Creates a separate budget preparation and submission process for the University of Hawaii. Recognizes the University of Hawaii as a state agency apart from the executive branch. Removes University of Hawaii employees from the state civil service system. Changes the appointment process for the board of regents.

A BILL FOR AN ACT

SECTION 1. The purposes of this Act are to:

SECTION 2. Chapter 304, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"§304- Administration; budget preparation and submission. (a) The board of regents shall make an annual report to the legislature, at each regular session thereof, of the business of the University of Hawaii and of the administration of the university system throughout the State. The board of regents shall present to the legislature a unified budget, six-year program and financial plan, and variance report for all of the colleges, departments, and programs of the University of Hawaii. The president of the university, who shall be appointed by the board of regents, shall direct the administration of the University of Hawaii and be responsible for the efficient operation of all of its colleges, departments, and programs.

(b) The president of the university shall have the power to:

(c) The budget, six-year program and financial plan, and the variance report of the University of Hawaii shall be submitted by the board of regents to the legislature in accordance with the schedule of submission specified for the governor in chapter 37 and shall contain the program information prescribed in that chapter. By November 1 of each year preceding a legislative session in which a budget is to be submitted, the board of regents shall provide written notification to the governor of the proposed total expenditures, by cost categories and sources of funding, and estimated revenues of the University of Hawaii for each fiscal year of the next fiscal biennium.

§304- Advisory selection commission; board of regents nominees. (a) There is established in the University of Hawaii for administrative purposes an advisory selection commission, which shall provide the governor with nominees for membership on the board of regents. The commission shall consist of eleven commissioners who shall be appointed as follows:

(b) Whenever a vacancy occurs in the membership of the board of regents, the advisory selection commission shall convene to solicit and interview potential nominees, and to produce a list of five nominees for each opening on the board of regents. The advisory selection commission shall forward its list of nominees to the governor within thirty days of the opening of the position. The governor may consider the list of nominees submitted by the advisory selection commission in making the governor's nomination and appointment to the board of regents. The governor's power of appointment shall not be limited by the actions of the commission. All actions of the commission shall be deemed to be advisory.

(c) Proceedings of the advisory selection commission regarding the selection of nominees shall be confidential and shall not be subject to section 92-3 on open meetings. Persons not selected as nominees are not precluded from being solicited, interviewed, and selected as nominees for future openings on the board of regents.

(d) The commissioners shall serve without pay but shall be reimbursed for expenses, including traveling expenses, incurred in the performance of their duties."

SECTION 3. Section 26-4, Hawaii Revised Statutes, is amended to read as follows:

"§26-4 Structure of government. Under the supervision of the governor, all executive and administrative offices, departments, and instrumentalities of the state government and their respective functions, powers, and duties shall be allocated among and within the following principal departments that are hereby established:

SECTION 4. Section 26-11, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The University of Hawaii shall be headed by an executive board to be known as the board of regents.

[The board shall consist of twelve members. No more than six of the members shall be members of the same political party and at least part of the membership of the board shall represent geographic subdivisions of the State.] At least one member shall be a University of Hawaii student at the time of the initial appointment. [This member may be reappointed for one additional term even though the member may no longer be a student at the time of reappointment.]

The board shall have power[, in accordance with the Constitution of the State and with law,] to formulate policy, and to exercise control over the university through its executive officer, the president of the university. The board shall have exclusive jurisdiction over the internal [organization and management] structure, management, and operation of the university."

SECTION 5. Section 26-25, Hawaii Revised Statutes, is amended to read as follows:

"[[]§26-25[]] Services to the judiciary [and], legislature[.], and the University of Hawaii. Any executive department may provide services to the judiciary [and], the legislature, and the University of Hawaii, but nothing in this part and this chapter shall be construed as granting any authority to the governor or any department to exercise control over the organization, programs, functions, operations, and expenditures of the judiciary [and], the legislature[.], and the University of Hawaii."

SECTION 6. Section 26-52, Hawaii Revised Statutes, is amended to read as follows:

"§26-52 Department heads and executive officers. The salaries of the following state officers shall be as follows:

SECTION 7. Section 37-92, Hawaii Revised Statutes, is amended to read as follows:

"§37-92 Proposed general fund appropriations; executive branch; judicial branch[.]; and University of Hawaii. (a) The governor shall submit a plan of proposed appropriations for the State to the legislature which shall accompany the state budget in odd-numbered years and the supplemental budget in even-numbered years. The plan of proposed appropriations shall include the executive budget, proposed grants to private entities, and any specific appropriation measures to be proposed by the executive branch, and estimates of the aggregate proposed appropriations of the judicial and legislative branches of government[.], and the University of Hawaii. In any year in which the plan of proposed appropriations from the general fund exceeds the expenditure ceiling, the governor shall set forth the dollar amount, the rate by which the expenditure ceiling would be exceeded, and the reasons for proposing appropriations in excess of those allowed under the expenditure ceiling.

