STATE OF HAWAII
BOARD OF EDUCATION
FINANCE AND INFRASTRUCTURE COMMITTEE

MINUTES

Queen Liliuokalani Building
1390 Miller Street, Room 404
Honolulu, Hawaii 96813
Thursday, February 21, 2019

PRESENT:
Kenneth Uemura, Committee Chairperson
Bruce Voss, Esq., Committee Vice Chairperson
Brian De Lima, Esq.
Nolan Kawano
Kili Namau‘u
Catherine Payne
Dwight Takeno
Patricia Bergin, Ex Officio

EXCUSED:
None

ALSO PRESENT:
Christina Kishimoto, Superintendent
Amy Kunz, Assistant Superintendent and Chief Financial Officer, Office of Fiscal Services
Dann Carlson, Assistant Superintendent, Office of School Facilities and Support Services
David Brookshire (“Brook”) Conner, Assistant Superintendent and Chief Information Officer, Office of Information Technology Services
Brian Frey, Director, Enterprise Systems Branch, Office of Information Technology Services
Brian Hallett, Director, Budget Branch, Office of Fiscal Services
Kenneth Masden, Public Works Manager, Planning Section, Facilities Development Branch, Office of School
Alison Kunishige, Executive Director
Kenyon Tam, Board Analyst
Regina Pascua, Board Private Secretary
Irina Dana, Secretary


I. Call to Order

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


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

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


III. Approval of Meeting Minutes of January 21, 2019

ACTION: Motion to approve the Finance and Infrastructure Committee Meeting minutes of January 17, 2019 (De Lima/Voss). The motion carried unanimously with all members present voting aye.


IV. Discussion Items

Amy Kunz, Assistant Superintendent and Chief Financial Officer, Office of Fiscal Services, reviewed the Department’s fiscal reports as of December 31, 2018. She stated that the general fund budget comparison reports show that expenditures are 4% above Fiscal Year (“FY”) 2018 actual expenditures with minimal total variance as compared to one half of the FY 2019 allocation. Kunz noted that collective bargaining increases drive most variances.

Committee Member Brian De Lima asked if advance payments drive large variances. Kunz explained that the large variance in EDN 400 as compared to the FY 2019 allocation is because the Department encumbered student transportation contracts for the year.

Committee Member De Lima noted that the Department is not spending special education funds. Kunz stated that the Department is closely monitoring this area and noted that it does not want large carryover balances. She explained that vacancies drive some of these variances and highlighted that the Department would be implementing ideas from its special education fiscal allocation workgroup, which would affect future years.

Committee Member De Lima noted that the Department only has four months to reprogram this funding. Kunz explained that complex areas reprogram funds using appropriations, which Department’s fiscal reports might not reflect. If complex areas fully use appropriations, which typically occurs during this time of the year, the Department would provide additional funding. She explained that complex areas sometimes contract services and need to provide services outlined in individualized education programs (“IEP”) even if services are not employee-based.

Committee Member De Lima stated that complex areas do not always fully allocate funding for IEPs because they cannot find specialists in time. He expressed concern over the Department reprioritizing available funding and suggested that the Department encumber funding before the end of the fiscal year to use on programs the following fiscal year so that it does not end the year with a large surplus. Kunz stated that the Department’s ongoing monitoring processes does this. Kunz noted that the Department plans to fully encumber skilled nursing contracts by the end of the year. She explained that the Department did trade-offs and transfers through the biennium budget process that would better align next year’s budget.

Committee Member De Lima emphasized the importance of the Department reprogramming funding for special education. He noted that skilled nursing is one aspect of special education, but students have a wide range of needs and would benefit from reprogrammed funds. He stated that he wants assurance that the Department is focusing on balancing and reprogramming funds. Committee Member De Lima noted that schools are prioritizing inclusion and suggested that the Department could leverage its surplus toward inclusion training.

Committee Vice Chairperson Bruce Voss stated that he understands that personnel costs are driving $8 million in variances due to the Department’s historical difficulties in hiring, but he does not understand how there is a $9 million variation in special education support services expenses. He asked how the Department could have a large variance mid-way through the year. Kunz explained that this is due to timing and noted that variances could reflect summer months when there is not much activity occurring in schools. She reiterated that the Department also has not fully encumbered school nursing contracts as of yet because there has not been a shortfall.

