EXCUSED:
None

ALSO PRESENT:
Keith Hayashi, Interim Superintendent, Department of Education
Brian Hallett, Assistant Superintendent, Office of Fiscal Services, Department of Education
Alison Kunishige, Executive Director
Kenyon Tam, Board Analyst
Regina Pascua, Executive Secretary
Lady Garrett, Secretary

1. Call to Order

II. Approval of Meeting Minutes of September 16, 2021

Committee Chairperson Voss called for public testimony on this agenda item. No one provided oral testimony at this time.

Committee Chairperson Voss asked Committee members to review the minutes of the Committee’s September 16, 2021 meeting.

Committee Vice Chairperson Lynn Fallin moved to approve the Committee’s meeting minutes of September 16, 2021. Committee Member Kili Namau‘u seconded.

Committee Chairperson Voss asked if there were any objections to the motion. No Committee member raised objections, and the motion carried through unanimous consent from all members present (Committee Vice Chairperson Fallin, Committee Members Arakaki, Namauʻu, and Payne).

ACTION: Motion to approve the Finance and Infrastructure Committee meeting minutes of September 16, 2021 (Fallin/Namau‘u). The motion carried through unanimous consent from all members present.

III. Recommendation for Action

1. Committee Action on recommendation concerning the Department of Education’s Supplemental Budget for Fiscal Year 2022-2023

David Miyashiro, HawaiiKidsCAN, testified that the Department of Education’s (“Department”) request to prioritize funding and restore budgets is a good opportunity to explore other issues not addressed in the memorandum, for example, efficiencies to address capacity issues; how distance learning options can affect statewide teacher capacity; enrollment trends across the system; and leveraging facilities.

Cheri Nakamura, HEʻE Coalition, shared Fairfax County’s strategic school budgeting process, which aligns to direction, strategic reports, and conclusions based on strategic plan goals and encouraged the Department to use the Fairfax County example as a reference and resource.

Committee Chairperson Voss called on Keith Hayashi, Interim Superintendent, to present the Department’s recommendation on the Department’s supplement budget for Fiscal year 2022-2023. Hayashi called on Brian Hallett, Assistant Superintendent, Office of Fiscal Services, to present the recommendation.

Hallett stated that in 2021, the legislature approved the Department’s 2021-2022 and 2022-2023 fiscal biennium (“FB”) budget and that now, the Department is seeking Board approval of the supplemental budget request to amend budget for the second year of the biennium, or fiscal year 2022-2023. He explained that since the close of the last legislative session the state’s Council on Revenues has projected a significantly improved financial outlook.

Hallett stated that the Department’s operating budget covers the expense of running programs, schools, offices and includes a capital improvement program budget that funds facilities development, major upgrades, and repair and maintenance. He summarized that the Department’s request would add $218.5 million in general funds to the budget, primarily in EDN 100 (distributed to schools using weighted student formula) and EDN 400 (school bills, including sewer, electric, water, school food service). Hallett noted that the total budget request is slightly smaller due to ceiling adjustments, which the Department detailed on page 10, Table 8 of Hayashi’s memorandum.

Hallett explained that the proposed adjustments relate to five prioritized adjustments. The first priority is to rebuild the foundation for K-12 education by restoring the $100.2 million reduction imposed by the legislature. The second priority is to restore stabilization and assurances across the education system. This second priority includes $11.1 million for 124 positions that the legislature declined to fund with general funds and which the Department has been covering with federal funds. The third priority is to address $52.1 million in priority budget shortfalls, including $49 million of pre-existing shortfalls such as teacher differentials, workers compensation, converge networks, and modernization of the new financial management system. This third priority also includes a request for restoration of $3.1 million for 53 positions that the legislature declined to fund with general funds. The fourth priority is to advance education, which includes several subcategories, including essential operations, student success, teacher and staff development, and workforce development. The fifth priority includes housekeeping items, including trade-off transfers or transfers between general funds and ceiling adjustments for non-general funds.

Hallett explained that Attachment A of Hayashi’s memorandum provides further details at the line item level for the priority areas with brief descriptions of the request. He stated that Attachment B provides the capital improvement project (“CIP”) request.

Committee Member Catherine Payne moved to approve $2,290,862,137 for Fiscal Year 2022-2023 supplemental operating budget and $631,450,000 for the Fiscal Year 2022-2023 supplemental capital improvement projects budget as outlined in Hayashi’s memorandum dated October 21, 2021. Committee Member Fallin seconded.

