STAND. COM. REP. NO. 678

Honolulu, Hawaii

RE:    S.B. No. 1426

       S.D. 2

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B. No. 1426, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO PUBLIC FUNDS,"

begs leave to report as follows:

     The purpose and intent of this measure is to explore options for balancing the state budget by:

     (1)  Requiring the City and County of Honolulu to return to the State $200,000,000 of the revenues from the county surcharge on state general excise and use taxes;

     (2)  Authorizing the issuance of general obligation bonds in the sum of $300,000,000 to reimburse the City and County of Honolulu; and

     (3)  Extending the county surcharge on general excise and use taxes under Act 247, Session Laws of Hawaii 2005, by two years.

     Your Committee received written comments in opposition to this measure from Peter B. Carlisle, Mayor, City and County of Honolulu; and the Land Use Research Foundation of Hawaii.  Written comments were received from the Tax Foundation of Hawaii.

     Your Committee finds that the State must find innovative ways to balance its budget amid the current economic crisis.  Borrowing funds from the City and County of Honolulu's surcharge on state taxes and repaying the county with revenues from the issuance of general obligation bonds will help the State to maintain current services and personnel while ensuring that the county is repaid in a timely manner.

     Your Committee has amended this measure by:

     (1)  Changing to unspecified sums, the dollar amounts for county surcharge revenues to be returned to the State and the general obligation bond proceeds to be transferred to the City and County of Honolulu;

     (2)  Clarifying that the State is to seek the affirmative advice of its bond counsel regarding any potential effect on the State's bond rating from using the general obligation bonds to replace the county surcharge revenues returned from the City and County of Honolulu; and

     (3)  Making technical nonsubstantive amendments for purposes of clarity and style.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1426, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 1426, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

DAVID Y. IGE, Chair