May 20, 2021

STATE OF HAWAII
BOARD OF EDUCATION
FINANCE AND INFRASTRUCTURE COMMITTEE MEETING

MINUTES

Thursday, May 20, 2021
*The Board did not meet at a physical location. As part of the response to the threat of COVID-19, Governor David Ige issued a Twentieth Supplementary Proclamation dated May 7, 2021, suspending Hawaii Revised Statutes Chapter 92, Public Agency Meetings and Records, to the extent necessary to enable boards as defined in Section 92-2, to conduct meetings without any board members or members of the public physically present in the same location, among other things.

PRESENT:
Bruce Voss, Chairperson
Lynn Fallin, Vice Chairperson
Margaret Cox
Kili Namauʻu
Catherine Payne
Dwight Takeno
Kaimana Barcarse, ex officio
Kenneth Uemura, ex officio

EXCUSED:
None

ALSO PRESENT:
Christina Kishimoto, Superintendent
Brian Hallett, Assistant Superintendent, Office of Fiscal Services
Randall Tanaka, Assistant Superintendent, Office of Facilities and Operations
Alison Kunishige, Executive Director
Kenyon Tam, Board Analyst
Regina Pascua, Executive Secretary
Lady Garrett, Secretary

I. Call to Order

Committee Chairperson Bruce Voss called the Finance and Infrastructure Committee (“Committee”) Meeting to order at 11:00 a.m.

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

Committee Chairperson Voss explained that the Committee would call for public testimony before each agenda item and would all for any late testimony at the end of the meeting.

After agenda item IV.B, entitled “Update on the Department of Education’s biennium Capital Improvement Project (“CIP”) budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps, the Committee revisited agenda item II for any late testimony.

Committee Chairperson Voss called for public testimony from any individuals who did not have an opportunity to testify on earlier agenda items.

Susan Pcola-Davis, member of the public, testified on agenda item IV.A, entitled “Update on the Department of Education’s biennium operating budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps.” She testified that extensive discussion should be avoided and it is premature if the results of the budget bill are not available and could be signed or vetoed by Governor David Ige.

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
Justin Hughey		IV. A. Update on the Department of Education’s biennium operating budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps
Corey Rosenlee	Hawaii State Teachers Association	IV. A. Update on the Department of Education’s biennium operating budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps
Paula Adams	Hawaii Afterschool Alliance	IV. A. Update on the Department of Education’s biennium operating budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps
Cheri Nakamura	HEʻE Coalition	IV. A. Update on the Department of Education’s biennium operating budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps
Susan Pcola-Davis		IV. A. Update on the Department of Education’s biennium operating budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps; IV. B. Update on the Department of Education’s biennium Capital Improvement Project (“CIP”) budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps

III. Approval of Meeting Minutes of December 3, 2020 and January 21, 2021

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

Committee Chairperson Voss asked Committee members to review the minutes of the Committee’s December 3, 2020 and January 21, 2021 meetings.

Committee Vice Chairperson Lynn Fallin moved to approve the Committee’s meeting minutes of December 3, 2020 and January 21, 2021. Committee Member Dwight Takeno seconded.

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

ACTION: Motion to approve the Finance and Infrastructure Committee Meeting minutes of December 3, 2020 and January 21, 2021 (Fallin/Takeno). The motion was carried through unanimous consent from all members present.

IV. Discussion Items

Update on the Department of Education’s biennium operating budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps

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

Corey Rosenlee, Hawaii State Teachers Association (“HSTA”), testified HSTA is asking the Board to support of House Bill 613 (“HB 613”), as it relates to the educator workforce stabilization payment of $2,200 for teachers. He noted that HSTA recognizes the need to restore the Department’s base budget and that it will support this next legislative session, but that it disagrees with the Department’s presentation that teacher bonuses are prohibited and require collective bargaining because Elementary and Secondary School Emergency Relief (“ESSER”) funds allow for employing existing or hiring school staff and many other states are using funding for its teachers.

Jeanné Kapela, State House of Representatives, testified regarding the Department’s budget and noted that the state is facing an unprecedented financial crisis and that worse case scenarios were prevented by the legislature’s plan to use federal funding as described in HB 613. She stated that HB 613 is prescriptive and leaves significant holes for the Department to fill such as teacher differentials, which has reduced teacher shortages in key areas.