Committee Member Payne asked about a subcategory of the fourth priority, essential operations for advancing education, which totaled $22.5 million and included items like electricity and custodial services. She requested clarification on why the Department considers this a part of advancing education and how it will help the Department advance education because these are basic needs.

Hallett replied that the fourth priority, advancing education, represents new requests beyond the current service budget. He also distinguished the fourth priority from the third priority, addressing budget shortfalls, which covers existing shortfalls. Hallett confirmed that Committee Member Payne is correct that several of the items in the third priority are similar to inflation related adjustments within the fourth priority. He explained that the Department can re-characterize the list and pull essential operations out of these categories, but the Department was trying to be explicit about new items that are necessary to advance education. Hallett also explained that these items in the fourth priority are supports that schools rely on, such as utilities, school food service, and maintenance contracts, but said that the Department will review its categorization further. Committee Member Payne noted that the legislature might ask this question because the fourth priority includes basic bills that the Department needs to pay regardless and that the Department may need to take money from other programs to pay these bills.

Committee Chairperson Voss questioned the Department choosing labeling the fourth priority as “advancing education” because it includes requests that seem to be unrelated or unconnected to one another. He asked how the Department gathered data to inform this request and how the Department ensured that this request is part of a cohesive strategic plan to advance learning and help students. Hallett stated that the Board’s direction to seek the restoration of the base budget allows each office to provide input on their needs. He also stated that assistant superintendents (“AS”) followed the 2017-2020 Board and Department Joint Strategic Plan (“2017-2020 Joint Strategic Plan”), but they do not know if the Department is operating under the 2030 Promise Plan or the 2017-2020 Joint Strategic Plan.

Hallett stated that he took the Board’s direction to seek restoration of the Department’s budget as a request to restore the Department’s budget as it specifically applies to advancing education. He stated that the Department opened up its budgeting system to allow every office to input their needs. Hallett stated that all AS are aware of the 2017-2020 Joint Strategic Plan and acknowledge the uncertainty of whether the Department is operating under the 2030 Promise Plan or the expense inspired strategic plan around staff, students and systems that was developed for the 2017-2020 Joint Strategic Plan. Hallett stated that the Department used the 2017-2020 Joint Strategic Plan model of staff, students and systems to develop the supplemental budget request.

Hayashi stated that the Department looked at how the needs and requests related to advancing education. He stated that the AS and complex area superintendents (“CAS”) focused on how to help students succeed and support students with workforce development. He stated that focus for student success relates to the transition through elementary, middle, and high school to the workforce or higher education, including the Nā Hopena A‘o (HĀ) framework that embraces student and staff values.

Committee Chairperson Voss clarified that all items in the request have merit, but expressed concern that the Department’s presentation to the legislature must be clear on how the request aligns with and supports the Department’s strategic objectives.

Committee Member Bill Arakaki asked for an explanation of each table on page 2 of Hayashi’s memorandum.

Hallett outlined that page 2, table 1, is a summary of general fund additions by budget programs, also known as EDNs. He stated that page 2, table 2 is a summary of budget adjustments by various means of financing, which includes general funds. Hallett also explained that table 1 shows that the Department has a $1.68 billion general fund budget and that the Department is seeking legislative approval of an additional $218.5 million, which will bring the Department’s general fund budget to $1.9 billion. He stated that the Department’s budget includes general, federal, and special funds and noted that Attachment A, page 17 provides more information on the various means of finance, including ceiling reductions.

Committee Vice Chairperson Fallin asked how the Department decided what would fall into the shortfall category versus unbudgeted funding. She also asked whether the Department uses projections, actuals, or balances when identifying a shortfall in a program, such as teacher differentials. Hallett explained that the Department addressed the teacher differential shortfall, by using federal funds instead of general funds to cover the teacher differential shortfall. He shared that the workers compensation program has a recurring shortfall of $10 million. Hallett stated that the Department uses funds from its salary budget to cover the workers compensation shortfall, but every year the salary budget gets tighter, so the Department is engaged in ongoing conversations with the legislature to request appropriations that appropriately fund the Department’s actual needs.

Committee Vice Chairperson Fallin stated that she understood the Department’s need for flexibility to move funds, but she wanted to ensure that the Department maximizes its efforts to rebuild its foundation. She also asked whether the Board needs to approve or is involved in the Department’s process of moving general funds or if the Department works with the Department of Budget and Finance (“B&F”) on that. Hallett replied that the Department works with B&F when moving general funds and noted that the Department is required to provide regular reports to the legislature when it moves money between EDNs.

