STAND. COM. REP. NO. 2855

Honolulu, Hawaii

RE: S.B. No. 2576

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2020

State of Hawaii

Sir:

Your Committees on Higher Education and Government Operations, to which was referred S.B. No. 2576 entitled:

"A BILL FOR AN ACT RELATING TO REIMBURSEMENTS FOR STATE CONTRIBUTIONS,"

beg leave to report as follows:

The purpose and intent of this measure is to:

(1) Specify exemptions for the University of Hawaii from sections 87A-39 and 88-125, Hawaii Revised Statutes;

(2) Codify in statute the cost-sharing agreement between the University of Hawaii and the Department of Budget and Finance; and

(3) Require annual reporting by the Department of Budget and Finance.

Your Committees received comments on this measure from the Department of Budget and Finance, Department of Accounting and General Services, and University of Hawai‘i System.

Your Committees find that "S397" refers to a practice whereby General Fund authorized positions at the University that have insufficient General Funds appropriated to pay their salaries, can instead have the salaries paid for in part or in whole from the Tuition and Fees Special Fund, while the fringe costs continue to be paid by the General Fund. This cost-sharing agreement has been utilized by the Department of Budget and Finance, Department of Accounting and General Services, and University for the last fifteen years but without any formal authorization to do such a practice.

While this practice may have had made sense when it originated fifteen years ago during an economic downturn, it bears further scrutiny at the present time. This legislative oversight is appropriate considering that, according to budget data provided by the Department of Budget and Finance for fiscal years 2014 to 2019, the cumulative salary costs paid out of the Tuition and Fees Special Fund continue to decrease while the cumulative fringe costs paid by General Funds continue to increase. Your Committees are cognizant of the fact that fringe costs can change due to a wide variety of factors.

In fiscal year 2019-2020, the University of Hawaii utilized the S397 practice with approximately 1,215 positions. As a part of this enhanced legislative oversight called for in the reporting provisions of this measure, your Committees require that the University, using fiscal year 2019-2020 as the salary cap start date, with fringe costs determining wages, shall report to the Legislature annually on all S397 positions authorized in the Budget Justification Details of the respective Appropriations Act or Supplemental Appropriations Act, with these positions and descriptions to remain the same. Your Committees anticipate that these reporting requirements will enhance fiscal prudence and encourage the efficient use of funds in the operations of the university. This salary cap can also be changed by passage of a concurrent resolution, if necessary.

Your Committees have amended this measure by:

(1) Deleting a statutory definition of the S397 account;

(2) Replacing language that:

(A) Specifies exemptions for the University of Hawaii from sections 87A-39 and 88-125, Hawaii Revised Statutes;

(B) Codifies in statute the cost-sharing agreement between the University of Hawaii and the Department of Budget and Finance; and

(C) Mandates reporting of various items; and

(3) Providing that the salary costs shall be capped at an unspecified amount and that this salary cap shall be adjusted by passage of a concurrent resolution.

As affirmed by the records of votes of the members of your Committees on Higher Education and Government Operations that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2576, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2576, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Higher Education and Government Operations,

________________________________ LAURA H. THIELEN, Chair

________________________________ DONNA MERCADO KIM, Chair