(b) The proposed appropriations from the general fund for each year of the biennium or each supplementary budget fiscal year for the executive and judicial branches and the University of Hawaii shall not be increased over the appropriations from the general fund for the preceding fiscal year for each branch[,] and the University of Hawaii, respectively, by more than the state growth, except as provided in this section. For purposes of this subsection, the appropriations from the general fund for the executive and judicial branches and the University of Hawaii shall not include any appropriations representing amounts authorized by the legislature under section 37-93(b).

(c) The governor shall submit a plan of proposed appropriations for the executive branch to the legislature which shall accompany the state budget in odd-numbered years and the supplemental budget in even-numbered years. The plan of proposed appropriations shall include the executive budget, proposed grants to private entities, and any specific appropriation measures to be proposed by the executive branch.

(d) The budget documents presented by the governor to the legislature shall include a statement or summary showing (1) the total state personal income for each of the four calendar years immediately preceding the fiscal year for which appropriations from the state general fund are to be made, (2) the appropriations from the general fund for the previous fiscal year, (3) the appropriations from the general fund for the fiscal year in progress, and (4) the general fund expenditure ceiling for the fiscal year in progress and for the ensuing fiscal year or, when necessary, for each fiscal year of the ensuing biennium.

(e) The governor shall also include a statement or summary showing (1) recommended appropriations from the general fund for the executive branch for the ensuing fiscal year or fiscal biennium, (2) actual appropriations from the general fund for the executive branch plus any recommended appropriations from the general fund for the executive branch for the fiscal year in progress, (3) the appropriations from the general fund for the executive branch for the previous fiscal year, and (4) the general fund appropriation ceiling for the executive branch as established by subsection (b) for the fiscal year in progress and for the ensuing fiscal year or, when necessary, for each fiscal year of the ensuing biennium.

(f) The chief justice shall submit a plan of proposed appropriations of the judicial branch to the legislature which shall accompany the judiciary biennial budget in odd-numbered years and the supplemental budget in even-numbered years. The plan of proposed appropriations shall include the judiciary budget, proposed grants to private entities, and any specific appropriation measures to be proposed by the judicial branch.

(g) The budget documents presented by the chief justice to the legislature shall include a statement or summary showing (1) recommended appropriations from the general fund for the judicial branch for the ensuing fiscal year or fiscal biennium, (2) actual appropriations from the general fund for the judicial branch plus any recommended appropriations from the general fund for the judicial branch for the fiscal year in progress, (3) the appropriations from the general fund for the judicial branch for the previous fiscal year, and (4) the general fund appropriation ceiling for the judicial branch as established by subsection (b) for the fiscal year in progress and for the ensuing fiscal year or, when necessary, for each fiscal year of the ensuing biennium.

(h) The board of regents of the University of Hawaii shall submit a plan of proposed appropriations of the University of Hawaii to the legislature which shall accompany the University of Hawaii biennial budget in odd-numbered years and the supplemental budget in even-numbered years. The plan of proposed appropriations shall include the University of Hawaii budget, proposed grants to private entities, and any specific appropriation measures to be proposed by the board of regents of the University of Hawaii.

(i) The budget documents presented by the board of regents of the University of Hawaii to the legislature shall include a statement or summary showing (1) recommended appropriations from the general fund for the University of Hawaii for the ensuing fiscal year or fiscal biennium, (2) actual appropriations from the general fund for the University of Hawaii plus any recommended appropriations from the general fund for the University of Hawaii for the fiscal year in progress, (3) the appropriations from the general fund for the University of Hawaii for the previous fiscal year, and (4) the general fund appropriation ceiling for the University of Hawaii as established by subsection (b) for the fiscal year in progress and for the ensuing fiscal year or, when necessary, for each fiscal year of the ensuing biennium.

[(h)] (j) The governor [or], the chief justice, or the board of regents may propose appropriations from the general fund for the executive or judicial branches[,] or the University of Hawaii, respectively, in excess of those allowed by subsection (b) if the governor [or], the chief justice, or the board of regents sets forth the dollar amount and the percentage change in excess of the appropriations allowed by subsection (b), and the reasons for proposing appropriations in excess of those allowed by subsection (b)."

SECTION 8. Section 37D-1, Hawaii Revised Statutes, is amended by amending the definition of "agency" to read as follows:

""Agency" means the judiciary, the University of Hawaii, any executive department, any independent commission, any board, any authority, any bureau, any office, any other establishment of the State (except the legislature and its agencies), or any public corporation that is supported in whole or in part by state funds, or any agent thereof, authorized by law to expend available moneys."

