HB580

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HOUSE OF REPRESENTATIVES	H.B. NO.	580
TWENTY-FIRST LEGISLATURE, 2001
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO GOVERNMENT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that the establishment of an emergency and budget reserve fund is necessary to provide the State with a mechanism to build a financial reserve to be used when there is an emergency or economic downturn, or when there is an unforeseen reduction in revenues.

Act 304, Session Laws of Hawaii 1999, established the emergency and budget reserve fund in chapter 328L, Hawaii Revised Statutes, to receive forty per cent of the proceeds from the tobacco settlement.

The purpose of this Act is to eliminate the emergency and budget reserve fund from chapter 328L relating to health and establish it under chapter 37, Hawaii Revised Statutes, and provide for additional changes. Chapter 37, which addresses state budgetary matters, is a more appropriate chapter for the emergency and budget reserve fund.

SECTION 2. The legislature finds that the Hawaii hurricane relief fund, which was enacted following Hurricane Iniki in 1992 to solve a crisis regarding homeowners' property insurance, has fulfilled its purposes. At the direction of the fund's board of directors, the fund's insurance program will be suspended on December 1, 2001. The fund anticipates suspending its day-to-day physical operations soon thereafter, although the fund structure will remain in existence to be utilized as needed in the future. At the time of the suspension of the fund's operations, the amount expected to be retained in the Hawaii hurricane relief fund's hurricane reserve trust fund, net of current anticipated expenses, is approximately $175,000,000.

The legislature finds that it is in the public interest that moneys remaining in the hurricane reserve trust fund be set aside as savings of the State for future emergencies and thus should be deposited to the credit of the emergency and budget reserve fund. The legislature also finds that the public interest will be served by using the income earned from moneys in the emergency and budget reserve fund to create and fund the Hawaii new century scholarship program at the University of Hawaii to be established under chapter 304, Hawaii Revised Statutes. The income may be used to fund scholarships, stipends, and mandatory fees for Hawaii students who attend the University of Hawaii system.

In the event that a "covered event", i.e., a hurricane, occurs prior to January 1, 2002, the moneys in the hurricane reserve trust fund shall not be transferred to the emergency and budget reserve fund.

SECTION 3. Chapter 37, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . EMERGENCY AND BUDGET RESERVE FUND

§37- Establishment of fund; deposits. There is established in the treasury of the State the emergency and budget reserve fund which shall be a special fund administered by the director of finance.

(a) The legislature may deposit funds from different sources to the emergency and budget reserve fund.

(b) All income earned from moneys in the emergency and budget reserve fund shall be credited to the Hawaii new century scholarship program endowment special fund.

§37- Deposits from tobacco settlement. Of the annual proceeds from the 1998 settlement between the attorney general of the State of Hawaii and the various tobacco companies, forty per cent shall be deposited into the emergency and budget reserve fund.

§37- Cap on the emergency and budget reserve fund. When the balance in the emergency and budget reserve fund exceeds twenty per cent of the general fund revenues at the close of a fiscal year, the governor in the next regular session of the legislature shall propose a bill to provide for the disposition of the excess amount.

§37- Appropriations required; purposes; prohibitions. (a) Expenditures from the emergency and budget reserve fund are meant to be a temporary supplemental source of funding during times of emergency, economic downturn, or unforeseen reduction in revenues. No expenditures shall be made from the emergency and budget reserve fund except pursuant to appropriations. The general appropriations bill or the supplemental appropriations bill, as defined in section 9 of article VII of the Constitution of the State of Hawaii, shall not be used to appropriate moneys from the emergency and budget reserve fund. The governor, through an appropriations bill, may recommend expenditures from the emergency and budget reserve fund by setting forth the purposes, consistent with the purposes listed in subsection (b), the amounts, and the reasons why the appropriations are necessary.