Cheri Nakamura, HEʻE Coalition, testified that no matter what the outcome of the two budget bills, this is a once in a lifetime opportunity to allocate a substantial amount of funds for schools to provide appropriate support for all students, especially the most vulnerable students. She noted that funds must be used strategically and that schools must clearly explain how they will deliver quality instruction to students, complex areas should provide more detailed explanation on its role in the tri-level system to support schools, new leadership must steer the system back to stability and consistency.

Committee Chairperson Voss called on Brian Hallett, Assistant Superintendent, Office of Fiscal Services, to present the update on the Department’s biennium operating budget request for fiscal years 2021-2023.

Christina Kishimoto, Superintendent, stated that the Department entered the 2021 legislative session requesting predictable and reliable funding to ensure stability for the public education system. She explained that the Department still does not have a financial structure for public education that allows for predictable and reliable funding and that the existing legislative process hinders long-term planning; however, federal funding can help to alleviate some of the negative impacts there is an improving fiscal outlook. She stated that the Department will open the public engagement process tomorrow, which it needs to complete in order to submit the application for the third round of the Education Stabilization Fund’s Elementary and Secondary School Emergency Relief (“ESSER”) Fund authorized under the American Rescue Plan Act of 2021 (“ESSER III”) to the United States Department of Education (“USDOE”).

Hallett provided an update on two pending appropriation bills (HB 613 and House Bill 200 (“HB 200”), which were passed by the legislature and are now awaiting Governor Ige’s signature. He explained that Governor Ige must notify the legislature of whether he intends to veto the bills by June 21, 2021 and that he must veto any bills by July 6, 2021. Hallett stated that during session, the budget landscape changed rapidly and dramatically, and while it was more positive at the end of the session, major challenges remain. He noted the following key points: (1) with the passage of HB 200 and HB 613 the Department is facing a $123.9 million projected shortfall over the next two fiscal years; (2) despite massive levels of federal support for education through federal funds the Department failed to secure predictable and reliable state funding for the next two years; and (3) USDOE requires the Department to have a public engagement process to develop a comprehensive plan for the use of ESSER III funds.

Hallett explained that following the 2020 elections and changes on the federal level there was a clear sense of urgency to advance federal COVID-19 assistance for education, state and local funding. He stated that federal funds helped to balance the state’s budget. He stated that the Council on Revenues forecast improved from previously anticipated levels with an increase in over $1.1 billion in state revenues.

Hallett stated that on March 19, 2021 Governor David Ige retracted all proposed programmatic review reductions for the Department as result of the improving economic. He also noted that the legislature cut $100.2 million from the Department’s budget and converted $39 million of state funded positions and programs over the next two years to rely on federal funds, eliminated various state funded positions and salaries, while adding funding for programs such as alternative learning, teacher improvement, and career and technical education (“CTE”).

Hallett explained that HB 613 appropriated most of the second round of the Education Stabilization Fund’s Elementary and Secondary School Emergency Relief (“ESSER”) Fund authorized under the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (“ESSER II”) and ESSER III funds totaling $557 million, together with $39 million appropriated through HB 200 in place of state funds. He noted that this represents the entire ESSER II award and all but a few thousand dollars of the ESSER III award. He stated that the Department is facing a funding gap of $123.9 million each year after taking into consideration both state and federal stabilization funds for fiscal year 2022-2023.

Hallett stated that HB 200 included both the operating and capital improvement project budgets for the next two years. He stated it is not clear whether the legislature will be reinstating state funds next legislative session.

Hallett stated that HB 613 mandated any reallocation of funds will require prior legislative approval and also put restrictions upon pay increases for all superintendents. He explained that the Department is left with a $296 million shortfall for the next two years, including: (1) $100.2 million per year from the base budget; (2) $39 million per year to state funds replaced with federal funds; (3) shortfalls which predated COVID-19 ($10 million in workers compensation); (4) $5 million for school network licensing and maintenance; and, (5) teacher differentials for the second year of the biennium.

Hallett explained that the legislature appropriated federal funds through HB 613 (approximately $172.3 million) to replace the $296 million in reductions. He provided an outline of the proposed replacements and reductions, which included $4 million in line item additions to EDN 150 in place of a $100.2 million cut, almost $56 million in reductions to EDN 400 each year, the restoration of $23 million to the weighted student formula, and the replacement of $39 million in state funds with federal funds. Hallett stated the Department’s total shortfall is about $123.9 million.

Hallett stated that the presentation includes a list of major categories or types of state fund adjustments that were incorporated into HB 200, and are broken down by EDN. He provided a breakdown of the cuts for EDN 100 and noted that there are no federal funds to address workers compensation shortfalls and that the Department will need to figure out how to address this issue.