SECTION 9. Section 40-1, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b) With respect to the executive branch, except [the University of Hawaii and] the department of education, the comptroller shall have complete supervision of all accounts. The comptroller shall preaudit all proposed payments of $10,000 or more to determine the propriety of expenditures and compliance with executive orders and rules that may be in effect. When necessary, the comptroller shall withhold approval of any payment. Whenever approval is withheld, the department or agency concerned shall be promptly notified. With respect to [the University of Hawaii and] the department of education, the comptroller shall issue warrants for the release of funds for the operating costs of [the university or] the department of education[, as applicable,] in amounts and at times mutually agreed upon by the governor or director of finance and the [university or] department of education[, as applicable]; provided:

The [University of Hawaii and the] department of education shall preaudit all proposed payments to determine the propriety of expenditures and compliance with applicable laws, executive orders, and rules as may be in effect. The [University of Hawaii and the] department of education shall make disbursements for operating expenses from the amounts released by the comptroller and maintain records and documents necessary to support those disbursements at times mutually agreed upon by [the university president or] the superintendent of education[, as applicable,] and the comptroller; provided that when requested by the university or department of education, the comptroller shall make all disbursements for the [university or] department of education, as applicable, subject to available allotment. Funds released pursuant to this section shall be deposited by the [university or] department of education[, as applicable,] in accordance with the provisions applicable to the director of finance by chapter 38. Any interest earned on the deposit of funds released pursuant to this section shall be deposited in the state treasury at the end of each fiscal year.

(c) With respect to the judiciary [and], the legislature, and the University of Hawaii, the comptroller shall make available to the judiciary [and], the legislature, and the University of Hawaii the total amount appropriated to each, except that the judiciary [and], the legislature, and the University of Hawaii may request the comptroller's services in maintaining custody of the amount appropriated to each and in making payments therefrom. When such services are requested, the comptroller shall make all disbursements requested by the judiciary [or], the legislature, or the University of Hawaii, but shall not make any disbursement for which no appropriation has been made or which would cause a specific appropriation to be exceeded."

SECTION 10. Section 40-2, Hawaii Revised Statutes, is amended to read as follows:

"§40-2 Accounting systems and internal control; enforcing the use of and inspection of the same. The accounting system installed by the commission on public accountancy under Act 181, Session Laws of Hawaii 1923, as amended by Act 220, Session Laws of Hawaii 1925, for use in the offices of the comptroller, director of finance, departmental and agency services of the State, and the auditors, treasurers, departmental and agency services of the several counties shall be the accounting and reporting systems of the State and counties; provided [that the University of Hawaii may install a different accounting system which shall be in conformity with generally accepted accounting principles as applied to colleges and universities; and provided further] that the department of education may install a different accounting system which shall be in conformity to generally accepted accounting principles. The comptroller shall make such changes and modifications in the accounting system as shall from time to time appear to be in the best interest of the State and counties.

The departments and agencies of the executive branch are respectively charged with the responsibility to maintain an adequate system of internal control and with the further responsibility to see that the internal control system continues to function effectively as designed. The comptroller shall make such investigations and audits from time to time to enforce the use of the accounting system and internal control systems in the executive branch.

The judiciary, the legislature, the University of Hawaii, and each county shall be responsible for the establishment and maintenance of its respective internal control system."

SECTION 11. Section 40-6, Hawaii Revised Statutes, is amended to read as follows:

"§40-6 Approval of business and accounting forms. The comptroller shall determine the forms required to adequately supply accounting and statistical data for the state government. The comptroller shall require heads of departments and establishments of the state government to submit proposed new forms or proposed changes in current business and accounting forms for review and approval before ordering the same printed; except that [the University of Hawaii and] the department of education shall be subject to this requirement only with respect to uniform business and accounting forms of statewide use in the State's accounting system. All standard state forms shall be classified, numbered, and standardized in design, dimensions, color, and grade of paper and recorded in a catalogue of accounting and statistical forms by the comptroller."

SECTION 12. Section 40-51, Hawaii Revised Statutes, is amended to read as follows:

"§40-51 Money drawn only on warrants. Excepting moneys paid for the redemption of bonds of the state debt, and the interest coupons of the same, and for interest on overdue warrants, and drafts against special deposits and for the expenses of the legislature [and], the judiciary, and the University of Hawaii, and payment authorized by the comptroller by means of electronic funds transfers and through automated clearinghouses for the purposes of implementing an electronic benefits transfer system for the department of human services, no money shall be drawn from or out of the treasury except upon warrants, substantially in the form of section 40-52, issued from the comptroller's office; provided that upon request, the comptroller shall provide financial services involving the issuance of warrants on behalf of the legislature [and], the judiciary[.], and the University of Hawaii. Every warrant shall be signed by the comptroller or the comptroller's deputy or by means of any mechanical check signer that may be adopted by the comptroller, and shall be made payable upon such date as may be approved by the director of finance to the order of the person to whom the State is directly indebted."

SECTION 13. Section 40-58, Hawaii Revised Statutes, is amended to read as follows:

"§40-58 In favor of assignees. No assignment of moneys by a person to whom the State is directly indebted shall be effective unless the assignment is first approved by the comptroller or, in the case of [the University of Hawaii and] the department of education, by [their] its respective chief financial [officers.] officer. The comptroller or the chief financial [officers of the University of Hawaii and] officer of the department of education may prescribe the form for an assignment, and may approve the assignment within a reasonable time period if, in their respective discretion, the rights or obligations of the State[, the University of Hawaii,] or the department of education under any contract or other undertaking or under any law, rule, or order by a competent authority will not be prejudiced thereby. Upon approval of the assignment, the comptroller or the [respective] chief financial [officers of the University of Hawaii and] officer of the department of education shall draw a warrant payable to the assignee. Except as to contracts encumbered by the comptroller[, the University of Hawaii,] or the department of education, each expending agency, upon notification of the comptroller's approval of an assignment, shall prepare a claim for payment in accordance with the terms of the assignment."

