STAND. COM. REP. NO. 1186

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 747
                                        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 Government Operations and Housing, to
which was referred H.B. No. 747, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO STATE GOVERNMENT,"

begs leave to report as follows:

     The purpose of this measure is to require the three
executive departments selected pursuant to section 4 of Act 230,
Session Laws of Hawaii (SLH) 1998, to begin the development of
outcome measures to facilitate the transformation of the State's
accounting and budgeting systems to a performance-based budgeting
system.

     Prior to the hearing, your Committee circulated a proposed
Senate draft.  Testimony was received on this proposed H.B.
No. 747, H.D. 1, S.D. 1.

     The proposed H.B. 747, H.D. 1, S.D. 1, replaced the contents
of the measure as received, with language that:

     (1)  Continues the ongoing work to transform the State's
          accounting system and budgeting system to a
          performance-based budgeting system, and to develop a
          managed process that enables state and county
          governments to implement public-private competition for
          government services;


 
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     (2)  Requires the procurement policy office to adopt rules
          for a managed procurement process that evaluates the
          efficiency, effectiveness, and economy of the purchase
          using uniform accounting standards;

     (3)  Requires all State departments and agencies to identify
          their goals, objectives, and policies to be submitted
          to the Legislature twenty days before the 2000 Regular
          Session, and annually thereafter;

     (4)  Streamlines and improves the delivery of government
          services by restructuring state government;

     (5)  Makes mandatory the Comptroller's present discretionary
          authority to collect assessments from state agencies
          for the risk management revolving fund;

     (6)  Requires the Auditor to contract with independent
          auditors to conduct comprehensive annual financial
          audits of state and county governments;

     (7)  Prohibits state agencies from charging other state
          agencies for services or goods provided to other state
          agencies, that are funded by general funds;

     (8)  Transfers the responsibility for advocacy services for
          persons with developmental disabilities and mental
          illness from the Department of Accounting and General
          Services to the Department of Commerce and Consumer
          Affairs, Office of Consumer Protection; and 

     (9)  Prohibits the Department of Health from issuing a
          permit for a medical waste incinerator or medical waste
          sterilizer that is located within one mile of any
          residential dwelling.

     Testimony in support of the section on managed process was
received from the American Society of Civil Engineers and Common
Cause Hawaii.  Testimony opposed to this section was received
from the State Procurement Office and the Department of Budget
and Finance.

     Testimony in support of the intent of the section on the
State Risk Management Revolving Fund was received from the
Department of Budget and Finance.

     Testimony opposed to the section on interagency charges was
received from the Department of Accounting and General Services
and the Department of Budget and Finance.  Comments on this

 
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section were received from the American Society of Civil
Engineers.

     Testimony opposed to the section on transferring advocacy
services for persons with disabilities and mental illness was
received from the Department of Commerce and Consumer Affairs,
Department of Budget and Finance, the Commission on Persons with
Disabilities, and Protection and Advocacy Agency of Hawaii.
Comments on this section were received from the State Planning
Council on Developmental Disabilities.

     Testimony in support of the one-mile residential ban of
medical waste disposal was received from the Kailua Neighborhood
Board No. 31.  The Board offered testimony opposed to the section
discussing the failure of the Director of Health to act on an
application for a medical waste disposal permit within 180 days.  

Managed Process and Costing Models

     Your Committee finds that the state government's budgeting,
accounting, and procurement systems should serve as effective
tools for the efficient use of scarce resources in pursuing the
goals and objectives of the people of Hawaii.

     Your Committee finds that in Act 230, Session Laws of Hawaii
1998, a special committee was established to begin the task of
transforming the State's accounting, procurement, and budgeting
systems.  This committee was established to develop prototype
models for transforming the budgeting and accounting systems of
three departments. 

     Your Committee finds that currently there is a need to
expand the duties and roles of the managed process committee by
allowing the committee to monitor and review the management
process and develop costing models and costs of conversion to the
private sector.

Uniform Accounting Standards in the State's Procurement Code

     Your Committee finds that the State uses the procurement
code to ensure that state purchases meet certain standards, but
it has thus far not required any type of determination that the
procurement of certain services or goods is the most effective,
efficient, and economical path to take.

     Your Committee finds that the current economic situation
requires the State to have a managed process for procurement and
to adopt standard methods for evaluation to ensure the effective,
efficient, and economical procurement of services.

 
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     Your Committee finds that this measure will help empower
state government in the delivery of competitive and cost
efficient services.  In turn, this will help to assure that
Hawaii's citizens receive the highest quality of government
provided goods, services, and construction at the lowest costs.

     Your Committee finds that using uniform accounting standards
will be the most equitable method of determining whether a
service or function can be provided more efficiently,
effectively, and economically by the government or private
sector.

Government Goals and Objectives

     Your Committee finds that State departments and agencies
should constantly work towards improving the effectiveness and
efficiency of our government.  Strategic planning and development
of goals and objectives are essential for more efficient and
productive operations for government agencies.

     Your Committee finds that the development of goals and
objectives is essential for State departments and agencies to
determine priorities, guide their decisions, and measure the
effectiveness of their programs and services.  

     Your Committee finds that goals and objectives assist the
legislature in evaluating the budgetary needs of departments and
agencies, and therefore every State agency and department should
submit their goals and objectives to the legislature every year. 

Improving Governmental Services

     Your Committee finds that there continues to be a need to
eliminate the duplication of government services and also a need
for government agencies to adapt to the ever-changing needs and
demands of the public they serve.  Your Committee finds that in
order to achieve improved government efficiency and productivity,
restructuring of the government must take place.

     Your Committee finds that studies to improve the
responsiveness and efficiency of state government have been
conducted, including the 1996 study conducted by the governor,
entitled, "Restructuring State Government Services," and reports
ranging from 1974 and 1977 from the commission on organization of
government ("CORE"), to the 1993 report of the interim commission
on government redesign, all of which supported the need to
redesign the delivery of state government services.  Your
Committee finds that these studies need to be re-visited in order

 
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to determine the best means to increase government productivity
and realize savings.

     Your Committee finds that this measure will enable the
structure of our State government to be researched and analyzed
thoroughly.  This will enable the public to actively contribute
to the reorganization and evaluation of our government's
organization.  Consequently, the public will have an improved
understanding of the agencies, departments, and employees that
comprise the State government organization.  Government employees
will benefit from this measure through improved efficiency which
in return will lower their anxiety and increase productivity.

     Your Committee finds that this measure addresses the State's
economic stagnation by enabling state government to enhance its
productivity and to fill the budget gap with the resultant
savings.  This measure encourages re-direction of government
first to a commitment to education of our children and more
efficient delivery of services to stimulate economic growth of
small businesses and re-shape economic development programs.

State Risk Management Revolving Fund

     Your Committee finds that this measure will require the
Comptroller to collect from state agencies their portion of
benefits received under the State Risk Management Revolving Fund.
It additionally requires the Comptroller to prepare a report each
fiscal year to agencies and the Legislature about the amount
appropriated to and collected from the agencies.

     Your Committee finds that collecting from agencies for
benefits received can be an effective tool to hold agencies
responsible for their losses and provide them with an incentive
to control their risks and losses. 

Financial Audit of State and County Government

     Your Committee finds that there is an immediate need for
independent comprehensive annual financial audits of Hawaii state
and county governments.  Annual audits provide management
information which enable the state and county governments to
examine their organization, management, operations, and programs,
and identify opportunities for reorganization, consolidation, and
elimination of duplicated functions.  

     Your Committee finds that audits enable both state and
county governments to develop more effective and efficient
budgets.


 
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     Your Committee further finds that this measure is necessary
to address the public demand for more accountability from state
government and to eliminate government waste, fraud or the
excesses that have plagued the administration for many years, and
will ultimately reduce government waste and enhance government
spending.

     Testimony in opposition of this measure stated that
requiring annual audits of all state and county governments
duplicates the state and county government audits which occur
every year and is too costly.  However, your Committee finds that
in order to ensure an objective and effective audit, each audit
should be conducted by one or more independent auditors.
Additionally, the money saved by identifying inefficient and
wasteful government operations through the audit process
justifies the expense of conducting annual audits of Hawaii state
and county governments.

State Agency Charges To Other State Agencies

     Your Committee finds that in order to improve government
efficiency and productivity, agencies should not charge each
other for goods and services.

     Your Committee finds that limiting the applicability of this
measure to goods and services funded by general funds will not
jeopardize special funds that State agencies rely on to maintain
government programs and services.  

Transfer of Advocacy Services for Persons With Developmental
Disabilities and Mental Illness

     Your Committee finds that currently, the state designated
department that provides advocacy services to persons with
developmental disabilities and mental illness is the Department
of Accounting and General Services (DAGS).

     Your Committee finds that DAGS administers a grant-in-aid to
the Protection and Advocacy Agency of Hawaii in the amount of
$210,000 for fiscal year 1999, to provide advocacy services for
people with developmental disabilities, mental illness and other
disabilities.
  
     Your Committee finds that DAGS has no expertise or knowledge
to effectively monitor and oversee a disabled advocacy agency.
As a result, there are no safeguards in place to ensure grant
money is effectively being used for its intended purpose.  


 
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     Your Committee finds that the Civil Rights Commission is a
more appropriate agency to administer advocacy services because
its responsibility is to protect the interests of the public in
the State.  The Civil Rights Commission protects these interests
by investigating alleged violations, holding hearings, commencing
civil action in circuit court to seek appropriate relief, and
ordering appropriate legal and equitable relief when a violation
is found. 

Medical Waste Facilities

     Your Committee finds that there are recorded incidents of
men, women, and children becoming ill after breathing the gases
emitted by a medical waste facility.  This type of waste also
employs the use of heavy trucks and equipment, which is not
acceptable in residential environments.  

     Your Committee further finds that in the interest of the
health and safety of the State, public hearings and environmental
impact statements should be required before any permit or renewal
of permit is issued for medical waste facilities.

     Your Committee further finds that in the interest of the
health and safety of the State, public hearings and environmental
impact statements should be required for current holders of
medical waste facility permits under sections 342B-24 and 342H-4,
Hawaii Revised Statutes, before July 1, 2000.

     Your Committee has amended the measure, as received, by
replacing the contents with the proposed H.B. No. 747, H.D. 1,
S.D. 1, with the following amendments:

     (1)  Replacing the Office of Consumer Protection with the
          Civil Rights Commission as the agency to administer
          services for the disabled;

     (2)  Eliminating the residential one-mile ban of medical
          waste facilities and replacing it with a requirement
          that an environmental impact statement and public
          hearing be held before a permit or renewal of permit is
          issued for a medical waste facility; and 

     (3)  Technical, nonsubstantive changes for clarity and
          preferred drafting style.

     As affirmed by the record of votes of the members of your
Committee on Government Operations and Housing that is attached
to this report, your Committee is in accord with the intent and
purpose of H.B. No. 747, H.D. 1, as amended herein, and

 
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recommends that it pass Second Reading in the form attached
hereto as H.B. No. 747, 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 Government
                                   Operations and Housing,



                                   ______________________________
                                   ROD TAM, Chair

 
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