Committee Vice Chairperson Voss asked about the portion of the variance that skilled nursing would impact. Kunz stated that skilled nursing drives $6 to 8 million of the $9 million variance. Committee Vice Chairperson Voss asked about the Department’s balance on support services that it has not expended. Kunz stated that she is unsure of the exact amounts.

Committee Member Nolan Kawano commented on Kunz’s explanation that expenditures and variances could reflect summer months and asked if the Department divides its budget by 12. Kunz explained that the Department does divide its budget by the number of months in a year, but it expends less funding when schools are not open. Committee Member Kawano commented that the issue is low expenditures rather than variances. Kunz stated that the Department would be concerned with large variances and wants to ensure that it is tracking the same level of expenditures it had the previous year.

Kunz stated that school food services revenues, expenditures, and balances are in line with the Department’s expectations. She noted that the federal government shutdown could have a negative effect on the timing of reimbursements for free and reduced lunch meals, which might be reflected in its third quarter report. She emphasized the importance of the Department maintaining operating cash reserves to limit exposure and allow programs to run uninterrupted.

Committee Chairperson Uemura asked about the Department’s reserves. Kunz stated that the Department is able to maintain up to three months of operating cash in reserve, which is about $35 million.

Committee Member De Lima asked if the Department would receive retroactive reimbursements. Kunz confirmed that it would.

Kunz stated that student transportation expenditures are in line with expectations at this time of the year. She stated that expenditures within student transportation are cash only and reviewed encumbrance balances.

Kunz stated that increases in gas, water, and sewer charges continue to drive utilities expenditures. She noted that the Department’s expenses for alternative energy costs in the first half of the year are greater than its expenses for the full year two years ago. The Department continues to focus on alternative energy and increased alternative energy generation is offsetting increases in charges in other areas. Kunz detailed that an overall cost-per-kilowatt-hour increase of three cents will drive the cost of electricity even though the Department has reduced consumption.

Kunz stated that the U.S. Department of Education finalized impact aid receipts for FY 2016 at $41.7 million at 92.69% of the learning opportunity threshold (“LOT”). She detailed that the FY 2017 and FY 2018 payments are at 87% and 89% LOT because the U.S. Department of Education is focusing on quicker distribution of funds. Kunz stated that the Department is waiting for final FY 2017 funds but received the majority of the FY 2018 payment in December, and the Department is expecting smaller incremental payments as the years close. Kunz noted that the federal government shutdown did not affect impact aid receipts and payments.

Committee Chairperson Uemura asked why the Department does not receive 100% of payments. Kunz explained that the federal government does not fully fund the impact aid program and discounts available funds that it distributes because the Education budget was passed prior to September 30, 2018.

Committee Member De Lima asked about the amount for which Department budgets. Kunz stated that the ceiling is at $50 million, but the Department requested to reduce its ceiling to $40 million in its biennium budget based on historical receipts. Committee Member De Lima asked if the Department budgeted $40 million in FY 2016. Kunz detailed that the Department budgeted $50 million, and its ceiling was $55 million. Committee Member De Lima asked if the Department budgets $55 million. Kunz explained that the Department requested a ceiling decrease of $10 million because it expects to spend that amount. She noted that a ceiling exists so that the Department could not spend more than it receives and explained that the Department could spend up to the ceiling.

Committee Member De Lima asked how much the Department spends in impact aid funding. Kunz detailed that the Department spends between $35 million and $40 million annually. It plans to use the bulk payments it received early in the year for next year’s expenditures. Committee Member De Lima asked how much the Department spent in FY 2016. Kunz stated that she is unsure of the exact amounts. Committee Member De Lima asked the Department to include this information in its future fiscal reports. He asked if the Department includes these funds in its balances for the next fiscal year or the prior fiscal year. Kunz explained that the Department includes these funds in its balance for the following fiscal year because these funds do not lapse.

Committee Chairperson Uemura asked if the Department includes these amounts in its carryover report. Kunz explained that the Department only includes general funds in its carryover report. Committee Chairperson Uemura asked if the Department could expand its definition of carryover funding. Kunz confirmed that it could do so for future carryover reports. Committee Chairperson Uemura asked if the Department has to use impact aid payments for specific purposes. Kunz explained that the Department could use impact aid reimbursements for a variety of expenditures because they are for lost tax revenue, but the Department prioritizes funding substitute teachers with impact aid reimbursements. Committee Chairperson Uemura stated that he would like the Department to include all funds it could use for general purposes in its carryover fund definition.