SECTION 14. Section 40-81, Hawaii Revised Statutes, is amended to read as follows:

"§40-81 Report by agencies receiving special moneys. All state officers, departments, boards, bureaus, commissions, or agencies collecting or receiving any moneys not required by law to be deposited in the state treasury shall report to the comptroller all receipts and disbursements on account thereof for each quarterly period of the calendar year not later than the fifteenth day following the end of each quarterly period on such forms and under such rules as may be prescribed by the comptroller; provided that with respect to all moneys held outside the state treasury by [the University of Hawaii or] the department of education pursuant to the authority granted to [the university and] the department of education by this chapter, [the University of Hawaii and] the department of education shall report to the comptroller all transactions for each quarterly period not later than the fifteenth day following the end of each quarterly period on such forms and under such rules as may be prescribed by the comptroller."

SECTION 15. Section 40-84, Hawaii Revised Statutes, is amended to read as follows:

"§40-84 Petty cash funds; regulations. Whenever the head of any state department, board, bureau, commission, or other agency deems it necessary to have a petty cash fund for the proper transaction of the business of the agency, a written application therefor shall be made to the comptroller setting forth the details covering the purposes and uses of and for the fund. The comptroller, before issuing a state warrant for that purpose, shall determine whether or not the business of the agency warrants the establishment of such a fund, and if the comptroller is satisfied that such a fund is necessary, the comptroller shall issue a state warrant to such agency for an amount as the comptroller shall determine, not to exceed the sum of $100,000, except that this limitation of $100,000 shall not apply to [the University of Hawaii and] the stadium authority.

The comptroller may prescribe such rules as the comptroller may deem necessary for the proper administration and accountability of these funds."

SECTION 16. Section 103F-102, Hawaii Revised Statutes, is amended by amending the definition of "agency" to read as follows:

""Agency" means any department, authority, commission, council, board, committee, institution, legislative body, agency, or other establishment or office of the executive, legislative, or judicial branch of the State, and includes the University of Hawaii and the office of Hawaiian affairs."

SECTION 17. Section 304-2, Hawaii Revised Statutes, is amended to read as follows:

"§304-2 University to be public corporation; general powers. The University of Hawaii is established as the state university and constituted a body corporate. The university, under the direction of the board of regents, shall have the following general powers:

SECTION 18. Section 304-3, Hawaii Revised Statutes, is amended to read as follows:

"§304-3 Regents; appointment; tenure; qualifications; meetings. The affairs of the university shall be under the general management and control of the board of regents consisting of twelve members who shall be appointed [and may be removed] by the governor. The term of each member shall be for [four] six years; provided that the term of the student member shall be for two years. Members may be reappointed; provided that:

The superintendent of education shall serve as an ex officio voting member. Except as otherwise provided by statute, state officers shall be eligible to appointment and membership. Every member may serve beyond the expiration date of the member's term of appointment until the member's successor has been appointed and has qualified. The board [shall], at its first meeting after June 30, shall elect a chairperson and vice-chairperson, who shall serve until adjournment of its first meeting after June 30 of the next year or thereafter until their successors are appointed and have qualified and whose election shall be immediately certified by the board to the chief election officer. The board shall appoint a secretary, who shall not be a member of the board. The president of the university shall act as executive officer of the board. The board shall meet not less often than ten times annually, and may from time to time meet in each of the counties of Hawaii, Maui, and Kauai.

The members of the board shall serve without pay but shall be entitled to their traveling expenses within the State when attending meetings of the board or when actually engaged in business relating to the work of the board."

SECTION 19. Section 304-4, Hawaii Revised Statutes, is amended to read as follows:

"§304-4 Powers of regents; official name. (a) The board of regents shall have management and control of the general affairs, and exclusive jurisdiction over the internal organization and management[,] of the university[.] through its executive officer.

(b) The board of regents shall appoint and may remove an executive officer to be known as the president of the University of Hawaii, and shall set the salary of the president. It may appoint a treasurer and such other officers as it deems necessary. It may authorize any officer, elected or appointed by it, to approve and sign on its behalf any voucher or other document which the board may approve and sign. It may delegate to the president or the president's designee the authority to render the final decision in contested case proceedings subject to chapter 91, as it deems appropriate. It may purchase or otherwise acquire lands, buildings, appliances, and other property for the purposes of the university and expend such sums of money as may be from time to time placed at the disposal of the university from whatever source. All lands, buildings, appliances, and other property so purchased or acquired shall be and remain the property of the university to be used in perpetuity for the benefit of the university. The board of regents, in accordance with law, shall manage the inventory, equipment, surplus property, and expenditures of the university and, subject to chapter 91, may adopt rules, further controlling and regulating the same.

[(b)] (c) The board may charge resident and nonresident tuition fees for regular courses of instruction at any University of Hawaii campus, including any community college.

The board may also charge other fees for special programs of instruction, including fees for the University laboratory school, as well as laboratory fees, course fees, fees for student activities, and an information technology user fee. The board may charge other fees for summer session or evening courses, including differential fees for nonresident students.

