Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 1626 entitled:

begs leave to report as follows:

The purpose of this measure is to earmark a general excise tax increase for educational purposes.

The bill also exempts food and drugs from the general excise tax.

Your Committee is very concerned with the state of our volatile economy. With our country on the brink of war and a stock market and economic indicators that are less than reassuring, prudence dictates budgetary caution. Caution has become all too familiar in the face of shrinking budgets, across-the-board cutbacks and the battle cry of the 90s, "doing more with less". Although caution may be prudent, excessive caution can be debilitating. If the State is to move out of the economic doldrums that have plagued us for over a decade, we must be willing to invest in the future of the State and provide the necessary resources and funds to do so.

This bill addresses the greatest investment our State can make in the future of Hawaii: the education of our children. Only with a quality education, can children grow and develop to ultimately compete and excel in a dynamic and complex global economy. To achieve this objective, this bill recommends a general excise tax increase to directly fund needed improvements in public education. Such proposals are not made frivolously, but are made with due consideration of the budgetary needs of public education in the State and the overwhelming support of the public, who believe that a quality education is worth supporting.

To adequately address the budgetary concerns of education in the State, your Committee has amended the bill by providing a one-half per cent increase in the general excise tax that will generate enough funds to designate $70 million per year to lower education, and $10 million to higher education. Of the $70 million to lower education, it is the intent of your Committee that these funds be allocated on a per pupil basis which should cost approximately $42 million. The balance of the $70 million will be legislatively appropriated to restore a $3 million budget restriction by the executive branch, provide $20 million for school repair and maintenance, with each school receiving no more than $500,000, and with the remaining funds, finance various education proposals by the Legislature.

To offset the increase in the general excise tax, your Committee has amended the bill by removing references to the food and drug general excise tax exemptions, and instead has provided a food tax credit of up to $100 that is based on a taxpayer's income.

Your Committee has also amended the bill by providing a repeal date of December 31, 2013

Finally, your Committee notes that this bill is a work in progress. Through the remainder of the session, your Committee intends to study and consider proposals expressed during public hearings, to expand the source of funding to possibly include income tax and other sources and to possibly raise the general excise tax by another one-half per cent to address the concerns of human services programs in the State.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1626, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1626, S.D. 1, and be placed on the calendar for Third Reading.