STAND. COM. REP. NO. 2269

Honolulu, Hawaii

RE:    S.B. No. 2143

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fifth State Legislature

Regular Session of 2010

State of Hawaii

Madam:

     Your Committees on Economic Development and Technology and Judiciary and Government Operations, to which was referred S.B. No. 2143 entitled:

"A BILL FOR AN ACT RELATING TO THE STATE FOUNDATION ON CULTURE AND THE ARTS,"

beg leave to report as follows:

     The purpose of this measure is to enhance the fiscal stability of the State Foundation on Culture and the Arts by authorizing use of the Works of Art Special Fund to fund position costs of the Executive Director and any other employee of the State Foundation on Culture and the Arts for a five-year period.

     Testimony in support of this measure was submitted by the Hawaii Arts Alliance and two individuals.  The Department of Budget and Finance submitted testimony in opposition.  The State Foundation on Culture and the Arts, the Chairperson and two of the Commissioners submitted comments.

     Written testimony presented to the Committees may be reviewed on the Legislature's website.

     Your Committees are gravely concerned about the stability of the State Foundation on Culture and the Arts (SFCA) due to cuts of eleven full time equivalent positions in late 2009.  The agency currently has no general-funded positions, and the National Endowment for the Arts (NEA) has expressed strong concern about continued federal funding of SFCA programs after these reductions in staffing.  Your Committees commend the SFCA and its Commissioners for their commitment to meeting the NEA obligations and their combined efforts to reorganize the agency in order to do so.  However, your Committees believe this will be difficult unless the Works of Art Special Fund is also reevaluated.

     In testimony, the SFCA noted that allocations of the one per cent bond revenues were quite low last year (compared against approximately $2,900,000 annually), and allotment advice for 2010 have been cancelled.  Fifteen of the agency's twenty staff positions are funded through the Works of Art Special Fund and a large part of programming and operations - approximately $3,000,000 – are made possible through special fund support.  The SFCA projects that under current conditions, the special fund will be completely depleted in two to three years.

     Your Committees are troubled that the funding levels deposited into the Works of Art Special Fund are being reported at relatively low levels at a time that the Legislature has funded capital improvements at historic highs to stimulate greater activity within the local economy.  Between 2008 and 2009, for example, the Legislature appropriated $308,033,000 for capital improvement projects (CIP) for the Department of Education in fiscal year 2008, and $320,293,000 in CIP for fiscal year 2009; yet the impact of this increased spending appears not to be reflected in the amounts allocated to the Works of Art Fund.  Accordingly, if the one per cent calculation for new construction and renovations were applied, the Works of Art Fund could potentially have received close to $3,000,000 in both fiscal year 2008 and fiscal year 2009, just by virtue of the Department of Education's CIP appropriation alone.

     This week, the State of Hawaii successfully sold $721,600,000 of general obligation bonds to fund various state capital projects, including public school facilities, University of Hawaii projects and other statewide capital projects.  As such, your Committees believe that the Legislature must monitor the implementation of section 103-8.5, Hawaii Revised Statutes, requirements more closely to assure that (a) the one per cent amount is calculated at the time that an Executive Budget appropriation bill is signed into law, and (b) that funds are transferred into the Works of Art Special Fund upon availability of funds from the appropriations (e.g., at the time of bond sales).

     Your Committees therefore pledge to assist the SFCA by insuring that the Works of Art Special Fund receives the correct amounts specified by Section 103-8.5, Hawaii Revised Statutes, and by exercising greater oversight over the agency's operations to prevent further deterioration of its purpose.

Your Committees have amended this measure accordingly, by:

     (1)  Limiting personnel costs to administrative, grants, and contracts personnel;

     (2)  Deleting the provision excluding items from the one per cent amount of an agency's capital improvement appropriations;

     (3)  Requiring an annual report to the Governor and the Legislature on the amounts due from each agency under the one per cent requirement; and

     (4)  Amending the effective date to July 1, 2050, for the purpose of encouraging further discussion; and to repeal only the amendments regarding personnel costs to be expended from the special fund on June 30, 2015.

     As affirmed by the records of votes of the members of your Committees on Economic Development and Technology and Judiciary and Government Operations that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2143, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2143, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Economic Development and Technology and Judiciary and Government Operations,

____________________________ BRIAN T. TANIGUCHI, Chair

____________________________ CAROL FUKUNAGA, Chair