CONFERENCE COMMITTEE REPORT NO. 134

                            Honolulu, Hawaii
                                            , 2000

                            RE:   H.B. No. 1900
                                  H.D. 1
                                  S.D. 1
                                  C.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Conference on the disagreeing vote of the
House of Representatives to the amendments proposed by the Senate
in H.B. No. 1900, H.D. 1, S.D. 1, entitled:

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

having met, and after full and free discussion, has agreed to
recommend and does recommend to the respective Houses the final
passage of this bill in an amended form.

                        GENERAL OVERVIEW

     As our voyage into the new century begins, it is becoming
clear that the State of Hawaii is heading in the right direction.
Positive indications for the future of our economy, combined with
renewed dedication to educating our children and caring for those
in need, are signs that the course we have charted has led us out
of the stormy seas of the last decade.


 
 
 
 
 
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Economic Backdrop

     After ten years of economic stagnation, Hawaii's economy is
finally showing signs of recovery.  Several leading economic
indicators support this claim, including increases in personal
income and visitor arrivals and decreases in unemployment claims
and bankruptcy filings.  Of particular note is the state
unemployment rate for March 2000, which is below the March 1999
rate by more than a percentage point.

     Despite these recent signs of strength, Hawaii's dependence
on economic growth in Asia and the mainland United States still
makes our economic future uncertain.  Unfortunately, the Japanese
economy continues to struggle, although there is long-term
expectation of growth in Japan.  In addition, recent volatility
in U.S. equity markets demonstrates that the American economy is
susceptible to economic shocks. 

     Thus, while a slowly expanding Hawaii economy has generated
additional revenues as evidenced by two upward revisions in state
tax revenues by the Council on Revenues, future economic
prosperity is far from certain.  For this reason, your Committee
on Conference remains cautiously optimistic.


Budgetary Approach

     These modestly increased revenues enabled your Committee on
Conference to focus on a broad, but prudent, range of initiatives
that demonstrate an investment in our future, a dedication to
providing for basic needs, and a continued commitment to
improving government operations.  

     Your Committee on Conference has made a concerted effort to
invest in our future by devoting additional funds to the
Department of Education (DOE) and the University of Hawaii (UH),
as well as making efforts to spur long term economic stability.
Simultaneously, your Committee on Conference has remained
dedicated to providing for the basic needs of our citizens with
increased funding for the Department of Health (DOH), as well as
the Department of Human Services (DHS).  Finally, your Committee
on Conference has continued the drive to improve the provision of
government services and support the ever-growing number of
programs moving towards self-sufficiency.

     In light of this, your Committee on Conference has
recommended an increase of the general fund executive budget in
fiscal year 2001 from $3,094,546,973 to $3,104,504,134  an
increase of $9,957,161 or 0.3%.  For all means of financing, your
Committee has proposed a total expenditure level of
$6,367,979,192 for fiscal year 2001.

 
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                        BUDGET HIGHLIGHTS

EDUCATION

Department of Education

     Although the outlook for Hawaii's economy is optimistic,
uncertainty still exists.  Consequently, the need to invest in
Hawaii's future is that much greater.  This investment
necessitates a commitment of resources to our public school
system.  As such, your Committee on Conference recognizes the
importance of smaller class sizes and has therefore appropriated
$2.6 million to reduce the student-teacher ratio for the most
formative years of a child's life from kindergarten through the
second grade.  To further reduce class size, your Committee on
Conference has also set aside resources for 275 additional
regular and special education teachers for all grade levels,
statewide.

     To assist all teachers and students, your Committee on
Conference is recommending an additional cash infusion of $3
million directly to our schools.  These funds will be spent at
the discretion of each school to address their unique needs from
technology infrastructure to textbooks to basic classroom
supplies. 

     To further aid teachers in classroom instruction, $2.7
million has been appropriated for the Hawaii Content and
Performance Standards.  These funds will complete the work on the
benchmarks teachers use to guide classroom instruction and
develop assessments that will measure student performance
statewide.  These standards and assessments are necessary to
ensure not only the instruction of a consistent curriculum but
also to hold both teachers and students to high standards.

     In addressing the need to improve our educational
infrastructure, $2.8 million was provided for equipping and
staffing new schools and facilities.  These funds are in addition
to the $30 million in general funds (S.B. 3026, C.D. 1) and $15
million in general obligation bonds that has been allocated for
the general repair and maintenance of our public schools
statewide.  This devotion of funds will not only ensure that
facilities are safe and adequate for our children, but will also
create an environment conducive to learning.

     With regard to broader educational concerns, your Committee
on Conference appropriated $5.7 million for an entire array of
educational programs, including English for Second Language
Learners, Hawaiian Language Immersion, and programs for at-risk

 
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students.  Your Committee on Conference also saw fit to increase
the budget of the public library system by $1.25 million for the
purchase of books and materials.   

