A. Presentation on Department of Education’s financial plan supporting its comprehensive plan for reopening schools for the 2020-2021 School Year: budget appropriations from 2020 Legislative Session; unspent carryover amounts from the 2019-2020 school year; plan for reprioritization of existing funds, assistance from the Hawaii Emergency Management Agency (“HI-EMA”) and timeline for these HI-EMA funds; Elementary and Secondary School Emergency Relief (“ESSR”) Funds (Coronavirus Aid, Relief, and Economic Security (“CARES”) Funds awarded directly to the Department for K-12 education); potential sources of additional funds; additional cost of reopening schools for 2020-2021 School Year; and anticipated shortfalls and potential impacts of anticipated shortfalls

Brian Hallett, Assistant Superintendent and Chief Financial Officer, Office of Fiscal Services, reviewed the Department’s financial plan supporting its comprehensive plan for reopening schools for the 2020-2021 school year. He stated that the Department is planning within fluid and dynamic conditions and moving fiscal impacts and operational considerations. For example, the Department announced this week that the Governor identified funding to support nurses for 15 complex areas. He noted that this was a new development that occurred after the Department finalized its presentation and materials for the Committee meeting. He emphasized the importance of the Department remaining flexible to adjust to new information that develops in terms of available resources, cost projections, and changing conditions. Hallett detailed that fiscal conditions are impacted by numerous variables, including tax revenue; the level of Coronavirus Aid, Relief, and Economic Security (“CARES”) allocation; congressional action; and budget restrictions. He noted that budget restrictions may be necessary as revenues continue to decrease. Hallett reviewed several operational variables, including health guidelines; county, state, and federal restrictions; the capacity for testing and contact tracing; virus spread, including infection rates and clusters; community reaction and impact, including parental decisions around student enrollment and attendance; and school-related decisions, such as school models and implications of those models.

Hallett reviewed budget appropriations from the 2020 Legislative Session, including an overview of the Department’s general fund operating base budget as reflected in Senate Bill 126. He detailed that the Council on Revenues (“COR”) projects resources for the state and lowered its projection to -7% in Fiscal Year (“FY”) 2020 and -12% in FY 2021, which translates to a $2.3 billion decrease in resources over both fiscal years of the current biennium. Hallett detailed that the Legislature made several adjustments, including several non-recurring reductions totaling $100.2 million and several recurring additions totaling $11.4 million. He noted that the additions are not new resources and are a result of legislative appropriations that the Legislature consolidated into a single appropriation bill.

Hallett reviewed how reductions were applied per EDN, the Department’s reduction proposal, appropriated general funds, and the overall net reduction to general fund appropriations.

Hallett reviewed unspent general fund carryover amounts from the 2019-2020 school year. He noted that these are preliminary figures and the Department is still in the process of ending the fiscal year. He detailed that there was an unspent balance of $107 million in the EDNs, which was intentional. School level carry over totaled $57 million because the Department encouraged schools to restrict spending in the fourth quarter because the Department anticipated reduced funding in FY 2021. He detailed $50 million lapsed back to the state general fund as a result of legislative reductions identified in May. The Department’s unspent balance totals $835,000, which will be used to address shortfalls.

Hallett reviewed the Department’s plan for reprioritization of existing funds, including non-recurring adjustments to program funding to implement the supplemental budget. He detailed that the Department would transfer $50 million in impact aid funds to the student transportation services branch to cover transportation contract costs. He explained that the Department moved from using prior year collections to meet current year requirements to relying on current year collections to meet impact aid requirements for the current year. He noted that this is a one-time adjustment, which the Department will not be able to do in future years. Hallett detailed that the Department is using $1.5 million in Compact of Free Association State funds and $4.5 million in Department of Defense funds in lieu of general funds. He further detailed that $24.2 million by reductions are being imposed on weighted student formula, indexed complex area allocation, and community schools for adults. He noted that the Department informed schools and offices of reductions in mid-April so that they were able to adjust their academic plans and advised schools to carryover funds to manage these reductions. Hallett detailed $10 million in salary savings to be realized via vacancy savings that result from the ongoing hiring freeze and $10 million from the non-salary budget. He emphasized the importance of identifying these five areas of reductions to minimize the impact to schools and support school-level planning and decision-making.

