SB1500 HD1

SECTION 1. This Act is recommended by the governor for immediate passage in accordance with section 9 of article VII of the Constitution of the State of Hawaii.

SECTION 2. The purpose of this Act is to make an emergency appropriation to the department of taxation to address unbudgeted expenses incurred by the department in implementing the administration of the county surcharge on state general excise tax provided for under section 46-16.8, Hawaii Revised Statutes.

SECTION 3. Act 247, Session Laws of Hawaii 2005, authorized the counties to adopt a county surcharge on state general excise tax, the revenue from which was to be deposited for the benefit of any adopting county. The purpose of the county surcharge was to provide the counties with a means of financing a preferred mass transit alternative. Act 247 placed the burden of administering and collecting the county surcharge on the department of taxation. The burdens of administering the county surcharge include assessment, collection, processing, accounting, and enforcement of the surcharge for the benefit of an enacting county.

Although Act 247 placed the administrative duties of county surcharge collection on the department of taxation, Act 247 contained no appropriation to offset the direct costs incident to administering the county surcharge.

The city and county of Honolulu was the only county to adopt a county surcharge on state general excise tax. Adopting this surcharge triggered the department of taxation's responsibilities regarding assessment and collection of the surcharge.

Assessment, collection, processing, accounting, and enforcement of the county surcharge imposed a substantial financial burden on the department of taxation that was not addressed by Act 247. Costs incurred by the department of taxation include:

(1) Substantial computer upgrades;

(2) Substantial personnel and professional time;

(3) Public outreach; and

(4) Additional personnel to assist with the department's other obligations.

In response to the department of taxation's unfunded mandate to assess and collect the county surcharge, the city and county of Honolulu agreed to guarantee the department of taxation's costs of up to $5,000,000. This guarantee is for costs that have been incurred until the legislature can consider this emergency appropriation to pay vendor and other costs. This appropriation is an emergency because the city and county of Honolulu guarantees the $5,000,000 payment only if the legislature does not appropriate funds through this Act by March 30, 2007.

The legislature finds that this emergency appropriation is necessary and in the best interests of the public to ensure that the city and county of Honolulu's county surcharge on the general excise tax does not adversely impact the city and county of Honolulu's mass transit project or its ability to obtain federal funding. The emergency appropriation is also necessary to relieve the city and county of Honolulu of its guarantee.

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $5,000,000 or so much thereof as may be necessary for fiscal year 2006-2007 to the department of taxation to reimburse the costs incurred for implementing and administering the county surcharge on the general excise tax, including the costs of the computer vendor.

The sum appropriated shall be expended by the department of taxation for the purposes of this Act.

SECTION 5. In accordance with section 9 of article VII of the Constitution of the State of Hawaii and sections 37-91 and 37-93, Hawaii Revised Statutes, the legislature has determined that the general fund expenditure ceiling for fiscal year 2006-2007 (established at $5,357,987,705 on November 8, 2006) has already been exceeded by $90,137,694 or 1.68 per cent. The appropriations contained in this Act will cause the state general fund expenditure ceiling for fiscal year 2006-2007 to be exceeded by an additional $5,000,000, or an additional 0.093 per cent. The calculation contained in the foregoing sentence relates only to the amount of general funds appropriated in this Act for fiscal year 2006-2007. The reason for exceeding the general fund expenditure ceiling is that the appropriation made in this Act is necessary to ensure that the city and county of Honolulu's county surcharge on the general excise tax does not adversely impact the city and county of Honolulu's mass transit project or its ability to obtain federal funding.

SECTION 6. This Act shall take effect upon its approval.

THE SENATE	S.B. NO.	1500
TWENTY-FOURTH LEGISLATURE, 2007		S.D. 3
STATE OF HAWAII		H.D. 1