SB44 HD1.DOC

PART I

SECTION 1. The legislature finds that the Hawaii health systems corporation faces fiscal challenges amounting to a projected deficit of $62,000,000 for fiscal year 2009-2010 in addition to an estimated shortfall of over $40,000,000 in fiscal year 2008-2009. This situation presents a potential crisis that may seriously affect the delivery of health care to Hawaii's residents by community hospitals statewide, especially health facilities on the neighbor islands.

The legislature also finds that, prior to the creation of the Hawaii health systems corporation by Act 262, Session Laws of Hawaii 1996, which took effect on July 1, 1996, the community hospitals then located within the division of community hospitals of the department of health had on its books a certain amount of accrued liabilities that were subsequently transferred to the Hawaii health systems corporation. The legislature further finds it necessary to take action to safeguard the delivery of health care through the statewide community hospitals to all Hawaii residents.

The purpose of this Act is to support the healthy financial operations of the Hawaii health systems corporation by reducing the corporation's debt obligations by determining why the current obligation as set forth was not rectified following the establishment of the health systems corporation on July 1, 1996. Correspondingly, it is a further purpose of this Act to require the Hawaii health systems corporation to assume all liabilities or debts or other obligations accrued by the community hospitals beginning on July 1, 1996, and thereafter. Finally, it is the purpose of this Act to clarify the Hawaii health systems corporation's responsibility for making payments into the employees' retirement system funds for its employees.

SECTION 2. Community hospitals; liabilities prior to July 1, 1996; assumption by department of health; report. (a) The department of health may assume the total amount of all liabilities and debts or other obligations of the Hawaii health systems corporation that had been accrued up to June 30, 1996, by the community hospitals while the community hospitals were operating within the division of community hospitals of the department of health. The Hawaii health systems corporation, with the assistance and cooperation of the department of health, shall determine the final amount of the liabilities and debts or other obligations to that may be transferred and provide to the department of health pursuant this subsection, a complete account of why the accrued liability was not repaid.

(b) The Hawaii health systems corporation shall report to the legislature the details of the total amount of liabilities and debts or other obligations that may be transferred from the department of health and assumed by the Hawaii health systems corporation pursuant to subsection (a) and a detailed account of why the repayment was not completed no later than twenty days prior to the convening of the regular session of 2010.

SECTION 3. Community hospitals; assumption of liabilities by Hawaii health systems corporation; after June 30, 1996. The Hawaii health systems corporation shall bear the sole responsibility for assuming all liabilities and debts or other obligations accrued beginning on July 1, 1996, and thereafter, by the community hospitals operating within the Hawaii health systems corporation.

SECTION 4. Hawaii health systems corporation; employees' retirement system liabilities; after June 30, 1996. The Hawaii health systems corporation shall bear sole responsibility for making all appropriate employer payments into funds of the employees' retirement system under chapter 88, Hawaii Revised Statutes beginning on July 1, 1996, and thereafter.

SECTION 5. Section 88-125, Hawaii Revised Statutes, is amended to read as follows:

"§88-125 Contributions by certain state agencies. (a) Each of the departments and agencies hereinafter described [~~and~~], the office of Hawaiian affairs, and the Hawaii health systems corporation shall reimburse the State for the respective amounts payable by the State to cover the liability of the State to the various funds of the system on account of the employees in [~~such~~] the departments and agencies [~~and~~], the trustees of the office of Hawaiian affairs[.], and the employees of the Hawaii health systems corporation. This provision shall apply to any department or agency of the State [~~which~~] that is authorized by law to fix, regulate, and collect rents, rates, fees, or charges of any nature. [~~The provisions herein~~] This subsection shall not apply as to rental units receiving federal subsidies until approval has been obtained from the appropriate federal agency.

(b) Whenever any department or agency of the State or the Hawaii health systems corporation receives federal-aid funds [~~which~~] that may be expended for the purpose of covering the liability of the State to the various funds of the system, the department or agency or the Hawaii health systems corporation shall set aside a portion of these funds sufficient to cover the amount of the State's liability to the various funds of the system on account of the employees in the department or agency or the Hawaii health systems corporation whose compensation is paid in whole or part from federal funds.

(c) The amount payable by each department or agency of the State, [or] the office of Hawaiian affairs, or the Hawaii health systems corporation, covered by this section shall be determined at least quarterly by the department of budget and finance on the basis of the payroll of the employees of the department or agency, [or] trustees of the office of Hawaiian affairs, or the Hawaii health systems corporation who are members of the system in the same manner the allocation of employer contributions is determined in section 88-123. The comptroller of the State, the office of Hawaiian affairs, the Hawaii health systems corporation, or any department or agency having control of its own funds [~~shall~~], upon information furnished by the department of budget and finance, shall issue a check for the proper amount to the director of finance, charging the same to the appropriate fund. The director of finance shall place all such sums to the credit of the State as part payment of the State's contributions to the various funds of the system.

(d) With respect to the Hawaii health systems corporation only, this section shall be operative with respect to costs accrued beginning July 1, 1996."

PART II

SECTION 6. Chapter 323F, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§323F- Annual management and performance audit. (a) The auditor shall annually perform a management and performance audit of the corporation. The auditor shall contract with an independent auditing entity that shall be authorized full access to all information required for a complete and thorough management and performance audit of the corporation. Funding for all aspects of the audit shall be provided by the corporation.

(b) The auditor shall submit a report of its findings and recommendations, including:

(1) A full evaluation of all corporation assets, liabilities, and contracts that deal with the management, running, and provision of services by the corporation; and

(2) Any proposed legislation,

each year not less than twenty days prior to the beginning of each regular session beginning with the regular session of 2010.

PART III

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2050.

THE SENATE	S.B. NO.	44
TWENTY-FIFTH LEGISLATURE, 2009		S.D. 2
STATE OF HAWAII		H.D. 1