The board may waive entirely or reduce the tuition fee or any of the other fees for graduate teaching and research assistants. The board may enter into agreements with government and university officials of any other state or foreign country to provide for reciprocal waiver of the nonresident tuition and fee differential. The board may waive the nonresident tuition and fee differential for selected students from Pacific and Asian jurisdictions when their presence would be beneficial to the university or the State. The board may waive entirely or reduce the tuition fee or any of the other fees for students, resident or nonresident. The board shall determine the percentage of allowable tuition and fee waivers for financial need and other university priorities. These tuition waivers and waivers of the nonresident tuition and fee differential shall be awarded in accordance with guidelines established by the board.

[(c)] (d) The board shall adopt the necessary rules defining residence for tuition purposes herein; provided that the basic rule shall be that a student shall qualify for the resident tuition fee only if the following criteria are met:

[(d)] (e) The board shall develop internal policies and procedures for the procurement of goods, services, and construction, consistent with the goals of public accountability and public procurement practices, but not subject to chapter 103D. However, where possible, the board is encouraged to use the provisions of chapter 103D; provided that the use of one or more provisions of chapter 103D shall not constitute a waiver of the exemption of chapter 103D and shall not subject the board to any other provision of chapter 103D.

[(e)] (f) The board may enter into concession agreements without regard to chapter 102.

(g) The board may enter into health and human services agreements without regard to chapter 103F.

(h) Any law to the contrary notwithstanding, the board may impose fees for dishonored checks written or electronic funds transfers made for charges administered by the university. Fees may include a late payment penalty, interest, and a service fee. The fees collected shall be deposited as a realization of the tuition and fees special fund.

(i) The board shall develop internal policies and procedures for personnel management, consistent with the goals of public accountability and public civil service management, but not subject to chapters 76 and 77, for classified staff currently employed by the university and those employed in the future. However, where possible, the board is encouraged to follow the provisions of chapters 76 and 77; provided that the use of one or more provisions of chapters 76 and 77 shall not constitute a waiver of the exemption of chapters 76 and 77 and shall not subject the board to any other provisions of chapters 76 and 77.

[(f)] (j) The official name of the board shall be Board of Regents, University of Hawaii, and the board shall adopt and use a common seal by which all official acts shall be authenticated."

SECTION 20. Section 304-7, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The board shall cause to be kept suitable books of account wherein shall be recorded each gift, the essential facts of the management thereof, and the expenditure of the income, and a statement of all trust funds shall be included in the annual report to [the governor and] the legislature."

SECTION 21. Section 304-7.8, Hawaii Revised Statutes, is amended to read as follows:

"[[]§304-7.8[]] Appropriations for special and revolving funds of the University of Hawaii. In any fiscal year if the amount of revenues deposited into a special or revolving fund of the university exceeds the amount appropriated from that fund for that year, the president may approve expenditures in excess of the amount appropriated, up to the amount by which revenues for that fund exceed the appropriations from that fund for a fiscal year; provided the university shall submit annually a report to [the governor and] the legislature of all expenditures in excess of each fund's appropriation for each fiscal year."

SECTION 22. Section 304-8, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Moneys appropriated by the legislature for the university shall be payable by the [director of finance,] university upon vouchers approved by the board of regents or by any officer elected or appointed by the board under section 304-4 and authorized by the board to approve such vouchers on behalf of the board. All moneys received by or on behalf of the board of the university shall be deposited with the director of finance, except that any moneys received from the federal government or from private contributions shall be deposited and accounted for in accordance with conditions established by the agencies or persons from whom the moneys are received and except that [with the concurrence of the director of finance,] moneys received from the federal government for research, training, and other related purposes of a transitory nature and moneys in trust, special, or revolving funds administered by the university may be deposited in depositories other than the state treasury[; provided that the university informs the director of finance of the depositories in which moneys from the funds have been deposited, and submits copies of annual statements from each of the depositories in which the moneys from the funds are deposited]. All income from regular credit tuition and tuition related course and fee charges against students shall be deposited to the credit of the University of Hawaii tuition and fees special fund pursuant to section 304-16.5. Income from university projects as defined and described in sections 306-1 to 306-12, may be credited to special or other funds."

SECTION 23. Section 304-8.1, Hawaii Revised Statutes, is amended to read as follows:

"§304-8.1 Research and training revolving fund. (a) There is established a University of Hawaii research and training revolving fund into which shall be deposited one hundred per cent of the total amount of indirect overhead revenues generated by the university from research and training programs. The board of regents of the University of Hawaii is authorized to expend eighty-four per cent of the revenues deposited in the fund for:

(b) The University of Hawaii shall prepare and submit an annual report on the status of the research and training revolving fund to the legislature twenty days before the convening of each regular session. The annual report shall include but not be limited to a breakdown of travel expenses.

(c) Notwithstanding sections 304-10, 304-8.92, and 304-8.96 to the contrary, the board of regents or its designee, may establish a separate account within the research and training revolving fund for the purpose of providing advance funding to meet reimbursable costs incurred in connection with federally financed research and training projects. Any reimbursement received as a result of providing advance funding shall be deposited into the research and training revolving fund to be used for the purpose of meeting reimbursable costs incurred in connection with federally financed projects.

