March 2, 2023

STATE OF HAWAII
BOARD OF EDUCATION
FINANCE AND INFRASTRUCTURE MEETING

MINUTES

Queen Liliuokalani Building
1390 Miller Street, Room 404
Honolulu, Hawaii 96813
Thursday, March 2, 2023

PRESENT:
Lynn Fallin, Chairperson
Ken Kuraya, Vice Chairperson
Bill Arakaki
Lauren Moriarty
Kili Namauʻu
Bruce Voss

EXCUSED:
Makana McClellan

ALSO PRESENT:
Keith Hayashi, Superintendent, Department of Education
Brian Hallett, Assistant Superintendent, Office of Fiscal Services, Department of Education
Curt Otaguro, Deputy Superintendent of Operations, Department of Education
Randy Tanaka, Assistant Superintendent, Office of Facilities and Operations, Department of Education
Alison Kunishige, Executive Director
Kenyon Tam, Board Analyst
Regina Pascua, Executive Secretary
Lady Garrett, 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, 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 VI.A., entitled “Update on status of Department’s capital improvement projects and repair and maintenance.” She stated that the problems at the Office of Facilities and Operations (“OFO”) are not new (referencing Kulanihakoi and $1 billion in unencumbered funds), that the Board is not using its power to convene and ask questions or to require the Department to provide appropriate information, and that the Board cannot evaluate Strategic Plan Goal 3.2 or the superintendent without this information.

Committee members received written testimony before the meeting. (A listing of the people who submitted written testimony before the meeting is included at the end of these minutes.)

III. Approval of Meeting Minutes of September 1, 2022 Committee Meeting

Committee Chairperson Fallin asked Committee members to review the Committee’s September 1, 2022 meeting minutes.

Committee Member Moriarty moved to approve the Committee’s September 1, 2022 meeting minutes. 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 and Committee Members Arakaki, Moriarty, Namauʻu, and Voss).

ACTION: Motion to approve the Finance and Infrastructure Committee’s September 1, 2022 meeting minutes (Moriarty/Kuraya). The motion carried through unanimous consent from all members present.

IV. Recommendation for Action

Committee Action on composition of Committee on Weights XIII

Committee Chairperson Fallin called on Keith Hayashi, Superintendent, and Brian Hallett, Assistant Superintendent, Office of Fiscal Services, to present the Department of Education’s (“Department”) recommendation on the composition of the Committee on Weights (“COW”) XIII.

Hayashi stated that the Department is requesting Board approval for the proposed role groups on the COW XIII to review the weighted student formula (“WSF”) for School Year (“SY”) 2024-2025. He explained that approximately half of the general funds are provided to schools using the WSF and that schools work with their respective School Community Councils (“SCC”) to distribute these funds. Hayashi stated that COW XIII would convene during the summer of 2023 with a recommendation for the Board in August or September 2023, so that schools can incorporate changes for SY 2024-2025. He stated that the Department took into consideration the various types of schools and geographical locations. Hayashi stated that the Department is recommending a similar composition to the last COW, assembled for SY 2020-2021, except that the Department is recommending reducing the number of community members from two to one. He stated that reducing the number of community members would allow the Department to add a member from the Hawaiian immersion community while still keeping the committee at a reasonable size. He stated that if the Board approves the composition of the COW today, the Department would move forward to fill the seats.

Committee Vice Chairperson Kuraya moved to approve the proposed composition of the COW XIII outlined in Attachment B of Hayashi’s memorandum dated March 2, 2023. Committee Member Arakaki seconded.

Committee Member Voss expressed support for continuing to include neighbor island representation on the COW. He asked why the Department is recommending the deletion of a community member seat while keeping a registrar seat, because community partners are essential to progress on strategic plan goals. Hallett replied that deleting a community member seat was for the Department’s convenience to avoid having too many members on the COW, but that the Board can determine whether the COW should retain a second community member.

Committee Member Voss expressed understanding of the difficulty of having too many committee members, but noted that the public would view the removal of a community members negatively.

Committee Member Arakaki asked for clarification regarding whether the representatives from neighbor islands are from each island or if members from neighbor islands are rotated. Hallett replied that the Department selects representatives from neighbor islands on a rotational basis.

