REPORT TITLE:
Education


DESCRIPTION:
Provides for constitutional amendment making the department of
education a political subdivision headed by the board of
education, places the income tax under the board, and gives the
board the authority to enact a retail sales tax. (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        150
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 1999                                S.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO EDUCATION.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1                              PART I
 
 2      SECTION 1.  The provision of quality education for the
 
 3 children of Hawaii remains a priority of the entire State.  All
 
 4 interested parties must work together to guarantee that our
 
 5 children have the right tools and a safe environment to enable
 
 6 them to become educated, productive individuals.  An educated
 
 7 citizenry and skilled workforce are key components of any
 
 8 society, but are especially crucial when society needs to
 
 9 reestablish its economic vitality.
 
10      In recent years, Hawaii's public education system has
 
11 undergone numerous changes, yet the public perception is that
 
12 graduation from a public high school in Hawaii does not guarantee
 
13 an educated citizen or skilled worker.  Currently, the education
 
14 system has goals, objectives, and performance standards, but few
 
15 assessments and little acceptance of responsibility for improving
 
16 on student performance.  Each year, we read of pronouncements by
 
17 the department of education that it is on the right track, yet
 
18 the reading scores of Hawaii's students remain among the lowest
 
19 in the nation.
 

 
Page 2                                                     150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      The board of education and the department of education
 
 2 clamor for increased levels of funding, advancing the perception
 
 3 that the legislature is providing insufficient funds to the
 
 4 department of education, and holding the legislature responsible
 
 5 for the inefficiencies and ineffectiveness of the educational
 
 6 system.  Nothing can be further from the truth.  While it is the
 
 7 responsibility of the legislature to provide funds to the
 
 8 department of education, it is incumbent on the legislature to
 
 9 balance the needs of the State against limited resources.  Even
 
10 under these circumstances, the legislature has increased the
 
11 department of education's budget to a level that represents 35.7
 
12 per cent of the general fund budget.  In addition, all governors
 
13 have attempted to preserve the department of education's budget
 
14 to the detriment of other programs of state government.
 
15 Unfortunately, the result is that Hawaii students scored the
 
16 lowest in reading among thirty-nine states last year.
 
17      It is obvious that the State is at a crossroads with regard
 
18 to education.  It is no longer a funding issue, it is an issue of
 
19 responsibility and accountability for the delivery of an
 
20 educational system that assures that every child will be
 
21 competent in the basic requirements of society.
 
22      It is time to develop and support a concept that provides
 
23 for a dedicated source of funding for education similar to that
 

 
Page 3                                                     150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 provided the tourism industry.  Providing the department with a
 
 2 separate means of financing would guarantee the availability of
 
 3 resources necessary to provide quality educational opportunities,
 
 4 both for students and teachers.
 
 5      Through this Act, the legislature changes a basic philosophy
 
 6 and seeks to reform the governance of a statewide education
 
 7 system by delineating clear lines of authority and responsibility
 
 8 in all fiscal matters, policy issues, and managerial oversight.
 
 9 This Act makes the department of education a political
 
10 subdivision headed by the board of education separate and apart
 
11 from state government but subject to the general laws of the
 
12 State.
 
13      In order to finance this new political subdivision, the
 
14 department of education is given control over the income tax and
 
15 is allowed to adopt a retail sales tax.  The department will be
 
16 fiscally responsible for its revenues and therefore will be
 
17 responsible for raising them in the amounts necessary as well as
 
18 expending those amounts in a manner desired by the public for the
 
19 benefit of the educational system.
 
20      Through this systemic change, the legislature believes that
 
21 existing resources will be utilized more efficiently and
 
22 effectively.  The department of education will be solely and
 
23 directly accountable to the public, with regard to performance,
 

 
Page 4                                                     150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 expenditure, and increases in taxes to fund the system.  The
 
 2 legislature notes that many school districts on the mainland have
 
 3 their own taxing power and the legislature believes that having
 
 4 this authority will make the department of education more
 
 5 accountable and responsive to the public that pays the taxes.
 