Committee Member De Lima stated that the Department has impact aid payments in its carryover funds and noted that the U.S. Department Education is distributing these funds at a quicker pace. Kunz stated that the Department normally receives bulk payments in February or March. Committee Member De Lima detailed that the elected Board of Education (“Board”) divided impact aid funding between Board and Department priorities and began directing it toward substitute teaching after budget reductions in 2008. He stated that the Department needs to address shortfalls, but the Board is limited in its resources and is unable to allow Board Members to attend educational meetings or hold meetings on neighbor islands. He stated that the Department could review using its surplus in impact aid payments to supplement Board community engagement activities and emphasized the necessity of a full report.

Committee Member Catherine Payne asked whether the Department allocates impact aid payments to schools. Kunz stated that it is dependent on the year, the federal government’s impact on the school, and the school’s rate of return of federal impact aid cards. Committee Member Payne asked whether the Department allocates impact aid payments to charter schools and asked the Department to include this information in its report. Kunz detailed that charter schools receive a share of impact aid funding proportionate to enrollment.

Committee Member Voss stated that the Department’s carryover spending is unrestricted, and the Committee is unaware of how the Department spends impact aid funding. He asked if the Department has historically provided the Board with a report regarding how the Department uses and allocates these carryover funds. Kunz stated that she is unaware of such a report. Committee Chairperson Uemura clarified that the Department provides the Committee with a quarterly carryover report and asked the Department to include this information in its future reporting, including how it spends impact aid payments.

Kunz reviewed the executive summary of capital improvement program (“CIP”) projects, including comparisons, financial activity, and balances.

Committee Chairperson Uemura asked about the Department’s repair and maintenance (“R&M”) backlog. Kunz stated that the Department discussed including an R&M backlog report for the Legislature and would include this information in its next fiscal report to the Committee.

Committee Chairperson Uemura commented on the Department’s financial activity and noted that allotment balances did not stay the same. He detailed that the Department listed its encumbrances and expenditures, but it appears as though expenditures did not occur. Kunz explained that the Department encumbers per contract and noted that contract amendments, such as nonfulfillment or change orders, could affect these totals.

Committee Chairperson Uemura asked if increased allotment balances are available to the Department. Kunz detailed that allotment occurs once the Governor releases funds. Committee Chairperson Uemura asked if encumbrances and expenditures reduce allotment balances. Kunz explained that allotment balances remained frozen in FYs 2014, 2015, and 2016. She noted that the balance is a result of allotment funds minus expenditures and encumbrances.

Committee Chairperson Uemura asked if the Department has additional funds to spend if allotment balances change due to contract amendments. Kunz detailed that these funds lapse if the Department does not expend them and detailed that balance changes might be due to interworking between encumbrances and expenditures. Committee Chairperson asked if this is a common occurrence. Dann Carlson, Assistant Superintendent, Office of School Facilities and Support Services, confirmed that it is and explained that the Department encumbers amounts once it awards contracts and expends amounts once projects are complete (e.g. percentage completion is one method outlined in contracts). He noted that projects are in different phases, and the Department does not expend funding in some instances because the Department completed and closed out projects.

Committee Chairperson Uemura noted that changes in encumbrances and expenditures do not align and asked why this is. Kunz stated that the Department would review this and follow up with the Committee.

Committee Vice Chairperson Voss asked why the Department put so few projects out to bid and expended less funding in the second quarter. Carlson stated that he would review this and provide the Committee with more information. He detailed that the Department requests allotments based on appropriations and typically experiences lags in allotments, which might explain the reduction in projects and expenditures. Committee Vice Chairperson Voss stated that the Legislature might be concerned over the Department’s low expenditures. Carlson explained that financial activity changes significantly in the fourth quarter.

Christina Kishimoto, Superintendent, stated that the Department’s financial management system (“FMS”) replacement is part of its overall modernization goals and is one of many components that the Department needs to address. She stated that it would take the Department time to select, design, and implement a new system because systems carry critical data, support workflow, and are part of broader integrated systems. She noted that the Department planned to select a replacement system this year, and the current system’s failure heightened the importance of the Department prioritizing modernization and moving forward. Kishimoto stated that the Department would eventually need input from the Committee on features the Committee wants to see. She stated that FMS modernization would allow the public to easily view the Department’s data and how it aligns funds with priorities. Kishimoto highlighted that the Department plans to request input from the Legislature on what it would like to see in the Department’s financial reports.