Committee Member Namauʻu requested confirmation that the Department is asking the Board to approve its request to restore general funds from the state and does not include a request relating to the federal Elementary and Secondary School Emergency Relief Funds (“ESSER”). Hallett confirmed that this is correct. He stated that the Department is asking for Board approval to submit a request to Governor Ige for his consideration for inclusion into his executive supplemental budget request, which Governor Ige will then submit to the legislature. He noted that the Department’s request aligns with the Department’s Option A for ESSER Funds, which it presented to the Board at its August 19, 2021 meetings. Hallett detailed that Option A sought general fund restoration to provide additional stability to the Department’s budget and to fulfill the federal maintenance of effort requirement.

Committee Member Namau‘u stated that she understood the urgency of the Department’s request, but expressed concern regarding the amount of time that the Board has to discuss the Department’s supplemental budget request. Committee Member Namau‘u emphasized that the Department should look at different approaches to situations, consolidate efforts, and move forward strategically to address the effects of the COVID-19 pandemic. She asked if the Department can use any cost savings or if the Department analyzed different educational opportunities to which it can redirect funds. Committee Member Namau‘u noted that the Department has not made an effort to evaluate systems of change or for the entire Department to figure out how much it needs to make this happen. Hayashi noted that the Department would consider her comments.

Committee Vice Chairperson Fallin noted that Governor Ige extended his budget deadline so that the Board could provide input. She noted that the budget request cycle should start with needs, which lead to proposals. Committee Vice Chairperson Fallin stated that if the Department develops an educational plan that informs the budget, it would have opportunities to consult with the Board earlier to discuss the proposals to address issues. By the time it comes to this Committee, the Board will only need to review the budget request from a financial lens to ensure funds will be spent as intended under the Department’s educational plan, which should avoid any unnecessary delays. Hayashi replied that the Department would do its best to work with the Board working within the allotted time frame.

Committee Vice Chairperson Fallin urged the Department to consider the Board’s comments and move towards a systems approach to develop a budget process that involves the Board earlier, at least for the educational plan, and uses data to develop this plan.

Committee Member Arakaki expressed support for an opportunity for the Board and Department to develop a budget cycle that involves the Board earlier so that it can discuss issues and get the information it needs. He reminded Board members that the Department’s budget affects schools because they need to understand what is in the Board approved budget so they can develop their financial plans. Committee Member Arakaki requested an explanation of items in table 7, which included two staff positions for the Board office, listed as $166,946. Hayashi replied that schools must provide their salaried financial plan to the state office in December, so it is important to keep in mind the processes that schools go through and that the timeline is important. Hallett explained that the Board office requests included $10,000 for charter school authorizer application assistance and two positions, a Private Secretary II and a BOE Analyst.

Committee Chairperson Voss expressed support for the Department’s supplemental budget request to restore legislative budget reductions because, if approved, this should free up additional funds to support students. He expressed support for the Department’s Capital Improvement Projects (“CIP”) supplemental budget request, although he noted that the legislature will consider a $631 million request as unrealistic, given the state’s bonding capacity and debt service limits. Committee Chairperson Voss expressed doubt that the legislature will willingly embrace building a new high school and kitchen, which were included in the Department’s CIP supplemental budget request. Committee Chairperson Voss noted that the Department should prepare explanations for the legislature on how it will expend these funds, if approved.

Committee Chairperson Voss called for a roll call vote on the motion. The motion carried unanimously with all members present voting aye (Committee Vice Chairperson Fallin, Committee Members Arakaki, Namauʻu, and Payne).

ACTION: Motion to approve $2,290,862,137 for Fiscal Year 2022-2023 supplemental operating budget and $631,450,000 for the Fiscal Year 2022-2023 supplemental capital improvement projects budget as outlined in Hayashi’s memorandum dated October 21, 2021 (Payne/Fallin). The motion carried unanimously with all members present voting aye.

IV. Late Public Testimony on Board Agenda Items

Committee Chairperson Voss called for public testimony from any individuals who did not have an opportunity to testify on earlier agenda items. No one provided oral testimony at this time.

Committee members received written testimony before the meeting. The following is a listing of the people who submitted written testimony before the meeting.

Committee Chairperson Voss adjourned the meeting at 10:55 a.m.