Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Conference on the disagreeing vote of the House of Representatives to the amendments proposed by the Senate in H.B. No. 100, H.D. 1, S.D. 1, entitled:

having met, and after full and free discussion, has agreed to recommend and does recommend to the respective Houses the final passage of this bill in an amended form.

Your Committee on Conference has labored to craft a balanced budget that is responsive to the needs and demands of our communities, focusing primarily on improving the quality of life for the people of Hawaii. Inherent in this approach is the need to be mindful of the interrelationships at play between the State and the federal government and how what happens at the federal level impacts the State's role in providing services. This approach also recognizes the pressing needs of our communities, particularly in the areas of education, controlling the crystal methamphetamine or ice epidemic, supporting the most vulnerable people in our communities, and ensuring a sustainable future for our children. The budget crafted by your Committee on Conference:

• Continues to support education system reform efforts initiated by Act 51, Session Laws of Hawaii 2004;

• Continues efforts to stem the ice epidemic by providing the resources needed to meet the objectives established by Act 40, Session Laws of Hawaii 2004;

• Provides additional funding for homeless programs and the general assistance population;

• Ensures that valuable green space will be preserved and protected for future generations;

• Supports the needs of the University of Hawaii system;

• Assists the counties by providing money to maintain their roads; and

• Honors the sacrifices being made by the men and women of the Hawaii National Guard.

Despite strong economic indicators for Hawaii, and the strong revenue projections made by the Council on Revenues, your Committee, as in previous years, continues to take a prudent and fiscally responsible approach to balancing competing demands for resources in the development of the Executive Biennium Budget.

The United States economy is growing at a steady pace with low unemployment, inflation, and interest rates, with many forecasters expecting non-inflationary real growth to continue. At the same time, the strain associated with the increasing demand on resources created by the solid performance of the economy is cause for concern. Rising oil prices and growing inflationary pressures are just a couple consequences of an economy that has seen sustained growth. In general, the adverse effects from these factors do not appear to threaten the overall outlook for continued expansion. However, how those adverse effects are resolved could substantially impact on United States national economic performance.

At its March 8, 2005 meeting, the Council on Revenues updated its forecast of the general fund tax revenues for fiscal year 2004-2005 and beyond. The growth rate for the current fiscal year is forecast at ten per cent, up from 8.8 per cent from its January 6, 2005 prediction. However, the Director of Taxation cautioned the Council that the bulk of the increase in revenues over the last fiscal year is attributable to one-time events that are unlikely to be repeated. The Council also revisited their visitor arrival assumptions and deemed them too high. Applying that rate to our current visitor levels would mean that total visitor arrivals would exceed 8,000,000 a year in the very near future. This was deemed to be an unrealistic forecast given our current capacity and lack of plans to increase it. The growth forecast was therefore lowered for fiscal year 2005-2006 from 5.3 per cent to five per cent and for the following year from 5.7 per cent to 4.9 per cent.

Although the outlook based upon the Council's projections is promising, your Committee on Conference proceeded with caution in anticipation of the reduction in state tax revenue. Additionally, a reduction in federal funding to Hawaii is looming on the horizon as Congress debates the President's plan to shift more of its current services and obligations onto the states.

According to the State Budget Update, April 2005, published by the National Conference of State Legislatures, state revenues are improving, but not enough to ameliorate continued budget gaps in a number of states.

Budget shortfalls continue, even though state revenues outpace estimates. Only a few states are reporting that collections from major tax sources are below previous estimates.

The problems are not with revenues but with expenditures. In recent years, states were forced to make drastic reductions to spending. These prior year reductions have placed extreme pressure on lawmakers to restore appropriations to previous levels. In addition, lawmakers have had to contend with increases in Medicaid and other health care costs. According to the National Conference on State Legislatures, this collision between current increases to revenues and prior year reductions is responsible for maintaining budget gaps in at least half the states:

• Rising health care costs and utilization are driving Medicaid and other health care programs over budget, a trend that began several years ago. Through the first eight months of the fiscal year, Medicaid and other health care spending exceed appropriations in twenty-three states (compared with sixteen in November).

