EXCUSED:
None

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

1. Call to Order

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

Committee members received written testimony. The following is a listing of the people who submitted written testimony before the meeting.

1. Recommendation for Action
   1. Committee Action on Department of Education’s repair and maintenance priority list in accordance with Board Policy 301-10, Equitable Allocation of Facilities Resources (FIC Strategic Priority 2)

Committee Chairperson Uemura reviewed Kishimoto’s memorandum, which briefly summarized the history of Board Policy 301-10, entitled “Equitable Allocation of Facilities Resources,” and the repair and maintenance (“R&M”) priority list that it requires. He stated the Department presented various iterations of the policy and priority list to the Committee with the Committee deferring action to allow the Department to respond to questions from the Committee. He explained that the Committee again deferred action on the priority list at its last meeting to allow the Department to make revisions based on the discussion at the meeting, and therefore, the Committee should first review whether the Department’s recommendation reflects the Committee’s discussion and then review whether the priority list accounts for the socioeconomic and academic needs of each school’s student population.

Committee Chairperson Uemura stated that the memo defines R&M as the work to address normal wear projects that are routine and relatively low in cost. He noted that the Department used R&M in past presentations to include capital improvement program (“CIP”) projects.

Committee Chairperson Uemura stated that DMPs are new to the Committee and conforms to the Department’s capitalization policy. He explained that the Department defines DMPs as major R&M projects that meet the following criteria: (1) cost more than $100,000; (2) extends the useful life of a building/facility by ten years or more; and, (3) qualifies for the use of bond funding. He noted that the criteria for capitalization are not applicable since funding does not determine whether an asset is capitalized or not.

Committee Chairperson Uemura referenced a memorandum No. 19-03 from the Department of Budget and Finance (“B&F”) and stated that the memorandum outlines the capital expenditures that are eligible for tax-exempt financing and those that are not. He noted that while only capital expenditures are eligible, the means of financing should not determine what a capital expenditure is. He asked if the Department classified any DMP solely based on this criterion.

Committee Chairperson Uemura stated that the Department needs another delineation between DMPs and CIP projects, which Kishimoto’s memorandum for the next agenda item defines but is relevant for the Committee’s discussion on the Department’s R&M priority list. He explained that the Department distinguishes CIP projects from DMPs in that CIP projects represent new or additional space or major renovations of an existing structure whereas DMPs are largely major replacements or repairs of existing building components. He noted that the major difference is new projects versus existing structures.

Committee Vice Chairperson Voss stated that the Department provided the project lists in alphabetical order, and it is not clear on how the Department will prioritize the projects. He asked for clarification on how the Department would prioritize the projects on the list if the Legislature does not appropriate the $168 million requested by the Department. Randall Tanaka, Assistant Superintendent, Office of Facilities and Operations, explained that one method of prioritization is that the Department organizes the priority list by a needs basis versus a timing basis. He stated that many of these projects are in the works and timing fluctuates. Tanaka requested to provide information to the Committee on an ongoing basis about the progress of projects.

Committee Vice Chairperson Voss stated that it is important to show the Legislature what the Department will fund first. He asked about the large amounts of money at the middle and high school levels labelled as “miscellaneous,” as the list does not provide details on the examples of those types of projects. Tanaka replied that the miscellaneous projects are a bundle of different types of work and multiple projects pulled from the lists versus jobs. Committee Vice Chairperson Voss stated that while it is convenient, the Legislature needs it broken down, and he encouraged the Department to do this.

Committee Chairperson Uemura asked if the Department classified any DMPs solely based on the criteria of funding. Tanaka replied that the Department did not classify DMPs in that manner.

Committee Chairperson Uemura asked for the cost of the R&M projects that the Department considered normal and routine. He stated that the Department pays for these projects from operating funds at the school level, and they will be subject to any budget reductions. Tanaka replied that these types of projects are varied and sometimes the project could be larger. He stated that he would get a better definition from his team and report back to the Committee.