 6      It is the intent of the legislature to achieve these
 
 7 objectives by providing total autonomy to the department of
 
 8 education
 
 9                              PART II
 
10      SECTION 2.  Article X of the Constitution of the State of
 
11 Hawaii is amended by adding three new sections to read as
 
12 follows:
 
13      "DEPARTMENT OF EDUCATION; POLITICAL SUBDIVISION; BONDS
 
14      Section 1.4.  The department of education shall be a
 
15 political subdivision headed by the board of education which
 
16 shall enact ordinances and govern the political subdivision in a
 
17 manner similar to other political subdivisions of the State.  The
 
18 department shall have all of the functions, powers and duties
 
19 necessary to provide for the establishment, support and control
 
20 of the statewide system of public education, except police
 
21 powers.  The department of education shall be separate and apart
 
22 from the rest of state government but shall be subject to general
 
23 law.
 

 
Page 5                                                     150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      The department of education may issue general obligation
 
 2 bonds for the payment of the principle and interest of which the
 
 3 full faith and credit of the political subdivision is pledged
 
 4 and, unless otherwise indicated, includes reimbursable general
 
 5 obligation bonds.  All bonds and other instruments of
 
 6 indebtedness issued by the department of education shall be
 
 7 subject to Article VII, sections 12 and 13.  For the purposes of
 
 8 determining the department's debt ceiling, the department of
 
 9 education shall follow the provisions of Article VII, section 13.
 
10 Fees, payments, income, excluding federal funds, and income tax
 
11 and retail sales tax revenues shall be considered general fund
 
12 revenues of the department.  The department of education shall be
 
13 responsible for the payment of all principle and interest on
 
14 general obligation bonds issued by the State and outstanding for
 
15 the direct benefit of the public school system on the effective
 
16 date of this section.
 
17                        POWERS OF TAXATION
 
18      Section 3.4.  The department of education shall exercise all
 
19 functions, powers and duties relating to the taxation of income,
 
20 except as to pension, social security, and corporate income which
 
21 shall be exempt from the department's powers.  The income tax
 
22 shall be assessed, levied and collected as provided in Article
 
23 VII, section 2 and Article XVIII, section 7.1.
 

 
Page 6                                                     150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      The department of education shall exercise all functions,
 
 2 powers and duties relating to a retail sales tax.  The retail
 
 3 sales tax shall be limited to the retail sale of tangible
 
 4 personal property and shall not exceed one cent on each one
 
 5 dollar of retail sales value.  The adoption of a retail sales tax
 
 6 and the establishment or change in the tax rate shall require a
 
 7 two-thirds vote of the members to which the board of education is
 
 8 entitled.
 
 9                          STATEWIDE LAWS
 
10      Section 7.  This article shall not limit the power of the
 
11 legislature to enact laws of statewide concern."
 
12      SECTION 3.  Article XVIII of the Constitution of the State
 
13 of Hawaii is amended by adding a new section to read as follows:
 
14          "DEPARTMENT OF EDUCATION; POLITICAL SUBDIVISION
 
15      Section 7.1.  The amendments made to Article VII, sections
 
16 2, 7 and 10, Article VIII, section 3, and Article X changing the
 
17 functions, powers and duties of the board of education and making
 
18 the department a political subdivision shall take effect on
 
19 July 1, 2002.
 
20      No change in income tax rates shall be made before July 1,
 
21 2005, and no changes shall be made to deductions, exemptions or
 
22 tax credits, except those made to the Internal Revenue Code and
 
23 adopted by the board, before July 1, 2007; provided that
 

 
Page 7                                                     150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 increases in those deductions, exemptions or tax credits, or the
 
 2 addition of new and further deductions, exemptions, or tax
 
 3 credits may be established by ordinance by the board of
 
 4 education.
 