     Finally, in accordance with the requirements of the Felix v.
Cayetano Consent Decree, $4.6 million was appropriated to improve
educational services to children with physical and mental
impairments.  These resources will be used to employ additional
speech pathologists, school psychologists, educational
assistants, and resource teachers to meet the special learning
needs of these children.

     In sum, your Committee on Conference has demonstrated a
clear commitment to investing in our future by approving an
additional $18 million in the operating budget for the education
of our young people, a full $6.7 million more than originally
requested by the Governor. 


University of Hawaii

     Despite the large investment in lower education, your
Committee on Conference has not overlooked the necessity of
investing in higher education as well.  To this end, your
Committee on Conference has appropriated an additional $8 million
for the University of Hawaii, which is $3.4 million more than
requested by the Governor.  These additional resources target two
specific areas: maintaining basic educational infrastructure and
improving instructional capacity in advanced technology.

     To improve the educational infrastructure of UH, your
Committee on Conference has appropriated $1.3 million for the
basic system-wide needs of the community college system.  In
addition, $15 million in general funds (S.B. 3026, C.D. 1) and $5
million in general obligation bonds have been provided to ensure
that the physical infrastructure of the University is functional,
architecturally sound, and in compliance with building and safety
codes.

     To build instructional capacity in advanced technology, your
Committee on Conference has appropriated $1 million for the
Pacific Center for Advanced Technology Training for the UH
Community Colleges.  This will better prepare students to enter
the high technology workforce.  Furthermore, to specifically
conduct research into wireless communication, $1 million was
approved for the UH School of Engineering to establish the Hawaii
Center for Advanced Communications.  Your Committee on Conference
also provided another $1 million for the business school to
purchase computer hardware and develop course material for an e-
commerce curriculum.

 
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     In the area of medical technology, $1 million was provided
to the John A. Burns School of Medicine to establish a molecular
genetics program focused on disease prevention.  In addition to
the necessary equipment, funds will be used to employ faculty who
are recognized as pioneers in their fields, which in turn will
attract additional funds to UH through external grants.

     Finally, your Committee on Conference has also provided $2
million to improve a wide range of educational programs at UH-
Hilo, including biology, marine science, astronomy, agricultural
research, nursing, psychology, and workforce training.


                           BASIC NEEDS

Department of Health

     In addition to investing in our future through
appropriations for higher and lower education, your Committee on
Conference also deemed important the basic needs of our citizens,
particularly those who live in isolated, rural areas.

     With this concern in mind, your Committee on Conference has
appropriated over $2.5 million for nonprofit community health
care facilities, such as Kahuku Hospital, Molokai General
Hospital, Hana Health Center, and the Waianae District
Comprehensive Health Center.  Recognizing the poor financial
situation of the Hawaii Health Systems Corporation, your
Committee on Conference also appropriated $13 million to Hawaii's
only network of public hospitals.  These health care facilities
are the safety net for those living in rural areas.

     Your Committee on Conference, dismayed with the ever-growing
number of people without health coverage, provided $800,000 for
primary health care for the uninsured.  This appropriation is
over and above the current $1.3 million budget and covers an
additional 4,800 uninsured people.

     Cognizant of its responsibility to provide adequate levels
of health care for Hawaii's special needs population children and
adults who are mentally ill and developmentally disabled, your
Committee on Conference has set aside funds in three distinct
areas.  First, your Committee on Conference has appropriated an
additional $2 million to provide child and adolescent mental
health services and to achieve compliance with the Felix v.
Cayetano Consent Decree.  

     Secondly, your Committee on Conference provided $4.2 million
in response to the Makin vs. State of Hawaii lawsuit.  These
funds will reduce the waitlist for home and community-based

 
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waiver services for persons with developmental disabilities or
mental retardation.  This appropriation will bring the total
number of clients served to 1,200.

     Finally, your Committee on Conference recognized the
longstanding nature of the Department of Justice Settlement
Agreement concerning the Hawaii State Hospital.  In light of
this, your Committee on Conference has increased the Adult Mental
Health Division budget by $23.5 million for community-based
mental health services for persons with serious mental illnesses.


Department of Human Services

     Your Committee was also sensitive to the needs of the most
vulnerable segments of our population and has allocated resources
to ensure that their basic needs are adequately met.

     To simultaneously protect those who cannot work and to
promote self-reliance, responsibility, and family stability, your
Committee on Conference has maintained $122 million in all means
of financing for the Temporary Assistance to Needy Families
(TANF) and Temporary Assistance to Other Needy Families (TANOF)
financial assistance programs.

     Your Committee on Conference has also maintained funding
levels of over $600 million for the state's medical assistance
payment programs to provide medical, dental, and other
professional health care services to those in need.

     In addition to these services, DHS is also responsible for
safeguarding the welfare of all children.  When the removal of a
child from the child's home is deemed necessary for safety
reasons, it is essential that the child be placed in an
appropriate and safe environment.  To this end, your Committee on
Conference has provided $3.2 million for out-of-home child
placement costs, which includes adoption and foster care.

