Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Transportation, Military Affairs and Government Operations, to which was referred H.B. No. 1823, H.D. 1, entitled:

begs leave to report as follows:

The purposes of this measure are to provide a general excise tax exemption for sales of goods and services, including contracting, to the State, to change the central services assessment rate from 5% to an unspecified percentage, and to repeal all central service and departmental administrative expense assessment exemptions.

Testimony in opposition to this measure was received from the Department of Business, Economic Development, and Tourism, the Department of Budget and Finance, the Attorney General, the Department of Commerce and Consumer Affairs and its Insurance and Consumer Advocacy Divisions, the Department of Taxation, the Judiciary, the Hawaii Community Development Authority, the Aloha Tower Development Corporation, Hawaii Health Systems Corporation, the High Technology Development Corporation, the Hawaii Hurricane Relief Fund, the Public Utilities Commission, and the Hawaii Tourism Authority. The Department of Land and Natural Resources and the Department of Health submitted testimony expressing concern with this measure, and the Tax Foundation of Hawaii submitted comments.

Your Committee recognizes that this measure will have an impact on state revenues, and that funds that are currently exempt from the central services and administrative expense assessments will be negatively impacted as well. In addition, your Committee recognizes that some of these funds do not utilize state administration, and therefore probably should not be assessed the administrative expense fee.

Your Committee finds that the opposition to this measure is overwhelming and unanimous. However, the Senate companion to this measure was held by your Committee earlier this session based on the same concerns; therefore, your Committee has decided to pass this measure so that your Committee on Ways and Means can review the feasibility and efficacy of the amendments proposed by this measure.

Your Committee amended this measure by delaying its effective date until July 1, 2050, and by making several technical, nonsubstantive amendments for style, and to effectuate the intent of the measure.

As affirmed by the record of votes of the members of your Committee on Transportation, Military Affairs and Government Operations that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1823, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1823, H.D. 1, S.D. 1, and be referred to the Committee on Ways and Means.