(b) The legislature may make appropriations from the fund for the following purposes:

(1) To maintain levels of programs determined to be essential to the public health, safety, and welfare;

(2) To provide for counter cyclical economic and employment programs in periods of economic downturn;

(3) To restore facilities destroyed or damaged or services disrupted by disaster in any county; and

(4) To meet other emergencies when declared by the governor or determined to be urgent by the legislature.

Any act making appropriations from the emergency and budget reserve fund shall include a declaration of findings and purposes setting forth the purposes, the amounts, and the reasons why the appropriations are necessary and shall require a three-fourths majority vote of each house of the legislature.

(1) To meet expenses of the legislature;

(2) To provide for salary adjustments for officials appointed pursuant to section 6 of article V or section 3 of article VI of the State of Hawaii Constitution and for others whose salaries are directly related to salaries of these officials; and

(3) To fund cost items in any collective bargaining contract.

§37- Report. At least twenty days prior to the convening of each regular session, the director of finance shall submit to the legislature a report of the condition of the emergency and budget reserve fund, including:

(1) For the previous fiscal year: the beginning balance; the amount deposited into the fund; the appropriations made from the fund; the expenditure and encumbrances for each appropriation; the amount, if any, lapsed for each appropriation; and the closing balance; and

(2) For the fiscal year in progress: the beginning balance; the amount deposited into the fund; the appropriations made from the fund; expenditures for each appropriation for the first quarter; estimated expenditures for the remaining three quarters; and the estimated closing balance."

SECTION 4. Chapter 304, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§304- Hawaii new century scholarship program endowment special fund. (a) There is created in the treasury of the State, the Hawaii new century scholarship program endowment special fund. Expenditures from the Hawaii new century scholarship program endowment special fund shall be limited to:

(1) Providing funds to award scholarships, stipends, and mandatory fees to Hawaii residents who graduate from a Hawaii high school with a cumulative high school grade point average of at least 3.0 and who are accepted for admission by the University of Hawaii system; and

(2) Pay all costs incident to the prudent investment of the principal and income deposited in the endowment special fund.

Appropriations from the Hawaii new century scholarship program endowment special fund shall be expended by the board of regents.

(b) The endowment special fund shall be administered by the board of regents, which shall also be responsible for the investment of such moneys.

(c) Scholarship, stipend, and mandatory fee awards for the University of Hawaii system, funded by sums from the Hawaii new century scholarship program endowment special fund, may be made beginning in the fiscal year 2002, in accordance with rules adopted by the board of regents pursuant to chapter 91 to effectuate this section.

(d) Notwithstanding any law to the contrary, revenues derived from private organizations, individuals, and the income derived from the investment of moneys in the emergency and budget reserve fund may be received by the Hawaii new century scholarship program endowment special fund and may be managed and invested pursuant to this section."

SECTION 5. Chapter 431P, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§431P- Use of hurricane reserve trust fund from January 1, 2002. (a) Except as provided in subsection (b), commencing on January 1, 2002, moneys in the hurricane reserve trust fund, net of anticipated expenses, shall be deposited to the credit of the emergency and budget reserve fund.

(b) If a covered event should occur prior to January 1, 2002, then the moneys in the hurricane reserve trust fund shall not be deposited to the credit of the emergency budget and reserve fund.

(c) Upon the happening of a covered event on January 1, 2002 or thereafter, moneys deposited into the emergency and budget reserve fund from the hurricane reserve trust fund or a portion thereof may be removed and re-deposited into the hurricane reserve trust fund."

SECTION 6. Section 36-27, Hawaii Revised Statutes, is amended to read as follows:

"§36-27 Transfers from special funds for central service expenses. Except as provided in this section, and notwithstanding any other law to the contrary, from time to time, the director of finance, for the purpose of defraying the prorated estimate of central service expenses of government in relation to all special funds, except the:

(1) Special summer school and intersession fund under section 302A-1310;

(2) School cafeteria special funds of the department of education;

(3) Special funds of the University of Hawaii;

(4) State educational facilities improvement special fund;

(5) Convention center capital and operations special fund under section 206X-10.5;

