STATE OF HAWAII
BOARD OF EDUCATION
FINANCE AND INFRASTRUCTURE COMMITTEE

MINUTES

Queen Liliuokalani Building
1390 Miller Street, Room 404
Honolulu, Hawaii 96813
Thursday, September 20, 2018


PRESENT:
Bruce Voss, Esq., Committee Vice Chairperson
Brian De Lima, Esq.
Nolan Kawano
Kili Namauʻu
Catherine Payne
Dwight Takeno

EXCUSED:
Kenneth Uemura, Committee Chairperson

ALSO PRESENT:
Christina Kishimoto, Superintendent
Amy Kunz, Senior Assistant Superintendent and Chief Financial Officer, Office of Fiscal Services
Brian Hallett, Director, Budget Branch, Office of Fiscal Services
John Chung, Public Works Manager, Project Management Section
Stacey Aldrich, State Librarian
Mallory Fujitani, Special Assistant to State Librarian
Alison Kunishige, Executive Director
Regina Pascua, Board Private Secretary
Irina Dana, Secretary


I. Call to Order

The Finance and Infrastructure Committee (“Committee”) was called to order by Committee Vice Chairperson Bruce Voss at 11:00 a.m.

II. *Public testimony on Finance and Infrastructure Committee (“Committee”) agenda items

Committee Vice Chairperson Voss called for public testimony. There was no public testimony at this time.

III. Approval of Meeting Minutes of June 21, 2018 and Joint Finance and Infrastructure Committee and Student Achievement Committee Meeting Minutes of September 6, 2018

ACTION: Motion to approve the Finance and Infrastructure Committee Meeting minutes of June 21, 2018 and the Joint Finance and Infrastructure Committee and Student Achievement Committee Meeting minutes of September 6, 2018 (De Lima/Payne). The motion carried unanimously with all members present voting aye.

IV. Discussion Items Stacey Aldrich, State Librarian, reviewed the Hawaii State Public Library System’s (“HSPLS”) supplemental budget allocation for Fiscal Year (“FY”) 2018-2019 and laws affecting libraries that the Legislature passed during the 2018 legislative session. Aldrich highlighted that the Governor and Legislature were supportive of libraries, and further highlighted that HSPLS received everything that it had requested. Aldrich stated that HSPLS’s total position count is 560.5 positions for FY 2019. She detailed that HSPLS received 3.5 additional positions to complete Nanakuli Public Library’s staffing requirements, but the Legislature reduced HSPLS’s total position count by one position. She noted that HSPLS received $36.1 million in general funds and stated that HSPLS mostly uses general funds for its positions and basics of keeping its libraries open. She stated that HSPLS’s special fund is at $4 million. She explained that special funds provide HSPLS with the authority to spend up to the listed amount in the budget. It does not mean that HSPLS has this amount of funding. For special funds, HSPLS began FY 2019 with $2.9 million. Similarly, HSPLS’s federal funds provide HSPLS with the authority to spend up to the listed amount in the budget, in this case $1.3 million. Each year HSPLS receives grants from the Institute of Museum and Library Services, specifically the Library Services grants and Technology Acts Grants to States. Each grant provides two years for expenditures. Due to the fact that HSPLS’s grants overlap each year, the authority gives HSPLS an opportunity to spend from both grants.

Aldrich stated that HSPLS’s total operating budget for FY 2019 is $41.5 million. She detailed that the Legislature allocated an additional $500,000 for library books and materials. This is an increase from the $250,000 in the previous year, but only for FY 2019. Aldrich highlighted that HSPLS is using this funding to provide access to resources statewide and conduct pilots with new kinds of reading. She detailed projects that HSPLS would be launching at some of its branches, books on tape, and other reading devices it is providing for its patrons. She highlighted that HSPLS is also working with the New York Times to have its subscription available at HSPLS libraries. Aldrich stated that the Legislature added $100,000 for HSPLS to conduct a Public Library Lands Program. She explained that this funding is in conjunction with a measure that the Governor vetoed, but HSPLS still received funding for this project. It is currently determining how and what it needs to study to be entrepreneurial. Aldrich stated that the Legislature added $110,000 as a grant pursuant to Chapter 42F, Hawaii Revised Statutes, to Hawaii Literacy, Inc., and noted that HSPLS is required to manage the grant to Hawaii Literacy, Inc.