David Brookshire (“Brook”) Conner, Assistant Superintendent and Chief Information Officer, Office of Information Technology Services, detailed that the Department presented its overall technology plan, entitled “Playground for the Instructional Enterprise” or “PIE,” to the Committee in March 2018. He emphasized that the FMS is part of the Department’s capabilities block and connects to talent management, school operations, and reporting. He noted that the Department needed to replace FMS prior to its system outage because it does not operate well and is not designed for continuous improvement or with students in mind. FMS replacement has always been a component in the Department’s strategic plan, but the October 2018 outage is driving urgency on timing.

Conner explained that the federal Internal Revenue Service audited the State’s Office of Enterprise Technology Services (“ETS”), which is part of the Department of Accounting and General Services (“DAGS”), and required ETS to upgrade its mainframe operating systems that were out of date. This affected the Department because its FMS runs on ETS’s mainframe. Conner detailed that ETS successfully installed its updated operating system; however, the Department’s FMS did not run on the updated version, which led to an outage. He noted that a back-out of the upgrade failed because appropriate procedures were not in place, and the only way for the Department to proceed was to fix the issues. Conner detailed that the Department was unable to issue electronic payments to vendors for a period of 13 days after the upgrade. During this time, the Department issued handwritten checks for critical payments. After 13 days, the Department felt its system was stable enough to release access to the Office of Fiscal Services (“OFS”) schools to issue critical checks. After six days of access by OFS, the system was deemed stable enough to release to schools. Schools were able to issue checks, pay vendors, and pay for projects at that point, but the Department recognized that it had a backlog in the number of checks it needed to process and was concerned that flooding the system would cause it to fail. Initially, the Department released access to half of its schools in the morning and half of its schools in the afternoon. After 25 days, the Department returned to normal operations. However, it expects to continue to experience operational issues and challenges.

Conner detailed that the outage occurred because FMS runs on a platform that the vendor no longer supports. However, the Department is pursuing extended support so it could have a minimum level of support for the time being. He stated that other factors contributed to the outage, including recent personnel retirements with limited knowledge transfer, an expertise gap, complexity of the system, and lack of software engineering best practices. Conner detailed that the Department’s main concern is lack of vendor support and further detailed that expertise for the old mainframe system is not widely available. He noted that there are further complications because the Department had the system custom built internally, it uses old programming language, and there are complex, interdependent systems.

Committee Chairperson Uemura asked how the FMS is outdated if the Department had it custom built. Conner explained that the application that runs on the operating system and uses the database is custom built, but the database and operating system themselves are not. Committee Chairperson Uemura asked for more on information on the upgrade. Conner detailed that the Department has experienced operational issues for years, and the current upgrade did not work.

Committee Vice Chairperson Voss asked why the Department did not perform test runs on the new operating system. Conner explained that the Department performed test runs in a testing environment for months and worked with ETS, but the testing environment did not match production. He noted that the risk was not apparent at the time.

Connor stated that the Department’s first priority is to maintain operational stability by ensuring minimal changes to the mainframe that could affect the FMS while procuring products and services to replace the FMS. The Department’s solution must cover accounting and financial reporting, invoicing, cash receipts, vendor payments, procurement, and fixed asset management. He stated that the Department expects to retain professional services to assist with setup, training, data migration, and data integration. Conner highlighted that the FMS replacement presents the Department with many opportunities, including the ability to advance financial management, a foundation to modernize other areas, a leverage into budget and reporting, the ability to rationalize existing systems, and a standardized chart of accounts.

Committee Chairperson Uemura asked about the replacement cost. Conner explained that the Department does not have estimate because it is in the process of procurement, but implementation might be in the low millions of dollars. He noted that this figure is consistent with enterprise software costs and detailed that Infinite Campus costs the Department just under $1 million in licensing each year while other enterprise systems cost considerably less. Conner stated that the Department is working with ETS to ensure alignment moving forward and would present anticipated costs in the future.

Committee Chairperson Uemura asked how the FMS replacement connects to the new payroll system. Conner explained that the FMS does not directly connect to HawaiiPay, but it connects to a separate payroll system that the Department already replaced and implemented. Committee Chairperson Uemura asked if the new platform would have a payroll component. Conner confirmed that it eventually would and stated that the Department would procure professional services to assist with planning for this.