• Corrections expenses are over budget in thirteen states, up from seven in November. In some of these states, pharmaceutical costs and other medical services explain the overruns.

• Property tax relief programs are over budget in Ohio and Maine.

• Other programs above budgeted levels include temporary assistance to needy families, mental health services, district courts, state parks, employee health insurance, and K-12 education.

According to National Conference of State Legislatures, Hawaii joins the overwhelming majority of states with no budget gaps for fiscal year 2004-2005. Hawaii also falls in line with half of the states entering fiscal year 2005-2006 without any spending overruns. Performance of major tax categories has exceeded expectations from last year, with the outlook for fiscal year 2005-2006 being positive but not likely to match or exceed the current fiscal year's rate of growth.

Your Committee on Conference finds that, in any organization, the quality of services delivered is determined by the quality of its employees. By addressing the salary and other conditions of work issues of teachers, firefighters, engineers, nurses, and other public workers, it should be easier to select and retain the best public servants who can provide the best services to the people of Hawaii. In today's economy, the public sector must remain competitive with the private sector in terms of wages and benefits.

Your Committee on Conference adjusted expenditures to account for the collective bargaining agreements for the Hawaii Government Employees Association, United Public Workers, and the Hawaii State Teachers Association.

These agreements will cost the State the following amounts:

Fiscal Year 2005-2006 Fiscal Year 2006-2007

Hawaii Government

Employees Association $31,200,000 $81,000,000

Hawaii State

Teachers Association $20,500,000 $77,100,000

United Public Workers $9,100,000 $20,500,000

On October 2004, the Board of Education approved a biennial operating budget request of an additional $102,700,000 to address essential public school programs. The biennial budget was later revised upward an additional $3,000,000.

However, after reviewing and revising the Board of Education's biennial budget request, the executive branch submitted a biennial budget on behalf of the Department of Education totaling only $23,500,000, creating underfunded and unfunded public education needs that totaled approximately $79,200,000 to $82,100,000.

One of your Committee on Conference's top priorities was to address the shortfalls in public education. Your Committee on Conference exceeds the Governor's proposal by almost twice the amount requested for the Department of Education. Still, the almost $40,000,000 appropriated by your Committee on Conference does not fully provide for budgetary shortfalls in the Department of Education. However, in light of lower revenue projections from the Council on Revenues in its March 2005 forecast, your Committee on Conference feels it did its best in crafting a balanced budget that not only addressed educational priorities but other top priorities as well.

Nationwide, the number of students diagnosed with autism spectrum disorder increases by approximately ten to seventeen per cent annually. In Hawaii, the increase in the number of students diagnosed with autism spectrum disorder is estimated at sixteen per cent annually. Based upon its initial analysis, the Department of Education requested an additional $6,000,000 for the fiscal biennium 2005-2007 to address the needs of students diagnosed with autism spectrum disorder. Although the Governor approved the amount, further analysis indicated that, for the fiscal biennium 2005-2007, the additional amount needed to address the needs of students diagnosed with autism spectrum disorder was over $10,000,000. Your Committee on Conference agreed with this later analysis and provided $10,000,000 in additional general funds for the treatment of students diagnosed with autism spectrum disorder.

Another priority that the Department of Education identified was the conversion of school principals from a ten-month to a twelve-month salary schedule. With Act 51, Session Laws of Hawaii 2004, also known as the "Reinventing Education Act of 2004," greater responsibilities and expectations are placed upon school principals. As part of the school principal's expanded role, the Department of Education requested that school principals be converted from a ten-month salary schedule to a twelve-month salary schedule. Your Committee on Conference agreed with the Department of Education and appropriated $5,286,750 in each year of fiscal biennium 2005-2007 to convert the salary schedules of school principals to a twelve-month salary schedule.