[(d) Revenues deposited into the fund shall not be used as a basis for reducing any current or future budget request or allotment to the University of Hawaii unless the university requests such a reduction.]"

SECTION 24. Section 304-8.4, Hawaii Revised Statutes, is amended to read as follows:

"§304-8.4 Vocational and technical training projects revolving fund. There is established a revolving fund for the vocational and technical training projects of the community colleges and the University of Hawaii at Hilo into which shall be deposited the receipts from fees for services, supplies, and use of equipment provided by or in connection with these projects. Funds deposited in this account shall be expended for vocational and technical training projects, and supplies, equipment, and services related thereto.

The University of Hawaii at Hilo shall report as of the close of each fiscal year to [the governor and] the legislature on the revolving fund's revenues and expenditures for the reported year. These reports shall be submitted not later than twenty days prior to the convening of each regular session."

SECTION 25. Section 304-8.92, Hawaii Revised Statutes, is amended to read as follows:

"§304-8.92 Discoveries and inventions revolving fund. (a) There is established a discoveries and inventions revolving fund into which shall be deposited four per cent of the total indirect overhead funds generated by the university for research and training purposes in the prior fiscal year. Appropriations by the state legislature [subject to the approval of the governor], proceeds from the commercial exploitation of inventions and intellectual property developed at the university, gifts, donations, fees collected, and grants from public agencies and private persons may also be deposited into the fund for the purposes of supporting innovation and research commercialization and the patenting, copyrighting, licensing, and marketing of discoveries, inventions, and technologies developed at the university. The fund shall be used to develop technologies which have potential commercial value, support the administration of technology transfer activities, and facilitate economic development through education and research undertaken at the university.

(b) The University of Hawaii shall provide an annual report to [the governor and] the legislature describing all transactions and activities involved in the administration of the discoveries and inventions revolving fund."

SECTION 26. Section 304-10, Hawaii Revised Statutes, is amended to read as follows:

"§304-10 Loans; advances. The university may borrow from time to time, sums [which in the aggregate shall not exceed $100,000,] from the state treasury; and the director of finance may make such loans to the university, without interest, provided that the loans shall be repaid within the same fiscal year unless extended by the director. In addition to the foregoing, the director may advance funds to the university when required to meet reimbursable costs incurred in connection with federally financed research and training projects[, and provided that such advances shall not amount in the aggregate to more than $100,000 at any time]."

SECTION 27. Section 304-16.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is established the University of Hawaii tuition and fees special fund into which shall be deposited all revenue collected by the university for regular, summer, and continuing education credit tuition, tuition related course and fee charges, University laboratory school fees, and any other charges to students, except as provided by law. Moneys deposited into the fund shall be expended to maintain or improve the university's programs and operations and shall not be[:

Any rule, policy, or action of any agency or individual in contravention of this subsection shall be void as against public policy."

SECTION 28. Section 304-93, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The university may spend out of the state higher education loan fund up to two per cent of the total amount of loans outstanding for collection and administrative expenses. [In accordance with chapter 103D, the] The university may enter into written contracts with collection agencies for the purpose of collecting delinquent student loans. All payments collected, exclusive of a collection agency's commissions, shall revert, and be credited, to the loan fund."

SECTION 29. Section 306-2, Hawaii Revised Statutes, is amended to read as follows:

"§306-2 Powers of the board. In addition to the powers which it now possesses, the board of regents shall have power to:

SECTION 30. Section 306-13, Hawaii Revised Statutes, is amended to read as follows:

"§306-13 Funding and refunding bonds; authorization and purpose. The board of regents may[, with the approval of the governor,] provide for the issuance of revenue bonds (herein referred to as refunding bonds) for the purpose of refunding, redeeming, or retiring at or at any time before maturity or at any time before the first date upon which the outstanding bonds to be refunded may be called for redemption, any bonds issued under this chapter, including any bonds which the holders may consent to be paid or refunded even though the bonds are not matured or are not callable or redeemable, and for the purpose of funding indebtedness not evidenced by revenue bonds but which was incurred for purposes for which revenue bonds may be issued pursuant to this chapter. The rate or rates of interest borne by the refunding bonds shall not be affected or limited by the rate or rates of interest borne by the bonds to be refunded or the indebtedness to be funded. All provisions of this chapter applicable to the issuance of revenue bonds shall be complied with in the issuance of refunding bonds. Refunding bonds shall be sold as provided in section 306-4, or the board may, in its discretion, provide for the exchange of refunding bonds for a like principal amount of outstanding bonds for the refunding of which the issuance of such refunding bonds has been authorized, whether or not the interest rate on the refunding bonds is higher than the interest rate on the bonds refunded thereby."

SECTION 31. Section 661-12, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) As used in this section:

"Agency" means any state or county board, commission, department, or officer authorized by law to make rules or to adjudicate contested cases except those in the legislative or judicial branches[.] or the University of Hawaii.