Hallett reviewed $10 million in non-recurring, non-salary reductions by program. He noted that the Department would return to the Board with a proposal when it returns to present on the fiscal biennium 2021-2023 if these reductions become necessary on a recurring basis. He stated that the Board previously emphasized that the Department should stay away from across the board budget cuts, so the Department targeted programs that it felt each office could manage in order to minimize impacts.

Hallett reviewed assistance from the Hawaii Emergency Management Agency (“Hawaii EMA”). He detailed that the Legislature dedicated $100 million in CARES Act funds to Hawaii EMA to help support different agencies procure personally protective equipment (“PPE”), including public education. He noted that the Department identified a shortfall because these funds end at the end of the calendar year and the Department is not anticipating that it will receive additional funds in the second half of the year.

Hallett reviewed Elementary and Secondary School Emergency Relief (“ESSER”) funds and CARES funds awarded directly to the Department for kindergarten through twelfth grade education totaling $43.4 million. He reviewed areas for which the Department prioritized this funding and stated that it could use these funds for a broad range of needs, including responding to impacts of the pandemic. Other approved uses include summer learning programs and investment in equipment and infrastructure to support and expand equitable provision of distance learning opportunities in the new school year. He stated that the Department has a remaining balance of $9 million and these funds available until September 30, 2022. The Department did not fully obligate all funds because it does not know whether additional federal funds are forthcoming.

Hallett reviewed potential sources of additional funds and noted that the Department’s reliance on alternative sources of support is critical during this time. He noted that the Department is regularly in communication with congressional delegation members to receive updates on efforts to secure resources and obtain guidance in seeking waivers to federal rules, such as school food service. He stated that the Department continues to advise offices to be cautious in spending and focus resources on provisions of educational services while responding to impacts of the pandemic.

Hallett reviewed additional costs of reopening schools for the 2020-2021 school year, the majority of which are borne by schools. Although there was a reduction to weighted student formula allocations, schools have Title I funds, special education per-pupil funds, and other categorical programs to help them reopen and operate. He detailed that the Department identified areas of major costs associated with equitably building out the system of distance learning infrastructure, including securing additional computers and tablets, connectivity, increasing capacity to manage student devices, building out distance learning platforms, and providing technical support. All items related to distance learning total $59.8 million. Hallett detailed that the cost estimate for nurses to support the telehealth program is $1.5 million and the Superintendent secured support from the Governor to meet this expense. Hallett detailed that the Department identified the shortfall or cost to sustain PPE for the full year is $750,000. Further newly identified costs related to responding to the pandemic include a potential shortfall of $14 million for food service and $12 million for unemployment insurance. He stated that the Department is in the preliminary phase of examining and reviewing ways in which to manage these costs but plans to present on these items in the future.

Hallett reviewed anticipated shortfalls and potential impacts of anticipated shortfalls, including pre-existing shortfalls and projected shortfalls. He noted that pre-existing shortfalls total $86.4 million and do not necessarily directly relate to the reopening of schools but affect the Department’s overall budget. Projected school reopening and pandemic shortfalls total $64.8 million. He detailed that pre-existing shortfalls include budget requests from the Board’s proposal that the Legislature did not fund. The Department is reexamining these expenses to determine whether they are truly necessary or whether the Department is able to scale back cost items related to these activities. He detailed that the Department committed funding sources to address shortfalls for digital devices and unemployment insurance but has been unable to secure funding for other areas.

