SB1638 HD1

SECTION 1. The legislature finds that the lack of affordable air travel disproportionately affects Molokai residents, many of whom rely on air transportation for essential services, including healthcare, employment, and education. The legislature further finds that reliable and cost-effective air service is not merely a convenience but a necessity for residents of remote island communities. As such, ensuring that Molokai residents have access to affordable air transportation serves a compelling public interest by improving economic opportunities, enhancing access to medical care, and supporting the overall well-being of the community. The establishment of a subsidy program is intended to encourage competition among air carriers, thereby reducing the cost burden on residents while maintaining reliable service levels. The legislature declares that this Act serves a valid public purpose and is an appropriate use of state funds under article VII, section 4, of the Hawaii State Constitution.

Accordingly, the purpose of this Act is to establish within the department of transportation a three-year Molokai air carrier subsidy pilot program to provide subsidies to airlines operating out of Molokai Airport.

SECTION 2. (a) There shall be established within the department a three-year Molokai air carrier subsidy pilot program to provide subsidies to air carriers operating out of Molokai Airport.

(b) The Molokai air carrier subsidy program shall provide subsidies to qualified applicants pursuant to the following terms, conditions, and standards:

(1) Any subsidy shall be used exclusively for the purposes of the program;

(2) The applicant shall indicate the capability to properly use the subsidy for the costs of operation in and out of Molokai Airport;

(3) The applicant shall comply with all applicable federal and state laws prohibiting discrimination against any person on the basis of race, color, national origin, religion, creed, sex, age, sexual orientation, disability, or any other characteristic protected under applicable federal or state law;

(4) The subsidy shall not be used for purposes of entertainment or perquisites;

(5) All activities undertaken with subsidy funds received shall comply with all applicable federal, state, and county statutes and ordinances;

(6) The applicant shall:

(A) Indemnify and hold harmless the State and its officers, agents, and employees from and against any and all claims arising out of or resulting from activities carried out or projects undertaken with funds received from the program; and

(B) Obtain sufficient insurance to provide the indemnification under subparagraph (A), if requested to do so by the department;

(7) The applicant shall agree to make available to the department all records the applicant may have relating to the subsidy to monitor the applicant's compliance with the requirements of the program;

(8) The applicant shall comply with other requirements as the department may prescribe; and

(9) The applicant shall demonstrate measurable improvements in air service availability or affordability for Molokai residents. Such improvements may include but are not limited to:

(A) An increase in the number of regularly scheduled flights;

(B) A reduction in airfare costs for residents; or

The department shall establish guidelines to evaluate the extent of such improvements before awarding or renewing any subsidy.

(c) The department shall submit a comprehensive report detailing the impact of the Molokai air carrier subsidy program, including but not limited to:

(1) The number of flights subsidized;

(2) Changes in air travel costs;

(3) The amount of subsidy funds disbursed;

(4) A detailed accounting and descriptions of expenditures of subsidy funds; and

(5) The overall benefits to Molokai residents,

to the legislature no later than twenty days prior to the convening of the regular sessions of 2026, 2027, and 2028.

(d) The department shall conduct an annual audit of all funds disbursed under the Molokai air carrier subsidy program to ensure compliance with program requirements. Each audit shall assess whether funds were used for their intended purpose and whether the subsidy has contributed to improving air service availability and affordability for Molokai residents. If an air carrier is found to have misused funds, the carrier shall return the misused amount to the department and shall be ineligible for further subsidies under the program for a period of up to three years.

(e) As used in this section:

"Applicant" means a qualified air carrier operating, or planning to operate, out of Molokai Airport seeking a subsidy.

"Department" means the department of transportation.

"Program" means the Molokai air carrier subsidy program.

"Subsidy" means the sum of money appropriated by the legislature to the department to be disbursed to qualified air carriers operating out of Molokai airport."

SECTION 3. In establishing the Molokai air carrier subsidy pilot program pursuant to section 2 of this Act, the department of transportation shall request the assistance of Hawaii's congressional delegation, the Federal Aviation Administration, and other pertinent federal officials.

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 to the department of transportation's administration division (TRN995) for the Molokai air carrier subsidy program.

The sums appropriated shall be expended by the department of transportation for the purposes of this Act.

SECTION 5. This Act shall take effect on July 1, 3000, and shall be repealed on June 30, 2028.

THE SENATE	S.B. NO.	1638
THIRTY-THIRD LEGISLATURE, 2025		S.D. 2
STATE OF HAWAII		H.D. 1