Aldrich reviewed funding that HSPLS received for Capital Improvement Projects (“CIP”), and highlighted that HSPLS received a lot of support for a multitude of projects for its libraries. She stated that HSPLS received $300,000 for a new library in Keaau and Mountain View, but noted that HSPLS’s plans to build two new libraries in the Puna region are on hold right now due to challenges with the volcano. She detailed that HSPLS received $3.5 million to plan and design for a Phase I renovation of the existing Makiki Public Library for a new public library. HSPLS also received $700,000 for renovation of Kahului Library and $1.9 million for land acquisition, ground and site improvements, and equipment for Waikoloa Library. Aldrich stated that HSPLS received funding for Wahiawa Library and explained that Wahiawa Library is a joint project between the University of Hawaii, Department of Education (“Department”), and HSPLS to build a center structure to have a new library office and training space for the Department of Education (“Department”) and University of Hawaii’s offsite campus.

Committee Member Catherine Payne asked what HSPLS plans to request from the Legislature next. Aldrich stated that HSPLS is currently working on putting together its requests and would present on this to the Board in the near future. She detailed that HSPLS is reviewing its positions in branches and collections and explained that collections are important because HSPLS’s revenue is decreasing and it has 51 branches. It needs funding to provide access to resources. Aldrich stated that HSPLS’s budget has been between $2.5 and $3 million for collections. In order to have a more robust system, it needs more support. In addition, HSPLS is reviewing building projects that it needs to focus energy on. Aldrich stated that she would provide more detail in a future presentation.

Committee Member Brian De Lima asked if the $300,000 HSPLS received for Keaau and Mountain View Library is for HSPLS to explore sites. Aldrich explained that the funding is for plans, construction, and equipment for repair, refurbishment, installation, and development. Committee Member De Lima asked if HSPLS already has land for this library. Aldrich explained that HSPLS has acquired land and the $300,000 would go toward the review of the site. Committee Member De Lima encouraged HSPLS to get involved in State and county discussions regarding the creation of new communities as a result of recent volcanic activity. He detailed plans for unit developments in the Keaau area and noted that it may behoove HSPLS to be a part of these discussions because it could help its $300,000 go further.

Committee Member De Lima commented that the community in Waikoloa has been advocating for a public library for a long time and noted that the Waikoloa Land Company has a lot of land in that area. He stated that he did not understand why Waikoloa Land Company is not providing land for a library because it would be an asset to its development area. Aldrich explained that the land that Waikoloa Land Company offer to HSPLS did not have infrastructure and was too far from the community. She stated that HSPLS spent more than three years trying to find a location for the Waikoloa Library and the current location is perfect, near to the community.

Committee Vice Chairperson Voss stated that HSPLS has $4 million in special funds approved in the budget, but it only has $2.9 million available for use, which seems counterintuitive. Aldrich stated that revenue amounts change year to year and HSPLS might have more or less revenue in a given year. She explained that HSPLS has the authority to spend up to $4 million in special funds. It provides HSPLS with latitude if more money is available. Committee Vice Chairperson Voss asked if these funds came from fines for books. Aldrich confirmed that these funds came from fines, printing, donations, usage of HSPLS’s meeting rooms, and purchases of book bags.

Committee Vice Chairperson Voss noted that the Governor issued a 5% restriction on HSPLS’s general funds budget for FY 2019. That is a total of $1.8 million that is held back in reserve until the Department of Budget and Finance (“B&F”) authorizes its release. He noted that the Board directed the Department to plan for restriction, but not immediately implement it to avoid unnecessarily affecting schools and students’ learning. He asked if HSPLS could do the same thing. Aldrich explained that HSPLS is functioning in a similar manner. She stated that HSPLS is reviewing requesting release of these funds sooner rather than later and noted that HSPLS plans to request funds earlier. Board Member Voss asked if HSPLS has experienced immediate cutbacks in spending for book materials. Aldrich stated that it has not experienced this as of yet.

