HB1280 HD2

PART I

SECTION 1. The legislature finds that Hawaii's desire for economic growth that benefits all residents depends on building our state's human resources.

Realization of Hawaii's longstanding desire for economic diversification and sustainability turns on applying the State's high skilled resources to the creation and adoption of innovation across the economy.

This Act is part of an initial package of initiatives focusing on innovation introduced for the 2007 regular session. This package is intented to achieve:

(1) A twenty-first century workforce with science, technology, engineering, math, and problem-solving skills sufficient to ensure innovation and sustainability of Hawaii's economy;

(2) Higher education institutions as "drivers" for innovation;

(3) Continued public investment in the State's innovation infrastructure;

(4) Addressing the capital gap for Hawaii's emerging technology and creative industry companies;

(5) Opportunities for incumbent workers to engage in skill building;

(6) Residents and businesses with international exposure, orientation, and skills to interact with and compete in a global economy;

(7) An innovation environment that encourages the creation of new products and services that command global market share; and

(8) Analytical capability to assess policy performance and progress toward innovation economy objectives.

In particular, this Act provides for two initiatives:

(1) The establishment of a rapid response training program and revolving fund in the department of business, economic development, and tourism to facilitate rapid custom training for high priority business investments; and

(2) The merging of certain workforce and economic development programs of the departments of labor and industrial relations and business, economic development, and tourism to more effectively and efficiently build a high-skilled economy.

Hawaii completed a year of solid economic and workforce growth in 2006. For most of 2006, Hawaii also enjoyed the lowest unemployment rate in the nation. However, according to the state workforce development council, the current shortage may be a relatively modest precursor of a more serious long-term shortage in the future. The workforce development council expects that this will become most evident after the baby boom generation becomes eligible for full social security retirement around 2012. But already parts of the economy in which pensions will support earlier retirement, such as government, are beginning to see an upturn in retirements. The duration of this coming shortage will be measured in decades not years. That is because the tail end of the baby boom generation will not reach the age of full social security retirement benefits (under current rules) until about 2031.

The latest projections from the department of labor and industrial relations, research and statistics office anticipate that reasonable expectations for growth in the economy, coupled with the need to replace workers leaving the workforce, will create a demand for about twenty-four thousand additional workers in Hawaii per year between 2004 and 2014. This is about twice the rate at which our youth will be arriving at workforce age. Moreover, 2014 is only two years into the baby boom retirement era. Retirements and separations will tend to accelerate through the following two decades.

In addition to the approaching, long-term labor shortage, studies point out two major weaknesses about Hawaii's workforce performance compared with top performing states.

First, Hawaii high school graduates are not adequately prepared for post-secondary training. A range of test score results for Hawaii students from eighth grade through high school are significantly lower than the top states. The rates at which high school graduates are enrolling in and completing post-secondary training also need to improve according to data collected by the National Center for Public policy and Higher Education.

Second, there is an inadequate focus on the need to increase the skill levels of incumbent workers to meet the rising skill need of an economy driven by more technology and competition. The workforce development council forum in the fall of 2006 concluded that employers need more information about training options and assistance in meeting the need to improve the skills of their workers.

Coupled with the emerging worker shortage, the weaknesses in preparing and upgrading our workforce have serious implications for Hawaii's ability to support a more knowledge- and innovation-intensive economy or raise its standard of living through a significant increase in higher paying jobs.

PART II

SECTION 2. This part establishes a rapid response, technical training development program and revolving fund within the department of business, economic development, and tourism. The goal of the program shall be to work with employers, business and industry organizations, economic development agencies, workforce development agencies, and training providers to develop training programs for firms needing trained workers in critical technical skill sets that cannot be adequately addressed by existing training programs.

The rapid pace of changing technology in business and industry requires companies and workers to seek frequent skills upgrade training to remain competitive. This is a particularly critical need for technical sectors of the economy such as military contracting, high technology firms, biotechnology, firms in life science, and digital media firms. In addition, companies that are interested in expanding in, or relocating to Hawaii, often face the challenge of finding a trained technical workforce in a matter of months.