Hallett reviewed strategies to mitigate anticipated shortfalls. He stated that the Department continues to reprioritize internal work and funds. Back in March, the Department asked schools to revisit academic and financial plans to limit expenses, stop out-of-state travel, cancel voluntary in-person workshops, and intentionally increase carry over at the school level. He detailed that the Department applied for federal funds, received these funds in May, and has been programming the use of these funds. The Department is monitoring spending and plans to gather and repurpose unspent balances from programs, such as summer learning, for other priority areas. He stated that the Department has also been receiving private donations. The Department released a document explaining how private donors could provide assistance and where assistance is necessary. He highlighted that the Department received a donation of PPE which benefited schools and offices.

Committee Chairperson Uemura stated that he would like the Committee to focus on four areas in its discussion, including reopening plan costs, available funds to cover costs, funding shortfalls, and plans to cover shortfalls. Committee Chairperson asked what assurances the Department could give that the Department’s process to reopen schools captured all of the costs necessary to enable safe reopening. He noted that each school principal is empowered to make decisions as to how his or her school reopens and asked how the Department is accumulating cost information. He noted that the Department presented shortfalls but did not present on the costs involved. Committee Chairperson Uemura asked whether the Department’s reopening plan accounts for increased costs in the form of labor, such as custodial workers. He noted that custodial staff are conducting more cleaning thus labor and sanitation costs are increasing. Committee Chairperson Uemura asked if the Department’s plan encompasses hiring additional health aides. He noted that the Department mentioned securing funding for nurses at the complex area level but did not mention health aides. He asked if the Department’s plan includes scenarios and responses to COVID-19 emergencies or accounts for testing should cases occur. He asked about assumptions being used for the potential that PPE supplies are unavailable due to nationwide shortages. Committee Chairperson Uemura noted that the Department is budgeting for six months but did not explain the impact on schools if supplies are unavailable.

Hallett stated that the Department implemented various processes that have been ongoing for months. He detailed that the leadership team, consisting of the Superintendent, Deputy Superintendent, Assistant Superintendents, and Complex Area Superintendents, participate in multiple calls each week in which needs are discussed and identified and solutions are proposed and embedded. These leadership meetings have been a strong source of input into the identification of needs, especially because the Department is unable to readily engage in travel. He detailed that the Department relies on information through the tri-level system to inform it of priorities. In addition, the Department is identifying how to address equity gaps.

The Department has been tracking metrics as part of its reopening plan, shifting work where possible, teleworking, and engaging with Hawaii EMA regarding PPE. He detailed two months ago it was difficult to find face masks, now they can be purchased in stores. He noted that the Department might be unable to procure resources in the event of shortages, so it is relying on donations. He stated that central offices help and equitably provide support to the extent possible but sometimes it is sometimes more efficient to make smaller purchases at the school level.

Committee Chairperson Uemura stated that the Department did not provide sufficient detail for the Committee to review costs. The Department simply communicated additional reopening costs. He asked what assurances the Department could give the Committee that its process captured the costs to enable a safe reopening. He stated that he needs assurances that the Department reviewed various scenarios, anticipated various costs, and included these factors in its total reopening costs. He asked if the Department’s plan includes scenarios for COVID-19 responses or if its reopening costs include COVID-19 costs. For example, the Department might need to close, clean, and reopen a school. He asked if the Department accounted for potential costs and situations when calculating total costs.

Hallett stated that the Department is ready to the extent based on what is known now. He highlighted that the Department has partnered with Hawaii EMA, the Department of Health, and others. He further highlighted that the Department is holding some CARES funding in reserve. He stated that conditions are changing and adjustments may need to be made in the months ahead. Thus, the Department’s strategy is to not fully leverage all resources at any level to be able to respond.

Committee Chairperson Uemura stated that Hallett has not answered his questions nor given assurances that the Department’s figures are as accurate as possible. Hallett stated that the Department based projections on what is currently known and its figures are as accurate as possible at this time. The burden of fulfilling additional pandemic requirements will most likely be borne by existing staff, not by hiring additional staff, like custodial staff.