 5      The department of education shall contract with the
 
 6 department in the executive branch responsible for collecting
 
 7 taxes to collect income taxes for the board until July 1, 2012.
 
 8 The executive department shall be reimbursed for direct and
 
 9 indirect costs in collecting income tax revenues for the board."
 
10      SECTION 4.  Article VII, section 2, of the Constitution of
 
11 the State of Hawaii is amended to read as follows:
 
12                         "INCOME TAXATION
 
13      Section 2.  In enacting any law or adopting any ordinance
 
14 imposing a tax on or measured by income, the legislature may and
 
15 board of education shall define income by reference to provisions
 
16 of the laws of the United States as they may be or become
 
17 effective at any time or from time to time, whether retrospective
 
18 or prospective in their operation.  The legislature and the board
 
19 of education may provide that amendments to such laws of the
 
20 United States shall become the law of the State or be adopted as
 
21 a ordinance upon their becoming the law of the United States.
 
22 The legislature and the board of education shall in any such law
 
23 or ordinance set the rate or rates of such tax[.]; provided that
 

 
Page 8                                                     150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 a two-thirds vote of the members to which the board of education
 
 2 is entitled shall be required to set or change the rate or rates
 
 3 of tax.  The legislature and the board of education may in so
 
 4 defining income make exceptions, additions or modifications to
 
 5 any provisions of the laws of the United States so referred to
 
 6 and provide for retrospective exceptions or modifications to
 
 7 those provisions which are retrospective."
 
 8      SECTION 5.  Article VII, section 7, of the Constitution of
 
 9 the State of Hawaii is amended to read as follows:
 
10                       "COUNCIL ON REVENUES
 
11      Section 7.  There shall be established by law a council on
 
12 revenues which shall prepare revenue estimates of the state
 
13 government, except the department of education, and shall report
 
14 the estimates to the governor and the legislature at times
 
15 provided by law.  The estimates shall be considered by the
 
16 governor in preparing the budget, recommending appropriations and
 
17 revenues and controlling expenditures.  The estimates shall be
 
18 considered by the legislature in appropriating funds and enacting
 
19 revenue measures.  All revenue estimates submitted by the council
 
20 to the governor and the legislature shall be made public.  If the
 
21 legislature in appropriating funds or if the governor in
 
22 preparing the budget or recommending appropriations exceeds
 
23 estimated revenues due to proposed expenditures, this fact shall
 

 
Page 9                                                     150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 be made public including the reasons therefor.
 
 2      The council on revenues shall also prepare revenue estimates
 
 3 of the department of education, and shall report the estimates to
 
 4 the board of education at times provided by law.  The estimates
 
 5 shall be considered by the board of education in preparing its
 
 6 budget, recommending its appropriations and revenues and
 
 7 controlling its expenditures.  All revenue estimates submitted by
 
 8 the council to the board of education shall be made public.  If
 
 9 the board of education in preparing the budget or recommending
 
10 expenditures exceeds estimated revenues due to proposed
 
11 expenditures, this fact shall be made public including the
 
12 reasons therefor."
 
13      SECTION 6.  Article VII, section 10, of the Constitution of
 
14 the State of Hawaii is amended to read as follows:
 
15                             "AUDITOR
 
16      Section 10.  The legislature, by a majority vote of each
 
17 house in joint session, shall appoint an auditor who shall serve
 
18 for a period of eight years and thereafter until a successor
 
19 shall have been appointed.  The legislature, by a two-thirds vote
 
20 of the members in joint session, may remove the auditor from
 
21 office at any time for cause.  It shall be the duty of the
 
22 auditor to conduct post-audits of the transactions, accounts,
 
23 programs and performance of all departments, offices and agencies
 

 
Page 10                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 of the State, the department of education and [its] political
 
 2 subdivisions[,] of the State, certify to the accuracy of all
 
 3 financial statements issued by the respective accounting officers
 
 4 and to report the auditor's findings and recommendations to the
 
 5 governor [and], to the legislature and to the board of education
 
 6 at such times as shall be provided by law.  The auditor shall
 
 7 also make such additional reports and conduct such other
 
 8 investigations as may be directed by the legislature."
 