Committee Chairperson Uemura stated that it is good to define separate categories but expressed concern about potentially excluding the R&M costs funded through the operating budget. He stated that the Committee does not know the exact amount at this time because the Department funds these projects through schools’ operating budgets, but he noted that they would come into play for the schools when the Department proceeds with reductions to EDN 100. He expressed concern about any R&M projects related to health and safety that do not meet the requirements for the capitalization policy due to being an R&M project. Tanaka replied that this is not a concern at this time and stated that health and safety projects come from EDN 400 funds, which the Maintenance Branch handles for projects on Oahu and the Department of Accounting and General Services handles for neighbor islands projects with the Department’s participation. He noted that these projects do not come out of the schools budget. Committee Chairperson Uemura cautioned that it is important to recognize that EDN 400 will also be facing budget cuts.

Committee Chairperson Uemura asked how the Department developed the weighted scoring rubric and how it applied the rubric to the list of outstanding DMPs projected to cost $899 million. Tanaka stated that his team established a weighted scoring system by looking at what the priorities were, assigning a weight to the projects, and then stacking projects based on their scores.

Committee Chairperson Uemura stated that the Department built the process off the CIP priority criteria and how the Department applied it. He stated that in reviewing the list of projects by school and job name, some project descriptions could be CIP projects by definition, such as various buildings installing ceiling fans, demolition of buildings, and installing perimeter retaining walls. He noted that these examples could also fall under the definition of DMP and asked if the Department looked at this and made determinations on what should be a DMP and what should be a CIP project. Tanaka mentioned that there would be gray areas for CIP projects and DMPs based on their definitions and the rationale on why the money will come from this budget. He stated that the Department uses flexibility when looking at the different areas.

Committee Chairperson Uemura stated that the Board has asked the Department to provide transparency to make sure the public have more details. He recommended that the Department provide miscellaneous lump sums in more detail and noted that the Committee wants the Department to follow the policy and not lump things together. Committee Chairperson Uemura stated that the emergency reserve of $20 million should be comprised of projects and not listed as reserves and that the $168 million should be comprised of projects. He asked what the Department would use the $10 million budgeted for the “Facilities Asset Management Assessments” job for and noted that if it is for overhead costs, the Department should list it as operating costs according to the B&F memorandum. Tanaka provided an example of the school roofs leaking due to recent heavy rainfall and stated that the Department needs emergency funding to fix those unanticipated and unforeseen emergency expenses.

Committee Chairperson Uemura stated that he recognizes the need for flexibility when dealing with emergencies but noted that the Department can fund them through basic budgeting allocations. He requested that the Department address this because Board members are not inclined to accept terminology such as “miscellaneous” and “reserves.” He asked what the “Facilities Asset Management Assessments” job budget of $10 million includes. Tanaka replied that that amount relates to the cost of consultants the Department uses to assess certain projects.

Committee Chairperson Uemura asked if the Department could assign this fee to a specific project to increase the cost of the project and then the Department could allocate the amount directly to a project. Tanaka replied that the Department could apply those costs to a specific project as opposed to applying it across the grouping.

Committee Chairperson Uemura stated that the Department should similarly attach the “JOC Design and CA Services” and “Project Management Services” jobs at $6 million and $5 million to project costs. He asked if the $1.7 million for the “Staff Support” job is an overhead cost since it was his understanding that overhead is not eligible for funding that is part of the operating budget. Tanaka replied that the $1.7 million is an overhead cost that relates to the one percent that would be back charged to the project. Committee Chairperson Uemura suggested a similar recommendation of assigning the amount to a specific project.

Committee Chairperson Uemura noted that the recommendation includes the priority list for $168 million for Fiscal Year (“FY”) 2021-2022 and asked for the list for the $168 million for FY 2022-2023. Tanaka stated that it is too soon to provide that list, and the Department would like to report to the Committee on a quarterly basis.

Committee Chairperson Uemura asked if the Department’s recommendation is to approve only one year of capital projects and asked when the Committee would get the list for FY 2022-2023. Tanaka stated that the deck includes a list of projects and that the Department is still working on the list for FY 2022-2023.

Committee Chairperson Uemura again asked when the Committee would receive this information. Tanaka stated that he would get back to the Committee.

