifies that the vendor will not get
paid unless there is an increase in revenue collection and/or
cost saving realized from and attributable to the implementation
of the automated tax system.

     This measure would establish a special fund which would be
used solely as a means of paying the vendor.  The special fund is
needed to facilitate timely payments to the vendor, thereby
minimizing interest costs to the State.

 
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     Your Committee has amended this measure by deleting the
contents in their entirety, and replacing them with the contents
of S.B. No. 1171, S.D. 1, its companion Senate measure.  To
address concerns regarding the linkage between the special fund
and the revenue source for payment of the integrated tax
information management system contracts, your Committee has also
adopted the recommendations of the Department of Taxation, and
has additionally amended this measure per that testimony.

     Specifically, these amendments:

     (1)  Clarify the statutory language to allow the Department
          of Taxation to only deposit into the special fund,
          general excise tax revenues as necessary to meet the
          obligations of the Integrated Tax Information
          Management Systems performance-based contract;

     (2)  Limit the amounts transferred to the special fund to
          amounts necessary to meet the obligations of the
          contract, and limit the total amounts transferred to
          the special fund for any fiscal year to the legislative
          appropriation authorized for the fiscal year;

     (3)  Specify that the moneys in the fund are to be expended
          to pay for the contract, and delete reference to
          payments for the operation, monitoring, maintenance,
          and improvement of the system;

     (4)  Amend section 237-31, Hawaii Revised Statutes, to
          include the tax information management systems special
          fund as a deduction from general excise tax revenues.
          This avoids the conflict established by creating a
          special fund without amending that section;

     (5)  Delete the amendments to sections 36-27 and 36-30, as
          unnecessary since the Director of Taxation may request
          moneys up to the limits established for the special
          fund to reimburse any administrative or other expenses;
          and

     (6)  Set a sunset date of July 1, 2004, for this special
          fund to be repealed, to ensure the timely
          implementation of the integrated tax information
          management system.

     As affirmed by the record of votes of the members of your
Committee on Education and Technology that is attached to this
report, your Committee is in accord with the intent and purpose
of H.B. No. 1198, H.D. 1, as amended herein, and recommends that

 
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it pass Second Reading in the form attached hereto as H.B.
No. 1198, H.D. 1, S.D. 1, and be referred to the Committee on
Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Education and
                                   Technology,



                                   ______________________________
                                   DAVID Y. IGE, Chair

 
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