Committee Member Arakaki asked whether the Department also rotates complex area superintendents (“CAS”) who serve on the COW. Hallett replied that the Department’s proposal is for at least one CAS to serve on the COW.

Committee Member Namauʻu asked how the Department recruits members to serve on the COW. Hallett replied that traditionally half of the members are retained as holdover members and the Department recruits new volunteers for the rest of the seats.

Committee Member Moriarty expressed appreciation for information on previous COW decisions. She stated that she had the same question as Board Member Voss relating to community members and expressed understanding that it becomes harder to get consensus with more members.

Committee Member Moriarty noted that the previous committee, COW XII, made several recommendations, including revisiting two issues specifically and provided guidance on other issues.

Committee Chairperson Fallin noted that the COW XIII would review COW XII’s recommendations and report back to the Committee. Committee Member Moriarty noted that since the Board approved the first phase of a strategic plan it would be helpful for the COW XIII to link strategic plan priorities and goals to its recommendation.

Committee Chairperson Fallin asked whether the Department complied with the statutory requirement that the Department get approval of the COW composition from the dean of the University of Hawaii at Manoa College of Education. Hallett confirmed that the Department has obtained the approval. Committee Chairperson Fallin urged Hallett to acknowledge fulfillment of things like statutory compliance in future memoranda.

Committee Vice Chairperson Kuraya moved to amend the main motion to add a second community member to the composition of the COW XIII. Committee Member Voss seconded the motion.

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

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

ACTION: Motion to approve the proposed composition of the COW XIII outlined in Attachment B of Hayashi’s memorandum dated March 2, 2023, with an amendment to add an additional community member (Kuraya/Voss). The motion carried unanimously with all members present voting aye.

V. Public testimony on Committee agenda items

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

VI. Discussion Items

Update on status of Department’s capital improvement projects and repair and maintenance

Committee Chairperson Fallin called on Keith Hayashi, Superintendent, and Curt Otaguro, Deputy Superintendent of Operations, and Randy Tanaka, Assistant Superintendent, Office of Facilities and Operations, to provide an update on the status of the Department's capital improvement projects and repair and maintenance.

Committee Chairperson Fallin noted that the Committee has not met in quite some time because the Board prioritized the development of a strategic plan.

Otaguro detailed the information the Department makes available to the public on its website and noted that the published information trails what the Department is actually doing. He explained that the legislature provides appropriations in two ways, either as line items (which allocates funds to specific projects) or as lump sums. Otaguro noted that of the 682 projects listed on the Department’s website, the Department is actively working on about 80% of the projects, which are worth approximately $570 million. He stated that there is another group of projects totaling approximately $430 million, where the Department encumbered funds, but the Department has not issued a notice to proceed on these projects, for various reasons. Otaguro noted that the Department has maintained communication with the House Finance Committee and Senate Ways and Means Committee on the status of projects. He also stated that the Department is still waiting for Governor Josh Green to approve the release of an additional $577 million.

Otaguro stated that the Department has received funds for 160 projects and noted that the chart on page 2 of Hayashi’s memorandum shows the amount of funds received and encumbered, every year since 2019. He stated that the chart does not include lapsing funds, but that this should be included in the future. Otaguro explained how the Department categorizes funds as encumbered or lapsed and how it allocates funds to specific projects. He provided an example of a project for which $20 million was appropriated where the Department used $12 million for design and planning, which would be reflected as encumbered, and the remaining $8 million would be reflected as lapsed, even though it is still available to the Department. Otaguro explained that it is incumbent on the Department to get a consultant for design then make a request for the remaining funds before the deadline so that the remaining funds do not lapse.

Tanaka stated that the Department only lapsed funds that were allocated to projects that were complete, so the lapsed funds were not needed. He stated that last year the Department lapsed $6 to 7 million, but these funds are not lost, instead the funds are suspended and the Department goes back to the legislature to ask that it appropriate the funds to other Department projects.

Otaguro stated that the way the Department uses terms can be confusing to the public. He stated that $266 million of the Maintenance of Effort (“MOE”) funds are flexible and $80 million has already been expended. He noted that the Department does not anticipate any challenges to expend all of the funds by June 30, 2023. Otaguro stated that the Department of Budget and Finance would like the Department to spend as much money as possible by the end of the fiscal year and that the remaining amount should be encumbered by the end of the 2023-2024 fiscal year 2024, which is the deadline for the state to use the MOE funds. He stated that the Department explained to Senator Donovan Dela Cruz, Chairperson of WAM, that the funds would fall short and that the Department would continue to provide updates to the Board.