In fiscal biennium 2003-2005, the Legislature noted that there were accumulated balances in federal and special funds for school food services. As a result, general fund appropriations were reduced in fiscal biennium 2003-2005 in order for the Department of Education to expend the excess federal and special funds. The Department of Education has informed the Legislature that, by the end of the current fiscal year, those federal and special fund balances will be depleted. Initially, the Department of Education requested over $10,000,000 in each year of the fiscal biennium. The executive branch submitted its request to the Legislature to restore general funds at less than half of the dollar level needed by school food service.

Subsequent analysis indicated that the shortfall for school food service would be even higher than originally estimated. Increases in food shipping costs resulted in revised increases in shortfall projections of forty to eighty per cent over original estimates. Your Committee on Conference recognizes the support and cooperation that the Department of Education demonstrated in assisting the State in balancing its budget during fiscal biennium 2003-2005. Due to fiscal constraints and your Committee on Conference's philosophy of providing resources to a broad range of basic priorities, your Committee on Conference provided a total of $20,000,000 in general funds toward school food services. This amount approximates over ninety per cent of the accumulated balances that remained in the school food services' special and federal funds accounts at the beginning of the fiscal biennium 2003-2005.

Finally, the executive branch sought only $200,000,000 in capital improvement program funds over the fiscal biennium for all of the Department of Education's capital requirements. Your Committee on Conference finds that this offering is embarrassingly short of the $500,000,000 needed to satisfy the enormous need in repair and maintenance projects, as well as other necessary improvements. As a result, your Committee on Conference increased the Governor's request and provided a total of $280,000,000 in capital improvement program funds, including $100,000,000 for school repairs and maintenance.

On September 10, 2004, the University of Hawaii Board of Regents approved a detailed biennial operating budget request of $70,000,000 ($31,000,000 in fiscal year 2005-2006 and $39,000,000 in fiscal year 2006-2007) and forwarded that plan to the Governor. The Board's budget plan included the creation of many positions vital to the expansion of programs, such as workforce development and economic diversification initiatives, to meet the needs of the State in areas of occupational growth as well as personnel shortages (e.g. teaching, nursing, and construction), and leveraging the resources of the University of Hawaii for economic expansion and job creation.

In the 2005 State of the State address, the Governor acknowledged that investment in the University of Hawaii is our best hope for meeting the higher education needs of our residents and that it is imperative that adequate resources be provided to the University.

However, the executive branch later revised the University of Hawaii Board of Regents' budget request down to $25,000,000 lump-sum amounts of $10,000,000 in fiscal year 2005-2006 and $15,000,000 in fiscal year 2006-2007.

Using the lump-sum budget method inherently removes the ties between the specific and detailed goals and objectives of an organization and the resources used to achieve those goals and objectives. As the lump-sum budget request did not originate from the University of Hawaii Board of Regents, the University of Hawaii administration could not adequately provide detailed information as to the allocation of the lump sum amounts. As a result, your Committee on Conference was prevented from performing its responsibility of analyzing the budget request of the University of Hawaii with the due diligence required in budget matters. Your Committee on Conference did not approve of the lump-sum budget requests as presented by the Governor's office. Your Committee on Conference spent countless hours crafting a detailed budget for the University of Hawaii. Your Committee on Conference feels that, although the result is a fair budget for the University of Hawaii, the Committee on Conference's limited resources could have been better spent in reviewing budget request priorities.

While your Committee on Conference recognizes the semi-autonomous status of the University of Hawaii, your Committee on Conference feels that it has a fiduciary duty to review monetary matters, especially matters regarding general funds, paid for by all taxpayers. Your Committee on Conference feels that the transparency and accountability that are paramount concerns in today's government are hindered by lump-sum budgeting. Furthermore, the flexibility and efficiency enjoyed by semi-autonomous governmental units should be balanced with the dissemination of accurate and meaningful information to stakeholders, the public, and other interested parties and individuals.

On March 25, 2004, the Governor, jointly with the President of the University of Hawaii, members of the University of Hawaii Board of Regents, and the University of Hawaii Professional Assembly announced that an unprecedented six-year collective bargaining contract between the State and University of Hawaii professors had been reached, which may exceed all prior year contract lengths. Among other things, the contract provided for pay increases equating to raises of over thirty-four per cent over the six-year contract, with the cost borne entirely by the State for the first three years and then split between the State and University of Hawaii over the last three. Total obligations are estimated to be $124,000,000 to the State and $39,000,000 to the University. State law requires that this contract only becomes valid when the Legislature appropriates the necessary funds to pay for the new cost items.

