SB2164 SD2

SECTION 1. The legislature finds that article X, section 1 of the Constitution of the State of Hawaii clearly indicates that the State has a constitutional obligation to support charter school facilities. In relevant part, it states that "[t]he State shall provide for the establishment, support and control of a statewide system of public schools free from sectarian control, a state university, public libraries and such other educational institutions as may be deemed desirable, including physical facilities therefor."

Department of education schools that convert to charter school status have pre-existing facilities and remain on the department's regular repair and maintenance and capital improvement program schedules. Furthermore, presently, all Hawaii 3R's projects must be selected from the department of education repair and maintenance backlog unfunded list, which only includes department of education-operated conversion charter schools. Start-up charter schools, however, receive no such support and only received legislative appropriations for facilities assistance once, after the 2006 session, in the amount of $660 per pupil.

Except for that single occasion, all of the twenty-three start-up charter schools have always been forced to pay for occupancy costs out of a per pupil allocation that is already significantly lower than that provided to the department of education-operated schools.

Although not intended to serve as the exclusive, sole means of meeting the State's constitutional obligation to support charter school facilities, the legislature finds that innovative, cost-effective public-private partnerships are promising means of addressing this issue. The legislature further finds that this program would provide a mechanism to leverage scarce public resources with private resources and to use state investments to leverage federal funding for charter school facilities, which often is unavailable absent state funding.

The legislature further finds that:

(1) Any charter school in the State may participate in programs of the fund, be they start-up or conversion; and

(2) Kanu o ka aina learning ohana may prioritize funding for projects that exhibit best practices in green building or sustainable construction, rehabilitation, repair, and maintenance.

Kanu o ka aina learning ohana is in the process of examining the feasibility of establishing a community development financial institution to support charter school facility financing. The legislature may consider transferring the Hawaii charter school facilities fund and related tax credit reporting responsibilities from Kanu o ka aina learning ohana to such a community development financial institution upon its establishment.

The legislature further finds that this program aligns well with another measure under consideration this legislative session to authorize the State to issue special purpose revenue bonds, and use the proceeds from those bonds, to assist charter schools, non-for-profit corporations supporting charter schools, and community development financial institutions supporting charter schools.

The purpose of this Act is to support the funding of charter school facilities by creating the Hawaii charter school facilities fund, a program comparable to Hawaii 3R's, except that the fund would only support charter schools, not-for-profit corporations supporting charter schools, and community development financial institutions supporting charter schools. This program shall also differ from Hawaii 3R's in that:

(1) It would be expanded to include acquisition, predevelopment, rehabilitation, construction, and other capital improvement projects, in addition to repair and maintenance; and

(2) It would accommodate the greater complexity of capital improvement projects.

SECTION 2. Chapter 302B, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§302B‑ Hawaii charter school facilities fund. (a) There is established the Hawaii charter school facilities fund as a separate fund of kanu o ka aina learning ohana, a Hawaii nonprofit corporation. Moneys received from the State, county, or federal government, private contributions of cash or other property, and the income and capital gains earned by the fund shall constitute its assets.

(b) Kanu o ka aina learning ohana shall spend moneys from the fund in the form of either grants, loans, or contracts to charter schools, nonprofit corporations that benefit charter schools, or contracts with private vendors for the repair, maintenance, acquisition, predevelopment, rehabilitation, construction, or other capital improvement projects of charter school facilities, or facilities administered, operated, or developed by nonprofit corporations for the support of charter schools in Hawaii in accordance with this section.

(c) The fund may receive contributions, grants, endowments, gifts in cash or otherwise, loans, and bond financing from all sources, including corporations or other businesses, foundations, government, individuals, and other interested parties. The State may appropriate moneys to the fund.