Otaguro reported that the Department also has special projects, like the purchase of the former St. Francis school campus. He noted that there is currently a bill for the University of Hawaii to purchase the St. Francis school campus. Otaguro noted that the property is 11 acres and that there would be a number of issues for whoever purchases the property, including property line and water line issues, adjacent residential properties, and a private road. He stated that the asking price remains high at $33 million, although the appraised value is $16 million however discussions would continue with the sisters of St. Francis. Otaguro explained that the Department has been in discussions with the University of Hawaii regarding who would purchase the property.

Committee Chairperson Fallin emphasized that the Department’s reports to the Board need to go beyond what the Department is doing and focus on performance, progress made, and impact. She stated that some of the Department’s efforts appear to have improved efficiency, but what is not apparent whether the Department has made any progress because of these efforts. Committee Chairperson Fallin noted that it is important for the public to understand the impact of the Department’s work.

Committee Chairperson Fallin shared that during a SCC meeting she attended, the school shared what it needs for repair and maintenance and that staff and school community council members were told that the school made the request, but has not heard back from the Department. She asked what metrics can the Department track that show whether there is any progress.

Committee Chairperson Fallin noted that the Department has been in the news because of school repair and maintenance issues and that moving forward the Department needs to begin to address some of these issues. She asked the Department to provide more detail on why the Department has challenges in the area of repair and maintenance areas and how the Department can avoid difficult community situations in the future. Otaguro noted that there was an error on page 4 of Hayashi’s memorandum and that “Improving ventilation for 377 classrooms at seven schools” should be corrected to read “Improving ventilation for 377 classrooms at nineteen schools.”

Otaguro stated that the media reports regarding the repair and maintenance issues at Holualoa Elementary School blew the situation out of proportion. He explained that the Department works with the Department of Accounting and General Services (“DAGS”) to address issues in neighbor island schools. He stated that the process works and DAGS responds quickly. Otaguro explained that the Department uses processes such as Job Order Contracting (“JOC”) to repair roofs and that processes are in place to address consistent repair orders, but noted that the Department does not track school initiated projects, which is a challenge. He stated that another challenge is that on any given island the process is different. Otaguro stated that the process works well on Kauai, less well on Maui, and that Hawaii Island has some clear geographical challenges.

Otaguro stated that the Department has a website which is publicly accessible but communication remains the biggest challenge. He stated that he is thinking about how to simplify the process for schools and noted that there is more demand than resources, which is a constant challenge.

Tanaka stated that the Department needs to focus on accomplishments and the program which enables the contractor in charge to handle compiling the information to help the Department measure projects. He stated that job order contracting helps the Department with pre-qualified smaller projects but the larger portion of the work is in school renovations. Tanaka explained that there is a difference between maintenance and repair which is tracked with the Hawaii Facilities Inspection Tool (“HI-FIT”) and the Department’s assets and projects database (“FAM”), which helps to build a better budget for school maintenance.

Tanaka described an example of a classroom on Lanai where repairs were necessary, but the DAGS would have taken too long to get to the classroom, so the Department sent OFO workers to assist.

Committee Chairperson Fallin pushed the Department to describe the impact of the work that the Department is doing, not just describe the work planned or completed.

Committee Member Voss stated that the Department has encumbered $100 million of lump sum MOE. He stated that the Department has not encumbered any of the $130 million allocated to larger line item projects. Committee Member Voss asked Otaguro to describe changes the Department made or intends to make to its structure and systems to remedy this situation.

Otaguro replied that the Department relies on consultants because it has too many vacancies. He noted that he has higher expectations of state office administrators and that he has observed that some people may not be in the right positions. Otaguro stated that he is looking at taking action and making management changes. He stated that auxiliary services are efficient because the JOC program has yielded results. He stated that more MOE funds need to be expended and that he is going to make management decisions.

