STATE OF HAWAII
BOARD OF EDUCATION
FINANCE AND INFRASTRUCTURE MEETING

MINUTES

Queen Liliuokalani Building
1390 Miller Street, Room 404
Honolulu, Hawaii 96813
Thursday, June 15, 2023

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

EXCUSED:
Ken Kuraya, Vice Chairperson
Makana McClellan

ALSO PRESENT:
Stacey Aldrich, State Librarian, Hawaii State Public Library System
Mallory Fujitani, Special Assistant, Hawaii State Public Library System
Brian Hallett, Assistant Superintendent, Office of Fiscal Services, Department of Education
Tammi Oyadomari-Chun, Deputy Superintendent of Strategy, Department of Education
Curt Otaguro, Deputy Superintendent of 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 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.

Susan Pcola-Davis, member of the public, testified on agenda item V.B., entitled “Update on Department of Education’s (“Department”) operating budget appropriations for fiscal biennium 2023-2025.” She referenced a newspaper article that reported on Governor Josh Green’s line item vetoes of the budget, noted that Governor Green approved all Department budget items relating to health, asked what would the Department do with the $55 million provided, and emphasized that the Committee is accountable for the use of these funds.

Susan Pcola-Davis, member of the public, testified on agenda item V.C., entitled “Update on Department’s capital improvement project budget appropriations for fiscal biennium 2023-2025.” She stated that the Legislature does not like how the Department allocates funds to capital improvement projects (“CIP”) and noted that based on Governor Green’s spending decisions, the Board is in jeopardy because Governor Green only understands health.

Cheri Nakamura, HE‘E Coalition, testified on agenda item V.C., entitled “Update on Department’s capital improvement project budget appropriations for fiscal biennium 2023-2025.” She recognized Deputy of Operations Curt Otaguro for his work making processes more efficient in the Office of Facilities and Operations and expressed concern regarding the over $2 billion in unexpended funds.

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 March 2, 2023

Committee Chairperson Fallin asked Committee members to review the Committee’s March 2, 2023, meeting minutes.

Committee Member Namau‘u moved to approve the Committee’s March 2, 2023, meeting minutes. Committee Member Arakaki 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 Members Arakaki, Moriarty, Namauʻu, and Voss).

ACTION: Motion to approve the Finance and Infrastructure Committee’s March 2, 2023, meeting minutes (Namau‘u/Arakaki). The motion carried through unanimous consent from all members present.


IV. Public testimony on Committee agenda items

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


V. Discussion Items

Committee Chairperson Fallin called on Stacey Aldrich, State Librarian, Hawaii State Public Library System (“HSPLS”), and Mallory Fujitani, Special Assistant, HSPLS, to provide an update on HSPLS’s operating budget and capital improvement budget appropriations for fiscal biennium (“FB”) 2023-2025.

Aldrich outlined the HSPLS operating budget and capital improvement budget for FB 2023-2025. She stated that the focus was on staffing which has been an issue over the past two years with 64 unfunded positions. Aldrich shared that the legislature has put forth $2 million in Fiscal Year (“FY”) 2024 and the remainder of funds in FY 2025. She noted that HSPLS received funding for the following: (1) two additional Librarian VI positions; (2) an additional driver for Hawaii island and a roving janitor to service 12 libraries; (3) additional security guard funding for increased costs; (4) digital literacy support; and (5) marketing for public awareness campaigns which reflects the 18,000 responses from the strategic plan survey results.

Fujitani outlined the HSPLS CIP appropriation request, which included a lump sum request for health and safety in FY 2024 and FY 2025 of $10 million. She stated that an additional $10 million was requested and approved to complete construction of the new Waikoloa library and would work with the Honolulu City & County (“City and County”) to build a new Kailua Library since the current structure has functional and operational issues.

Aldrich expressed gratitude to the legislature and the Board for their continued support.

Committee Member Voss noted that HSPLS did very well with its budget and asked whether the Legislature released funds for the Kailua Library and the process for building a new library. Aldrich attributed the legislative success to Fujitani and her staff.

Fujitani stated that HSPLS and Senator Chris Lee have been in discussions with the City and County to use an existing parking lot space to build a new facility. Aldrich clarified that the Legislature appropriated planning funds. Fujitani also stated that the City and County is amenable to the new library.

Committee Member Voss asked if it would take two years to find employees for the new positions. Aldrich confirmed that it would take time to fill these positions.

Committee Member Moriarty congratulated Aldrich for the focused approach. She noted that security guard funding was included the second year of the FB and asked what would be done to mitigate the possible budget shortfall. Aldrich replied that HSPLS is in process of bidding for a new security guard vendor so once the new contract is determined then there would be a better understanding of the amount of funding needed.

Committee Member Moriarty congratulated HSPLS on the summer reading program and for the focused budget.

Committee Member Arakaki expressed appreciation for the summer reading program, which has positively affected his family.