The community college system has taken steps to develop an internal capacity to respond to rapid response training needs. Because a broader effort is needed to identify and work with the potential users of rapid response training, it is the intent of this Act to supplement, rather than replace funds for rapid response training that may be in the biennium budget of the University of Hawaii.

SECTION 3. Chapter 201, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . RAPID RESPONSE TRAINING

§201- Rapid response training program. (a) There is established the rapid response training program in the department of business, economic development, and tourism. The purpose of the program shall be to facilitate the development of a rapid response training capacity in Hawaii that will be capable of developing and delivering, for businesses and industries, short-term customized training programs, which cannot be provided in a timely fashion by existing training programs.

(b) The program shall achieve its purpose by:

(1) Working with the workforce development community, county economic development boards, business and industry associations, and other appropriate entities to identify and market rapid response custom training to the business community;

(2) Contracting with firms requesting customized training to provide for the development and delivery of such training;

(3) Contracting with appropriate training providers for the development of customized training programs; and (4) Upon commencement of training delivery, collecting fees from contracted firms for the training of their current or prospective employees.

(c) The department of business, economic development, and tourism shall contract for the development of custom training programs with educational and training resources in the public and private sectors throughout the state, as may be appropriate to accomplish the purpose of the program.

(d) The rapid response training program shall place a priority on developing training programs that provide high- skilled workers for jobs paying more than the median wage in new or expanding businesses, and for which the rapid development and delivery of training is important to the decision of the firm or industry to make the proposed business investment. The program shall also place priority on business expansions that propose to train or retrain workers who are unemployed or facing unemployment due to mass-layoff events.

(e) The program shall develop measures of program performance to assess the impact of the training provided under the rapid response program on the supply of high skilled workers in the economy and the impact on the development of sustained, new business activity.

§201- Rapid response training revolving fund. (a) There is established in the state treasury the rapid response training revolving fund, into which shall be deposited:

(1) Appropriations by the legislature;

(2) Training fees paid by firms or other agencies and organizations related to training services;

(3) Donations and contributions made by private individuals or organizations for deposit into the fund; and

(4) Grants or transfers of funds provided by governmental agencies or any other source.

(b) Moneys in the rapid response training revolving fund shall be used by the department:

(1) To contract with appropriate training providers for the development of rapid response custom training programs; and

(2) For administrative expenses, including but not limited to supplies, equipment, and services necessary for the appropriate administration of the rapid response training program. "

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $500,000 for fiscal year 2007-2008 and the sum of $500,000 for fiscal year 2008-2009 to be paid into the rapid response training revolving fund.

The sums appropriated shall be in addition to, and not replace, funds requested in the University of Hawaii biennium budget for rapid response training program development.

PART III

SECTION 5. This part improves the effectiveness of economic development and workforce development in the state by relocating certain key workforce development programs within the department of labor and industrial relations to the department of business, economic development, and tourism.

The need to merge economic development and workforce development efforts stems from the changing role of workforce development. In the past, federal and state workforce programs were targeted toward specific client groups that found entry into the labor market difficult. This included such populations as school dropouts, the disabled, welfare recipients, and other hard-to-hire groups. These groups are still important in workforce development. However, the main thrust of workforce development is undergoing a significant transformation from serving primarily client groups to the broader goal of supplying business's need for skilled, productive workers, especially in industries emerging as new economic drivers in the twenty-first century. This changing role has redirected workforce development from a social service orientation to an economic development orientation involving considerable collaboration with the business community. Moreover, as the baby boom generation enters retirement age, the emerging critical issue for economic development is ensuring skilled labor replacement and growth to maintain a competitive growing economy. In effect, workforce and economic development are now two sides of the same coin. Each system maintains teams that deal with business, develop growth strategies, and generate research and policy recommendations. However, they are currently not doing these within the scope of a single coordinated plan for economic and workforce development. Nor are the activities of these systems coordinated to draw on the expertise and additional resources of one another.

A recent September 2005, study by the National Governors Association ("Aligning State Workforce Development and Economic Development Initiatives"), finds that organization consolidation can produce many benefits and lasting change that justify the effort, such as unified authority and its potential for ensuring more coordinated planning, implementation, and evaluation. Other benefits include:

(1) Consistency and alignment through one broadly defined, clear mission;

(2) Greater resources under one roof that can be more flexibly and creatively applied;

(3) Greater accountability by all staff ultimately answering to one organizational leader; and

(4) The potential for restructuring to institutionalize desired changes in attitudes, behavior, and outcomes that often motivate the effort and influence its success.