Committee Vice Chairperson Voss stated he fine with the suggestion since the Legislature will focus on how the Department will use the funds in the first fiscal year of the biennium. He stated it would be appropriate for Tanaka to come back with a recommendation on how the Department will use the funds for FY 2022-2023.

Committee Chairperson Uemura reiterated that the Committee would consider approval of the priority list for FY 2021-2022, which totals $168 million, and then the Department would come back later with the details on the FY 2022-2023 priority list. Tanaka confirmed.

Committee Chairperson Uemura asked for the total number of projects in FY 2021-2022 and FY 2022-2023. Tanaka stated that there are 192 projects for FY 2021-2022. He stated he would report to the Committee later on the FY 2022-2023 projects.

Committee Chairperson Uemura called for a roll call vote on the motion. The motion carried unanimously with all members present voting aye (Committee Vice Chairperson Voss, Committee Members Cox, Fallin, Namauʻu, Payne, and Takeno).

ACTION: Motion to approve the proposed deferred maintenance projects priority list attached to Superintendent Christina Kishimoto’s memorandum, dated December 3, 2020, as Attachment A2 for the 2021-2023 fiscal biennium (Voss/Namau‘u). The motion carried unanimously with all members present voting aye.

1. Committee Action on Department of Education’s priority criteria for executing Capital Improvement Program projects, in accordance with Board Policy 301-10, Equitable Allocation of Facilities Resources (FIC Strategic Priority 2)

Committee Vice Chairperson Voss moved to approve the proposed CIP prioritization criteria attached to Superintendent Christina Kishimoto’s memorandum, dated December 3, 2020, as Attachment B1. Committee Member Dwight Takeno seconded.

Committee Chairperson Uemura stated that the approval of the criteria would form the basis for agenda item III.D concerning the Department’s CIP budget for the 2021-2023 fiscal biennium. He also stated that what is important is how the Department developed the criteria and how the criteria were applied to determine the Capital Improvement Projects Budget.

Committee Vice Chairperson Voss stated that while the Committee is considering the recommendation for approval, it is the initial prioritization criteria, and the Department will amend and send them back to the Committee if the Department deems revisions are appropriate. Tanaka agreed and stated that representatives from the complex area and school level will be part of the process.

Committee Vice Chairperson Voss asked if the Department applied the criteria to the lump sum projects attached to Kishimoto’s memorandum for agenda item III.D. Tanaka confirmed that it did.

Committee Chairperson Uemura called for a roll call vote on the motion. The motion carried unanimously with all members present voting aye (Committee Vice Chairperson Voss, Committee Members Cox, Fallin, Namauʻu, Payne, and Takeno).

ACTION: Motion to approve the proposed Capital Improvement Program prioritization criteria attached to Superintendent Christina Kishimoto’s memorandum, dated December 3, 2020, as Attachment B1 (Voss/Takeno). The motion carried unanimously with all members present voting aye.

1. Committee Action on recommendation concerning the Department of Education’s operating budget for 2021-2023 fiscal biennium

Committee Chairperson Uemura noted that the Department’s recommendation on its proposed operating budget for the 2021-2023 fiscal biennium is in the Committee’s meeting materials.

Committee Member Catherine Payne moved to approve the proposed operating budget for Fiscal Biennium 2021-2023 attached to Superintendent Christina Kishimoto’s memorandum, dated December 3, 2020, as Attachment D. Committee Member Takeno seconded.

Committee Chairperson Uemura stated that the timeline under which the Board and the Department have been working for submitting the operating and CIP budgets has changed from December 21, 2020 to December 4, 2020. He noted that B&F has stated that it will use the operating and CIP budgets on today’s agenda, and tomorrow is the last day that B&F will take any submission of changes to the budgets. He stated that the Department and the Board are deprived of having any significant input into the budget submitted to the Governor, but the process will continue and may undergo changes and, after legislative review, will require the Department to address any adjustments to the budget. Committee Chairperson Uemura stated that the Committee would not be able to fulfill its obligations under the Committee’s charter to approve the budgets prior to submittal to the Governor.