Aldrich encouraged everyone to join the summer reading program.

Committee Chairperson Fallin expressed concern with the security guard funding and recommended looking ahead for budget preparations.

Aldrich shared that two public concerns are hours of operation and collections. She advocated for additional funding to build library collections and expressed concern with charging children library fees. Aldrich also shared about the challenges relating to vacancies and staffing.


Committee Chairperson Fallin called on Brian Hallett, Assistant Superintendent, Office of Fiscal Services, Department of Education (“Department”), to provide an update on the status of the operating budget appropriations for fiscal biennium 2023-2025.

Hallett highlighted the status of the Department’s operating budget appropriations for FB 2023-2025. He shared that the Department was surprised by the outcome of House Bill 300. Hallett acknowledged that various legislators recognized the shortcomings and commented to the media.

Hallett outlined attachment A, which summarizes the total funding appropriation and compares Governor Green’s request to what the Legislature funded. He explained that based on the level of funding requested by Governor Green, the Department is looking at a $57.1 million shortfall for FY 2024 and a $109.7 million shortfall for FY 2025.

Hallett outlined attachment B, which is a summary of non-general funds. He outlined attachment C, which lists the entire Board approved request versus what the Legislature funded. Hallett stated that the Department received $88.7 million in FY 2024 and $50 million in FY 2025.

Hallett outlined attachment D, which provides the entire list of Board approved requests and reflects the funds the Legislature declined to include. He explained that based on the level of funding requested in the Department’s Board approved budget request, $98.2 million for FY 2024 and $163.5 million for FY 2025 was not incorporated into House Bill 300. Hallett shared that the Department is in communication with the Department of Budget and Finance (“B&F”) and Governor Green held a press conference reporting that the Department would receive $55 million of the $200 million fund to reduce the $98.2 million shortfall. He explained that the Department would review the amounts in the red columns and that the budget gap totals $43.2 million.

Hallett shared that the Department expects funding for all health and safety items and that the work to advance the Board approved strategic plan would not be a fiscal constraint. He noted that the assistance from Governor Green is only available in FY 2024 as a one-time appropriation and emphasized that the gap in the second year budget is larger, so the Department needs to focus on preparing the supplemental budget request.

Committee Member Voss expressed appreciation for the Department’s hard work and commended it for the substantial improvement to the information provided to the Board. He expressed concern with the cuts to the additional funds for weighted student formula (“WSF”) programs that are important to the strategic plan and asked if he had any explanation as to why the Legislature zeroed out program funding. Hallett replied that the committee report provided some highlights but does not speak to why certain requests are not funded.

Committee Member Voss asked about the allocation process for the $55 million in the first year of the fiscal biennium to achieve the ambitious objectives of the strategic plan. Hallett replied that the Department would consult with Tammi Oyadomari-Chun, Deputy Superintendent of Strategy, and review the list to determine delays or partial implementation. He opined that a $15.4 million request relating to moving state offices is a relatively easier expense not to incur, but other items needed closer review. Hallett also stated that Senator Donovan Dela Cruz, Committee on Ways and Means (“WAM”), Chairperson expressed regret that many initiatives are not included in the final budget and that these comments provide hope for more conversations in the next legislative session.

Oyadomari-Chun shared that the Department anticipates discussions with Governor Green on the $55 million, and that the Department does not anticipate the funding to come in a lump sum. She stated that many of the unfunded items were included in the Senate draft version of the budget bill, but noted that the Department can only commit to certain programs with one year of funding.

Committee Member Arakaki asked how the Board can support the Department for budgeting and fiscal items. Hallett replied that there are 51 members in the House and 25 members in the Senate so it would be helpful for the Board to help with engagement with various lawmakers.

Oyadomari-Chun stated that in addition to engagement with lawmakers, showing that the investments are paying off would be helpful.

Committee Member Moriarty asked Hallett to describe the principles that guide the Department’s prioritization of strategies when allocating funds. She noted that Hallett shared all health and safety initiatives and asked what items the Department would focus on first and what needs to wait.

Hallett stated that this prioritization would be difficult given the lack of communication on why the legislature did not fund certain projects. He stated that the Department would look at where the Department can logistically look to defer or delay implementation of operational spending, while prioritizing spending on academics and student needs, should resources become available.

Committee Member Moriarty asked if the Board has a role in this prioritization process because the Department needs to look at making significant changes to reevaluate what can be accomplished.

Hallett replied that the Department would push forward to do as much as possible and look for ways to manage from within. He stated that regarding the $42 million gap, more information would be provided to show how the Department would work to maximize resources to support all priorities.

Oyadomari-Chun stated that the Department focuses on all priorities but the reality is that funding cannot cover everything. She explained that the Department would need to scale back and may not be as efficient as intended. Oyadomari-Chun also stated that the Department would review federal funds, including Elementary and Secondary School Emergency Relief funds and reallocate resources to support priorities.

