Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Legislative Management, to which was referred H.B. No. 2231 entitled:

begs leave to report as follows:

The purpose of this bill is to:

The Auditor and the Office of Information Practices (OIP) testified in support of this measure. The Superintendent of Education and the DOH testified in opposition to this measure. The Department of the Attorney General (AG) and the Hawaii State Teachers Association commented on this bill.

Your Committee finds that the issue of confidentiality has prevented the Auditor from conducting a thorough review of concerns regarding the provision of mental health services to Felix class students. During the Joint Senate-House Investigation of the State's compliance with the Felix Consent Decree, the Auditor faced a number of obstacles that prevented her from reviewing confidential student records.

The DOE and DOH, acting on advice of the AG, cited federal laws, such as the Family Educational Rights and Privacy Act (FERPA) and Medicaid statutes to quash the Auditor's request to review student records. Therefore, the Auditor was forced to enter into an agreement that required her to obtain written parental consent to obtain student records. However, many parents refused to grant their permission. As a result, the Auditor was not able to independently verify allegations of fraudulent billing by service providers, including whether the State was being billed accurately for services for specific students at specific times.

Your Committee learned that in 1998 the Auditor did not have any problems obtaining student records from the DOE and DOH. Subsequently, the AG prevented the Auditor from obtaining the records because of the AG's interpretation of federal law. The Auditor also noted that the FERPA law did not change any time since 1998. Further, the Auditor testified that a similar type of investigation in Colorado was not hindered by FERPA.

The AG submitted testimony that this bill raises conflict of interest problems arising from the separation of powers between the Legislature and the Executive Branch since the Auditor would be the authorized representative of the agency from whom the confidential records would be obtained. However, the AG fails to understand that statutory and constitutional authority allows the Auditor to have access to records to perform her auditing function. Your Committee further finds that the Auditor already follows established rules regarding the confidentiality of records with respect to other departments.

Another issue that was raised during the hearing pertained to physical security of the student records. The Auditor testified that all documents are kept in a locked room and shredded when no longer needed. In addition, section 23-9.5, Hawaii Revised Statutes, prevents the disclosure of any working papers, which ensures that confidential materials are only reviewed and handled by audit staff directly involved with the particular audit or study. Therefore, your Committee does not find that physical security is an issue.

Further, OIP assisted your Committee in understanding the issue of privacy. According to OIP, the rights of privacy are "tapped down" considering the scope of the audit and the purpose for which the Auditor obtains records to determine whether services are being delivered pursuant to what has been represented by DOE and DOH. The only way the Auditor can determine that is to actually review those records and perform her sample selection without any hindrance or without having to obtain consents from the subjects of the sample. OIP testified that the rights of these individuals are "tapped down" in that type of situation. Your Committee finds that the Auditor's possession of intimate knowledge does not adversely affect her independence.

Your Committee further finds that the concerns regarding this bill were adequately addressed by the Auditor and that this bill satisfies the federal requirements as interpreted by the AG.

The AG was not present to respond to questions by your Committee. Therefore, your Committee would like to leave it up to your Committee on Judiciary and Hawaiian Affairs to pursue questioning of the AG regarding its objections to this bill.

As affirmed by the record of votes of the members of your Committee on Legislative Management that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2231 and recommends that it pass Second Reading and be referred to the Committee on Judiciary and Hawaiian Affairs.