The December 19, 2005, final report of the governor's economic momentum commission also recommends the merger of the workforce development programs of the department of labor and industrial relations with the economic development programs of the department of business, economic development, and tourism, with the latter department providing strategic oversight and coordination.

SECTION 6. Section 202-5, Hawaii Revised Statutes, is amended to read as follows:

"§202-5 Organizational relationships. The workforce development council is placed within the department of [~~labor and industrial relations~~] business, economic development, and tourism for administrative purposes and shall act in an advisory capacity to the governor. "

SECTION 7. On July 1, 2008, the workforce development division and office of research and statistics in the department of labor and industrial relations, including rights, powers, functions duties and positions, shall be transferred to the department of business, economic development, and tourism.

SECTION 8. All officers and employees whose functions are transferred by this Act shall be transferred with their functions and shall continue to perform their regular duties upon their transfer, subject to the state personnel laws and this Act.

No officer or employee of the State having tenure shall suffer any loss of salary, seniority, prior service credit, vacation, sick leave, or other employee benefit or privilege as a consequence of this Act, and such officer or employee may be transferred or appointed to a civil service position without the necessity of examination; provided that the officer or employee possesses the minimum qualifications for the position to which transferred or appointed; and provided that subsequent changes in status may be made pursuant to applicable civil service and compensation laws.

An officer or employee of the State who does not have tenure and who may be transferred or appointed to a civil service position as a consequence of this Act shall become a civil service employee without the loss of salary, seniority, prior service credit, vacation, sick leave, or other employee benefits or privileges and without the necessity of examination; provided that such officer or employee possesses the minimum qualifications for the position to which transferred or appointed.

If an office or position held by an officer or employee having tenure is abolished, the officer or employee shall not thereby be separated from public employment, but shall remain in the employment of the State with the same pay and classification and shall be transferred to some other office or position for which the officer or employee is eligible under the personnel laws of the State as determined by the head of the department or the governor.

All appropriations, records, equipment, machines, files, supplies, contracts, books, papers, documents, maps, and other personal property heretofore made, used, acquired, or held by the agencies, divisions, or offices transferred or placed for administrative purposes under this Act shall be transferred with the functions to which they relate.

All rules, policies, procedures, guidelines, and other material adopted or developed by the agencies, divisions or offices transferred or placed for administrative purposes under this Act, shall remain in full force and effect until amended or repealed by the department of business, economic development, and tourism pursuant to chapter 91, Hawaii Revised Statutes.

All deeds, leases, contracts, loans, agreements, permits, or other documents executed or entered into by or on behalf of the agencies, divisions, or offices transferred or placed for administrative purposes under this Act, shall remain in full force and effect.

The department of business, economic development, and tourism and the department of labor and industrial relations, with the cooperation and assistance of the workforce development council, shall prepare an implementation plan for the reorganization of the State's economic development and workforce development programs transferred or placed for administrative purposes under this Act and shall submit a report to the legislature not later than twenty days prior to the convening of the 2008 regular session. The report shall include but not be limited to:

(1) The implementation plan;

(2) Recommendations for any additional statutory amendments that may be necessary to fully effectuate the implementation plan and the purposes of this Act; and

(3) Proposed legislation containing the recommended statutory amendments.

If any part of this Act is found to be in conflict with federal requirements that are a prescribed condition for the allocation of federal funds to the State, the conflicting part of this Act is inoperative solely to the extent of the conflict and with respect to the agencies directly affected, and this finding does not affect the operation of the remainder of this Act in its application to the agencies concerned. The rules under this Act shall meet federal requirements that are a necessary condition to the receipt of federal funds by the State.

PART IV

SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 10. This Act shall take effect on July 1, 2059.

HOUSE OF REPRESENTATIVES	H.B. NO.	1280
TWENTY-FOURTH LEGISLATURE, 2007		H.D. 2
STATE OF HAWAII