"Civil proceeding" means any proceeding other than a criminal proceeding or a proceeding before a family court.

"Small business" means an independently owned business with less than fifty employees."

SECTION 32. Section 12 of Act 321, Session Laws of Hawaii 1986, as amended by section 69 of Act 283, Session Laws of Hawaii 1987, by section 7 of Act 371, Session Laws of Hawaii 1989, by section 3 of Act 163, Session Laws of Hawaii 1991, by section 2 of Act 314, Session Laws of Hawaii 1993, by section 22 of Act 8, Special Session Laws of Hawaii 1993, by section 1 of Act 180, Session Laws of Hawaii 1997, and by section 24, Act 115, Session Laws of Hawaii 1998, is amended to read as follows:

"SECTION 24. Section 12 of Act 321, Session Laws of Hawaii 1986, as amended by section 69 of Act 283, Session Laws of Hawaii 1987, as amended by section 7 of Act 371, Session Laws of Hawaii 1989, as amended by section 3 of Act 163, Session Laws of Hawaii 1991, as amended by section 2 of Act 314, Session Laws of Hawaii 1993, as amended by section 22 of Act 8, Special Session Laws of Hawaii 1993, and as amended by section 1 of Act 180, Session Laws of Hawaii 1997, is amended to read as follows:

"SECTION 12. This Act shall take effect on July 1, 1986, and be repealed as of June 30, 2005; [provided that on repeal sections 40-1, 40-2, 40-4, 40-6, and 40-81, Hawaii Revised Statutes, are reenacted in the form in which they read on June 30, 1986, and section 40-58, Hawaii Revised Statutes, is reenacted in the form in which it read on June 30, 1991.] provided that:

SECTION 33. Section 306-5, Hawaii Revised Statutes, as amended by Act 253, Session Laws of Hawaii 2000, section 150 is amended to read as follows:

"§306-5 Covenants in resolution authorizing revenue bonds. Any resolution or resolutions authorizing the issuance of revenue bonds under this chapter may contain covenants as to:

This chapter and any such resolution or resolutions shall be a contract with the holders of bonds issued under this chapter, and the duties of the board and any such resolution or resolutions shall be enforceable by any bondholder by mandamus or other appropriate suit, action, or proceeding in any court of competent jurisdiction."

SECTION 34. Act 253, Session Laws of Hawaii 2000, is amended as follows:

1. By amending section 9 to read:

"SECTION 9. Section 76-11, Hawaii Revised Statutes, is amended to read as follows:

"§76-11 Definitions. As used in this chapter, unless the context clearly requires otherwise:

"Appointing authority" means a department head or designee having the power to make appointments or changes in the status of employees.

"Chief executive" means the governor, the respective mayors, the chief justice of the supreme court, and the chief executive officer of the Hawaii health systems corporation. It may include the superintendent of education and the president of the University of Hawaii with respect to their employees on any matter that applies to employees in general, including employees who are not covered by this chapter.

"Civil service" includes all positions within a jurisdiction that are not exempted by section 46-33, 76-16, or 76-77, or by other law and must be filled through civil service recruitment procedures based on merit.

"Civil service employee" means an employee who has met all requirements for membership in the civil service under section 76-27.

"Class" means a group of positions that reflect sufficiently similar duties and responsibilities such that the same title and the same pay range may apply to each position allocated to the class. "Classification system" means classes of positions arranged in a logical and systematic order.

"Day" means a calendar day unless otherwise specified.

"Department" means any department, board, commission, or agency of a jurisdiction.

"Director" means the head of the central personnel agency for a jurisdiction regardless of title, whether it is the director of human resources development, director of personnel, director of personnel services, [or] personnel director[.], or the chief executive of the University of Hawaii.

"Employee" or "public employee" means any person holding a position in the service of a jurisdiction, irrespective of status or type of appointment; provided that, if the context clearly applies only to an employee who is a member of the civil service, "employee" means a civil service employee.

"Employer" or "public employer" means the governor in the case of the State, the respective mayors in the case of the counties, the chief justice of the supreme court in the case of the judiciary, the board of education in the case of the department of education, the board of regents in the case of the University of Hawaii, the Hawaii health systems corporation board in the case of the Hawaii health systems corporation, and any individual who represents one of the employers or acts in their interest in dealing with public employees. In the case of the judiciary, the administrative director of the courts shall be the employer in lieu of the chief justice for purposes which the chief justice determines would be prudent or necessary to avoid conflict.

"Exclusive representative" means the employee organization certified by the board under section 89-8 as the collective bargaining agent to represent all employees in an appropriate bargaining unit without discrimination and without regard to employee organization membership.

"Jurisdiction" means the State, the city and county of Honolulu, the county of Hawaii, the county of Maui, the county of Kauai, the judiciary, the department of education, the University of Hawaii, and the Hawaii health systems corporation.

"Legislative body" means the legislature in the case of the State, including the judiciary, the department of education, the University of Hawaii, and the Hawaii health systems corporation; the city council in the case of the city and county of Honolulu; and the respective county councils in the case of the counties of Hawaii, Maui, and Kauai.