Committee Chairperson Uemura asked whether the existing base budget is sufficient to cover additional workloads described in the Department’s reopening plan, such as additional cleaning and supplies. He asked if existing staff and positions would cover this work. Hallett confirmed that schools would use existing staff or supplement with part-time employees to clean classrooms.

Committee Chairperson Uemura stated that the Department’s reopening plan does not account for these potential additional costs because the Department assumes that its existing base budget will cover these aspects of its reopening plan. Hallett explained that the Department advised schools to carryover funds to offset reductions in weighted student formula. He noted that schools have flexibility to reprioritize within existing allocations and are trying to be cognizant of enrollment adjustments. The Department built a system that is flexible and responsive within academic and financial plans and the Department based its costs on what is currently known. He stated that the Department might need to add costs as conditions change and potential costs materialize.

Committee Chairperson Uemura stated that he is not assured that the Department’s reopening plan budget is accurate and includes all of the reopening costs.

Committee Vice Chairperson Voss commented that the Department is expending $40 million for digital devices at $500 per device even though many devices cost around $250. Hallett explained that $500 is an average. The cost per device depends on grade level and curriculum design. Some students might need tablets while others need Chromebooks or iPads. He stated that there might also be additional costs associated with software management and security. He explained that the Department uses averages for planning purposes. Committee Vice Chairperson Voss asked about $14 million shortfall in food service and asked whether this cost is associated with grab and go or reduced revenues due to fewer purchases. Hallett explained that the figure is preliminary but the Department based this number on anticipating lower participation over the full year.

Committee Vice Chairperson Voss commented on the Department’s distance learning platform partnership with Arizona State University and noted that this costs $2.5 million. He asked why the Department is prioritizing these expenses for school reopening and why in this amount. Christina Kishimoto, Superintendent, explained that the Department based this projection on parent feedback at this point in time, including parents who have communicated that their children may not return to school. She detailed that this platform is a full-time distance learning platform that allows schools to have a fully vetted standards-based curriculum available to them. She detailed that the curriculum is part of a pilot program that includes the Department and Kamehameha Schools. Committee Vice Chairperson Voss asked if this distance learning platform is intended to help existing teachers. He noted that teachers would need to participate in in-person, hybrid, and online instruction if some parents decide to send their children to school while others opt for full distance learning. Kishimoto explained that the Department is not hiring teachers from Arizona State University. The Department procured the curriculum for utilization by the Department’s teachers so that its teachers do not need to design a distance learning curriculum.

Committee Member Lynn Fallin asked about the Department’s budget development and breakdown. She asked if the Department has any available funds that it did not include in its presentation, such as special funds or other sources. Committee Member Fallin asked about the Department’s criteria and how it determined which areas to fund and which to zero out.

Hallett explained that the Department identified areas and gaps by focusing on equity and what can be best managed centrally. The Department based purchases on available funds and assessment of needs. He noted that the Department’s Ohana Help Desk is based on actual costs. He explained that the Department released surveys to principals, which informed the Department of priorities and gaps. The Department also conducted pilots over the summer to test out different vehicles to review how to provide services in remote locations. He detailed that the Department identified needs collectively and identified costs in conjunction with vetting programs and reviewing assumptions. The Department is monitoring expenses and plans to gather any available funds to allocate to other priority areas.

Committee Member Fallin asked if need was the Department’s primary criteria. Hallett confirmed that need was the Department’s primary criteria. He detailed that the Department conducted principal and parent surveys and assessments and focused on equitable access to online resources. He stated that the Department learned many lessons over the fourth quarter which it used to prepare for the upcoming school year.

Committee Member Fallin asked about whether the Department distributed devices based on surveys and needs or other criteria. Hallett explained that the Department distributed devices and connectivity largely based on need, including projected enrollment by complex area. The Department allocates funding to complex areas to support funding at schools. He noted that some resources are available statewide, such as its information technology help desk.