Hallett expressed distress that the Department does not have predictable, reliable, or sufficient funding. He explained that the Department will need to review legislative appropriations of federal funds to determine whether federal requirements allow the Department to use these funds for these purposes. These federal funds can be used for things like cleaning supplies and sanitation, improving indoor air quality, addressing student needs (particularly disadvantaged students, students with disabilities, English language learners, foster children, and homeless students), addressing learning loss, and other activities that are necessary to maintain operations and continuity of services.

Kishimoto stated that the deadline for the ESSER III application was June 7, 2021; however, the Department requested an extension until July 1, 2021, in order to bring the draft plan for Board approval on June 17, 2021, which would complete the Department’s public engagement process. She noted an important component is to ensure that the Department has stakeholder input and that the Department is treating HB 200 and HB 613 as critical stakeholder input from the legislature and will seek input from the Board, employees, students, community partners, and parents. Kishimoto also noted that the Board approved continuing teacher differentials on February 18, 2021, but that the legislature did not appropriate funds for teacher differentials for the next school year. She stated that the Department is reiterating in recruitment and retention that teacher differentials are in place by Board action and that this Board action stands so teachers can expect that the differential is in place for next school year, but if the Board decides to retract teacher differentials, then it needs to take action immediately.

Committee Chairperson Voss stated that the numbers are clear for the fiscal year beginning July 1, 2021 and asked for highlights of the major focus areas. He stated that for EDN 100 there are no federal funds allocated for teacher pay differentials indicating clear legislative intent and asked where the Department will find the $32 million necessary to fund teacher differentials.

Kishimoto replied that funding that would have been used for teacher differentials has been allocated to a new school facilities agency. She stated the Department has asked whether this is not an allowable use of ESSER III funds based on USDOE guidance. She stated that the Department will not know for use until it submits its ESSER III application and USDOE provides feedback.

Hallett stated that the Department is planning to use ESSER II funds to cover teacher differentials if it cannot use the funds allocated to a new school facilities agency. He explained that the Department does not have an answer at this time and that it has to look at areas to cut, although federal legislation prohibits this.

Committee Member Catherine Payne asked if having qualified teachers in areas of need could be considered a way to mitigate learning loss. She stated that teachers are paid differentials in areas of special education, Hawaiian language immersion, and hard-to-fill geographic areas. Board Chairperson Payne noted her concerns about who is accountable for spending federal funds and asked if the legislature has decided how federal funds were spent in the past.

Hallett replied that teacher differentials would not be coded as learning loss programs and that the legislature has not determined how federal funds should be spent in the past.

Kishimoto stated that the ESSER III application process requires the application to be supported by the Board and that typically federal grants do not include legislative involvement.

Committee Member Payne noted research-based evidence that suggests children having qualified and capable teachers in the classroom is the most important factor to address learning, perhaps more than programs.

Committee Vice Chairperson Fallin asked for a description of the USDOE required process for decision-making on the use of these federal funds. She asked the Department to provide background information on who needs to participate in the process and the key elements to make decisions on how funding is expended.

Hallett explained that ESSER III includes an extensive list of groups that are considered stakeholders and that the Department will collect public input from its website to initiate public engagement. He stated that the Department needs to show a correlation between its needs assessment and current uses.

Committee Vice Chairperson Fallin stated that the Department referenced data from Board metrics, asked if this is a requirement, and asked how Board metrics fit into the Department’s planning efforts. She asked if the data will be statewide or broken down by complexes and how it will be organized and used to make decisions and why. Committee Vice Chairperson Fallin stated that the local educational agency (“LEA”) is required to go through the planning process and asked how the requirement that 20% of funds be used for learning loss fit into the overall effort.

Kishimoto stated that the process to review data throughout the year is a part of the Board and administration’s engagement process. She explained that the application is not separate or absent from existing strategic plans and will use data from previous student performance reports to identify the students struggling the most. She noted that the federal funds cannot be applied across the board to the weighted student formula and the maintenance of equity lens needs to be demonstrated towards the students with the greatest need.

Kishimoto expressed concerns regarding interpretations of allowable uses of federal funds. She stated as both state educational agency and LEA, the Department considers input from the community and legislature and that the legislature has voiced its priorities through budget appropriations. She explained that the Department will treat HB 613 as major stakeholder input and consider alignments as it puts forth an application with justification; however, the application adopted by the Board and submitted will be what is funded or not.

Committee Vice Chairperson Fallin asked about the relationship between HB 613 and the planning process and the plan to get clarification from USDOE about the allowable uses of these federal funds. She stated that this is a lot of money, but there is a lot of need. She asked if the opinion of any stakeholder group participating in the public engagement process is weighted more heavily.