Conner stated that the Department’s desired solution features include cloud-based software, single sign-on, and streamlined workflows. He stated that this is ideal for the Department’s environment and large-scale enterprise and aligns with ETS’s strategic direction. The Department currently has separate log-ins and passwords for its mainframe. The Department’s desired solution features would increase efficiency and improve business functionality for accounting and finance, reporting and analytics, consolidation, financial planning, expenses, procurement, inventory, projects, and grants management.

Brian Frey, Director, Enterprise Systems Branch, Office of Information Technology Services, reviewed an overall timeline, including the Department’s procurement for a replacement product and associated services. He noted that the Department began the process of engaging communities and issued a request for information (“RFI”), and the Department is in the process of receiving questions and would begin evaluations soon.

Frey highlighted that the Department is ensuring that its request for proposal (“RFP”) would provide it with opportunities for long-term success and expects to issue the RFP in June. He detailed that the Department plans to receive responses from vendors, review information, evaluate proposals, select products, and execute contracts in July 2019 through September 2019. The Department’s goal is to commence its FMS replacement project in October 2019, and it estimates that implementation would occur in November 2020 through May 2021. Implementation would include migration, integration, testing, training, and launch.

Committee Chairperson Uemura asked how the Department is addressing the personnel component that led to the outage and whether it plans to hire a consultant. Frey detailed that existing personnel are focused on maintaining the operational health of the current system, and the Department plans to use a consultant to set up the new system and assist with data migration.

Committee Chairperson Uemura stated that the Department’s target date for commencement is October 2019. Conner explained that the Department anticipates it would be able to answer questions regarding cost at this time and could then engage in discussions regarding funding. Committee Chairperson Uemura asked if the Department plans to pay for the FMS from its internal budget and noted that the Department needs to include this component in its operating and financial plans. Kunz stated that the Department submitted its budget request to the Legislature prior to the outage and currently does not have funds reserved for the FMS. She detailed that it is difficult for the Department to reserve funds because it does not have a range of costs. The Department is aware of the level of expenses for the current system, but it would need to review expenditures and implementation costs for the new system. She stated that the Department did not ask for ongoing funding for prior system upgrades from the Legislature because implementation and training are nonrecurring costs.

Conner stated that the Department included a headcount of staff through trade-offs and transfers in its budget request to implement continuous change processes across technology requests. Committee Chairperson Uemura stated that he anticipates costs after implementation because the Department would still have its old system in place. He suggested that the Department plan by reviewing savings from transitioning to a new system, carryover funding, and lease possibilities. Conner detailed that the Department could include recurring license fees in its base budget. Kunz detailed that software as a service has recurring baseline totals unlike old hardware that required the Department to use upfront capital, and the Department would receive estimates in response to its RFI. Committee Chairperson Uemura stated that the Committee would like the Department to share how it would fund the new system and the recurring costs it anticipates in the future.

Frey stated that the Department is engaging a variety of stakeholders, including the Office of Fiscal Services as the primary business owner, the Office of Information Technology Services as the primary technology owner, tri-level representatives, and other state agencies, such as ETS and DAGS. Frey reviewed the Department’s next steps. He stated that the Department would issue an RFI to expose staff to modern systems and processes, and the Department has started engaging professional services to receive information from vendors. The Department plans to work on implementation architecture that aligns with its strategic plan. The Department is working with stakeholders to gather FMS replacement needs and state agencies in support of House Bill 1593, which would require state agencies to develop and procure a financial database for use by all state agencies. Lastly, the Department needs the Board’s input on the frequency and nature of updates that it would like on the FMS modernization.

Committee Member De Lima referenced a study that the Department released several years ago on the cost to replace its systems. Kunz stated that the Department used a consultant to conduct the Gartner study. Committee Member De Lima asked what the study determined. Kunz stated that the study determined that it would cost $58 million to replace its systems, including payroll, vendor payment, and procurement. Committee Member De Lima stated that the Department should review this study because the purpose was to seek input regarding need. He noted that stakeholders have similar needs even though the study is out of date because the Department did not replace its systems. Committee Member De Lima expressed concern that the Department’s plans would not come to fruition. He stated that the Department should determine needs, attainable plans, funding, and incremental steps and justify the needs to the Legislature.