 9      SECTION 7.  Article VIII, section 3, of the Constitution of
 
10 the State of Hawaii is amended to read as follows:
 
11                       "TAXATION AND FINANCE
 
12      Section 3.  The taxing power shall be reserved to the State,
 
13 except so much thereof as may be delegated by the legislature to
 
14 the political subdivisions, except the income tax and retail
 
15 sales tax given to the department of education under Article X,
 
16 section 3.4, and except that all functions, powers and duties
 
17 relating to the taxation of real property shall be exercised
 
18 exclusively by the counties, with the exception of the county of
 
19 Kalawao.  The legislature shall have the power to apportion state
 
20 revenues among the several political subdivisions."
 
21      SECTION 8.  Article X, section 2, of the Constitution of the
 
22 State of Hawaii is amended to read as follows:
 
23                        "BOARD OF EDUCATION
 

 
Page 11                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      Section 2.  There shall be a board of education composed of
 
 2 members who shall be elected in a nonpartisan manner by qualified
 
 3 voters, as provided by [law,] ordinance of the board of
 
 4 education, from two at-large school board districts.  The first
 
 5 school board district shall be comprised of the island of Oahu
 
 6 and all other islands not specifically enumerated.  The second
 
 7 school board district shall be comprised of the islands of
 
 8 Hawaii, Maui, Lanai, Molokai, Kahoolawe, Kauai and Niihau.  Each
 
 9 at-large school board district shall be divided into departmental
 
10 school districts, as may be provided by [law.] ordinance of the
 
11 board of education.  There shall be at least one member residing
 
12 in each departmental school district.  The Hawaii State Student
 
13 Council shall select a public high school student to serve as a
 
14 nonvoting member on the board of education."
 
15      SECTION 9.  Article X, section 3, of the Constitution of the
 
16 State of Hawaii is amended to read as follows:
 
17                 "POWER OF THE BOARD OF EDUCATION;
 
18                 GENERAL FUND EXPENDITURE CEILING
 
19      Section 3.  The board of education shall have the power[, as
 
20 provided by law,] to formulate statewide educational policy and
 
21 appoint the superintendent of education as the chief executive
 
22 officer of the public school system.  The board of education
 
23 shall have jurisdiction over the internal organization and
 

 
Page 12                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 management of the department of education and the public school
 
 2 system and shall exercise its jurisdiction in a manner consistent
 
 3 with general laws.
 
 4                 GENERAL FUND EXPENDITURE CEILING
 
 5      Notwithstanding any other provision to the contrary, the
 
 6 board of education shall establish a general fund expenditure
 
 7 ceiling which shall limit the rate of growth of general fund
 
 8 appropriations, excluding federal funds received by the general
 
 9 fund of the department of education, to the estimated rate of
 
10 growth of the State's economy as provided by law.  No
 
11 appropriations by the department in excess of this ceiling shall
 
12 be authorized by the board of education unless the board of
 
13 education shall, by a two-thirds vote of the members to which the
 
14 board of education is entitled, set forth the dollar amount and
 
15 the rate by which the ceiling will be exceeded and the reasons
 
16 therefor."
 
17      SECTION 10.  The question to be printed on the ballot shall
 
18 be as follows:
 
19      "Shall:
 
20      (1)  The powers, functions, and duties of the board of
 
21           education to manage and control the public school and
 
22           public library system, be independent of legislative
 
23           and gubernatorial review so that the department of
 

 
Page 13                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1           education is a political subdivision; and
 
 2      (2)  The board of education be granted complete authority
 
 3           over the income tax and be allowed to impose a retail
 
 4           sales tax?"
 
 5      SECTION 11.  Constitutional material to be repealed is
 
 6 bracketed.  New constitutional material is underscored.
 