During the 2004 legislative session, members of the Legislature expressed concerns that, in order for the University of Hawaii to pay for its portion of the contract, tuition for students may have to be raised. While your Committee on Conference cannot draw a direct correlation between the pay raises and the actions of the University of Hawaii, your Committee on Conference notes that, in March of this year, the University of Hawaii proposed to increase tuition to more than double its current rate within the next five years. Among its top priorities, the University of Hawaii cited the need to hire and retain faculty and fix classrooms and buildings. While your Committee on Conference recognizes that the needs expressed by the University of Hawaii are legitimate and valid, we note that, in its current biennial budget, the University of Hawaii identified $20,000,000 ($4,500,000 in fiscal year 2005-2006 and $15,500,000 in fiscal year 2006-2007) in additional collective bargaining costs over and above the $8,600,000 in collective bargaining costs expended in prior years. Despite its concerns, your Committee on Conference recommends to fully provide for the University of Hawaii Professional Assembly's collective bargaining costs of $37,200,000 ($13,100,000 in fiscal year 2005-2006 and $24,100,000 in fiscal year 2006-2007).

Your Committee on Conference remains committed to the vision of creating a world-class institution of higher learning. In spite of substantial collective bargaining costs and lower overall revenue expectations from the Council of Revenues, your Committee on Conference provided nearly $16,000,000 in general funds for fiscal biennium 2005-2007 in increased support for various University of Hawaii programs, such as nursing, improvements to campus security, workforce development, financial aid and student services to the community colleges, a "B" Plus Scholarship Program, and several Hawaiian studies programs.

Your Committee on Conference also provided $13,000,000 in general fund appropriations and revolving fund ceiling increases to address projected shortfalls in operating, faculty, and support functions at the new facilities for the John A. Burns School of Medicine. Your Committee on Conference believes that prior University of Hawaii administrations may have been overly optimistic as to the short-term potential of the new John A. Burns School of Medicine facilities at Kakaako to generate external grant and other non-general funds. However, your Committee on Conference continues to believe in the medium and long-range potential of the John A. Burns School of Medicine facilities at Kakaako in becoming a world-class health, biomedical, and biotech research and teaching facility.

In this regard, your Committee on Conference provided for budget shortfalls of the John A. Burns School of Medicine with a combination of general funds and revolving funds. Although the University of Hawaii administration did not adequately budget for "start-up" or operating costs, your Committee on Conference acknowledges that millions of dollars have already been committed to the construction of the John A. Burns School of Medicine. It would not be fiscally prudent to have the facilities sit dormant or underutilized because funds were not provided for the start-up costs or day-to-day operations. Your Committee on Conference also recognizes the fact that, while research has the potential of becoming "self-supporting," this does not apply to the educational portion of the Kakaako facility. The intent of your Committee on Conference is to provide general funds to support costs associated with the educational functions of the facility, while authorizing expenditure ceiling increases from the research and training revolving fund to temporarily support the research component of the John A. Burns School of Medicine, Kakaako facility. This action will give the research component of the facility time to become fully operational to fulfill the expectations of the Legislature, the University community, and the general public in becoming a world-class medical, biomedical, and biotech center. It is hoped that, as more external funding is obtained for research by the School of Medicine, the initial "investment" from the research and training revolving fund will be returned several fold.

The research and training revolving fund is the depository for overhead reimbursements that the State or the University of Hawaii expended in support of administering federal grants. Historically, the University of Hawaii has allowed the research unit that obtained federal grants to retain approximately fifty per cent of the reimbursement, with the vice-president for research and various chancellors receiving the remaining fifty per cent. There are no federal guidelines as to the disposition of federal overhead reimbursements. In the distant past, all federal overhead reimbursements were deposited into the state treasury as general funds.

