HB1537 HD1

SECTION 1. The legislature finds that article X, section 1, of the Constitution of the State of Hawaii requires the State to provide a system of public education, which includes K-12 and post secondary education institutions. Compared to other states, Hawaii is unique because the State is responsible for providing and funding public education and has only one public higher education system in the State. As a result, funding for public education in Hawaii is primarily sourced from the general revenues of the State.

The legislature further finds that public education in Hawaii is not adequately funded. According to a 2017 analysis of real property tax in Hawaii performed by the department of business, economic development, and tourism, Hawaii's education expenditures, as a share of combined state and local government expenditures, is 27.3 per cent and ranks as the lowest in the nation. At $12,855 per child, Hawaii trails mainland school districts of similar size when adjusting for cost of living. This inadequate funding of Hawaii's public school system has played a role in driving many Hawaii families to enroll their children in private schools, leaving Hawaii with one of the highest rates of private school enrollment in the nation according to the United States Census Bureau.

The legislature additionally finds that the United States Department of Education currently considers over seventy per cent of Hawaii's public schools to be Title I schools. In addition, a majority of public school students are now considered high-needs students, meaning they are students who qualify for free or reduced price lunch, English language learners, or special education students.

The legislature also finds that funding of public higher education in the State has declined as a portion of the state budget from nine per cent in 2013 to seven per cent in 2022. During the same period, the cost of higher education has increased nationally. The 2022 Hawaii Databook reports that the number of faculty, staff, and personnel at the university of Hawaii has declined from 2019 to 2022. Reductions in funding and available state revenue have compromised the sustainability and availability of programs at the State's only public higher education institutions. With the costs of a college education rising, the legislature further finds that access to, and affordability of, public universities is even more critical for Hawaii residents. The university of Hawaii facilities are aged, lack current investment, and are not contemporary to other universities due to inadequate funding investment. While statewide need for higher education and enrollment are ever increasing, the lack of historical public funding support undermines the State's ability to meet this demand.

The legislature further finds that Hawaii's K-12 school and university facilities are aging, and funding for the repair and maintenance of older facilities and building of newer facilities is sorely needed. The mean age of K-12 school facilities in Hawaii is sixty-one years; the average school building is forty-four years old; and fifty-three buildings are over one hundred years old. The majority of buildings at the University of Hawaii were constructed over forty years ago. Classroom facilities, student housing buildings, campus amenities, and facilities that support the physical plant of the campus have not been adequately funded to the level to support regular routine maintenance.

The legislature additionally finds that after adjusting for the high cost of living in Hawaii, teachers' average salaries are in the lower half of pay compared to other states in the United States. State spending on public education is the lowest in the nation and is ranked as the forty-ninth worst state in the nation for teachers.

The legislature further finds that the COVID-19 pandemic brought unprecedented challenges that had a disproportionate effect on students of color and students from low-income backgrounds. The federal government was able to inject funds through the American Rescue Plan and highlighted the importance of increased funds for public education in the State.

The legislature also finds that chronic underfunding in public education undermines the State's goal of providing a quality education to all of Hawaii's students and to having an educated workforce. Insufficient funding results in delayed repairs to school facilities, overheated classrooms, larger class sizes, a lack of adequate classroom supplies, elimination of arts and career and technical education courses, budget cuts for special education and English language learner programs, increased in-state tuition costs to attend the University of Hawaii, and an increasing number of vacant teacher positions statewide. It is necessary to develop a new means of funding Hawaii's public education system to ensure that the State will be able to prepare all students to meet the social and economic demands of the twenty-first century.

The legislature notes that the cost of housing is a significant deterrent to affordability of residing in Hawaii. Real estate owned by nonresident investors exacerbates the economics of unaffordability of housing. The State needs its residents to be educated and for local businesses and industry to have a well-educated resident workforce. Enabling funding from real estate speculation to support public education infrastructure within the State is rational.

The purpose of this Act is to propose an amendment to the Constitution of the State of Hawaii to increase funding for public education for all students of Hawaii by authorizing the legislature to establish a surcharge on residential investment property.

SECTION 2. Article VIII, section 3, of the Constitution of the State of Hawaii is amended to read as follows:

"TAXATION AND FINANCE

Section 3. The taxing power shall be reserved to the State, except so much thereof as may be delegated by the legislature to the political subdivisions, and except that all functions, powers and duties relating to the taxation of real property shall be exercised [~~exclusively~~] by the counties, with the exception of the county of Kalawao[.]; provided that the legislature shall not be prohibited from establishing a surcharge on residential investment property pursuant to Article X, section 1. The legislature shall have the power to apportion state revenues among the several political subdivisions."

SECTION 3. Article X, section 1, of the Constitution of the State of Hawaii is amended to read as follows:

"PUBLIC EDUCATION

Section 1. The State shall provide for the establishment, support and control of a statewide system of public schools free from sectarian control, a state university, public libraries and such other educational institutions as may be deemed desirable, including physical facilities therefor. There shall be no discrimination in public educational institutions because of race, religion, sex or ancestry; nor shall public funds be appropriated for the support or benefit of any sectarian or nonsectarian private educational institution, except that proceeds of special purpose revenue bonds authorized or issued under section 12 of Article VII may be appropriated to finance or assist:

1. Not-for-profit corporations that provide early childhood education and care facilities serving the general public; and

2. Not-for-profit private nonsectarian and sectarian elementary schools, secondary schools, colleges and universities.

The legislature may establish, as provided by law, a surcharge on residential investment property valued at $3,000,000 or greater to increase funding for public education for all of Hawaii's children and adults.

For the purposes of this section:

The term "residential investment property" means all real property including apartments and condominiums and appurtenances thereto, including buildings, structures, fences and improvements erected on or affixed to such real property, and any fixture that is erected on or affixed to the land, buildings, structures, fences and improvements; and all machinery and other mechanical or other allied equipment, and the foundations thereof, that are dedicated for residential use and that do not serve as the owner's primary residence; provided that the surcharge shall not apply to any affordable housing development that is subject to a regulatory agreement with the State or a county."

SECTION 4. The question to be printed on the ballot shall be as follows:

"Shall the legislature increase funding for public education for all of Hawaii's children and adults by establishing, as provided by law, a surcharge on residential investment property valued at $3,000,000 or greater, excluding a homeowner's primary residence?"

SECTION 5. Constitutional material to be repealed is bracketed and stricken. New constitutional material is underscored.

SECTION 6. This amendment shall take effect on July 1, 3000; provided that this amendment shall take effect upon compliance with article XVII, section 3, of the Constitution of the State of Hawaii.

HOUSE OF REPRESENTATIVES	H.B. NO.	1537
THIRTY-SECOND LEGISLATURE, 2024		H.D. 1
STATE OF HAWAII