Committee Chairperson Uemura stated that the Committee’s review would focus on any recommended changes to the budget, and the Committee should view this exercise as preparing the groundwork for contingency reduction plans that the Department will have to prepare. He noted that the ten percent reduction embedded in the operating plan may not be the reductions that the Legislature will look for, and it may look for more than a ten percent reduction. He stated that the Committee should focus on the process that the Department used to develop the budget so that the Committee is comfortable with the outcomes. Committee Chairperson Uemura noted that the most significant concern is the capacity to continue to provide a quality education, including services for students, protecting the core mission of teaching and learning to ensure equity for all students, and sustaining essential functions to ensure student achievement during this period of declining state revenues, while addressing learning loss from COVID-19 health pandemic. He explained that budget reductions need to follow criteria, and he stated that he believes state offices should absorb more than ten percent of the targeted cuts. He highlighted critical areas to protect on page 11 of Kishimoto’s memorandum and noted that the Committee should review these areas to determine if it agrees or wants to add any other critical areas. He stated that this exercise will also drive any recommendations that members want to see in the budget.

Committee Chairperson Uemura mentioned other items relating to the recommendation, including a $110.2 million recurring reduction that was already included in Act 9 and a $99.9 million reduction to EDN 100, which is the largest component of the $164 million reduction, with details still unknown until the end of the school year when schools complete their staffing plans. The underfunded or unfunded needs of $96 million is additive to the $164 million reduction. The total is $260 million.

Committee Vice Chairperson Voss asked if the proposed $24.48 million cut for special education is feasible for the Department to remain in compliance with law. Kishimoto stated that the Department asked throughout the process what is legally required in terms of what is best for students. She stated that the Department would need to review what it could provide after reviewing the cuts at the school level. Kishimoto stated that cuts to this degree make it difficult not to touch services that will directly affect children.

Committee Vice Chairperson Voss stated that he has heard comments that the Department needs to “cut the fat” at the state office level. He asked Kishimoto to explain what the Department has done to try to improve efficiencies, transfer personnel, and any other measures to reduce the impacts at the school level. Kishimoto reiterated that there is no way for the students not to feel these cuts and noted that every office would need to cut back. Kishimoto referenced attachment C of her memorandum and explained that there is a listing of every office. She explained that the Department did a review of what it was able to cut without cutting into what is required of the State Education Agency (“SEA”) and Local Education Agency (“LEA”) because the Department could not legally cut those are things. She stated that the Department needs teacher experts in the schools and can see what is at the state level. Kishimoto stated that the Department looked at modernizations that it needs to protect, such as the financial management systems that are at a crisis level at over 30 years old and in need of replacement. She noted that the Department is looking at the centralized services that it can offer to extend capacity to put everything on the table. She mentioned that the Department is recognized as the smallest SEA and LEA in the nation, but it is still looking at additional areas to cut back on costs.

Committee Member Margaret Cox asked if the federal funds for special education would be cut in addition to state funds. Kishimoto replied that they would not be.

Committee Member Cox expressed concern about early college funding because it is to better educate the new workforce. She asked where the $1.5 million of the non-recurring early college funding is coming from and what happens to the small high schools who cannot do the same things as the big schools. Brian Hallett, Assistant Superintendent, Office of Fiscal Services, explained that this area will require further investigation. He noted that the early college budget is currently $2.5 million of which $1.5 million is non-recurring, and the expectation is that the Department will remove that amount from the program. He stated that the base budget is $1 million with a possible $500,000 reduction, and the Department knows that this will have impacts and this will be an ongoing conversation.

Committee Member Cox stated that a $500,000 reduction to a $2.5 million budget would destroy the program.