Finally, your Committee on Conference eliminated approximately two hundred positions from the University of Hawaii system. These positions have been vacant and unfunded for at least one year. Vacant and unfunded positions occur when the University of Hawaii chooses to reallocate funding to other areas of importance. Your Committee on Conference noted that, in the past several years, while other executive branch departments have experienced the reduction of vacant and unfunded positions, very few, if any, vacant and unfunded positions have been reduced from the University of Hawaii inventory. It is estimated that, at the beginning of the 2005 regular legislative session, over five hundred positions were classified as vacant and unfunded in the University of Hawaii system.

While your Committee on Conference, in part, understands the rationale behind the University of Hawaii's desire to retain all of its vacant and unfunded positions, your Committee on Conference also realizes that the University of Hawaii may have exceeded what would be considered acceptable in retaining these vacant and unfunded positions. By reducing a portion of the vacant and unfunded positions from the University of Hawaii, it is hoped that the University will become more efficient and prudent in the management of its position counts.

Your Committee on Conference firmly recognizes the need to continue the work of the Joint House-Senate Task Force on Ice and Drug Abatement, which provided a comprehensive plan last legislative session established under Act 40, Session Laws of Hawaii 2004, to address the ice epidemic. Accordingly, your Committee on Conference provided an additional $13,100,000 in general funds to the Department of Health for substance abuse treatment services and prevention programs over the biennium for both adolescents and adults. In addition, your Committee on Conference provided $1,200,000 in each year of the biennium for the counties to continue support for anti-drug campaigns and community substance abuse prevention, as was provided for in Act 40.

Your Committee on Conference also notes that the level of funding provided for substance abuse prevention exceeds the executive branch's biennial request, which only provided marginal support to stem the ice epidemic.

The paramount concerns of the Department of Public Safety continue to be the overcrowded conditions of our correctional facilities, the deteriorating physical condition of these facilities, and the increased demand for correctional services. For example, on March 7, 2005, there were 3,943 inmates in facilities in Hawaii, although the design capacity is only 3,487. Additionally, 1,617 Hawaii inmates were held in facilities on the mainland and ninety-nine were held at the Federal Detention Center on Oahu.

With the unlikelihood of any new facilities being built in Hawaii in the near future, transferring inmates to the mainland or to the Federal Detention Center is the current solution to reducing the overcrowding at our correctional facilities. This budget approves the transfer of an additional two hundred fifty inmates to out-of-state facilities, which would bring the total Hawaii inmate population housed on the mainland to 1,867. Your Committee on Conference provided $6,055,128 for fiscal year 2005-2006 and $7,203,436 for fiscal year 2006-2007 for this purpose. Those amounts include $1,500,000 per year to cover a 2.50 per cent annual increase in the basic daily fee for the one thousand six hundred inmates currently held in mainland facilities. Furthermore, your Committee on Conference provided $8,200,000 over the fiscal biennium 2005-2007 for one hundred forty more contract beds at the Federal Detention Center.

With the recent construction of new court buildings and the increased responsibility over state buildings and their interests, your Committee on Conference has provided for eighteen new deputy sheriff positions for Hawaii, Maui, and Oahu courts at a cost of $566,230 in fiscal year 2005-2006 and $851,624 in fiscal year 2006-2007.

Your Committee on Conference is committed to strengthening Hawaii's system of care and affirms its support for our most vulnerable populations, including those suffering from mental illness and substance abuse. Your Committee on Conference further reaffirms its commitment to ensuring that the health and safety needs of all of Hawaii's people are met despite the State's limited resources. As such, the appropriations authorized by your Committee on Conference ensure sufficient funds for the Department of Health's high priority areas, specifically, developmental disabilities, adult mental health, and substance abuse.

To provide for the increase in the number of individuals with developmental disabilities admitted to the Home and Community Based Waiver Services, your Committee on Conference provided $15,710,000 in general funds over the fiscal biennium 2005-2007 to be matched by Title XIX federal funds.

