SB2699

SECTION 1. The legislature finds that public transit is vital for Hawaii's children and families and provides access to schools, jobs, sports and extracurriculars, health services, and community activities. Public transit is especially critical for disadvantaged communities where many are unable to afford personal vehicles, and disabled individuals who are unable to drive, or to walk or bike long distances. Existing state and county programs, including the department of education's express county bus pass program and county-specific fare reductions, support youth transit access but have limitations that may make access inequitable. For example, the express county bus pass program is limited to intermediate, middle, and high school students attending their home school and residing 1.5 miles or more from school, which excludes students who live within shorter distances. County bus systems provide some financial relief for youth. For example, Oahu's bus system provides free rides for children ages five and younger when they ride with a paying adult and offers reduced fares for youth aged six to nineteen. Maui's bus system offers fare-free transit for children and youth aged twenty-four and younger with a valid student identification card, with a requirement that children five and under are accompanied by a paying adult. Hawaii island's hele-on transit service is currently fare-free for all riders. Kauai's bus provides free rides for children aged six and younger when they ride with a paying adult and offers discounted fares for youth aged seven to eighteen. However, county transit options are not necessarily available every year.

The legislature further finds that other states, including Washington, have successfully implemented state-supported fare-free youth transit programs, which have resulted in millions of fare-free trips, greater independence for youth, measurable progress toward state emissions reduction goals, and financial relief for families. In Hawaii, however, varying eligibility requirements and administrative processes create burdens for families and limit program effectiveness.

The legislature believes that a universal fare-free transit program for all children through high school age would eliminate these barriers and reduce family transportation costs.

The legislature further believes that increasing transit ridership will support the State's goals to reduce emissions by fifty per cent by 2030 and to achieve net negative greenhouse gas emissions by 2045, pursuant to section 225P-5 Hawaii Revised Statutes. Increased public transit use will also move the State closer to realizing zero emissions from transportation, the goal established in section 225P-8, Hawaii Revised Statutes.

The legislature recognizes that in October 2025, the department of transportation published its "Energy Security and Waste Reduction Plan", which fulfills a requirement of the landmark settlement agreement in Navahine F. v. Department of Transportation. The plan identifies actions the State can take to meet its legal mandates to decarbonize the statewide transportation system. These actions include providing increased transit access as an equitable transportation option, especially for disadvantaged and rural communities.

The legislature finds that providing state-supported fare-free youth transit, which will offer broad public benefits through increased affordability, equity, safety, health and carbon emissions reduction, is directly relevant to the State's environmental goals and an appropriate use of funds from the environmental response, energy, and food security tax under section 243-3.5, Hawaii Revised Statutes.

The legislature also finds that allocating a portion of these tax revenues to fund the fare-free youth transit program directly fulfills the purpose for establishing the tax and aligns the allocation of the revenues with the need to increase transit ridership in furtherance of the State's emissions reduction targets. Establishing a fare-free youth transit program special fund, and allocating 38 cents out of the existing $1.05 per barrel tax on petroleum products, and 7 cents or 36.8 per cent out of the existing 19 cents per each million British thermal units tax on non-petroleum fossil fuels, will provide an estimated total of $9,870,000 annually to fund the free youth transit program.

The legislature concludes that the expected benefits from increasing youth access to equitable and affordable transportation through fare-free youth transit are:

(1) A reduction in overall household financial burdens on families, especially low-income families who depend on public transportation;

(2) A reduction in the State's dependence on fossil fuel, imported oil, and other imported energy resources thereby moving Hawaii toward energy and transportation self-sufficiency and helping to reach the State's emissions reduction targets;

(3) Improved youth access to schools, jobs, extra-curricular activities, and health and community services;

(4) A reduction in the number of motor vehicles on the roads, and corresponding reductions in traffic, improved road safety, and a better quality of life for everyone.

Accordingly, the purpose of this Act is to:

(1) Establish within the department of transportation a fare-free youth transit program, to be coordinated with the counties;

(2) Establish a fare-free youth transit program special fund;

(3) Require biannual evaluations of the new program and special fund;

(4) Allocate moneys from the environmental response, energy, and food security tax to the fare-free youth transit program special fund; and

(5) Appropriate moneys into and out of the fare-free youth transit program special fund.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to title 15 to be appropriately designated and to read as follows:

"Chapter

FARE-FREE YOUTH TRANSIT PROGRAM

§ -1 Definitions. As used in this chapter, unless the context otherwise requires:

"Child" or "children" means an individual or individuals less than eighteen years of age.

"County transit service" means a public bus or rail service, operated by or on behalf of a county in the State.

"Department" means the department of transportation.

"Elementary-age or younger child" means a child from birth through twelve years of age.

"Guardian" means a parent, legal guardian, or other adult responsible for accompanying an elementary-age or younger child.

"Youth" means an individual from birth to young adulthood, and may include individuals eighteen years of age or older.