Amy Kunz, Assistant Superintendent and Chief Financial Officer, Office of Fiscal Services, reviewed the Department’s fiscal reports as of June 30, 2018, and noted that the Department updated its carryover financial brief. Kunz reviewed the comparison to prior year-to-date expenditures and encumbrances and noted that the Department expended 5% more in FY 2018 than it did in FY 2017. She stated that there are no major fluctuations except in EDN 500 and detailed that the variance is primarily due to increased school-level personnel cost, and the new GIAs and Reinventing Education Act for the Children of Hawaii, also known as Act 51 (“REACH”) appropriations. Kunz reviewed the comparison to current year-to-date allocations and noted that the expenditures finished within 3% of FY 2018 allocations. She detailed that the Department reduced its carryover balances from year end FY 2017 from about $70 million to under $50 million. Kunz stated that the Department updated its carryover fiscal brief to walk through what generates carryover and what the Department is allowed to carryover. She noted that by law, the Department is authorized to carryover up to 5% of its appropriations, which given its $1.6 billion general fund budget in FY 2017-2018 equated to approximately $82.3 million. Kunz reiterated that at the end of FY 2017-2018, the total carryover for general funds was $48 million. She highlighted that the Department remains committed to ensure that schools are funded. Kunz stated that the purpose of carryover funds is to allow the Department flexibility to empower schools, be innovative and creative, and reduce the risk of schools and offices falling into a short-sighted “use it or lose it” mentality that can be inherent to public sector spending, and supports the deliberate and strategic leveraging of year-end balances in the following year. Kunz detailed that from FY 2018 to FY 2019, the Department carried over $47.9 million. She explained the Department carried over $26.6 million within Weighted Student Formula (“WSF”), and noted that unexpended funds at schools remain at the school-level. She detailed that the Department carried over $10 million in non-WSF within EDN 100. This includes $4 million for equipment for new facilities due to timing issues in the completion of construction projects; $2.4 million in the Hawaiian Studies program, $1.2 million in various athletics programs, $.25 million for Hawaiian Language Immersion, and $1 million carried over centrally. Kunz reviewed priorities supported by carryover in FY 2018-2019, and noted that these priorities guide how the Department is using its carryover funds in the current fiscal year. She stated that priority areas focused on unfunded Board supplemental requests include equipment for new facilities, data governance and analysis staffing, Office of Hawaiian Education positions, Hawaii Keiki partnership with the University of Hawaii Nursing program, heat abatement air conditioner maintenance, and Board needs, such as laptops, community engagement funds, and travel expenses. Kunz explained that the Department challenges programs to utilize funds that are available first. If these funds are fully exhausted, the Department revisits and provides more funding so that the programs could finish out the year. She highlighted that the Department allows programs to exhaust available funding rather than providing additional funding upfront.

Committee Member De Lima asked if the Department used $9 million out of its $18 million carryover limit for special education and student support services. Kunz explained that the $18 million in EDN 150 refers to the Department’s carryover limit based on statute. Committee Member De Lima asked if $82 million is the 5% carryover limit for the entire Department. Kunz confirmed that it is. She stated that the Department carried over $9.3 million in EDN 150. Committee Member De Lima asked if the Department carried over $36 million total. Kunz stated that the Department carried over a total of $47.9 million, which is 2.91% of the budget versus the 5% that the Department is allowed to carry over.

Committee Member De Lima asked if the $9 million carryover within EDN 150 is what the carryover amount was after the Department transferred funding for legal purposes. Kunz confirmed that this is correct.

Committee Member De Lima asked if the $34.6 million carryover amount in EDN 100 goes straight to schools and asked if this is what schools actually spend. He asked for confirmation that the Department does not reallocate this funding and that this funding remains at the school. Kunz explained that the $26.6 million carryover amount in WSF remains at the school. She further explained that the additional $10 million she highlighted is in non-WSF within EDN 100 and goes toward other programs, such as equipment for new facilities, athletics, and the Hawaiian Studies program, which are the major drivers. Committee Member De Lima asked if the Department allocated the additional $10 million for these types of programs and reprogrammed for areas that provided carryover. Kunz stated that the Department prioritized these programs. Committee Member De Lima asked if the Department used discretion to utilize the $10 million amount in carryover funds toward what it believed were priorities. Kunz detailed that the Department included priorities and discussion of these priorities in its report.

Committee Member Nolan Kawano asked if the Department could provide a list of carryover balances by school. Kunz stated that the Department could provide this to him.

Committee Vice Chairperson Voss commented that the Department has been criticized in the past for lacking transparency in regards to its carryover funding, and commended the Department for its financial reporting. Committee Vice Chairperson Voss stated that $9 million is a substantial amount in EDN 150, which is one of the Department’s largest areas of need. He noted that the Department’s report includes new and potential priorities, such as contracts for special education related services and skilled nursing contracting costs, which the Department has yet to determine. He asked when the Department would determine how much carryover funding to allocate to these priorities and asked what the Department is using the $9 million carryover amount in EDN 150 toward in general. Kunz explained that the Department’s to be determined amounts for new and potential priorities, such as skilled nursing contract costs, fluctuate based on things like needs in Individualized Education Programs and are driven by school-level decisions. She reiterated that the Department is challenging programs to utilize funding that they already have prior to the Department allocating additional funding. She noted that the Department knows that it will have a shortfall in skilled nursing contract costs and will need to provide those funds. In terms of other processes around EDN 150 and carryover funding in general, the Department started increasing communication to program managers and Complex Area Superintendents regarding reviewing their school-level expenditures at the Program ID level and predicting where they would finish the year. She highlighted that the Department opened up this conversation more boldly this year because the prior year’s carryover was so high. Kunz noted that it was concerning that these conversations were not already occurring on their own. Kunz stated that the Department is watching special education closely. It is also launching a work group on the Special Education’s Taskforce’s recommendations to address fiscal allocation around special education funds. She stated that although it would not occur instantly, the work group would ultimately help the Department in addressing and allocating carryover funding.

Committee Vice Chairperson Voss commented on new and potential priorities, including contracts for special education related services. He stated that there has been concern over the efficiencies of some of these contracts and asked what the Department is doing to ensure that funding is spent efficiently in this area. Kunz agreed with Committee Vice Chairperson Voss and noted that the Department reviews information as it goes through the procurement cycle. She stated that she does not believe that the Department is currently in a renewal year, but when it goes through the procurement process it reviews Request for Proposals to ensure that it gets the most qualified bidders. Furthermore, the Department reviews cost-analysis when evaluating the bidders before it awards contracts.

Committee Member De Lima stated that the problem is more complex than including a line for new and potential priorities. He stated that there were discussions in the past regarding reprogramming and noted that reprogramming would require the Department to review priorities within various complexes. He stated that the Department would have significant carryover amounts again due to vacancies and detailed that there are vacant special education teacher positions and vacant service provider positions. He noted that there are not enough individuals to contract even though the Board and Department would like for IEPs to provide for various contract services. He emphasized the importance of having these conversations and of the Department providing principals and district educational specialists with flexibility. Committee Member De Lima stated that the Special Education Taskforce reported on inclusion and training, and noted that the Department needs to address how it would address and manage shortfalls. He stated that the Department needs to focus on programmatic allocations that make sense and stated that he would like to see more programmatic allocations that are going to meaningfully accommodate families. He commented that the Department is working on Medicaid reimbursements and stated that he would like an update on the Department’s efforts at a future Board meeting.

Committee Vice Chairperson Voss stated that he understands that the Department is trying to use its carryover funding efficiently, but noted that he does not understand where the funding goes. He stated that he would like a report specifically on how the Department used its carryover funds in any given year.

Kunz reviewed the School Food Service report and noted that School Food Service finished the year with overall increases in both payroll and other categories, with total expenditures approximately $6 million above last fiscal year. This has reduced the operating cash available in federal and special funds below the three months allowable balance. Kunz stated that the Department anticipates continued increases in spending for payroll, aging equipment, and vehicles and is closely monitoring funds. She stated that the Department may need additional funds, such as additional collective bargaining adjustments to address payroll increases. She reiterated that the Department is watching and monitoring as expenses are increasing.

Committee Member De Lima asked if the Department is anticipating needing to increase the cost of lunch. Kunz stated that the answer to Committee Member De Lima’s question is part of a current analysis that the Department is doing. Committee Member De Lima commended the Department on its work engaging students, finding out their interests, and involving them in menu planning to increase the number of students who buy lunch. Kunz highlighted that the Department is trying to do a breakfast push. Committee Member De Lima detailed the number of schools that received grants so that 100% of students receive free breakfast and lunch and stated that the Department is doing a good job of expanding the number of students taking advantage of that program.

Committee Member Kawano commented on expenditures where the Department receives federal funding. He asked if there is anything that the Department could provide to the Committee in terms of best practices so that the Committee knows if what the Department is receiving is comparable to what other states are receiving. He detailed that other states are receiving Medicaid reimbursement and emphasized the importance of knowing whether or not the Department is getting its fair share and maximizing available federal funding. Kunz stated that the Department reviewed Medicaid reimbursements specifically. She highlighted that the Department believes it is maximizing opportunities for school lunch, but stated that the Department has not yet done a comparison. Committee Member Kawano asked the Department to provide information regarding federal funds that the Department receives and a comparison to federal funds that other states receive.

Committee Member Payne asked if the ʻAina Pono Farm to School pilot program would result in cost savings or cost the Department additional money. Kunz explained that if the Department simply buys local, it would cost more. She explained that in its pilot schools, the Department is attempting to ensure that schools reduce waste, engage in careful menu planning, and predict how many students would be buying lunch. She stated that these efforts are offsetting some of the cost, but overall the program would cost more money.

Committee Member De Lima agreed with Board Member Kawano’s questions regarding best practices. He noted that the elected Board was a member of the National Association of State Boards of Education until it stopped paying annual dues. He stated that becoming a member and using its staff may be a wise investment in terms of finding out best practices in other states. Committee Member De Lima stated that if the Department has carryover funding, Board Chairperson Payne and Christina Kishimoto, Superintendent, could discuss if they want to renew the Board’s membership so it could take advantage of the research aspect. Committee Member Payne stated that the Board and Department are reviewing this and it is in the Board’s requested budget for the next biennium.

Committee Vice Chairperson Voss agreed with Committee Member De Lima regarding carryover balances. He stated that School Food Services is one of the Department’s most successful programs and he does not want the Department to increase the price of school lunch, if possible. He stated that the Department should use carryover funds to support School Food Services if there is a shortfall. Kunz stated that the Department could potentially do so. It cannot take funding out of School Food Services, but it could infuse money into it. She explained that statute requires the Department to charge students at least 50% of the cost of the meal. Committee Vice Chairperson Voss stated that this would be an excellent use of carryover funds.

Kunz stated that student transportation expenditures finished FY 2018 as expected. She stated that there is nothing to highlight because the Department is where it expected to be and there is nothing of concern.

Kunz reviewed utilities expenditures and detailed that electricity consumption finished FY 2018 as expected. She highlighted that the Department included new categories in its report and went through the various categories. She explained that payments of electric bills were in the utilities category and the utilities efficiencies category showed funds that the Department expended for energy efficiency, such as LED bulbs, fixtures, and overtime labor to install these efficiencies. She detailed that the utilities management category showed funds that the Department expended to manage, monitor, and control energy usage. The utilities sustainability category showed funds that the Department expended to produce renewable energy. Utilities operations and maintenance showed funds that the Department expended on maintenance for micro grids and power purchase agreements. Utilities buyouts showed funds that the Department expended on Solar PV to buyout, after amortization of depreciation are fully captured by power purchasing agreement financiers. Kunz stated that the usage of alternative energy continues to increase, with each year almost doubling. Sewer charges continue to increase, which negatively impacts electricity savings. She detailed that electricity usage kilowatt per hour is running approximately 9% below last year levels. However, the average cost per kilowatt hour is over two cents higher on average, which is driving the total cost higher. Kunz highlighted that the Department continues to leverage alternative energy and is using 75% more kilowatts of alternative energy per hour than last year.

Kunz reviewed impact aid and noted that impact aid receipts for FY 2016 are finalized at $41.7 million at 92.33% Learning Opportunity Threshold (“LOT”). She stated that the FY 2017 payments are at 87% LOT and the Department anticipates additional funds in the future to close this year. She noted that the Department submitted cards for FY 2017-2018 and is waiting for an initial payment.

Kunz reviewed the executive summary of the Facilities Development Branch’s quarterly report. She noted that allotments increased, encumbrances increased, expenditures increased, and the allotment balance decreased. Kunz stated that 69 projects with an estimated cost of $326.8 million went out to bid during the quarter. Significant projects put out to bid include phase two of Kihei High School, Mililani Middle School’s classroom building, and Lahainaluna High School’s classroom building.

Committee Vice Chairperson Bruce Voss stated that the Department is trying to get parents to return impact aid cards. He noted that in SY 2017-2018, fewer cards were returned compared to the previous year. He asked if there was a statistical reason for this. Kunz stated that she would need to review the data. She explained that it may depend on whether the military was shifting forces around. She stated that the Department would continue to monitor these numbers. Kunz highlighted that Congress has included increases in its appropriation the last two years and it looks as though the Department will receive $41 million for this year as well. Kunz detailed that the Department is working with the military in regards to communication. Furthermore, the Department is trying to figure out how to maintain a digital collection, would like to pilot this, and may potentially test this pilot in the spring.
Kunz introduced Brian Hallett, Director, Budget Branch, Office of Fiscal Services; and
John Chung, Public Works Manager, Project Management Section. She detailed that this presentation was meant to describe how the Department develops and determines its operating budget requests and CIP budget requests for the 2019-2021 fiscal biennium. She stated the Department is currently collecting proposals from the Deputy Superintendent and Assistant Superintendents and budget teams are reviewing proposals with their departments. Kunz stated that B&F issued budget development instructions, collective bargaining amounts, and reductions for non-recurring amounts the previous day. She noted that the Department would complete reviews of program budget needs and consider available resources from the recalculation of salary budget requirements based on new collective bargaining increases. Kunz added that in July, FY 2018-2019 allocation notices were sent out and the web-based form system was finalized for the 2019-2021 fiscal biennium budget proposals. In August, programs entered needs into the web-based form system and received guidance to check needs against internal resources. She stated that budget forms are due to B&F on October 12, 2018. However, the Department requested an extension so that the Board could review the Department’s proposal prior to submission. Kunz noted that B&F confirmed that this is okay as long as the Department continues to communicate with B&F. She detailed that the Department would present its budget proposal to the Committee and Board during its October meetings.

Hallett detailed B&F’s general approach. He noted that the standard memo mentioned uncertainty and risk. Hallett stated that all budget requests must be sustainable and reasonable and B&F would employ a cautious approach in developing the executive budget.

Kunz detailed that the legislative process begins once the Department submits its budget proposal. She reviewed the summary of the Department’s base budget, including FY 2018-2019 resources, permanent and temporary positions, projected additions and subtractions pending B&F instructions, and estimated base. Kunz stated that the Department projected collective bargaining for both FY 2019-2020 and FY 2020-2021. She noted that the Department’s current figures do not include funding and positions for EDN 700. She explained that the Executive Office of Early Learning would be approving the budget for EDN 700.

Kunz detailed that the biggest piece of projected additions and subtractions includes projected non-recurrences and projected collective bargaining. Kunz reviewed a brief summary of the Department’s base budget, including the estimated base for the 2019-2021 fiscal biennium. She highlighted estimated totals by fund type and needs under review. Kunz stated that the Department’s approach to this year’s budget includes lumping requests in categories on the operating side. The Department is reviewing new requests and determining if internal transfers are necessary and trying to reposition its budget within what has been appropriated, for example reprogramming carryover funds for recurring issues such as skilled nursing. She explained that the Department moving funds into skilled nursing would program these funds, which would help establish carryover amounts. She stated that the Department is reviewing carryover funds and placing them in program areas where the Department expends them. Kunz stated that the Department is also determining whether it should prioritize carryover funds for one-time expenditures or request funding from the Legislature. On the operational side, the Department wants to minimize increased budget requests that it takes to the Legislature in order to get the operational side realigned to where the Department is actually expending funds.

Kunz stated that the Department would send the Committee B&F’s instructions. She detailed CIP’s budget, including key areas and stated that means would be adjusted as the Department undergoes the process. She noted that the Department is giving the Committee an early look at potential numbers that may come up in the CIP budget request. Kunz reviewed lump sum descriptions and noted that the Department is within compliance and its requests cover the American with Disabilities Act and Title IX of the Education Amendments Act of 1972. She highlighted that the Department would present on gender equity in a couple of weeks and noted that these numbers would be amended based on what the Board approves in regards to gender equity.

Committee Member De Lima stated that the Board and Department Joint Strategic Plan (“Strategic Plan”) highlights different priorities, such as shortfalls in regards to induction and mentoring. He stated that he would like to see the Department strengthen areas of priority, build on foundations, and implement what is already done in the budget when it presents in October. He emphasized the importance of the Department moving forward and making progress. He detailed school design and student engagement and stated that he would like to see the Department’s budget support these priorities in a meaningful way that shows that they Department is committed to and prioritizing these areas. Committee Member De Lima noted that it is important that the Legislature understands that the Department is moving in the direction of the Strategic Plan, empowering schools, and supporting community engagement. He stated that the Department needs to engage in more discussions regarding what community engagement means and how it could support community plans. He noted the importance of the Department translating visions and action plans by putting funding behind the plan. He stated that the Department needs to ask for programmatic school-level supports from the Legislature. Committee Member De Lima emphasized the importance of the Department supporting induction and mentoring and maintaining staff development and training. He noted that staff need to understand that they are valued and the Department needs to support best practices in order to maintain high morale in the field.

Committee Member Kawano asked for the Department to redo its carryover funds with to be determined amounts filled in when it presents its draft budget. He stated that these amounts are part of the Department’s expenditures next year even though the amounts are not in the budget. He stated that it would be good for the Committee to know what the Department will be working on and how it will use total funds. Committee Member Kawano agreed with Committee Member De Lima and noted that the Department’s realignment should be strategic. He asked for the Department to redo its appropriations and add which initiatives it will spend funding on in the comment section. He noted that this would be helpful for new Committee Members as well as the public.

Committee Vice Chairperson Voss stated that legislators are going to ask the Department why it needs additional funding when it already has large amounts. He stated that reprogramming could help to address these questions. Kunz agreed with Committee Vice Chairperson Voss and stated that the Department anticipates expending funding that it is moving in its budget requests.

Committee Vice Chairperson Voss agreed with Committee Member De Lima’s comments and stated that while the Department needs to be respectful of guidance to have a budget that is sustainable and reasonable, the Board and Department advocate for education and students and need to ask for funding to support its most successful programs and critical needs, such as English learners and retention. Committee Vice Chairperson Voss stated that it is important for individuals in the field to understand that the Department is trying to support them with as much funding as they can get.

Committee Vice Chairperson Voss stated that he supports the Department’s approach in regards to the CIP budget and noted that it seems to be endorsed by the Governor’s message regarding learning environments at school. He stated that in the past, the Legislature has not provided the Department with large sums within CIP to address special education by department according to priorities. He asked for the Department to provide more details around the messaging it will use with the Legislature to encourage the Legislature to support the Department’s approach. Kunz stated that expanding lump sum categories will help the Department communicate its CIP needs. She explained that in the past, the Department had four or five categories that were difficult to decipher. Additional categories will help clarify intent. Kunz highlighted that the Department has been working with professional learning communities within the Secondary Principal’s Form to discuss facilities, lack of funding, and challenges regarding repair and maintenance. She stated that the Department is making progress, but realized it needs to do a better job of providing principals with tools so that principals can communicate priorities to the Legislature. She emphasized the importance of matching messages and priorities and highlighted that the Department would continue to work with principals on better communication and talking points. Committee Vice Chairperson Voss stated that this is a good and constructive approach.

Kishimoto summarized that part of the Department’s reprogramming includes it making funds internally available to address priorities areas based on the Strategic Plan. She stated that the Department needs to have discussions with the Legislature in a certain manner so that the Legislature’s projects do not override Board priorities. Kishimoto detailed that the Legislature funded 20% of the Department’s requests, but 80% of funds were for projects that the Department did not ask for. She stated that the Board needs to be empowered to have this authority remain at the Board-level. Kishimoto detailed that the Department needs to move funding around programmatic priorities. Kishimoto stated that another piece of the Department’s messaging is around equity and access. CIP is a direct reflection of which communities have the most empowered voices to go after funding for schools. She stated that some communities may be disempowered and not have enough voices at the Legislature-level or not enough advocates. Kishimoto emphasized the importance of the Department separating out ADA and Title IX in its requests and noted that the Department is focusing on the Board’s priorities and access.

Committee Vice Chairperson Voss agreed with Kishimoto. He commented on equity and access and noted that some schools do not receive funds because they do not have influence at the Legislature. He stated that this a serious problem for the community to address and an issue that the Board needs to focus on this legislative session.

Kunz stated that on September 4, 2018, the Department of Accounting and General Services (“DAGS”) and the Office of Enterprise Technology Services (“ETS”), who are the project leads for HawaiiPay, held a meeting and determined that the Department should be allowed more time to conduct additional testing. She stated that Group 3, which includes the Department and the University of Hawaii, will go-live on January 4, 2019. This means that the open enrollment period would be in the first couple of weeks of December, which was originally supposed to occur in October. Kunz stated that the Department has been pushing communication to the field and now needs to adjust its communication. She detailed that there has been some confusion, but the Department is committed to the revised schedule and appreciates the additional testing time so that it can ensure that the system is functioning and pay employees accurately. Kunz stated that despite concerns, the Department appreciates shifting to new dates and a new schedule.

Committee Member De Lima stated that a January 4 go-live date would result in staff working over the holiday break. He noted that if the go-live period is unsuccessful, staff expecting checks on January 4 will not receive them, which will be difficult if individuals are traveling. Committee Member De Lima asked when school begins after the holiday break. Kunz stated that school starts on either January 7 or January 8.

Committee Member De Lima expressed further concern and asked why the Department cannot go-live during the second week of January. He stated that he does not agree with the go-live date of January 4. Committee Member De Lima suggested that a liaison meet with the Governor to discuss moving the go-live date to the second pay period in January.

Kishimoto explained that the Department cannot move the go-live date by two weeks. She detailed that the go-live period is already delayed by two months and that it operates on two-month increments. She stated that the Department could go-live on January 4 or delay the go-live date until March or the next fiscal year. She explained that there are certain periods where the Department could engage in rollout.

Kunz stated that the original go-live date of November 5 would have included part of enrollment occurring during Fall break. She stated that there could be challenges with any go-live date. If the Department waits until July to go-live, then enrollment would occur when teachers are not in session. Kunz detailed that a go-live date during the second week in January would result in enrollment occurring while teachers are on holiday break. Kunz stated that the Department expressed concern over staff working over the holidays and noted that payroll staff will have to work on Christmas day to process payroll in order to meet the deadline. She detailed potential risks, including individuals thinking that they are enrolled in direct deposit when they are not and not receiving a paycheck on January 4. She stated that there are potentially significant issues and noted that the situation is not ideal. Kunz stated that the Department is engaging in discussions regarding these concerns with DAGS and ETS. She detailed that there is a cost to the delay that the Department has been notified of and the cost will increase if there are further delays. Kunz stated that the Department would communicate the Committee’s concerns.

Committee Member Dwight Takeno stated that a delay in the project allows for additional conversion and parallel testing. He stated that he would like to know how testing is going so that the Committee could anticipate challenges or difficulties that may occur in the conversion process with a go-live date of January 4. Kunz stated that the Department requested DAGS and ETS to provide updates during the October and November Committee meetings. She stated that the Department would communicate that the Committee would like an update on the next agenda.

Committee Member Takeno commented that in addition to current additional costs due to a delay, the Department should consider other costs it may incur if the January 4 go-live date is unsuccessful and there are challenges with the Department issuing checks to employees. He stated that other associated costs could include penalties.