Your Committee on Conference also provided $1,000,000 in general funds for each year of the biennium to fund emergency medical services for the county of Maui's aeromedical services.

Your Committee on Conference commends the Adult Mental Health Division in complying with its court-ordered mandate in meeting the requirements of the omnibus plan for community mental health services. More importantly, your Committee on Conference acknowledges and appreciates the significant advancements made by the Division in the treatment and care of its patients.

When reviewing the biennial requests of the Adult Mental Health Division, your Committee on Conference was made aware that funding levels for outpatient services were predicated on its earlier emergency appropriation request for this current fiscal year. Based upon updated information provided by the Division, it was determined that the Adult Mental Health Division's original fifteen per cent increase in clients did not materialize as projected. Accordingly, your Committee on Conference was informed that no additional general funds were necessary for the upcoming biennium.

Further, your Committee on Conference acknowledges the recent implementation in December 2004, of the Adult Mental Health Division's new medicaid rehabilitation option to allow for federal reimbursements for eligible state-funded behavioral health services. Given this recent implementation and the lack of historical data to determine how effective its collection rates are, your Committee on Conference did not believe it would be prudent to reduce or make any adjustments to the current base funding levels of the Adult Mental Health Division pending the outcome of the medicaid rehabilitation option program.

Your Committee on Conference also provided $996,960 in general funds to the Hawaii State Hospital. These funds provide for the increasing costs of pharmaceutical drugs, the implementation of an automated medication dispensing system, as well as the acquisition of medication carts over the biennium. In addition, $27,500 in general funds was also provided to the Hawaii State Hospital to purchase a truck to meet the growing demands of the facility. Your Committee on Conference further provided $2,820,000 in general funds for staffing support for the various statewide Community Mental Health Centers.

With regard to the Hawaii Health Systems Corporation, your Committee on Conference is cognizant of the continual and on-going negotiations between the Department of Human Services and the Centers for Medicare and Medicaid Services to amend its current medicaid QUEST demonstration project waiver program. When implemented, the waiver will permit the Corporation's acute care hospitals to recover a portion of their unreimbursed costs for providing health care to those in our population that are either indigent or uninsured. These payments, aptly named "DSH-Like" payments, simulate for Hawaii the "Disproportionate Share Hospital" reimbursements that other states receive by federal allotment provided under federal law.

Your Committee on Conference is mindful that, when implemented, these reimbursements will provide some fiscal relief to the Hawaii Health Systems Corporation. Concurrently, upon receipt of the federal reimbursements, your Committee on Conference expects the Hawaii Health Systems Corporation to cooperate and to reimburse the state treasury with the appropriate amount of general funds that the Corporation will receive in federal funds.

Your Committee on Conference readily acknowledges the need to support the safety net hospitals and provides a continued recurring source of general funds amounting to $32,300,000 for fiscal year 2005-2006 and $34,100,000 for fiscal year 2006-2007 to the Hawaii Health Systems Corporation.

In concluding this section, your Committee on Conference believes that the Healthy Start program warrants attention by the Department of Health's administration. Established in 1985 to prevent child abuse and neglect by providing support for families of newborns, the Healthy Start program appears to be in need of restructuring. Although the department readily acknowledges and has raised concerns about the Healthy Start program, little has been done to address these concerns. Further, concerns raised by service agencies and providers with regard to the program also need to be addressed by the department.

Your Committee on Conference also believes that there is a need for the department to conduct a thorough program review of the Healthy Start program as soon as possible, to develop its findings, and to make appropriate recommendations. To this end, your Committee on Conference has included a proviso for the Healthy Start program to address some of these concerns. Meanwhile, your Committee on Conference has also included a proviso earmarking up to $2,000,000 from the early intervention special fund in fiscal year 2005-2006 to support the Healthy Start program while the department works to resolve the problems the Healthy Start program faces.