Committee Member Moriarty requested more discussion to understand how to address budget issues. She encouraged the Board and Department to continue discussions regarding strategic plan priorities because the situation is evolving and changing.

Committee Member Arakaki asked if reduced funding would affect schools. Hallett said the lack of predictable and reliable funding creates challenges for schools but the Department calculates projections based on available funding, not on requests. He shared that the Department received $5 million more for WSF in FY 2024. Hallett also shared that the Committee on Weights would review this further to provide schools with predictable and reliable funding.

Committee Chairperson Fallin expressed appreciation for the improved meeting materials and Hallett’s responsiveness to her inquiries. She noted that the $55 million from Governor Green’s fund is good news and commended the Department for using the Board approved formula for the priorities, using strategic plan strategies to develop and manage budget requests, and emphasized the importance of using the strategic plan as a guide.


Committee Chairperson Fallin called on Curt Otaguro, Deputy Superintendent of Operations, Department of Education, to provide an update on the status of the Department’s capital improvement project budget appropriations for fiscal biennium 2023-2025.

Otaguro acknowledged various team members from the Office of Facilities and Operations. He reported that the Department processed 38,000 daily maintenance work orders, 2,500 deferred maintenance projects valued at $300 million, and currently there are 224 active CIP projects valued at $704 million. He stated that the Department is focusing on active projects. Otaguro shared that the Department is looking at current CIP, which are underfunded and may need to be reprioritized so the Department would need to make decisions based on the strategic priorities. He stated that the Legislature funded 19% of what was requested and that a different discipline needs to be established to move forward.

Otaguro described options with matched scopes for completion, projects that may be paused for review of concerns, and projects that would stop since it does not make sense to continue. Otaguro stated that the Department would provide what projects would lapse or need to be appropriated going forward. He reported that the legislature funded 117 projects, but there are 76 legislators and therefore there are 76 priority projects, but the economic forecast gives the Department a reason to pause.

Otaguro explained that deferred maintenance projects total $187 million with $125 million awarded as lump sums. He reported that the Department is on track to encumber all monies by the end of June 30, 2023. Otaguro outlined the lump sums that are broken down into nine categories, project completion/federal grants, and emphasized that the Department needs to live within its means to redefine the scope of projects.

Committee Member Arakaki asked whether the Department is looking at the availability and cost of resources on neighbor islands when determining project feasibility. He assumed that fewer resources are available on neighbor islands and the cost is higher, but the needs on neighbor islands are great.

Otaguro acknowledged that resources are scarce on the neighbor islands and that the Department needs to reengineer how it assigns projects with the job order contracting program. He stated that the Department focuses on neighbor island projects because of limited resources and shared that each island has different issues and processes, which the Department needs to take into account.

Committee Member Voss acknowledged Otaguro and his staff for the investment of time at the legislature this session. He noted that the legislature did not allocate any funding for project completion and that this means that the Department cannot finish projects or finish project planning, which can result in a contractor bringing a claim against the state. He emphasized that it is baffling that the Legislature did not provide funds for project completion and asked how short the Department would be. Otaguro replied that the Department is $55 million short on project completion funds. He shared that the Department anticipates another $17 million in active funds but expressed concern for 81 projects that are ready to go with no funding.

Committee Member Voss stated that there may be a little overlap with health and safety compliance and asked about the negative impact for schools, especially neighbor islands. Otaguro replied that the Department would need to make hard and unpopular decisions.

Committee Member Moriarty asked what process sets the priorities to make decisions going forward, if the Board should be working with the Department and at what time. She asked what principles would guide decision-making, and the zeroing out of monies for compliance is contradictory to a strategic plan priority.

Otaguro stated that the Department is addressing health and safety projects and further engagement with complex area superintendents would need to happen to review categories and gain feedback.

Committee Member Moriarty asked if there is a process to link budget items to the strategic plan. Otaguro replied that there is a process and emphasized that the Department needs to maintain the projects.

Committee Member Namauʻu expressed appreciation and noted that if any legislators are listening, she wanted them to know that what is happening to the Department is a travesty. She emphasized that our students need help and expressed hope that the Department can survive and figure this out for students.

Committee Chairperson Fallin expressed appreciation for the comments from Committee Member Namauʻu and acknowledged Otaguro for his candor about progress. She expressed concern for the line item versus lump sum funding because this information would be helpful to think about policy shifts

VI. Adjournment

Committee Chairperson Fallin adjourned the meeting at 10:57 a.m.

List of the people who submitted written testimony before the meeting


NAME
Organization
Agenda Item
Susan Pcola-DavisV.B. Update on Department’s operating budget appropriations for fiscal biennium 2023-2025; & V.C. Update on Department’s CIP budget appropriations for fiscal biennium 2023-2025
Cheri Nakamura
HE’E Coalition
V.C. Update on Department’s CIP budget appropriations for fiscal biennium 2023-2025