Committee Chairperson Uemura asked if the Department is reviewing distance learning platforms other than Arizona State University. Kishimoto detailed the Department’s use of Accellus. She explained how distance learning platforms support its Google platform and detailed vetted units that teachers can access. Teachers using Arizona State University’s curriculum for online learning would not need to design their own. The Accellus platform is for schools that want more flexibility to use portions of the designed curriculum while also providing teachers with the opportunity to create their own curriculum. Committee Chairperson Uemura asked if the Department included Accellus in its $2.5 million projection. Kishimoto explained that the Department uses Blackboard and Google Classroom, which it has used for some time. Arizona State University uses Canvas, which is a pilot for kindergarten through fifth grade. She explained that schools have a variety of needs that need to be met and circumstances as far as staffing numbers and enrollment numbers thus the Department has provided schools with flexibility and options.

Committee Chairperson Uemura asked if the Department included Accellus and Arizona State University in its $2.5 million projection and other platforms in $3.2 million additional costs. Kishimoto detailed $9.1 million in funds held in reserve and explained that demand may exceed $2.5 million. The $2.5 million projection is based on current demand. She explained that the Department is projecting a specific figure to meet current demand levels but principals are expressing concern that demand might change and increase. Thus, the Department is retaining funding in its reserves to be able to prioritize meeting increases in demand if increases in demand are to occur.

Committee Member Kili Namauʻu asked if the $2.5 million projection is the per student cost, which Kishimoto confirmed. Committee Member Namauʻu commented that the Department is able to meet current demand but it is uncertain whether demand levels will change once school reopens and might need to use $9 million in CARES funding to meet increased demand levels. Kishimoto confirmed that this is correct. The Department’s survey data indicated that 16% of families statewide are interested in distance learning and the Department is planning based on its survey data. However, some schools have higher numbers of families requesting distance learning while others have lower numbers of families requesting distance learning. These numbers may change as parents become more or less comfortable.

Committee Member Namauʻu asked whether the Department procured these platforms to provide schools and teachers with additional options. Kishimoto confirmed that this is correct. She stated that schools are making selections and cannot randomly change their platform. The Department decided to use Arizona State University’s curriculum because Kamehameha Schools did the upfront work and worked out an agreement where Hawaiian-based language and cultural-based curriculum were embedded into Arizona State University’s curriculum. Committee Member Namauʻu asked if pilot schools are using this curriculum or if schools have an option to use this curriculum. Kishimoto explained the Department’s pilot and confirmed that schools have the option to be a part of the pilot program. She further explained that Department implemented these platforms over a year ago and many schools are using these platforms for distance learning.

Committee Chairperson Uemura asked about the result of spending, how much remains, and how much is available to fund reopening costs. He noted that the Department is holding funds in reserve to help the Department remain flexible to meet ongoing requests.

Committee Member Fallin asked about criteria to establish priorities and how the Department decided which areas to zero out and which areas to fund. She asked whether these decisions were based on funding availability. Hallett explained that the Department used CARES funds and other funds it received in the spring and summer. He stated that during the shutdown of schools the Department had to determine how to operate within that structure. Afterwards, the Department’s focus shifted to the use of CARES funds for summer programs, special education, learning hubs, and summer assessments. The Department is currently moving to the third phase and focusing on reopening schools and its distance learning infrastructure and capacity. He explained that the Department did not zero areas out. There are currently gaps and the Department is still in the process of determining how to close those gaps and meet shortfalls.