Your Committee on Conference reviewed the budget requests of the Department of Human Services and approved the vast majority of them. That approval, however, came with reservations due, in large part, to the absence of timely communication from the department. The lack of information left your Committee on Conference with questions regarding the departments fiscal discipline, accountability for taxpayers' moneys, and the department's responsibility to the Legislature to provide the information necessary to make appropriate decisions. Despite the department's failure to respond to your Committee on Conference's requests for information, your Committee on Conference provided the majority of the department's budget requests.

In program areas where decreases in program population or costs are anticipated because individuals are being encouraged towards self-sufficiency, your Committee on Conference has transferred over $11,800,000 in general funds from the Temporary Assistance to Needy Families and General Assistance Payments in an attempt to mimic expected reductions in expenditures. These funds will be used to assist Hawaii's rapidly growing aged, blind, and disabled population as well as the non-citizen households under the temporary assistance to other needy families program.

Your Committee on Conference understood that one of the most basic needs for any human being is a decent, safe, and affordable place to live. However, the shortage of affordable rental housing is a serious problem in Hawaii for the many low- and moderate-income-working families. Thus, your Committee on Conference appropriated an additional $5,000,000 annually for development, construction, and management of affordable housing. In addition, your Committee on Conference realized that the homeless problem facing our State has grown too large. Your Committee on Conference therefore appropriated an additional $1,600,000 to provide homeless individuals and families with a safer and better living standard.

Your Committee on Conference acknowledges that the soaring costs of medical care and the increased number of uninsured adults and children prompted the need for large spending to assist the people of Hawaii. To offset this cost increase, your Committee on Conference found it necessary to appropriate an additional $7,500,000 in fiscal year 2005-2006 and $15,400,000 in fiscal year 2006-2007 to assist the needy adults and children eligible under the Hawaii QUEST program. In addition, your Committee on Conference found that the population of the aged, blind, and disabled has reached over 37,000 recipients and is expected to increase further by approximately sixteen per cent per year. Your Committee on Conference found it crucial to provide payments for medical care to the State's low-income population through the Medicaid program by appropriating additional general funds of $29,700,000 in fiscal year 2005-2006 and $41,700,000 in fiscal year 2006-2007 to improve the health care in Hawaii.

Your Committee on Conference remains committed to the home- and community-based services program that provides medicaid waiver services to low-income persons with disabilities and chronic illnesses to live in community settings as an alternative to more costly institutional placement. In caring for the needs of the developmentally disabled and mentally retarded, your Committee on Conference appropriated an additional $16,100,000 in fiscal year 2005-2006 and $19,200,000 in fiscal year 2006-2007 for qualified children and adults in the program to improve the much needed health care of our needy population in Hawaii.

Your Committee on Conference recognized that the counties required assistance in the repair and maintenance of public roads. To this end, your Committee on Conference provided an additional $10,000,000 to assist each of the counties in their efforts to improve those thoroughfares that suffer from disrepair.

Your Committee on Conference has added $8,200,000 in fiscal year 2005-2006 and $9,700,000 in fiscal year 2006-2007 in tourism special funds for the continued expansion of its promotional programs. However, the Committee has also reduced or eliminated funding for marketing in several other areas where the return on investment could not be quantified to justify additional funds.

Your Committee on Conference has also provided $1,500,000 in each year of the fiscal biennium for the Hawaii Experimental Program To Stimulate Competitive Research that has proven to be successful over the last three years and $551,769 in fiscal year 2005-2006 and $251,769 in special funds for fiscal year 2006-2007 for the implementation of the petroleum industry data and information functions as mandated by chapter 486J, Hawaii Revised Statutes.

In addition, your Committee on Conference appropriated $250,000 in general funds for fiscal year 2005-2006 for an event to thank our troops for their service. On behalf of the Legislature, your Committee on Conference expresses its heartfelt gratitude for the courage and hardships that the men and women of the Hawaii National Guard have endured in the name of freedom.

As affirmed by the record of votes of the managers of your Committee on Conference that is attached to this report, your Committee on Conference is in accord with the intent and purpose of H.B. No. 100, H.D. 1, S.D. 1, as amended herein, and recommends that it pass Final Reading in the form attached hereto as H.B. No. 100, H.D. 1, S.D. 1, C.D. 1.