(6) Special funds established by section 206E-6;

(7) Housing loan program revenue bond special fund;

(8) Housing project bond special fund;

(9) Aloha Tower fund created by section 206J-17;

(10) Domestic violence prevention special fund under section 321-1.3;

(11) Spouse and child abuse special account under section 346-7.5;

(12) Spouse and child abuse special account under section 601-3.6;

(13) Funds of the employees' retirement system created by section 88-109;

(14) Unemployment compensation fund established under section 383-121;

(15) Hawaii hurricane relief fund established under chapter 431P;

(16) Hawaii health systems corporation special funds;

(17) Boiler and elevator safety revolving fund established under section 397-5.5;

(18) Tourism special fund established under section 201B-11;

(19) Department of commerce and consumer affairs' special funds;

(20) Compliance resolution fund established under section 26-9;

(21) Universal service fund established under chapter 269;

(22) Integrated tax information management systems special fund under section 231-3.2;

(23) Insurance regulation fund under section 431:2-215;

(24) Hawaii tobacco settlement special fund under section 328L-2;

(25) Emergency budget and reserve fund under section [328L-3] 37-__;

(26) Probation services special fund under section 706-649; and

(27) High technology special fund under section 206M-15.5; shall deduct five per cent of all receipts of all other special funds, which deduction shall be transferred to the general fund of the State and become general realizations of the State. All officers of the State and other persons having power to allocate or disburse any special funds shall cooperate with the director in effecting these transfers. To determine the proper revenue base upon which the central service assessment is to be calculated, the director shall adopt rules pursuant to chapter 91 for the purpose of suspending or limiting the application of the central service assessment of any fund. No later than twenty days prior to the convening of each regular session of the legislature, the director shall report all central service assessments made during the preceding fiscal year."

SECTION 7. Section 36-30, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Each special fund, except the:

(1) Transportation use special fund established by section 261D-1;

(2) Special summer school and intersession fund under 302A-1310;

(3) School cafeteria special funds of the department of education;

(4) Special funds of the University of Hawaii;

(5) State educational facilities improvement special fund;

(6) Special funds established by section 206E-6;

(7) Aloha Tower fund created by section 206J-17;

(8) Domestic violence prevention special fund under section 321-1.3;

(9) Spouse and child abuse special account under section 346-7.5;

(10) Spouse and child abuse special account under section 601-3.6;

(11) Funds of employees' retirement system created by section 88-109;

(12) Unemployment compensation fund established under section 383-121;

(13) Hawaii hurricane relief fund established under chapter 431P;

(14) Convention center capital and operations special fund established under section 206X-10.5;

(15) Hawaii health systems corporation special funds;

(16) Tourism special fund established under section 201B-11;

(17) Compliance resolution fund established under section 26-9;

(18) Universal service fund established under chapter 269;

(19) Integrated tax information management systems special fund;

(20) Insurance regulation fund under section 431:2-215;

(21) Hawaii tobacco settlement special fund under section 328L-2;

(22) Emergency and budget reserve fund under section [328L-3] 37-__;

(23) Probation services special fund under section 706-649; and

(24) High technology special fund under section 206M-15.5; shall be responsible for its pro rata share of the administrative expenses incurred by the department responsible for the operations supported by the special fund concerned."

SECTION 8. Section 328L-2, Hawaii Revised Statutes, is amended to read as follows:

"§328L-2 Hawaii tobacco settlement special fund. (a) There is established in the state treasury the Hawaii tobacco settlement special fund into which shall be deposited:

(1) All tobacco settlement moneys; and

(2) All interest and earnings accruing from the investment of moneys in the fund.

The Hawaii tobacco settlement special fund shall be administered by the department.

(b) The fund shall be used for the purpose of receiving and appropriating the tobacco settlement moneys as follows:

(1) Forty per cent shall be appropriated into the emergency and budget reserve fund as established under [section 328L-3;] chapter 37;

(2) Thirty-five per cent shall be appropriated to the department for purpose of section 328L-4; and

(3) Twenty-five per cent shall be appropriated into the Hawaii tobacco prevention and control trust fund under section 328L-5."