Hallett replied that the federal government has not suggested any group be weighted more heavily, but explicitly required that at least 25% of the funds should support students with socio-emotional or disproportionate impact relating to the learning loss area.

Committee Member Payne asked if HB 613 will be considered as stakeholder input and noted that other voices need to be gathered in order for the Board to make a final decision. She asked if the legislature also understands the process.

Kishimoto noted that the Department cannot reflect on the legislature’s understanding and that it has been clear that this will need to include a public engagement process. She noted that guidance related to ESSER III was not released while the legislature was considering HB 613, so Governor Ige will need to determine further actions.

Committee Member Kili Namauʻu asked if the legislature’s appropriations align with the Department’s priorities for students and schools.

Kishimoto replied that many of the items aligned with previous Board action relating to ESSER II funds, but the Board has not taken action on ESSER III funds. She noted there are questions about legislative appropriations that do not reflect Board or Department priorities, such as the school facilities agency, which is not existing and not related to COVID-19 and learning loss. She stated that the amount dedicated to the new school facilities agency is almost the same amount needed to fund teacher differentials and that this needs to be resolved with Board action.

Committee Member Namauʻu asked what happens with shortfalls. Kishimoto replied that the Department must pay its bills and currently the Department has unfunded obligations. She recommended the Board prioritize student learning loss and covering those unfunded obligations.

Committee Member Namauʻu stated that the legislature did not provide the Department with additional funds and looked at federal funds coming in and decided how to use the federal funding. She expressed hope the legislature would fund schools appropriately since it is not clear that there are additional federal funds forthcoming. Committee Member Namauʻu stated that the legislative finance committee said that resources will be there for the Department and it seems like the Board is waiting for these things to happen but then the legislature went forward and started to make decisions about how federal funds will be used. She asked for confirmation that the Department’s base budget was not restored.

Hallett replied that the legislature made partial restorations to the approximately $100 million cut from the base budget, but that the Department is still facing a $123 million shortfall which will make it difficult to safely open schools. He also noted that it will be disruptive if the Department has to cover the shortfall.

Committee Member Namauʻu asked if the Board’s responsibility to set the budget and determine how federal funds are spent and asked when it will have the opportunity to weigh in and make changes.

Kishimoto confirmed that this is the process and that she would like to get input from the Board on what it wants to include in the ESSER III application.

Committee Member Namauʻu stated that teacher differentials in rural complexes has positively affected special education, Hawaiian Immersion, and hard-to-fill areas and should be included as a priority in the ESSER III application. She noted that there are ways to address learning loss for students through summer and afterschool programming over the next couple of years. Committee Member Namauʻu stated that on Maui, summer learning because teachers are tired and community partnerships are important.

Committee Chairperson Voss noted the Board has already voted to use ESSER II funds to pay for teacher differentials. Committee Member Margaret Cox stated teacher differentials need to be paid and any funding amount to be reallocated to meet the requirements needs to go to the legislature again. She asked if teacher differentials will be included in the ESSER III application. Kishimoto stated that the Board has been clear in its priority areas and that she does not expect to see anything unexpected, but that she needs to see if there are innovative ideas that are aligned with priorities. She stated that because there is a finite amount of funds, once the Department addresses Board priorities, it will run out of money to cover everything else. Kishimoto stated that she will build out a budget based on priorities and justify why things are there or not. She noted that Governor Ige needs to decide whether to exercise his veto powers and if he does not, the Department will need to go back to the legislature to explain why and how it deviated from legislative appropriations in HB 200 and HB 613.

Committee Member Cox stated there has been no discussion on learning loss and whether the Department is looking for remediation or acceleration. She also noted that the Department has not explained what it is doing to address student learning loss.

Committee Member Payne asked for confirmation that the funds the legislature allocated to the new school facilities agency funding is about the same amount that is needed to fund teacher differentials because the Department’s materials state that the legislature allocated $2.5 million to the new school facilities agency, but it would take $30 million to cover teacher differentials .

Kishimoto replied that she misstated that information and that $30 million was allocated to weighted student formula for the second year of the biennium.

Committee Chairperson Voss stated that the legislature did not disclose its budget until after the conference versions were complete and that public input is supposed to be done before the allocation of federal funds and not after. He asked what the Department will be doing to reconcile this requirement.

Kishimoto reiterated that public input is the Board’s responsibility and that the legislature did not follow the federal process, but the Department still needs to adhere to it. She stated that the Department can treat the legislature’s process as stakeholder input.