Committee Chairperson Uemura asked Hallett to summarize costs and sources. Hallett detailed the Department’s reliable resources and detailed decreases in general fund revenue. He stated that federal funds have been stable and reliable thus the Department has used these funds to meet shortfall areas. The Department is reviewing how to maximize various other sources described in its materials. Hallett stated that the Department continues to monitor funds, how to allocate funds it has not yet expended, and how to reallocate existing funds. Hallett stated that the Governor is reviewing leveraging the Governor’s relief funds to support both higher and K-12 education. The Department would use these funds to support professional development and distance learning infrastructure and capacity. Hallett reviewed the Governor’s discretionary share of COVID relief funds and noted that the Department is continuing to have discussions related to these funds. He detailed discussions within congress regarding additional relief packages, including $70 billion to support K-12 education. Hallett stated that the Department is reprioritizing general fund categorical programs for activities, such as scaling back athletics and other programs that are unable to operate as normal. The Department is always reviewing donations. He stated that the Department plans to maximize impact aid receipts because doing so is critical. Hallett detailed other potential sources that the Department previously used to meet restrictions, such as the annual charter school true-up, which may yield additional funds in October. Hallett stated that the Department is also monitoring its salary budget and reviewing whether it could repurpose any of those funds to meet shortfall areas.

Committee Vice Chairperson Voss asked about areas other than athletics in which the Department could reduce its spending to cover shortfalls. Hallett explained that the Department is still in the process of examining its budget and various budget areas. He noted that there are other potential reductions, such as sabbaticals, but the Department would need to continue its review. He noted that each office is reviewing its budget and tracking spending to determine where cuts could be made. Currently, the Department does not have a list of additional areas to share.

Committee Vice Chairperson Voss asked if the Department anticipates asking schools to make further reductions in school-level funding. Hallett confirmed that the Department does not anticipate doing so. He stated that this is partly why there was an early decision to reduce weighted student formula. The Department wanted schools to know ahead of time and have the opportunity to plan for reductions. He stated that the Department would look to other areas of its budget to make reductions other than school-level funding, such as state offices, state operations, and complex level areas. Committee Vice Chairperson Voss stated that it is the Committee’s desire to limit additional cuts at the school level that schools are unable to plan for.

Committee Chairperson Uemura asked about the Department’s identified reopening of schools and pandemic shortfall of $65 million. He asked how the Department reconciles the shortfall with reopening schools and whether the Department has been reviewing scenarios to incorporate mitigation strategies. He asked if any scenarios resulted in no shortfalls and asked about determined success rates of scenarios. Hallett explained that the Department begins each year with more needs than identified resources. He detailed how the Department could reconcile its shortfall and described support from the Governor in providing nurses and further described the Governor’s desire to support distance learning in general. He stated that the Department would monitor spending but taking money from schools would be the last resort. He noted that each allocation document indicates that each area is subject to spending. Hallett stated that if the Department does not identify savings, options, or other sources, the Department might need to impose further restrictions in order to balance its budget. He detailed a projected list of needs and noted that digital devices are based on the projection of providing a device for every student who received free and reduced lunch last year. He stated that although it is not ideal, the Department might need to live with less or even might need to prioritize within its current needs and priority list.

Committee Chairperson Uemura commented on the Department beginning the school year with a deficit and noted that the Department always relied on vacant positions to cover any deficits.

Board Member Fallin asked about budget provisos that would limit the Department’s flexibility or ability to expand resources. Hallett confirmed that there were no provisos that would limit the Department’s flexibility. The Legislature recognized the Department’s need for flexibility and left discretion to the Department.

Committee Chairperson Uemura emphasized that the Board of Education (“Board”) mandated the health and safety of students, faculty, and staff. There is a real possibility that the Department might run out of funds, which would jeopardize health and safety. He stated that he will not have confidence that the Department will be able to reopen safely if the Department is unable to address shortfalls.

Committee Vice Chairperson Voss stated that the Department has been given an impossible task. The Legislature substantially cut funds, there are huge anticipated costs for school reopening, and there is uncertainty regarding whether the federal government will provide additional funds. He stated that it is important for every party to find workable solutions and keep schools safely open as much as possible.

Committee Member Namauʻu recognized budget shortfalls and stated that she is confident that the Department will be able to address gaps.

V. Adjournment

Committee Chairperson Uemura adjourned the meeting at 1:00 p.m.