STAND. COM. REP. NO. 2525

Honolulu, Hawaii

RE:    S.B. No. 2300

       S.D. 2

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2008

State of Hawaii

Madam:

     Your Committee on Economic Development and Taxation, to which was referred S.B. No. 2300, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to establish a tax credit for teachers for professional development and training programs.

     Your Committee received testimony in support of this measure from the Department of Taxation, Department of Education, and Kamehameha Schools.  Comments were received from the Tax Foundation of Hawaii.

     Your Committee finds that Hawaii is experiencing a drastic teacher shortage, wherein the recruitment and retention of qualified teachers is of the utmost importance to the future of our education and our State.  Your Committee further finds that the provision of incentives in varying manners will help in the battle to keep and attract qualified educators in the State.  This measure provides a tax credit to public school teachers for their professional development and training expenses.

     The Department of Taxation stated that this measure will result in an indeterminate revenue estimate because the credit cap is unspecified.  However, the Department estimated annual revenue losses based upon various scenarios of credit caps:

          Credit of $2,500        Revenue loss of $25,000,000

          Credit of $1,000        Revenue loss of $10,000,000

          Credit of $500          Revenue loss of $5,000,000

The revenue impact estimates assume that teachers will take the credit up to the maximum allowable per year.  There are approximately 11,000 teachers in Hawaii.  From individual school budget statements, it is estimated that ninety per cent of teachers are non-resource-teachers that would meet the seventy per cent classroom-time restriction.  Thus, with 9,900 eligible teachers, with a one hundred per cent participation rate, the annual revenue cost would be (credit limit) x 9,900.  For credit limits below $2,500, the credit should fall under the tax liability of most qualified teachers, thus carry-over effects can be ignored.

     Accordingly, your Committee has amended this measure by making the amount of the credit unspecified in the interests of continuing the discussion.

     As affirmed by the record of votes of the members of your Committee on Economic Development and Taxation that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2300, S.D. 1, as amended herein, and recommends that it be referred to the Committee on Ways and Means, in the form attached hereto as S.B. No. 2300, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Economic Development and Taxation,

____________________________

CAROL FUKUNAGA, Chair