Committee Chairperson Voss asked if the Department will treat HB 613 as advisory. Kishimoto replied the Department will treat HB 613 as advisory because state law does not supersede federal law.

Committee Chairperson Voss what happens if the proposed plan approved by USDOE contradicts what is in HB 613 and HB 200. Kishimoto replied that there are two options, either Governor Ige vetos the state legislation or the Department seeks an attorney general opinion, which provides that federal law must be considered first whenever there is conflict between state and federal law.

Committee Chairperson Voss asked how the shortfall for fiscal year 2022-2023 will affect schools. Hallett replied academic-financial plans are issued in October and that there will be $23 million less that schools will have to work with for the school year; 2% reductions for some schools can be dramatic and cause a lot of uncertainty.

Update on the Department of Education’s biennium Capital Improvement Project (“CIP”) budget request for fiscal years 2021-2023: Legislative conference committee decisions and next steps

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

Susan Pcola-Davis, member of the public, testified the Board is aware from previous presentations and it is premature if the results of HB 200 is not available because it has not been signed or vetoed. (Note: placed testimony above under the testimony agenda item)

Committee Chairperson Voss called on Randall Tanaka, Assistant Superintendent, Office of Facilities and Operations (“OFO”), to present the update on the Department’s biennium Capital Improvement Project (“CIP”) budget request for fiscal years 2021-2023.

Tanaka noted that the Department did a lot of work evaluating and restacking projects. He explained that principals were involved through the HI-FIT and facilities index and the team reviewed this based on Board guidance. He expressed concern that under HB 200, the funds are front loaded with $427 million allocated for the first year and much less for the second year. He stated that the Department will work with what has been provided given the tremendous priorities in health and equity.

Committee Vice Chairperson Fallin stated that the Board has worked on a weighted prioritizing of CIP projects to address equity concerns. She asked whether the Board and legislature’s priorities were closely aligned.

Tanaka replied funding came in two packages via line items from legislators and the Department’s proposal. He explained there is little the Department can do with the legislature’s line item directives, although some cross into areas of need such as Title I and health and safety. He further explained the Department’s priorities are established and weighted, but that the Department needs to adjustment priorities because of emergency situations. He stated that Hawaii Island has inconsistent energy in classrooms and there other issues on Lanai, so the list was restacked. He stated that he will continue to report to the Board on quarterly basis and factor in the elements mentioned.

Committee Member Fallin asked whether the legislature used the Department’s weights and prioritizing in its deliberations. Tanaka said that it did not because the legislature creates its own list.

Tanaka stated there are a lot of heat abatement issues and the Department has tried to address air quality circulation due to COVID-19 by looking at things like fans to promote air circulation. Committee Vice Chairperson Fallin requested that the priorities be included as a part of the process since much time was spent developing this process.

Committee Chairperson Voss stated nothing under the lump sum was allocated for several areas for fiscal year 2022-2023. He asked what the Department’s plan is and whether it will seek supplemental budget appropriations for the second half of the biennium.

Tanaka expressed optimism that with the rise in tourism the economy will continue to improve rapidly and that more tax dollars will soften the blow in the second part of the biennium. He also stated the Department will request additional funds.

Committee Chairperson Voss stated the Department’s original request includes approximately $100 million in deferred maintenance projects; however, only $88 million was funded by the legislature. He asked how this will affect the Department. Tanaka replied there will never be enough money but the Department prioritized $88 million and will work with that to address the areas. He stated that the Department will also continue to press funders on problems.

Committee Chairperson Voss stated there is a little more than $150 million for CIP and $300 million in line item projects. He asked how many of these projects in the line item were not prioritized by the Department. Tanaka replied the percentage is large and Kishimoto can provide further information. Committee Chairperson Voss asked if the amount is about half. Tanaka replied the amount is substantial, about 60 to 70% of what was not in the Department’s request. Committee Chairperson Voss asked that Tanaka provide the information at the next committee meeting.

Committee Chairperson Cox stated that the legislature always comes in with line item priorities but the Department needs to work on what the real priorities will be. She stated it is not easy since every school wants something.

Susan Pcola-Davis, member of the public, testified that during the discussion it was not until Board Member Namauʻu asked about how to influence the priorities of the Board for the application that Kishimoto stated that she expected the Board to provide guidance on priorities so she can include it in the application. She shared that on Friday both the House and Senate will have a joint informational briefing at 2:00 p.m. where the Department may be presenting answers to questions on today’s discussion.

V. Adjournment

Committee Chairperson Voss adjourned the meeting at 12:51 p.m.