 7      SECTION 12.  Constitutional amendments made to Article VII,
 
 8 Article VIII, Article X, and Article XVIII in this Part shall
 
 9 take effect upon compliance with Article XVII, section 3, of the
 
10 Constitution of the State of Hawaii.
 
11                             PART III
 
12      SECTION 13.  Section 26-4, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "§26-4 Structure of government.  Under the supervision of
 
15 the governor, all executive and administrative offices,
 
16 departments, and instrumentalities of the state government and
 
17 their respective functions, powers, and duties shall be allocated
 
18 among and within the following principal departments that are
 
19 hereby established:
 
20      (1)  Department of human resources development (Section
 
21           26-5)
 
22      (2)  Department of accounting and general services (Section
 
23           26-6)
 

 
Page 14                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      (3)  Department of the attorney general (Section 26-7)
 
 2      (4)  Department of budget and finance (Section 26-8)
 
 3      (5)  Department of commerce and consumer affairs (Section
 
 4           26-9)
 
 5      (6)  Department of taxation (Section 26-10)
 
 6      (7)  University of Hawaii (Section 26-11)
 
 7     [(8)  Department of education (Section 26-12)
 
 8      (9)] (8)  Department of health (Section 26-13)
 
 9    [(10)] (9)  Department of human services (Section 26-14)
 
10    [(11)] (10)  Department of land and natural resources (Section
 
11           26-15)
 
12    [(12)] (11)  Department of agriculture (Section 26-16)
 
13    [(13)] (12)  Department of Hawaiian home lands (Section 26-17)
 
14    [(14)] (13)  Department of business, economic development, and
 
15           tourism (Section 26-18)
 
16    [(15)] (14)  Department of transportation (Section 26-19)
 
17    [(16)] (15)  Department of labor and industrial relations
 
18           (Section 26-20)
 
19    [(17)] (16)  Department of defense (Section 26-21)
 
20    [(18)] (17)  Department of public safety (Section 26-14.6)"
 
21      SECTION 14.  Section 37-113.1, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 
23      "§37-113.1  Council on revenues; estimate of total personal
 

 


 

Page 15                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 income.  The council shall prepare an estimate of the total state
 
 2 personal income for the calendar year in progress and, when
 
 3 necessary, for the next succeeding calendar year for which such
 
 4 income has not been determined or published and shall report the
 
 5 estimate and any revision thereto to the director of finance, the
 
 6 governor, the chief justice, the board of education, and the
 
 7 legislature each July 20 and October 20."
 
 8      SECTION 15.  Section 235-119, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "§235-119  Taxes, state realizations.  All corporate income
 
11 taxes shall be for the use of the State and shall be paid into
 
12 the state treasury at such times as the director of finance shall
 
13 direct.  All individual income taxes shall be for the use of the
 
14 board of education.  Out of the income tax revenues the director
 
15 of finance shall retain sufficient amounts to reimburse the State
 
16 for the costs of assessment, collection, and disposition incurred
 
17 by the departments of budget and finance and taxation.  Amounts
 
18 retained shall be general fund realizations.
 
19      For the purposes of this section, the costs of assessment,
 
20 collection, and disposition shall include any and all costs,
 
21 direct or indirect, that are deemed necessary and proper to carry
 
22 out this chapter."
 
23      SECTION 16.  Section 237-31, Hawaii Revised Statutes, is
 

 
Page 16                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 amended to read as follows:
 
 2      "§237-31  Remittances.  All remittances of taxes imposed by
 
 3 this chapter shall be made by money, bank draft, check, cashier's
 
 4 check, money order, or certificate of deposit to the office of
 
 5 the department of taxation to which the return was transmitted.
 