SECTION 9. Section 328L-3, Hawaii Revised Statutes, is repealed.

["§328L-3 Emergency and budget reserve fund. (a) There is established in the state treasury the emergency budget and reserve fund which shall be a special fund administered by the director of finance, into which shall be deposited:

(1) Forty per cent of the moneys received from the tobacco settlement moneys under section 328L-2(b)(1);

(2) Appropriations made by the legislature to the fund.

(b) All interest earned from moneys in the emergency and budget reserve fund shall be credited to the general fund.

(c) Expenditures from the emergency and budget reserve fund shall be a temporary supplemental source of funding for the State during times of emergency, economic downturn, or unforeseen reduction in revenues. No expenditure shall be made from the emergency and budget reserve fund except pursuant to appropriations. The general appropriations bill or the supplemental appropriations bill, as defined in section 9 of article VII of the Constitution of the State of Hawaii, shall not be used to appropriate moneys from the emergency and budget reserve fund. The governor, through an appropriations bill, may recommend expenditures from the emergency and budget reserve fund by setting forth the purposes of the expenditures consistent with subsection (d), the amounts, and the reasons justifying the necessity for the appropriations.

(d) The legislature may make appropriations from the fund for the following purposes:

(1) To maintain levels of programs determined to be essential to the public health, safety, and welfare;

(2) To provide for counter cyclical economic and employment programs in periods of economic downturn;

(3) To restore facilities destroyed or damaged or services disrupted by disaster in any county; and

(4) To meet other emergencies when declared by the governor or determined to be urgent by the legislature.

Any act making appropriations from the emergency and budget reserve fund shall include a declaration of findings and purposes setting forth the purposes, the amounts, and the reasons why the appropriations are necessary and shall require a two-thirds majority vote of each house of the legislature.

(e) Appropriations for the following purposes from the emergency and budget reserve fund are specifically prohibited:

(1) To meet expenses of the legislature;

(2) To provide for salary adjustments for officials appointed pursuant to article V, section 6 or article VI, section 3 of the Constitution of the State of Hawaii and for others whose salaries are directly related to salaries of these officials; and

(3) To fund cost items in any collective bargaining contract."]

SECTION 10. There is appropriated out of the Hawaii tobacco settlement special fund the sum of $33,707,886, or so much thereof as may be necessary, for fiscal year 2001-2002 and the sum of $20,203,335, or so much thereof as may be necessary, for fiscal year 2002-2003, to be deposited into the emergency and budget reserve fund. The sums appropriated shall be expended by the department of health for the purposes of this Act.

SECTION 11. There is appropriated out of the hurricane reserve trust fund the sum of $175,000,000, or so much thereof as may be necessary, for fiscal year 2001-2002, to be deposited to the credit of the emergency and budget reserve fund, provided that no "covered event", as that phrase is defined in chapter 431P, has occurred prior to January 1, 2002. The sum appropriated shall be expended by the Hawaii hurricane relief fund for the purposes of this Act.

SECTION 12. There is appropriated out of the Hawaii new century scholarship program endowment special fund the sum of $12,000,000, or so much thereof as may be necessary, for the fiscal year 2001-2002 and the sum of $12,000,000, or so much thereof as may be necessary for fiscal year 2002-2003, to implement the Hawaii new century scholarship program as established under section 304- , Hawaii Revised Statutes. The sums appropriated shall be expended by the board of regents of the University of Hawaii for the purposes of this Act.

SECTION 13. Statutory material to be repealed is bracketed. New statutory material is underscored.

SECTION 14. This Act shall take effect on July 1, 2001; provided that the amendments made to section 36-27, Hawaii Revised Statutes, by this Act shall not be repealed when that section is reenacted on July 1, 2003, by section 9 of Act 142, Session Laws of Hawaii 1998.

INTRODUCED BY:	_____________________________