§ -2 Program; established. (a) There is established within the department a fare-free youth transit program. The program shall provide, in coordination with the counties, fare-free county transit services to:

(1) All children through age seventeen;

(2) Youth who are high school students; and

(3) Guardians accompanying elementary-age or younger children; provided that no more than one guardian may receive a free fare for each elementary-age or younger child for any ride.

(b) The department shall coordinate with the counties and evaluate at least biannually the program's:

(1) Impact on ridership; costs and savings to families; costs and other impacts to counties; transportation equity; including disadvantaged and rural communities; safety; and

(2) Alignment with state environmental goals.

§ -3 Fare-free youth transit program special fund. (a) There is established within the state treasury a fare-free youth transit program special fund.

(b) Deposits into the special fund may include:

(1) The portion of the environmental response, energy, and food security tax specified under section 243-3.5(6);

(2) Moneys appropriated to the fund by the legislature; and

(3) Investment earnings, gifts, donations, or other income received by the department of transportation.

(d) All moneys deposited into the fare-free youth transit program special fund shall be expended by the department to:

(1) Award moneys to county transit agencies to provide fare-free county transit services to eligible riders, as specified under section -1; and

(2) Cover administrative and program evaluation costs associated with the implementation and operation of the fare-free youth transit program.

(e) No later than twenty days prior to the convening of each regular session, the director of transportation shall submit a report to the legislature, regarding:

(1) The status, progress, and impact of existing programs and activities and the status and expected impact of new programs and activities funded by the fare-free youth transit program special fund;

(2) The spending plan for the fare-free youth transit program special fund;

(3) All expenditures of fare-free youth transit program special fund moneys; and

(4) The targeted markets of the expenditures, including the reasons for selecting those markets; the persons to be served; and the specific objectives of the expenditures, including measurable outcomes."

SECTION 3. Section 243-3.5, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) In addition to any other taxes provided by law, subject to the exemptions set forth in section 243-7, there is hereby imposed a state environmental response, energy, and food security tax on each barrel or fractional part of a barrel of petroleum product sold by a distributor to any retail dealer or end user of petroleum product, other than a refiner. The tax shall be $1.05 on each barrel or fractional part of a barrel of petroleum product that is not aviation fuel; provided that of the tax collected pursuant to this subsection:

(1) 5 cents of the tax on each barrel shall be deposited into the environmental response revolving fund established under section 128D-2;

(2) 4 cents of the tax on each barrel shall be deposited into the energy security special fund established under section 201-12.8;

(3) 5 cents of the tax on each barrel shall be deposited into the energy systems development special fund established under section 304A-2169.1;

(4) 3 cents of the tax on each barrel shall be deposited into the electric vehicle charging system subaccount established pursuant to section 269-33(e); [~~and~~]

(5) 3 cents of the tax on each barrel shall be deposited into the hydrogen fueling system subaccount established pursuant to section 269-33(f)[.]; and

(6) 38 cents of the tax on each barrel shall be deposited into the fare-free youth transit program special fund established pursuant to section -3.

The tax imposed by this subsection shall be paid by the distributor of the petroleum product.

(b) In addition to subsection (a), the tax shall also be imposed on each one million British thermal units of fossil fuel sold by a distributor to any retail dealer or end user, other than a refiner, of fossil fuel. The tax shall be 19 cents on each one million British thermal units of fossil fuel; provided that of the tax collected pursuant to this subsection:

(1) 4.8 per cent of the tax on each one million British thermal units shall be deposited into the environmental response revolving fund established under section 128D-2;

(2) 14.3 per cent of the tax on each one million British thermal units shall be deposited into the energy security special fund established under section 201‑12.8; [~~and~~]

(3) 9.5 per cent of the tax on each one million British thermal units shall be deposited into the energy systems development special fund established under section 304A-2169.1[.]; and

(4) 36.8 per cent of the tax on each one million British thermal units shall be deposited into the fare-free youth transit program special fund established under section -3."

The tax imposed by this subsection shall be paid by the distributor of the fossil fuel."

SECTION 4. The department of transportation shall evaluate the fare-free youth transit program at least biannually for the first two years of its existence and submit a report to the legislature on the program's implementation no later than twenty days prior to the convening of the regular session of 2029. The report shall include:

(1) Data on ridership, costs, and administrative challenges; and

(2) Recommendations, including proposed legislation, for any necessary modifications to the program.

SECTION 5. There is appropriated out of the general revenues of the State the sum of $ or so much thereof as may be necessary for fiscal year 2026-2027 to be deposited into the fare-free youth transit program special fund.

SECTION 6. There is appropriated out of the fare-free youth transit program special fund the sum of $ or so much thereof as may be necessary for fiscal year 2026-2027 for the purposes of the fund.

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

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect upon its approval; provided that sections 5 and 6 shall take effect on July 1, 2026.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2699
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII