STATE OF HAWAII
BOARD OF EDUCATION
FINANCE AND INFRASTRUCTURE COMMITTEE MEETING

MINUTES

Queen Liliuokalani Building
1390 Miller Street, Room 404
Honolulu, Hawaii 96813
Thursday, September 1, 2022

PRESENT:
Lynn Fallin, Chairperson
Ken Kuraya, Vice Chairperson
Bill Arakaki
Makana McClellan
Lauren Moriarty
Kili Namauʻu
Bruce Voss
Shanty Asher, ex officio

EXCUSED:
None

ALSO PRESENT:
Keith Hayashi, Superintendent, Department of Education
Brian Hallett, Assistant Superintendent, Office of Fiscal Services, Department of Education
Heidi Armstrong, Interim Deputy Superintendent, Department of Education
Randall Tanaka, Assistant Superintendent, Office of Facilities and Operations, Department of Education
Maverick Yasuda, Incoming Student Representative
Alison Kunishige, Executive Director
Kenyon Tam, Board Analyst
Regina Pascua, Executive Secretary


I. Call to Order

Committee Chairperson Lynn Fallin called the Finance and Infrastructure Committee (“Committee”) Meeting to order at 9:30 a.m. Committee Chairperson Fallin, Committee Vice Chairperson Ken Kuraya, and Committee Members Bill Arakaki, Makana McClellan, Lauren Moriarty, Kili Namauʻu, and Bruce Voss were present.


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

Committee Chairperson Fallin called for public testimony.

Cheri Nakamura, HEʻE Coalition, testified on agenda item IV.A, entitled “Presentation on Department of Education’s (“Department”) 2023-2025 fiscal biennium operating budget process.” She stated that in the Department’s budget plan does not include a statement of values or goals, which should drive the review process.

Susan Pcola-Davis, member of the public, testified on agenda item IV.A, entitled “Presentation on Department’s 2023-2025 fiscal biennium operating budget process.” She stated that she is not convinced the Department’s presentation of the budget will be any better than previous years, she stated the presentation lacks clarity and specificity, and stated that based on the internal budget development process timeline, the budget approval process would be the same as in previous years.


III. Approval of Meeting Minutes of June 2, 2022, and Minutes of April 21, 2022 Student Achievement and Finance and Infrastructure Joint Committee meeting

Committee Chairperson Fallin asked Committee members to review the minutes of the Committee’s June 2, 2022, meeting and the minutes of the Student Achievement and Finance and Infrastructure Committees’ April 21, 2022 joint meeting.

Committee Member Voss moved to approve the minutes of the Committee’s June 2, 2022, meeting and the minutes of the Student Achievement and Finance and Infrastructure Committees’ April 21, 2022 joint meeting. Committee Vice Chairperson Kuraya seconded.

Committee Chairperson Fallin 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 Kuraya, Committee Members Arakaki, McClellan, Moriarty, Namauʻu, and Voss).

ACTION: Motion to approve the minutes of Student Achievement Committee’s June 2, 2022, meeting and the minutes of the Student Achievement and Finance and Infrastructure Committees’ April 21, 2022 joint meeting (Voss/Kuraya). The motion carried through unanimous consent from all members present.


IV. Discussion Items

Committee Chairperson Fallin called for public testimony on this agenda item. No one testified at this time.

Committee Chairperson Fallin called on Keith Hayashi, Superintendent, and Brian Hallett, Assistant Superintendent, Office of Fiscal Services (“OFS”), to present on the Department’s fiscal biennium operating budget process.

Hallett outlined the Department’s 2023-2025 fiscal biennium operating budget process. He shared that the Department is providing preliminary information to the Board prior to the October meeting when the Department will present its budget proposals to the Board. He detailed that the presentation would include the following: (1) where are the Department is now, the current fiscal year (“FY”) 2022-2023; (2) what the Department can expect for the next two FYs 2023-2024 and 2024-2025; (3) how does the fiscal climate look; (4) what is the Department’s internal budget development process for the upcoming FYs; and (5) additional concerns.

Hallett highlighted that upon the passage of Act 248, Session Laws of Hawaii (2022), the legislature provided $165.5 million in new resources, including $121.7 million for repricing; restored $114 million in budget cuts; provided $49 million to address shortages (of this amount, $32 million was for teacher differentials), and a $3 million increase for FY 2022-2023 for alternative learning programs.

Hallett stated that the Legislature added $256 million to the Department’s budget this year for Repair and Maintenance (“R&M”) projects, teacher repricing, and Hawaii Repair, Remodel, and Restore, also known as Hawaii 3Rs. He explained that the Department would need to ask that the Legislature release all of these funds and would follow a similar process used for the eight specific appropriations. Hallett shared that his office posted the appropriation summary report on the Department’s website and that the report is helpful to understand the foundation of the budget.

Hallett stated that the office of Budget and Finance (“B&F”) determines the Department’s starting point for the base budget. He explained that the Department will need to incorporate collective bargaining costs, appropriated separately from the budget bill, Act 248, Session Laws of Hawaii (2022), into the base budget. He also stated that the Department will remove one-time non-recurring expenses determined by the Governor and Legislature, including $256 million for one-time R&M, $14.3 million for various facilities activities, and $10 million for worker’s compensation. Hallett noted that this is the starting point for the Department to recommend transfers, additions or transitions of new programs.

Hallett highlighted that each year B&F issues instructions and that the Department needs to be aware of the fiscal and political context, such as an outgoing and incoming administration, current service budget, and the expectation that the next budget phase will take a two-step approach. He noted that at this point the Department does not have instructions from B&F. Hallett explained that overall, the fiscal climate looks positive. He stated that the Council on Revenues makes revenue projections, which the governor would consider when making recommendations to the Legislature. Hallett shared that the Department is anticipating and currently conducting a review of the following programs: school food service, student transportation, utilities, skilled nursing services, and worker’s compensation.

Hallett outlined the major steps of the school financial plan process. He also outlined the Department’s internal budget development process and estimated timeline of key events. Hallett stated that the Department would go over the current plan, prioritize students, staff and systems, and engage with stakeholders.

Hallett stated that Board Policy 303-1, entitled “Department of Education Budgets” includes deliverables and expectations regarding proposed changes to the budget. He shared that the Board should take into consideration additional concerns relating to the fiscal climate, priorities of the new administration, and Maintenance of Effort (“MOE”) and that the Department will encumber and spend a good amount of funds outside of the current period.

Hallett explained that Elementary and Secondary School Emergency Relief Fund, American Rescue Plan (“ESSER ARP’) funds are good through the first year of the next fiscal biennium. He stated that the Department develops a fiscal biennium budget every two years and a supplemental budget in between every two years.

Committee Member Voss emphasized that for years the Board has been fighting to get a full budget from the Legislature and recognized the uncertainty of a new administration and changes in the legislature. He stated that it would be beneficial for the Department to make the necessary changes needed once the Legislature full funds the budget and asked what is the process the Department is going through now to make structural changes. Hallett replied that the Department has the ability to ask for new resources for system support and realignment. He stated that the Department anticipates the transfers or additional funds for existing or new programs and noted that it is likely that B&F will encourage the Department to reallocate resources.

Committee Member Voss asked the Department to share how it would realign or restructure funds. Hayashi replied that the Deputy Superintendent of Operations would assess areas related to student need to support academic and social-emotional learning. He noted that Heidi Armstrong, Interim Deputy Superintendent has been engaged in this work.

Armstrong stated that the four foundational strategies are the grounding drivers to help with spending and to determine where monies will go. She referred to the Department’s previous strategic plan and emphasized that the Department is consistently looking at action-oriented data decision-making processes in the areas of wellness, universal screener data, status of social emotional learning, competencies, and school level formative instruction process programs to review what the data is telling the Department about student needs. Armstrong stated that the Department has been relying on past targets and foundational strategies to drive the work ahead.

Hayashi stated that based on the four strategies, schools would assess needs and focus on where students are at with the Hawaii Multi-Tiered Support System (“HMTSS”) while implementing universal screeners to help identify needs. He stated that schools would use this data to make informed decisions.

Hayashi explained that when the Department thinks about the students, staff, and system support, there is a significant need to modernize current systems and connect various offices to bring forth efficiency. He emphasized that Department leadership would look at the entire continuum from early to higher education for reading and math needs and see results compared to national results. Hayashi stated that another area to address is middle school and that he has held discussions with principals and complex area superintendents to reflect on effective middle school practices, including partnering with a national organization to focus on middle school development.

Committee Chairperson Voss stated that the Board would be looking at the reallocation of funds and how this would tie into strategic plan objectives to support the needs that have to be addressed.

Committee Chairperson Voss asked for clarification regarding the $425 million in the base operating budget for school support under EDN 400. Hallett replied that the $425 million for EDN 400 was further detailed on the summary page, which breaks down the amounts by character of expenditure, A1 for salaries, B for office supplies, and C for equipment. He clarified that the breakdown shows all the programs that make up the $425 million, including $218 million for the ESSER MOE, because the legislature did not assign this amount to a specific EDN.

Committee Member Arakaki asked how the Department would make sure to align school academic and financial plans, because technically both plans should be together. He stated that it is critical to understand how the Department is spending the money. Committee Member Arakaki asked, if programs are not working what is the process to make changes and how can the Department provide this information to the Board.

Committee Member Moriarty asked where is the Department is currently and where is it going. Committee Member Moriarty shared that Representative Sylvia Luke sent out summary information on the overall state budget, which shows that the Department has done a lot relating to salaries. She noted that it would be helpful to have a picture graph of what employees received pay increases and how this will align with current priorities versus previous priorities. Committee Member Moriarty noted that she does not have a sense among all the priorities what the Department has accomplished and what the Department needs to focus on. She stated that she would like to know if there is a way to assess budget allocations in a meaningful manner.

Committee Member Moriarty stated that she would like an understanding of the status quo and how the Department would assess it by linking priorities to the policy and process. She stated that she would like to understand how the Department can make corrections in a timely fashion to get desired results that positively impact students. Committee Member Moriarty asked what are the best metrics and indicators that can show what the Department has done in the past and going forward, which metrics and indicators can identify progress. She emphasized that there is a maintenance level for the priorities, but that the presentation shows a bottom up process and referred to the slide, which mentions taking the requests and compiling this information.

Committee Member Moriarty emphasized that, as a Board Member she would like to understand the big picture. She asked for clarification on the process for looking at the budget requests the Department will present to the Board.

Hayashi replied that the Department reviews information collected from the different areas and then prioritizes by looking at where the Department wants to be in three to five years, so the timing is optimum to align to the Board’s strategic plan. He stated that the Department is reviewing the priorities and the connection between the complex area and school financial plans. Hayashi stated that going forward the Department also plans to engage other stakeholders in this process.

Moriarty asked Hayashi to elaborate on linking the academic plans to the budget requests, including how this process will carry to the higher level to match resources.
Hayashi replied that the process is fluid from the state, complex area, and schools with each plan connecting to the broader goals and unique needs of schools. He stated that schools are also revisiting their academic plans based on data and the complex area superintendents will be the key connection between the state and school levels to move forward and reflect on complex area plans.

Committee Vice Chairperson Kuraya noted that the Department needs to conduct a comprehensive review of the various offices to ensure that funds and programs are in alignment.

Committee Vice Chairperson Kuraya suggested that the Department include assessment evaluation information on slide 13 after the expenditure data. He also stated that the Board should look at FY 2017-2018 to present specifically A1, B, and C funds to understand the reasons for any changes between the base budgets of previous years and FY 2022-2023.

Committee Member Namauʻu expressed appreciation for the information but emphasized that the budget does not reflect information relating to students. She requested information on baselines of where our students are at, especially the disadvantaged students dealing with the impacts of the COVID-19 pandemic.

Committee Member Namauʻu emphasized that unless the Board is looking at clear metrics, she does not understand how the Department can create a budget to address student needs. She also asked what kinds of changes the Department could make to reflect the needs of children.

Committee Member Namauʻu stated that the Board is in process of developing a new strategic plan and she is hearing that schools drive decisions then the complex area superintendents review the plans. She stated that it is not clear how the Department will spend ESSER funds and asked how the Department is communicating this information.

Hayashi clarified that in December 2021, school principals put together their school salary financial plans based on data for the year, which is then submitted to their complex area superintendent for approval. He stated that schools would continue to analyze data in February and March to finalize the rest of their plan, including input from the School Community Council. Hayashi noted that changes occur and schools continue to modify and adjust their academic plans throughout the year.

Hayashi explained that in August of 2021 many schools began implementing universal screeners to help drive their academic and financial plans. He stated that the Department continues to leverage this data to drive decisions relating to math, reading, and social-emotional learning. Hayashi also stated that the Department is reviewing transitions between elementary, middle, and high school and asked Armstrong to share more about the systems to help aggregate and improve communication to schools.

Armstrong shared that schools and complex areas know what the enabling activities are and what their intentions are for spending. She stated that moving forward the Department is developing a system called eGrants to help schools complete academic plans that feed information into the budget system.

The Committee recessed at 10:51 a.m. and reconvened at 1:50 p.m. Ex Officio Committee Member Shanty Asher joined the meeting at its reconvening.

Hallett explained that academic and financial plans are based on approximately 70% in weighted student formula (“WSF”) and special education per pupil funding. He explained that the Department does not need to make budget changes on a year-to-year basis. Hallett stated that the COW is charged with looking at the Department’s tri-level system and determining what should be included in the WSF. He stated that this year the COW will provide its recommendation for WSF to the Board.

Committee Chairperson Fallin stated that this information would help to show what adjustments the Department can make since a large percentage of the Department’s budget is allocated to personnel.
Committee Member Voss asked the Department to explain rollover funds and whether and how rollover funds impact the budgeting process. He also asked how the Department can use these funds to supplement the budget. Hallett replied that if schools have in excess of 5% of their budget, these funds are considered rollover funds. He stated that the Department aggregates these funds and spreads them across the complex areas. Hallett stated that the Department returns these funds as current year funds so schools have a full year to spend them before they lapse. He stated that this process allows schools to supplement funds, helps them to avoid the year-end use or lose, helps schools to afford larger purchases, and provides a buffer to provide reliable funding if there is a big year-to-year difference in student enrollment.

Committee Chairperson Fallin stated that originally she wanted the Department to provide a more in-depth report on carryover funds, but she will place the carryover fund discussion on another meeting agenda and the Department will issue its carryover report in September.

Committee Chairperson Fallin summarized that the goal of this discussion was to have the Department present on its budget process and receive input from committee members on perspectives, concerns, or ways to strengthen the budget process. She highlighted the written testimony submitted by the HEʻE Coalition and noted that some concerns outlined in the testimony include a more systematic process that links specific goals or strategic objectives to budget changes. Committee Chairperson Fallin also stated that the discussion on the process raised issues on how efforts align between state, complex, and school levels. Committee Member Fallin stated that the Committee asked for a program overview to determine whether the Department needs to reallocate or increase program funding and commented that budget proposals need to clearly explain how they focus on student outcomes.


Committee Chairperson Fallin called for public testimony on this agenda item.

Committee Vice Chairperson Kuraya left the meeting at 2:04 p.m.

Susan Pcola-Davis, member of the public, testified that approving a new Deputy Superintendent for Operations is a good start, and asked for clarification on the process for job order contracting (“JOC”), and asked how JOC expedites work.

Committee Vice Chairperson Kuraya returned to the meeting at 2:07 p.m.

Committee Chairperson Fallin called on Hayashi and Randall Tanaka, Assistant Superintendent, Office of Facilities and Operations, to present on the Department’s capital improvement projects (“CIP”) and R&M and anticipated challenges for the 2022-2023 school year.

Tanaka outlined the Office of Facilities and Operations (“OFO”) plans to repair, fix, update, and increase capacity for schools. He stated that there are new demands on energy and efficiency upgrades and two tools, a Hawaii Facilities Inspection Tool (“HI-FIT”) and Facilities Asset Management (“FAM”). He explained that based on the Jacob’s Study (a facility inventory, assessment, and capacity study), the Department is experiencing challenges when retrofitting older schools. Tanaka stated that last year, the Department had an additional $256 million, because of the MOE, which was problematic because the Department had to develop the capacity to deliver more work.

Tanaka explained that the Department has to deal with construction challenges created by the COVID-19 pandemic. He shared that a bid for the construction of a school came out $25 million higher after the scope of services was issued and that the work needs to continue.

Committee Member Voss emphasized that it does not seem realistic that the Department can spend $256 million and that if the Department is spending this quickly, then operational changes need to happen soon.

Tanaka stated that due to a lack of quality engineers, the Department had 95 vacancies. He shared that he worked with the University of Hawaii College of Engineering to recruit three current students in their last year and was able to hire two students, but the third student went to the federal government because they received a signing bonus.

Tanaka stated that the Department is also challenged with construction management because the staff becomes the conduit with the contractors. He emphasized that the Department needs construction experienced staff and is currently recruiting retirees who are going through the job selection process. Tanaka stated that the Department needs to update some of job descriptions to meet the level of experience required.

Tanaka stated that regarding student transportation, school food service, and safety planning, the Department hired new staff to handle logistics person, but it has been a challenge because the Department does not own vehicles or hire drivers. He shared that the Department is going to roll out a program for high school students to get city bus passes, although the Department does not know whether students will ride the city bus.

Committee Member Voss stated that when the Department has $1 billion and another billion under contract management and project completion funds the Department is in serious danger of not being able to start or finish some projects. Tanaka replied that the Department used to only get design money, which can be a waste of money. He explained that relationships with legislators is critical to get the jobs done, while monitoring inflation and rising costs to do business. Committee Member Voss asked that Tanaka keep the Board updated on funding.

Incoming Board Student Representative Maverick Yasuda asked if it is possible for the Department to update water fountains on school campuses. He stated that each new water fountain costs approximately $1,250, but that these types of projects have countless benefits that affect learning. incoming Student Representative Yasuda asked if the Department thinks that these kinds of projects can be planned and implemented on a statewide level with the current budget. Tanaka replied that the Department is moving towards providing water stations.

Committee Member Moriarty asked if the Department can complete this work and noted that with 95 engineering vacancies, what strategies can the Department use to make progress within the timeframe. Tanaka confirmed that since going through reorganization, the state transferred construction from the Department of Accounting and General Services to the Department, but the roles and responsibilities did not change.

Tanaka stated that the contract systems expanded from roofing to other trade areas and the Department expects to spend another $125 million in this area. He expressed that another challenge is getting into the schools and not interfering with the school day.

Committee Member Moriarty asked whether the Department tapped into the experiences of other school districts, nationally or internationally to better use technology.

Tanaka shared that developing a central kitchen in Whitmore is important because the average school facility in the state is 63 years old and the Department does not have the infrastructure to address the needs. He shared that he was able to visit the Los Angeles Unified School District, which prepares and serves 100,000 meals per day within 100 miles. Tanaka also shared that he is working with the University of Hawaii at Manoa, School for Design and that the proof of concept is nearly completed to preserve and extend the life of school products. He emphasized that his job is to inspire his team to think differently and create efficiencies.

Committee Member Moriarty asked how the Department will collaborate with the new School Facilities Agency and if a model has been developed.
She stated that she would like more information about costs and coordination efforts.

Tanaka shared that the hardest areas to service are the rural, outlying communities and schools with aging facilities. He also stated that there are specifications for pre-Kindergarten classrooms that the School Facilities Agency will need to take into consideration.

Committee Member Moriarty asked the Department to talk about sustainability and how it fits into the way the Department will address challenges. Tanaka replied that school design has changed since the COVID-19 pandemic and that the Department has begun to use local farmers for its school food service program.

Committee Member Moriarty stated that there are ways to address challenges like price increases and that workers come in and work at night instead of the school day in order to see real progress.

Committee Vice Chairperson Kuraya asked if there are other projects that are similar to Mokapu Elementary School, where 80% of the funding was covered by the federal government. Tanaka confirmed that Lehua Elementary School and Hickam Elementary School are similar projects. Committee Vice Chairperson Kuraya stated that for these types of projects as long as the Department can come up with 20% the federal government will cover 80%. He expressed support for the central kitchen. Tanaka emphasized that a centralized kitchen could be an economic machine for the Department.

Committee Vice Chairperson Kuraya stated that on the active CIP list, there are 118 projects the Department is in the process of closing and asked for clarification on how many projects are closed versus in process. He asked how the Department defines closed projects. Tanaka replied that he will provide that information.

Committee Vice Chairperson Kuraya noted that the Board cannot wait three to five years for this information and noted that it is important for projects to move forward. He asked if it is possible to know specifically when schools request projects as a part of typical R&M work because there is a priority list. Tanaka replied that it is critical to have this type of information to move forward.

Committee Chairperson Fallin asked for an update on ventilation and water for Red Hill areas. Tanaka stated that regarding ventilation, the precautionary measures require alignment in the classroom parameters. He also stated that regarding Red Hill, the Department conducted training on how to respond to this type of situation and what precautions will be in place. Tanaka also replied that regarding ventilation, the Department created five tiers and purchased box fans to allow for classroom ventilation. Committee Chairperson Fallin asked if the Department has adequate funding for ventilation. Tanaka confirmed that the Department has adequate funding to address ventilation issues.

Committee Chairperson Fallin asked how many air filters the Department purchased. Tanaka replied that OFO recently completed a survey on August 26, 2022 and that he is in process of providing this information to Hayashi.

Committee Chairperson Fallin asked if teachers decide whether to use an air filter in a classroom. Tanaka replied that teachers do have a choice to use air filters in their classroom.

Committee Chairperson Fallin expressed appreciation for questions from the Committee and noted that going forward the priorities and the strategies to remedy some concerns are clear and that it would be good to schedule periodic updates. Tanaka stated that the Department provides a quarterly budget variance report.

Committee Chairperson Fallin asked if quarterly budget variance reports are appropriate. Committee Member Voss replied that quarterly reports are appropriate.

Committee Chairperson Fallin noted that she would like to anticipate what will be proposed to the Committee.

Incoming Board Student Representative Yasuda asked if there are any other safety precautions other than infrastructure and if the Department can name some of the most vital ones that can be implemented on a statewide level. Tanaka replied that part of the effort is associated with costs of materials and the bid process.

Incoming Board Student Representative Yasuda asked what are the Department’s thoughts on internships of high school students to gain meaningful experience. Tanaka stated that the Department has not considered this option.

Committee Vice Chairperson Kuraya asked if the Department is looking to increase federal reimbursements for school food services. Tanaka replied that the Department needs to improve menus and look at both sides of the coin.


V. Late Public Testimony on Board Agenda Items

Committee Chairperson Fallin called for public testimony from any individuals who did not have an opportunity to testify on earlier agenda items. No one testified 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.


Name
Organization
Agenda Item
Sarah HofstadterHALE Hawaii IV.B. Presentation on Department’s 2023-2025 fiscal biennium operating budget process
Cheri NakamuraHEʻE CoalitionIV.A. Presentation on Department’s 2023-2025 fiscal biennium operating budget process
Mara HansonIV.B. Presentation on Department’s 2023-2025 fiscal biennium operating budget process
Susan Pcola-DavisIV.A. Presentation on Department’s 2023-2025 fiscal biennium operating budget process
Lynn OtaguroIV.B. Presentation on Department’s 2023-2025 fiscal biennium operating budget process



VI. Adjournment

Committee Chairperson Fallin adjourned the meeting at 3:23 p.m.