HB2315 HD1

SECTION 1. The legislature finds that vacancy rates across government agencies, particularly in the executive department, persists at elevated levels. These vacancies are fueled in part by Hawaii's high cost of living and lack of sufficient affordable housing, which drives many residents to leave for less expensive jurisdictions on the mainland to pursue their dream of homeownership and the stability and financial security it brings. This housing crisis disproportionately affects younger employees, lower- and middle-wage earners, and renters, groups that form a large portion of the state workforce and represent the future of public service.

National surveys confirm that the down payment, ordinarily required to qualify for a mortgage or to avoid the added expense of mortgage insurance, is the single greatest barrier to homeownership. According to a 2024 Gallup report, sixty-eight per cent of renters cite affordability and insufficient savings for a down payment as the main reason why they remain renters. A 2024 Bankrate survey likewise found that more than half of aspiring homeowners cannot save for a down payment because of high living costs and low income, with one in five believing they may never save enough.

The legislature further finds that a potential resource for state employees to fund these down payments may exist in the earned vacation benefits held by each individual state employee. Under the terms of current collective bargaining agreements, a typical full-time employee for the State accrues fourteen hours of vacation leave per month and can carry up to a balance of seven hundred twenty hours from year-to-year. Upon a separation of service, because of retirement or other break of service lasting more than seven calendar days without rehire, the employee is paid the value of the accumulated vacation leave as a lump sum equal to the amount of compensation the employee would be entitled or allowed if the vacation leave was used in the normal manner. These lump sum payments, especially for separating employees with high vacation accrual balances, can be worth tens of thousands of dollars. While employees who separate to find other employment or who retire will receive the lump sum payment, employees who continuously work for the State without a break in service are not permitted to "cash out" their accrued vacation balances.

The legislature also finds that establishing a pilot program to allow state employees to liquidate a portion of their earned and accrued vacation benefits and apply the disbursement to the down payment of a personal primary residence without the necessity of a separation of service will allow the State to increase the recruitment and retention of employees. The legislature additionally finds that a project of this nature aligns with the State's broader housing and workforce development policies by addressing a primary barrier to homeownership without creating new subsidies or pension liabilities, and will support a more stable workforce, lower turnover costs, and strengthen local families and neighborhoods.

Accordingly, the purpose of this Act is to authorize the department of health to establish a three-year vacation payout pilot program to liquidate a portion of department of health employees' earned and accrued vacation benefits and apply the disbursement to the down payment of a personal primary residence without the necessity of a separation of service.

SECTION 2. (a) The department of health may establish a vacation payout pilot program to permit department of health employees to use earned vacation leave benefits to fund the down payment of a personal primary residence in the State of Hawaii.

(b) A department of health employee shall be eligible to participate in the pilot program if the employee, at a minimum:

(1) Is a purchaser of residential real property in the State of Hawaii who:

(A) Is a citizen of the United States;

(B) Is a bona fide resident of the State;

(D) Does not personally, or, if the employee is married, whose spouse does not own any interest in a primary residence within or without the State and who has not owned a primary residence within three years immediately prior to the application to participate in the vacation payout pilot program;

(2) Is a permanent full or part-time employee with the department of health in good standing. For purposes of this paragraph, "good standing" means the employee:

(A) Is not serving an initial or new probationary period;

(B) Is not subject to suspension, pending disciplinary action, or termination proceedings at the time of application;

(D) Is not the subject of a pending investigation or substantiated investigation that may reasonably lead to discipline;

(3) Has been employed by the department of health for at least one year at the time of the application;

(4) Submits an affidavit stating that the employee:

(A) Will occupy the purchased property as their primary residence within ninety days of the deed being recorded;

(B) Intends to maintain occupancy in the purchased property for at least three years; and

(5) Is not acting as the agent of any other person or entity in purchasing the mortgaged property.

(c) The department of health shall establish procedures to receive, review, and adjudicate applications requesting vacation pay out as part of the pilot program.

(d) Funds shall be paid on behalf of the employee directly to the escrow, title company, or company lender at closing and not as a lump-sum to the employee, subject to any withholdings required by state and federal law.

(e) The vacation payout shall only include vacation leave earned at the time of the application and shall not include any future unearned vacation leave.

(f) The minimum vacation leave payout shall be no less than $5,000 and the maximum payout shall be no more than $50,000 per eligible employee, inclusive of any taxes withheld, subject to the availability of funds within the department of health's budget.

(g) The department of health shall submit a report of its findings and recommendations, including any proposed legislation, regarding the pilot program to the legislature no later than twenty days prior to the convening of the regular sessions of 2027, 2028, and 2029. The report submitted prior to the convening of the regular session of 2028 shall make a recommendation as to whether the pilot program should be extended.

(h) For purposes of this Act, "primary residence" means a dwelling unit where the owner lives for the majority of the year and intends to use as their main permanent home.

SECTION 3. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 4. This Act shall take effect on July 1, 3000, and shall be repealed on June 30, 2029.

HOUSE OF REPRESENTATIVES	H.B. NO.	2315
THIRTY-THIRD LEGISLATURE, 2026		H.D. 1
STATE OF HAWAII