Conner stated that the Department reviewed the Gartner study, used it as a knowledge base, and engaged analysts that worked on the study to solicit feedback on how it could approach issues differently. He emphasized the importance of attainable achievement and explained that this is why the Department included pilots in its strategy and is modernizing its system in components rather than all at once. Kunz confirmed that the Department continues to review and use the Gartner study in partnership with ETS to configure its system correctly so that it increases user efficiency.

Committee Member Kawano asked if the Department is reviewing one system or various modules.
Conner stated that the Department is open to different ideas. It wants competitive bids from system integrators and providers and wants components that promote school empowerment and autonomy. Committee Member Kawano asked if the Department polled other school districts. Conner stated that the Department engages in discussions with local organizations and detailed that some states face similar issues with outdated mainframes while others have successfully modernized systems.

Committee Member Kawano asked for more information regarding vendors and Conner summarized various discussions with vendors and procurement laws. Kunz stated that communities are skeptical whether the Department can implement large-scale systems, but the Department has recently successfully implemented large-scale systems, so there is staff buy-in and positive momentum going into this project.
Committee Member Dwight Takeno asked about vendor support for the Department’s current system. Conner explained that Department employees developed the current system internally and wrote the original code. He noted that the Department pays vendors to implement some systems but not the FMS. Committee Member Takeno asked whether vendors would need to understand the original code in order to assist with migration and integration. Conner emphasized that it is more important for vendors to understand the Department’s data than its code. He detailed that data migration issues might include gaps in data in the existing system. Committee Member Takeno asked if the Department foresees running its existing system concurrently with the new system initially. Conner stated that the Department’s intention is to make backups of data and turn off its existing system once the new system is ready.

Committee Vice Chairperson Voss asked how existing staff are maintaining system stability so the Department does not experience additional outages. Conner detailed that staff have to restore processes, recompile systems of code, and manually conduct work for the FMS to operate. Existing staff work on receiving extended vendor support to ensure that the Department is protected in the case of additional database outages.
Carlson stated that the Department proposed legislation that would extend the lease term from 55 years to 99 years to allow for leasehold condominiums. The Department also proposed a legislative amendment to Act 210 to include the transfer of the 1046 Young Street property to the Department instead of the Department of Land and Natural Resources (“DLNR”).

Carlson stated that the Department is engaging with the City and County of Honolulu (“City”) on its options because the City denied the transfer of the Young Street property to the Department because the Honolulu Fire Department would like to use it for a fire station. Carlson stated that the Department met with the City in January to facilitate land transfers under Act 206 and Act 210.

Carlson stated that the Department sent a letter to the Department of the Attorney General (“AG”) asking for clarification on the Department’s authority to enter into a direct lease on the 3633 Waialae Avenue property. The Department also sent a letter to the Chairperson of DLNR requesting that DLNR transfer the fee simple interest in the land at the 3633 Waialae Avenue and 4087 Diamond Head Road properties. He stated that the Department entered into a memorandum of understanding (“MOU”) with the Hawaii Housing Finance and Development Corporation (“HHFDC”) and sent this to the AG for review. The Department is conducting due diligence, requested sewer and water capacity from the City, and is working to complete a draft market study. Carlson stated that the Department’s next step is to meet with HHFDC to develop a timeline and determine how to proceed with RFPs.

Committee Member Kawano asked when the Department would hold community meetings. Carlson stated that the Department would inform the Committee once it scheduled community meetings. Committee Member Kawano asked if the Department plans to hold community meetings prior to or after issuing RFPs. Carlson stated that the Department is in the process of reviewing this, but the Department would conduct community engagement prior to issuing RFPs because it might take some time to develop RFPs in conjunction with HHFDC.

Committee Chairperson Uemura asked for a draft of the Department’s MOU. He asked why the Department is conducting a market study and whether this is part of due diligence efforts. Carlson explained that the market study is part of due diligence efforts for the RFPs and work with HHFDC. He noted that developers might be more willing to engage if the Department includes a market study in its RFPs. Committee Chairperson Uemura asked about the timeframe and costs of the market study. Carlson stated the Department should complete the market study within a month and noted that the study helps the Department to understand and qualify zoning. Kenneth Masden, Public Works Manager, Planning Section, Facilities Development Branch, Office of School Facilities and Support Services, added that the market study helps the Department to understand existing and potential zoning changes. He highlighted that the Department could upzone the 3633 Waialae Avenue property, which would increase its worth. Committee Chairperson Uemura commented that the Department mentioned discussions with developers regarding upzoning in prior meetings and noted that developers typically conduct their own market studies.