"Merit appeals board" means a jurisdiction's appellate body for purposes of section 76-14 regardless of whether it is named merit appeals board, civil service commission, or appeals board.

"Position" means a specific job requiring the full or part-time employment of one person.""

2. By amending section 14 to read:

"SECTION 14. Section 76-16, Hawaii Revised Statutes, is amended to read as follows:

"§76-16 Civil service and exemptions. (a) The State Constitution mandates that the employment of persons in the civil service, as defined by law, be governed by the merit principle. The legislature declares that the public policy of the State is that all positions in the civil service systems of the respective jurisdictions shall be filled through civil service recruitment procedures based on merit and that the civil service system of the respective jurisdictions shall comprise all positions, whether permanent or temporary, in the jurisdiction now existing or hereafter established and embrace all personal services performed for the jurisdiction, except employees or positions exempted under this section, or sections 46-33 and 76-77.

(b) The civil service to which this chapter applies shall comprise all positions in the State now existing or hereafter established and embrace all personal services performed for the State, except the following:

The director shall determine the applicability of this section to specific positions.

Nothing in this section shall be deemed to affect the civil service status of any incumbent as it existed on July 1, 1955.

(c) No position shall be exempted from civil service recruitment procedures unless it is in accordance with this section. In addition to the exemptions under subsection (b), sections 46-33 and 76-77, or other law, the director may exempt additional positions if the reason for exempting the position is for the same reason as a position that is included in the list of exemptions for the respective jurisdiction.

(d) The director may provide for an exemption from civil service recruitment procedures if the appointment to the position has a limitation date and it would be impracticable to recruit under civil service recruitment procedures because the required probation period that is part of the examination process cannot be completed by the limitation date. The rules shall not permit additional exemptions from civil service recruitment procedures for the same position when the position will be filled for a duration that would be sufficient to recruit under civil service recruitment procedures and allow for completion of the required probation period.

(e) It is also the public policy of the State that all civil service positions be covered under the classification systems of the jurisdictions, unless the position was exempted from the classification systems by law prior to July 1, 2002 or based on reasons set forth in rules. The rules may include reasons for a temporary exemption of a position, such as the establishment of a new class is pending, or for a permanent exemption when the establishment of a class is impracticable.

(f) The exemption of a position from the classification systems, whether temporary or permanent, or an appointment with a limitation date shall not itself result in an exemption from civil service recruitment procedures. Civil service recruitment procedures based on merit shall be followed for all positions unless exempted under subsection (b), (c), or (d). Applicants referred under civil service recruitment procedures shall be informed if the appointment has a limitation date or if the position is temporarily or permanently exempted from the classification systems.

(g) Each director shall be responsible for ensuring that all exemptions from civil service recruitment procedures or from the classification systems are consistent with this section. With respect to positions exempted under this section prior to July 1, 2002 by any other law, the director shall review these positions to determine whether the positions should continue to be exempt and if so, whether from civil service recruitment procedures or the classification systems, or both. If the director determines that a position should no longer be exempt from either or both based on the intent of this section, the director shall consult with the appropriate appointing authority and its chief executive on removing the exemptions. With the approval of the chief executive, the director shall take whatever action is necessary to remove the exemptions, including submittal of proposed legislation to remove the exemptions.

(h) The director shall establish rules to implement this section that shall be in accordance with the following:

(i) Employees in positions subject to civil service recruitment procedures shall be entitled to become and remain members of the civil service for the duration of their appointments as provided in section 76-27. Employees in positions exempted from civil service recruitment procedures shall not be entitled to membership in the civil service.

(j) Employees in positions that are exempted from the classification plan, whether temporarily or permanently, may be entitled to membership in the civil service as provided in subsection (i).""

SECTION 35. Section 26-11, Hawaii Revised Statutes, is repealed.

["§26-11 University of Hawaii. (a) The University of Hawaii shall be headed by an executive board to be known as the board of regents.

The board shall consist of twelve members. No more than six of the members shall be members of the same political party and at least part of the membership of the board shall represent geographic subdivisions of the State. At least one member shall be a University of Hawaii student at the time of the initial appointment. This member may be reappointed for one additional term even though the member may no longer be a student at the time of reappointment.

The board shall have power, in accordance with the Constitution of the State and with law, to formulate policy, and to exercise control over the university through its executive officer, the president of the university. The board shall have exclusive jurisdiction over the internal organization and management of the university.

(b) The board of regents shall appoint and may remove an executive officer to be known as the president of the University of Hawaii.

The University of Hawaii as heretofore constituted as a body corporate is continued as the University of Hawaii established by this chapter."]

SECTION 36. Except as modified in sections 15 of this Act, no part of this Act shall contravene any part of chapter 76 or 89, Hawaii Revised Statutes, or any collective bargaining agreement that may have been or may be negotiated under chapter 89, Hawaii Revised Statutes.

SECTION 37. This Act applies to any person who has served as a member of the board of regents whether before or after the effective date of this Act.

SECTION 38. Following approval of this Act, the revisor of statutes shall insert the number of this Act in the blank spaces in paragraphs (3) and (5) of section 32.

SECTION 39. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 40. This Act shall take effect on July 1, 2002.