 6 The department shall issue its receipts therefor to the taxpayer
 
 7 and shall pay the moneys into the state treasury as a state
 
 8 realization, to be kept and accounted for as provided by law;
 
 9 [provided that the sum from all general excise tax revenues
 
10 realized by the State that represents the difference between
 
11 $90,000,000 and the proceeds from the sale of any general
 
12 obligation bonds authorized for that fiscal year for the purposes
 
13 of the state educational facilities improvement special fund
 
14 shall be deposited in the state treasury in each fiscal year to
 
15 the credit of the state educational facilities improvement
 
16 special fund;] provided further that a sum, not to exceed
 
17 $5,000,000, from all general excise tax revenues realized by the
 
18 State shall be deposited in the state treasury in each fiscal
 
19 year to the credit of the compound interest bond reserve fund."
 
20      SECTION 17.  Section 26-12, Hawaii Revised Statutes, is
 
21 repealed.
 
22      ["§26-12  Department of education.  The department of
 
23 education shall be headed by an executive board to be known as
 

 
Page 17                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 the board of education.
 
 2      Under policies established by the board, the superintendent
 
 3 shall administer programs of education and public instruction
 
 4 throughout the State, including education at the preschool,
 
 5 primary, and secondary school levels, adult education, school
 
 6 library services, health education and instruction (not including
 
 7 dental health treatment transferred to the department of health),
 
 8 and such other programs as may be established by law.  The state
 
 9 librarian, under policies established by the board of education,
 
10 shall be responsible for the administration of programs relating
 
11 to public library services and transcribing services for the
 
12 blind.
 
13      The functions and authority heretofore exercised by the
 
14 department of education (except dental health treatment
 
15 transferred to the department of health), library of Hawaii,
 
16 Hawaii county library, Maui county library, and the transcribing
 
17 services program of the bureau of sight conservation and work
 
18 with the blind, as heretofore constituted are transferred to the
 
19 public library system established by this chapter.
 
20      The management contract between the board of supervisors of
 
21 the county of Kauai and the Kauai public library association
 
22 shall be terminated at the earliest time after November 25, 1959,
 
23 permissible under the terms of the contract and the provisions of
 

 
Page 18                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 this paragraph shall constitute notice of termination, and the
 
 2 functions and authority heretofore exercised by the Kauai county
 
 3 library as heretofore constituted and the Kauai public library
 
 4 association over the public libraries in the county of Kauai
 
 5 shall thereupon be transferred to the public library system
 
 6 established by this chapter.
 
 7      The management contracts between the trustees of the library
 
 8 of Hawaii and the Friends of the Library of Hawaii, and between
 
 9 the library of Hawaii and the Hilo library and reading room
 
10 association, shall be terminated at the earliest time after
 
11 November 25, 1959, permissible under the terms of the contracts,
 
12 and the provisions of this paragraph shall constitute notice of
 
13 termination.
 
14      Upon the termination of the contracts, the State or the
 
15 counties shall not enter into any library management contracts
 
16 with any private association; provided that in providing library
 
17 services the board of education may enter into contracts approved
 
18 by the governor for the use of lands, buildings, equipment, and
 
19 facilities owned by any private association.
 
20      Notwithstanding any law to the contrary, the board of
 
21 education may establish, specify the membership number and quorum
 
22 requirements for, appoint members to, and disestablish a
 
23 commission in each county to be known as the library advisory
 

 
Page 19                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 commission, which shall in each case sit in an advisory capacity
 
 2 to the board of education on matters relating to public library
 
 3 services in their respective county."]
 
 4      SECTION 18.  Section 36-32, Hawaii Revised Statutes, is
 
 5 repealed.
 
 6      ["§36-32  State educational facilities improvement special
 
 7 fund.(a)  There is created in the treasury of the State the
 
 8 state educational facilities improvement special fund, into which
 
 9 shall be deposited a portion of all general excise tax revenues
 
10 collected by the department of taxation under section 237-31.
 
11 The special fund shall be used solely to plan, design, acquire
 
12 lands for and to construct public school facilities and to
 
13 provide equipment and technology infrastructure to improve public
 
14 schools and other facilities under the jurisdiction of the
 
15 department of education, except public libraries.  In addition,
 
16 activities of the department of education intended to eliminate
 
17 the gap between the facility needs of schools and available
 
18 resources shall be eligible for funding from the special fund.
 