Committee Member Fallin asked for clarification on the reduction in positions that Kishimoto’s memorandum lists because testimony received indicated that the effects might be greater. She noted that testimonies referenced over 1,000 positions that the budget cuts could affect. Kishimoto stated that the 102.5 positions referenced in the memorandum relate to reductions from the state office level. She stated that the reductions to the school and complex would be over 1,000 positions. She noted that schools would be completing their academic and financial plans by the end of the year, which School Community Councils (“SCCs”) at the school level and Complex Area Superintendents (“CAS”) at the complex area review. Kishimoto stated that this year, the Department is doing an analysis on the impact at the state level and, if necessary, would present to the Board so that the public has a clear understanding of what would be available during public forums. She noted that the forums would include information on per-school impacts available in January.

Committee Member Takeno stated that this will be a huge and uncomfortable undertaking and noted that the Board is in a tough position since it has to approve the budget presented by the Department because of the deadlines to get it to the Governor and Legislature. He stated that he agrees with Hallett about the budget needing to be a continuing conversation and stated that the Committee needs to review if the Department is following processes, if the outcomes of the budget are acceptable, and whether it fits the core mission. He stated that the Committee needs detailed information whenever the Department proposes budget cuts with better attachments than what the Department provided to hold it accountable to its core mission. Committee Member Takeno stated that he would like a detailed and comprehensive report for the Committee to review with justification for each program the Department proposes to continue or avoid cutting. He stated that the Committee would need to see what else the Department did previously so the Committee could have a comparison on what the budget cuts would impact.

Committee Member Namau‘u stated that the State should invest in public education, especially because it was in a deficit before the pandemic, and noted that the State should not be looking at the Department to meet budget shortfalls. She stated that the pandemic has given the State opportunities to do things better than before.

Committee Member Cox asked what would happen if the Committee voted down the Department’s recommendation. Committee Chairperson Uemura stated that if the Committee does not have significant corrections to the budget, then it does not matter whether or not the Board approves the recommendation because the Department has already provide it to the Governor. He noted that it is important for the Committee to get through the budget since the reductions are deep.

Committee Vice Chairperson Voss stated that the Board has the obligation to approve a budget by law. He explained that it is the first step in the budget process and noted that every dollar for education is a dollar cut from other areas. He stated that the Board has an obligation to advocate as to why education needs to be a top priority.

Committee Chairperson Uemura stated that this first step could lead to further reductions and reiterated that the Board and Department would need to make a better case to the Legislature.

Committee Chairperson Uemura asked what would happen with federal funds for COVID-19 relief and how they would affect the budget. Hallett stated that a detailed list is on the Department’s website and noted that the federal funds authorized by the Governor are helpful. He stated that these federal funds would run out at the end of December. He explained that these federal funds would not be available during the 2021-2023 fiscal biennium.

Committee Chairperson Uemura asked how much savings the Department achieved when the schools were not open during the pandemic. Hallett stated that the Department considered those savings when it put forth the $100 million one-time reduction.

Committee Chairperson Uemura stated that Exhibit C of Kishimoto’s memorandum lists the impacts. He asked if the Department considered impacts to COVID-19 safety protocols when recommending reductions. Hallett replied, confirmed that it did and noted that the Department was dealing with unknowns since conditions will change.

Committee Chairperson Uemura asked if collections are up on Medicaid forms. Hallett noted that the Department would use any increase in those funds to offset reductions to the special education program. Heidi Armstrong, Assistant Superintendent, Office of Student Support Services, stated that special education is an allowable use for Medicaid funds.

Committee Chairperson Uemura asked how much the Department collected in Medicaid funds. Armstrong stated that the Department collected a little over $1 million, but COVID-19 has affected collections and there are anticipated shortages.

Committee Chairperson Uemura stated that the budget did not reflect personnel reductions and furloughs and tiered salary reductions.

Committee Member Fallin stated that the public should know exactly what is at stake and requested that the Department complete the public engagement part of the process in a timely manner with as much detail as possible.

Committee Chairperson Person Uemura called for a roll call vote on the motion. The motion carried unanimously with all members present voting aye (Committee Vice Chairperson Voss, Committee Members Cox, Fallin, Namauʻu, Payne, and Takeno).

ACTION: Motion to approve the proposed operating budget for Fiscal Biennium 2021-2023 attached to Superintendent Christina Kishimoto’s memorandum, dated December 3, 2020, as Attachment D (Payne/Takeno). The motion carried unanimously with all members present voting aye.