(d) There is established the Hawaii charter school facilities fund advisory board, which shall consist of five members who shall be appointed without regard to section 26-34. Kanu o ka aina learning ohana shall appoint two members, the Hawaii charter school network shall appoint two members, and the office shall appoint one member to the Hawaii charter school facilities fund advisory board. The Hawaii charter school facilities fund advisory board shall be responsible for:

(1) Soliciting and otherwise raising funds for the Hawaii charter school facilities fund;

(2) Establishing criteria for the expenditure of funds;

(3) Reviewing grant and loan proposals using criteria established by kanu o ka aina learning ohana;

(4) Making recommendations for grants, loans, and other specific expenditures; and

(5) Engaging in other activities necessary to support the prudent and efficient operation of the Hawaii charter school facilities fund.

(e) In managing the Hawaii charter school facilities fund, the kanu o ka aina learning ohana shall exercise ordinary business care and prudence, given the facts and circumstances prevailing at the time of action or decision. In so doing, kanu o ka aina learning ohana shall consider the fund's long- and short-term needs in carrying out its purposes, its present and anticipated financial requirements, expected total return on its investments, price trends, and general economic conditions.

(f) There may be an endowment component of the Hawaii charter school facilities fund, and kanu o ka aina learning ohana may accumulate net income and add the same to the principal.

(g) The use of any state moneys may be restricted by the legislature in appropriating moneys to the Hawaii charter school facilities fund.

(h) Kanu o ka aina learning ohana may expend principal from the Hawaii charter school facilities fund for the purposes of the fund.

(i) Any organization submitting a proposal to kanu o ka aina learning ohana for moneys shall meet the following standards at the time of application and:

(1) Be:

(A) A for-profit organization duly registered under the laws of the State;

(B) A nonprofit organization determined by the Internal Revenue Service to be exempt from the federal income tax; or

(2) Have experience with the project or in the program area for which the proposal is being made; and

(3) Be licensed and accredited, as applicable, in accordance with the requirements of federal, state, and county governments.

(j) Organizations or agencies to which moneys are awarded shall agree to comply with the following conditions prior to receiving the award:

(1) Use persons qualified to engage in the activity to be funded;

(2) Comply with the applicable federal, state, and county laws; and

(3) Comply with any other requirements prescribed by kanu o ka aina learning ohana to ensure adherence by the recipient of the award with applicable federal, state, and county laws, ordinances, rules, and regulations, and with the purposes of this section.

(k) Chapter 103D shall not apply to organizations or agencies that apply for grants or contracts under this section; provided that kanu o ka aina learning ohana shall be held accountable for the use of the funds.

(l) The Hawaii charter school facilities fund shall be audited annually by an independent auditor. The results of each annual audit shall be submitted to the department of budget and finance not later than thirty days from the date kanu o ka aina learning ohana receives the audit results. Kanu o ka aina learning ohana shall retain for a period of three years and permit the department of budget and finance, state legislators, and the auditor, or their duly authorized representatives, to inspect and have access to any documents, papers, books, records, and other evidence that is pertinent to the Hawaii charter school facilities fund.

(m) The fund shall not be placed in the state treasury, and the State shall not administer the fund, nor shall the State be liable for the operation or solvency of the fund or kanu o ka aina learning ohana.

(n) For every dollar of state moneys granted by the Hawaii charter school facilities fund to the project, there shall be a minimum of $1 in value matched by kanu o ka aina learning ohana from private, federal, or county sources; provided that this matching value may include:

(1) The fair market value of contributions of in-kind goods and services;

(2) Federal funding intended for charter schools that passes through the department as the federally-designated state education agency or local education agency;

(3) Federal funding that passes through any agency, board, panel, or other subdivision of the State for the benefit of charter schools; and

(4) Any funding from the office of Hawaiian affairs, as a quasi-state agency, that did not originate as general revenues appropriated to it by the legislature.

(o) Kanu o ka aina learning ohana shall submit an annual report to the legislature on the progress of the fund no later than twenty days prior to the convening of each regular session."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $2,500,000 or so much thereof as may be necessary for fiscal year 2008-2009 for the Hawaii charter school facilities fund.

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

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2008.

THE SENATE	S.B. NO.	2164
TWENTY-FOURTH LEGISLATURE, 2008		S.D. 2
STATE OF HAWAII