Committee Member Payne asked how much it costs each time that there is a delay. Kunz stated that it costs $200,000 per month. Committee Member Payne stated that a January 4 go-live date costs $400,000 total. She asked if it was DAGS and ETS’ decision to delay the go-live date. Kunz confirmed that it was not the Department’s decision. Committee Member Payne stated a further two-month delay would cost an additional $400,000. She asked if this amount would be charged to the Department. Kunz stated that she is unsure if costs would increase with further delays and detailed concerns regarding two payroll systems operating simultaneously. She stated that Group 1 and Group 2 have already gone live and detailed that payroll staff is attempting to operate its current system while converting to a new system and managing individuals that have already converted to a new system. Kunz detailed staff and capacity issues that DAGS is having and noted that this could drive costs and challenges. Kunz mentioned that W2 processing will also occur in January.

Committee Vice Chairperson Voss agreed with Committee Member Takeno and expressed concern and disappointment over HawaiiPay not being able to make it to the Committee’s meeting as requested. He stated that he hopes it could provide an update and answer questions at the following Committee meeting. Committee Vice Chairperson Voss stated that not only is it not ideal that staff has to work on Christmas day, but that it is unacceptable. Committee Vice Chairperson Voss stated that the cost of delay is $200,000 per month and he does not want teachers and staff to have to pay for a poorly organized and poorly negotiated contract. He emphasized the importance of staff receiving the correct pay on the go-live date. He commented on the costs again and stated that teachers and staff did not negotiate the HawaiiPay contract.

V. Recommendation for Action

Aldrich introduced Mallory Fujitani, Special Assistant to State Librarian. She stated that HSPLS is requesting permission to work with the Office of the Attorney General (“AG”) and the Department of Land and Natural Resources (“DLNR”) to enter into an agreement with Hawaiian Electric Company, Inc. (“HECO”) for the purpose of installing a HECO electric vehicle charging station in the parking lot of the Waikiki-Kapahulu Public Library. She explained that HECO has been installing fast-charging stations throughout the state since 2010 as part of a pilot program approved by the Public Utilities Commission to encourage ownership of plug-in electric vehicles in Hawaii. She highlighted that partnering with HECO would enable HSPLS to provide electric vehicle charging station services to library patrons while they are at the Waikiki-Kapahulu Public Library at no cost to HSPLS. Upon approval, HSPLS would work with the AG and DLNR, which will ultimately sign any agreement with HECO prior to the installation of an electric vehicle charging station.

ACTION: Motion to approve the Hawaii State Public Library System’s request to work with the Office of the Attorney General and the Department of Land and Natural Resources to move forward to enter into an agreement with Hawaiian Electric Company, Inc. to install electric car charging stations at the Waikiki-Kapahulu Public Library as described in the Hawaii State Public Library System’s memorandum dated September 20, 2018 (De Lima/Takeno). The motion carried unanimously with all members present voting aye.

Kunz stated that on June 22, 2018, the Governor provided the FY 2019 budget execution policies and instructions to guide the implementation of program appropriations for the Department. Although the Council on Revenues (“COR”) raised its FY 2018 general fund tax revenue growth rate forecast from 5.3% to 7.3% and increased its FY 2019 projection from 4.5% to 5%, the Governor has implemented a 5% contingency on restriction on general funded discretionary appropriations less a $4 million discretionary adjustment. The 5% contingency restriction is intended as a contingency reserve for FY 2019 and may be adjusted during the second half of the fiscal year based on actual tax collection trends and COR’s updated forecasts later in the fiscal year.

Kunz stated that in FY 2017-2018, the Committee approved the Department’s restriction plan, but directed that the plan not be immediately implemented. Over the course of the year, the restriction was partially lifted and savings were realized, making the implementation of the restriction plan unnecessary. She stated that the Department recommends that the Committee take a similar course of action concerning the FY 2018-2019 restriction. In the interest of avoiding disruption for programs at the state and complex area levels, the Department recommends that the $5 million contingency restriction be managed at the EDN level. This would allow the Department to monitor all affected spending through the first half of the fiscal year, and request for the release of the contingency restriction during the second half of the fiscal year.

Committee Vice Chairperson Voss thanked the Department for following the Committee’s suggestion from the previous year. He stated that the Department’s recommendation is best for students and schools. Committee Vice Chairperson Voss asked if the Department would present to the Committee on what was withheld if the restriction does in fact become implemented. Kunz stated that the Department could monitor this and come back to the Committee. She stated a portion of the restriction could be released around the January timeframe and explained that the Department did not report to the Committee the previous year because funds were released and the Department did not have to implement the restriction plan. She stated that the Department would report to the Committee if it needs to implement. Committee Vice Chairperson Voss stated that it would be useful for the Committee to know if this results in cuts.

ACTION: Motion to approve the Department of Education’s operating budget restriction implementation for the 2018-2019 Fiscal Year as described in the Department’s memorandum dated September 20, 2018 (De Lima/Takeno). The motion carried unanimously with all members present voting aye.

VI. Adjournment

Committee Vice Chairperson Voss adjourned the meeting at 12:25 p.m.