1. Committee Action on recommendation concerning the Department of Education’s Capital Improvement Projects budget for 2021-2023 fiscal biennium

Committee Chairperson Uemura noted that the Department’s recommendation on its proposed CIP budget for the 2021-2023 fiscal biennium is in the Committee’s meeting materials.

Committee Vice Chairperson Voss moved to approve the proposed CIP budget for Fiscal Biennium 2021-2023 attached to Superintendent Christina Kishimoto’s memorandum, dated December 3, 2020, as Attachments D-1 and D-2. Committee Member Takeno seconded.

Committee Chairperson Uemura stated that the Department is proposing $805.6 million in its CIP biennium budget request to cover eight areas of need. He noted that the Committee already took action on the DMP priority list to approve $168 million for FY 2021-2022 and FY 2022-2023 for a total of $336 million. He explained that the Committee would still need to approve the remaining $287 million for FY 2021-2022 and $182.6 million for FY 2022-2023. He stated that his assumption is that if the Department applied the CIP criteria as approved, the Committee would approve the list as one item in order to comply with Board Policy 301-10.

Committee Chairperson Uemura stated that he did not see total projects beyond FY 2022-2023 for health and safety compliance and noted that it seems like the amounts allocated in the next fiscal biennium should be larger. Tanaka stated that health and safety is a moving target since part of it deals with compliance and safety issues. He noted that the Department asked for flexibility to report to the Committee quarterly as the Department moves through the projects throughout the year.

Committee Chairperson Uemura stated that he would like to make sure $10 million would cover the health and safety needs for this fiscal year and asked if this is a comfortable amount. Tanaka replied that the Department built the budget as best as it could.

Committee Chairperson Uemura requested that the Department make the DMP information transparent with a detailed budget breakdown for the Committee, public, and Legislature. He stated that the Department could provide a report on this and put it on its website. Tanaka replied that he is committed to doing this.

Committee Member Lynn Fallin asked what part of the CIP budget includes additional wiring for schools, especially considering the current information technology needs. Tanaka mentioned that a $5 million per year allocation is included with the Office of Information and Technology Services, but he noted that not all of these types of projects are allowed as part of the bond. He explained that technology is only allowable if it is for a new building or major renovation.

Committee Member Fallin asked where schools could get other funding for information technology infrastructure. Tanaka stated it would need to come from the operating budget. Committee Member Fallin asked if this is the case even if the project requires building modifications. Tanaka said the Department would need to look at individual projects, which include electrical infrastructure that would fall under the DMPs.

Committee Member Fallin asked if there has been a review statewide for each of the schools in this area. Tanaka mentioned that it probably comes from primarily the Office of Information and Technology Services.

Committee Vice Chairperson Voss asked if the Department could expend all the funds for four large projects during FY 2021-2022, which are $64 million for Kapolei East Elementary School, $31 million for Holualoa Elementary School, $58 million for Farrington High School Phase II Masterplan, and $35 million for a central kitchen for West Oahu. Tanaka stated that the Department would be making commitments and has three years to execute these projects.

Committee Vice Chairperson Voss stated that the Legislature wants to fund projects now, and it is looking at things that are ready to go to generate income for the communities. He asked if all four projects are ready to go. Tanaka replied that the Farrington High School project is nearly ready while the other projects are in different phases of design.

Committee Chairperson Voss stated that the Department should be prepared to explain that it plans to allocate the funds for specific fiscal years, and under normal procedures, it would have three years to expend the funds.

Committee Chairperson Uemura called for a roll call vote on the motion. The motion carried unanimously with all members present voting aye (Committee Vice Chairperson Voss, Committee Members Cox, Fallin, Namauʻu, Payne, and Takeno).

ACTION: Motion to approve the proposed Capital Improvement Projects budget for Fiscal Biennium 2021-2023 attached to Superintendent Christina Kishimoto’s memorandum, dated December 3, 2020, as Attachments D-1 and D-2 (Voss/Takeno). The motion carried unanimously with all members present voting aye.

1. Adjournment