     In continuing your Committee on Conference's dedication to
the safety of children, $420,000 has been appropriated for the
Blueprint for Change program.  This program will provide for the
basic needs of Hawaii's children by establishing community-based
services for families considered to be at-risk for child abuse
and neglect.

     Along with the growing needs of our children, the needs of
Hawaii's elderly have also grown.  The number of elderly who need
long-term care will continue to grow as the median age of the
population increases.  To enable Hawaii's elderly to remain in

 
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their homes and to prevent or delay institutionalized care, your
Committee on Conference has provided an additional $2 million for
home-based care services.


ECONOMIC DEVELOPMENT

     In an effort to improve the state economy, to build a sound
foundation from which to invest in education, and to provide for
the basic needs of our population, your Committee on Conference
has allocated resources to retain and improve our competitiveness
in the tourism industry as well as to diversify our economic
base.

     To improve Hawaii's position in the tourism industry, your
Committee on Conference provided an additional $1 million for the
Hawaii Tourism Authority.  These funds will be used for marketing
and product development programs in order to maintain Hawaii's
status as one of the top destinations for travelers worldwide.  

     Recognizing the need to incubate an entrepreneurial spirit
in the islands, an additional $2.5 million for the Hawaii
Strategic Development Corporation (HSDC) was appropriated.
Through various partnerships with venture capital firms, HSDC
will be able to increase investment in Hawaii-based companies.

     Even with investment and tax incentives for high technology
firms being the focus of legislative initiatives, your Committee
on Conference still recognizes the importance of providing
support for those who have been displaced by the decline of the
sugar and pineapple industries in Hawaii.  To this end, your
Committee on Conference supports economic diversification through
the continued funding of the Community-Based Economic Development
Program (CBED).  Through CBED support, hundreds of business
startups and expansions are expected statewide.  This program
will continue to provide financial and technical assistance to
those areas transitioning to a more diversified economy.

     With their large populations and close proximity to Hawaii,
the emerging economies of Asia present a substantial opportunity
for local growth and development.  One of these opportunities is
tapping Asia's infrastructure development markets with the
expertise of local architecture, engineering, and planning firms.
To aid in this process, $175,000 has been set aside for obtaining
matching funds from the federal government to establish the
Center for Asia-Pacific Infrastructure Development (CAPID).
CAPID will provide links and will facilitate business for small
to medium-sized local firms by assisting in the process of making
initial contact and fostering relations with foreign business
partners.


 
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GOVERNMENT OPERATIONS

     To complement efforts to increase economic growth and
resulting tax revenues, your Committee on Conference has
recommended budgetary measures to maximize existing streams of
revenue.  The Office of the Attorney General was appropriated $4
million to allow for aggressive litigation efforts.  Recent
examples of success in this area include an antitrust lawsuit
against gasoline dealers resulting in a substantial partial
settlement of millions of dollars and legal action against
asbestos manufacturers that should result in a settlement of at
least $30 million.

     In addition to these efforts, your Committee on Conference
has also supported proposals that encourage efficient and
effective use of current revenue levels by promoting self-
sufficiency and improving the delivery of services.  The move
towards self-sufficiency calls for state agencies to sustain
their operations through use of non-general funds, thereby
freeing up general funds that may be used to support not only
existing programs but also new initiatives.  Divisions striving
to achieve self-sufficiency include the Land Division under the
Department of Land and Natural Resources and the entire
Department of Commerce and Consumer Affairs.

     Your Committee on Conference also approved the transfer of
the student transportation program from the Department of
Accounting and General Services to the Department of Education.
This will advance the State towards the goal of optimizing
government services while minimizing the costs of these services.
This transfer improves program coordination and brings revenue
and cost accountability for student transportation services into
one department.

     Finally, in efforts to further improve services to the
public, your Committee on Conference has appropriated $840,000 to
complete the modernization of the document recordation systems at
the Bureau of Conveyances.  This will improve efficiency and
alleviate the problems caused by the time consuming and labor-
intensive process of manual document recording done presently. 


                           CONCLUSION

     This is a responsible budget.  It not only meets the needs
of the State, but also allocates resources to those areas of
highest priority such as education, health, and human services.
It also promotes improved government operations, all while
ensuring that the State lives within its means.  With this
budget, your Committee on Conference trusts that the State is

 
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equipped to stay the course of fiscal prudence that your
leadership has charted.

     As affirmed by the record of votes of the managers of your
Committee on Conference that is attached to this report, your
Committee on Conference is in accord with the intent and purpose
of H.B. 1900, H.D. 1, S.D. 1, as amended herein, and recommends
that it pass Final Reading in the form attached hereto as H.B.
1900, H.D. 1, S.D. 1, C.D. 1.

                                   Respectfully submitted on
                                   behalf of the managers:

  ON THE PART OF THE SENATE        ON THE PART OF THE HOUSE
                                   
                                   
                                   
                                   
______________________________     ______________________________
CAROL FUKUNAGA, Co-Chair           DWIGHT Y. TAKAMINE, Chair




______________________________
ANDREW LEVIN, Co-Chair