Otaguro stated that what has been brought to light regarding Kulanihakoi High School does not meet his expectations and that the Department is in this situation because it did not give consultants sufficient direction. He stated that the Department needs to address these issues up front, that construction management needs to get a better handle on things, and that the Department needs to fill vacant positions. Otaguro noted that the Department needs to more aggressively streamline its hiring and recruitment processes.

Committee Member Voss expressed appreciation for the explanation from Otaguro and noted that the changes being contemplated need to be done now.

Committee Member Arakaki left the meeting at 10:46 a.m.

Committee Vice Chairperson Kuraya stated that the chart on page 2 lists the funds the Department received and asked for an explanation of what the Department considers additional expenditures. Otaguro replied that additional expenditures are related to completion because projects may deal with cost escalation. He stated that it is challenging to complete projects because of cost escalation and change orders.

Committee Vice Chairperson Kuraya asked how the contractor costs relate to the $1.2 million. Tanaka replied that this is part of the budget in different stages. Committee Vice Chairperson Kuraya asked Tanaka to explain the difference between the $1.5 million and $1.2 million. Tanaka replied that the Department would provide clarification on this difference.

Committee Vice Chairperson Kuraya left the meeting at 10:50 a.m.

Committee Member Namauʻu asked what was the response from legislators when the Department informed them that the Department was not able to expend all of the amounts allocated. Otaguro replied that legislators shared that the Department needs to be transparent and upfront about what it can or cannot do.

Committee Member Arakaki returned to the meeting at 10:51 a.m.

Committee Member Namauʻu stated that this is a large sum and the Department cannot spend all of the money. Otaguro replied that the Department is trying to spend the money

Committee Member Namauʻu expressed concern with spending the money and that the public needs a better understanding of how the Department is spending money because the information the Department provides to the Board is unclear. She noted that the Board asked the Office of Fiscal Services to provide clarity. Committee Member Namauʻu stated the greatest challenges are on the neighbor islands and encouraged the Department to figure out different ways to use the employees to fulfill school requests. Otaguro replied that the Department needs to reassess its resources if it is going to continue to use DAGS to provide the work for neighbor island schools.

Committee Member Namauʻu stated that responsibility for the challenges relating to Kulanihakoi do not solely lie with consultants because the Department made decisions that resulted in the current situation. She stated that at the Land Use Commission (“LUC”) meeting, an LUC commissioner asked raised issues about the Board being aware of the issues.

Committee Vice Chairperson Kuraya returned to the meeting at 10:57 a.m.

Committee Member Namauʻu stated that she watched as the Department declined to adhere to the LUC’s conditions. She noted that the Kulanihakoi school community feels like collateral damage and she expressed concern that the Department is paying for the roundabout. Committee Member Namauʻu stated that the Department needs to make amends and address what is necessary to open the school safely, but that there also needs to be systemic changes to ensure that this does not happen again. She noted that other Maui schools are impacted by the repercussions of the Department’s decisions relating to Kulanihakoi.

Committee Chairperson Fallin and Committee Member Moriarty supported Committee Member Namauʻu’s comments. Committee Member Moriarty asked Hayashi to respond relating to his involvement and how the Department can move forward from this.

Hayashi replied that moving forward, the Department decisions would be made in consultation with those who are informed and with subject matter experts from various state agencies and the issues which impact the Department. He stated the Department would determine future actions based on discussions and that his team is committed to the students. Hayashi stated that the Department needs to make improvements to move forward and that there are areas that need to be improved, like all large organizations, and that he is committed to continuous improvement. He stated that his team is working together, identifying areas of need, and would create plans to address them. Hayashi stated that he wants to focus on leveraging the talents of principals, teachers and employees at the complex area and state levels. He stated that he is up to the challenge with the people the Department has to move forward and with the he team assembled. Hayashi stated that he is able to move forward in alignment with the Board’s strategic plan and that he is excited to move forward. He stated that the Department would do better and be better for the sake of the students.

VII. Adjournment

Committee Chairperson Fallin adjourned the meeting at 11:08 a.m.

List of the people who submitted written testimony before the meeting

NAME	Organization	Agenda Item
Cheri Nakamura	HE’E Coalition	VI.A. Update on status of Department’s capital improvement projects repair and maintenance
Susan Pcola-Davis		VI.A. Update on status of Department’s capital improvement projects repair and maintenance