19 Expenditures from the special fund shall be limited to projects
 
20 authorized by the legislature and shall be subject to sections
 
21 37-31, and 37-33 through 37-40.  Appropriations or authorizations
 
22 from the special fund shall be expended by the comptroller.
 
23      (b)  The department of accounting and general services shall
 

 
Page 20                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 submit an annual report to the legislature, which shall include a
 
 2 financial statement of the special fund and the status of
 
 3 projects undertaken pursuant to this section, no later than
 
 4 twenty days prior to the convening of each regular session."]
 
 5      SECTION 19.  Transition and implementation.  The legislature
 
 6 recognizes that while it currently bears the constitutional
 
 7 authority for raising revenues and allocating resources, the
 
 8 successful implementation of school programs that bring about
 
 9 enhanced student outcomes requires unambiguous accountability and
 
10 authority in taxation, budgeting, expenditure control, and
 
11 determination of educational needs by the board of education.
 
12 The legislature also recognizes that providing increased
 
13 flexibility requires increased accountability.  The legislature
 
14 believes that achieving enhanced assessment and greater
 
15 accountability requires a fundamental change in the assumptions
 
16 that govern the educational system.  The legislature also
 
17 believes that consolidating and reorganizing the education
 
18 programs and related supporting programs at this time of
 
19 transition of the department of education to a political
 
20 subdivision will bring greater efficiencies and responsiveness to
 
21 the educational system.  To achieve these objectives,
 
22 restructuring the governance and processes of the educational
 
23 system is undertaken by this Act.
 

 
Page 21                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      The legislature intends that there be an orderly transition
 
 2 period, wherein the board, superintendent, and state librarian
 
 3 begin to implement this restructuring.  The interest of the State
 
 4 and its people requires that the transition be accomplished so as
 
 5 to ensure continuity and quality in education programs.
 
 6 Accordingly, it is the intent of the legislature that appropriate
 
 7 planning and actions be authorized and taken to avoid or minimize
 
 8 any disruptions to the educational system and process.
 
 9      To facilitate the restructuring of the department and the
 
10 educational system, there is established an educational
 
11 restructuring and transition committee, consisting of eleven
 
12 members.  Three members shall be members of the board of
 
13 education, one of whom shall serve as the chairperson.  Two
 
14 members shall be appointed by the governor in accordance with
 
15 section 26-41, Hawaii Revised Statutes.  Two members each shall
 
16 be appointed by the president of the senate and the speaker of
 
17 the house of representatives.  The superintendent of education
 
18 and state librarian shall serve as ex officio members.  Any
 
19 vacancy shall be filled by the respective appointing authority.
 
20      The committee shall review the structure of the department
 
21 and make recommendations to the board of education and the
 
22 legislature on the implementation and transition in governance of
 
23 the educational system as provided in this Act.  Such related
 

 
Page 22                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 functions, programs, and issues as public libraries, school
 
 2 health services, administration, personnel and personnel costs,
 
 3 facilities repair and maintenance, risk management, retirement,
 
 4 health insurance, and collective bargaining, among others, should
 
 5 be addressed.  The committee shall facilitate the implementation
 
 6 of this Act by performing the following functions:
 
 7      (1)  Make recommendations on implementation of this Act,
 
 8           including:
 
 9           (A)  How the authority under chapter 38, Hawaii Revised
 
10                Statutes (deposits of public funds), should be
 
11                transferred to the board so that the board has all
 
12                the rights, powers, obligations, and duties with
 
13                respect to the moneys of the department as the
 
14                State, director of finance, and governor,
 
15                respectively, have with respect to moneys of the
 
16                State under chapter 38, Hawaii Revised Statutes;
 
17           (B)  Whether title to lands and real property should be
 
18                transferred to the department with authority in
 
19                the board of education to sell or otherwise
 
20                dispose of the lands and real property;
 