Committee Vice Chairperson Voss asked if developers have expressed informal interest or asked questions since the media publicized the Department’s efforts. Carlson stated that developers have not actively expressed interest nor engaged the Department since the Department issued its RFIs.


V. Recommendation for Action

Brian Hallett, Director, Budget Branch, Office of Fiscal Services, stated that the Department is requesting the Committee’s approval of the Department’s proposed composition of the Committee on Weights XI (“COW XI”). He detailed that the Department consulted with the Dean of the College of Education who concurred with the Department’s recommended proposition. Hallett highlighted that the composition represents various communities and the diverse characteristics of schools, including small, rural, neighbor island, and combination schools.

Committee Member De Lima asked if the Department sought representation from the Hawaii State Student Council in order to include student voice in its composition. Hallett stated that COW XI convenes over the spring and summer and noted that the Department would consider Committee Member De Lima’s suggestion.

Committee Member De Lima asked how the Department plans to select COW XI members. Hallett explained that the Department wants cross representation and strives for a good balance of past members and new members. Committee Member De Lima asked who the past representatives were. Hallett detailed that past compositions included a special education teacher, a member of the Hawaii State Teachers Association, and other members from stakeholder groups. Committee Member De Lima stated that it is important for the Department to include stakeholders who are active in community organizations in its composition. Kunz highlighted that COW XI is subject to Sunshine Law requirements, so it publicly posts its meeting agendas and accepts community feedback and testimony. She noted that the Department is attempting to share this information with the community to increase meeting turnout. Committee Member De Lima noted that stakeholders who are part of community organizations could share this information. Kunz agreed with Committee Member De Lima and noted that community members who are not on COW XI could still attend meetings, get information, and learn with COW XI’s members.

Kishimoto stated that this is her first experience with COX XI, and she is still determining whether to co-chair with one or two complex area superintendents (“CAS”) to add value to the committee. She is also reviewing vacancies to ensure that the members represent a variety of voices.

Committee Member Kawano stated that COW XI would be reviewing the Weighted Student Formula (“WSF”) and recommending to the Committee the formula the Department should use to allocate state funds. He noted that schools do not receive an equitable amount of funding because when past COWs have worked on the WSF, it used average teacher cost. However, when WSF is implemented, actual teacher cost is used and some schools do not receive enough funding as a result. What started off as an effort for equity ends up being inequitable. He stated that would like COW XI to recommend a formula that would allow the Department to distribute funds equitably to schools that experience these kinds of shortfalls. Kunz stated that COW XI plans to cover this topic. Committee Member Kawano stated that the Department could ensure equity without changing budgeted teacher salaries, or schools might need more funding in addition to WSF. Kunz stated that the Department could review this.

Committee Chairperson Uemura agreed with Committee Member Kawano and noted that it is important for the Committee to share these thoughts with the Department. Kunz stated that the Committee would have additional opportunities to weigh in when the Department presents COW XI’s recommended formula in the future for adoption.

Committee Chairperson Uemura asked if law limits the number of COW XI members to 18. Hallett explained that the Department attempts to balance broad representation and a workable number of members. Committee Chairperson Uemura indicated that his concern was that low enrollment and rural schools were not being fairly represented and that they seem to get the short end of the stick. He asked if the Department would include neighbor island representatives in each category from all islands and noted that this representation determines equity. Hallett detailed that the Department is attempting to include two individuals from each county in order to have cross representation. Committee Chairperson Uemura suggested that the Department create a matrix when selecting representatives to fulfill its own equity requirements. He emphasized that COW XI members need to represent all islands.

Committee Vice Chairperson Voss commented that the Department is focusing on equity and improving English learner services but not did include representatives from low socioeconomic schools even though the formula tends to affect lower socioeconomic schools. Hallett stated that there are many schools with low socioeconomic populations, so CAS representation covers that group and engage in discussions regarding economic disadvantages. Committee Vice Chairperson Voss stated that the composition should include members who advocate for particular groups, especially lower socioeconomic schools.

ACTION: Motion to recommend the Board approve the proposed composition of the Committee on Weights XI as described in the Department’s memorandum dated February 21, 2019, with the addition of a student representative to the composition (De Lima/Voss). The motion carried unanimously with all members present voting aye.


VI. Adjournment Committee Chairperson Uemura adjourned then meeting at 12:57 p.m.