21           (C)  Transfer of the functions of insurance management,
 
22                central purchasing, funds custody, cash
 
23                management, and debt management with respect to
 

 
Page 23                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1                the educational system to the board;
 
 2           (D)  Transfer of responsibility for the payment of
 
 3                principal and interest on bonds issued by the
 
 4                State for the direct benefit of the public school
 
 5                system;
 
 6           (E)  Transfer of transportation services to the board;
 
 7                and
 
 8           (F)  Revisions and amendments, as needed, to the Hawaii
 
 9                Revised Statutes.
 
10      (2)  Make inquiries to elicit descriptions of programs,
 
11           recommendations, and justifications for reorganizing
 
12           and consolidating educational programs and supporting
 
13           programs, projections of future developments or needs
 
14           within educational programs, recommendations for
 
15           administrative changes, and elaboration of procedural
 
16           details;
 
17      (3)  Evaluate and make recommendations concerning the
 
18           transfer of employees whose duties affect educational
 
19           systems or are in functional areas covered by this Act;
 
20      (4)  Make recommendations on the timing and sequence of
 
21           personnel transfers;
 
22      (5)  Evaluate and make recommendations concerning the
 
23           transfer of records, equipment, machinery, supplies,
 

 
Page 24                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1           contracts, and other personal property used in the
 
 2           performance of functional areas covered by this Act;
 
 3      (6)  Evaluate and make recommendations on the timing and
 
 4           sequence of programmatic transfers;
 
 5      (7)  Evaluate and make recommendations on the schedule of
 
 6           consolidation of services and programs provided by
 
 7           other departments to the educational system and the
 
 8           ability of the board of education to contract for those
 
 9           services;
 
10      (8)  Receive public input in preparing legislation to
 
11           implement the objectives and policies of this Act;
 
12      (9)  Devise and recommend legislative and administrative
 
13           action for an orderly transition;
 
14     (10)  Evaluate and make recommendations concerning
 
15           accounting, auditing, and accountability processes and
 
16           protocols;
 
17     (11)  Evaluate and make recommendations on the regularity
 
18           with which the auditor should conduct audits of the the
 
19           department and submit reports and recommendations to
 
20           the board;
 
21     (12)  Make recommendations regarding legislation to provide
 
22           immunity from legal process for the department and
 
23           members of the board of education in a manner similar
 

 
Page 25                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1           to the counties;
 
 2     (13)  Evaluate and make recommendations concerning any other
 
 3           matters pertinent to the implementation of the
 
 4           objectives of this Act; and
 
 5     (14)  Prepare and submit a report no later than nine months
 
 6           following ratification of the constitutional
 
 7           amendments, which report shall include recommendations
 
 8           for the enactment of any legislation necessary to
 
 9           achieve the objectives and policies of this Act.
 
10 The committee members shall serve without compensation, but shall
 
11 be reimbursed for expenses, including travel expenses, necessary
 
12 to perform their duties.  The committee shall submit to the
 
13 governor, the legislature, and the board of education a report
 
14 and an evaluation of the structure and organization of the
 
15 department of education, recommend changes, and then dissolve.
 
16      The board shall receive the committee's report, and shall
 
17 prepare and submit a report to the governor and the legislature,
 
18 and prepare legislation to implement the restructuring,
 
19 reorganization, objectives, and policies of this Act, to be
 
20 submitted twenty days prior to the convening of the regular
 
21 session 2002 of the legislature for review, modification, or
 
22 enactment by the legislature.
 
23      SECTION 20.  Statutory material to be repealed is bracketed.
 

 
Page 26                                                    150
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 New statutory material is underscored.
 
 2      SECTION 21.  This Act shall take effect upon its approval
 
 3 subject to the effective date in section 12 and provided that
 
 4 sections 13 to 18 of this Act shall take effect on July 1, 2002.