SB 375: RELATING TO GOVERNMENT.

A BILL FOR AN ACT

RELATING TO GOVERNMENT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that in the mid-twentieth century, Hawaii's economy was predominantly agrarian, with significant revenues derived from plantations, tourism, and military expenditures.  During this period, the State assumed responsibilities in education, health, public safety, and other sectors that, in other states, were typically managed by the counties.  The intent was to protect rural communities from excessive property taxation and to capitalize on economic pillars centered in Honolulu.  As a result, the State became the primary entity responsible for funding and administering services in these critical sectors.

     The legislature notes that in the twenty-first century, Hawaii's economic landscape has undergone a dramatic transformation.  Real estate investments have surged and there has been a notable increase in non-resident property ownership, which has contributed to a housing affordability crisis.  The State's property tax rates, which are among the lowest in the nation, have attracted speculative investments, leading to the current proliferation of vacant homes.  These properties are often held as second or third homes or used as short-term rentals, reducing housing availability for the State's residents.  Many of these property owners contribute minimally to state revenues since many do not pay state income tax and have limited exposure to general excise taxes due to their non‑resident status.

     The legislature recognizes that Hawaii's fiscal structure, where the State predominantly funds education, health, and public safety, has resulted in challenges in revenue generation and equitable service delivery.  The legislature therefore recognizes the need to reexamine and redefine the roles, responsibilities, and funding mechanisms of Hawaii's state and county governments.  This examination and restructuring will help address the State's urgent need to ensure that property tax revenues and other financial resources are equitably utilized and that the responsibilities for public services are appropriately allocated to enhance government and public service outcomes.

     Accordingly, the purpose of this Act is to establish and appropriate moneys for a select commission on government restructuring to examine and provide recommendations on the allocation and sharing of funding and duties between the State and counties, particularly in the areas of education, health, and public safety.

     SECTION 2.  (a)  There is established the select commission on government restructuring, which shall be placed within the office of the governor for administrative purposes.  The commission shall comprise the following members:

     (1)  The governor, or the governor's designee, who shall serve as the chairperson of the commission;

     (2)  The director of transportation, or the director's designee;

     (3)  The chairperson of the board of land and natural resources, or the chairperson's designee;

     (4)  The superintendent of education, or the superintendent's designee;

     (5)  The director of corrections and rehabilitation, or the director's designee;

     (6)  The director of law enforcement, or the director's designee;

     (7)  The director of health, or the director's designee;

     (8)  Two members of the senate, to be appointed by the president of the senate;

     (9)  Two members of the house of representatives, to be appointed by the speaker of the house of representatives; and

    (10)  Two citizens with expertise in public administration, finance, or a related field, chosen and invited to participate by the governor.

     (b)  Members shall serve until the commission dissolves; provided that any vacancies shall be filled in the same manner as the original appointments.

     (c)  Members shall serve without compensation but shall be reimbursed for reasonable expenses, including travel expenses, necessary for the performance of their duties.

     (d)  The commission shall:

     (1)  Examine the current allocation of responsibilities and funding between the state and county governments, with a focus on education, health, and public safety;

     (2)  Assess the impacts of the State's property tax structure on the affordability and availability of housing, including the prevalence of vacant homes and non-resident property ownership;

     (3)  Explore models for bifurcating and sharing duties and funding between the State and counties to enhance efficiency, equity, and responsiveness to local needs;

     (4)  Consider the potential for structural flexibility to allow counties to assume greater responsibility in certain areas, and the implications of reallocating duties among the State and counties;

     (5)  Develop recommendations for legislative, administrative, or policy changes to realign government functions and funding mechanisms in accordance with current economic and social conditions; and

     (6)  Engage with stakeholders, including government agencies, community organizations, subject matter experts, and the public to inform its deliberations and recommendations.

     (e)  The commission shall submit to the legislature:

     (1)  An interim report of its findings and recommendations no later than twenty days prior to the convening of the regular sessions of 2026 and 2027; and

     (2)  A final report, including its findings and recommendations and any proposed legislation, no later than twenty days prior to the convening of the regular session of 2028.

     (f)  The commission shall meet as determined by the chairperson and shall hold at least one public hearing in each county to solicit input from the county's residents.

     (g)  The office of the governor shall provide administrative support to the commission.  The commission may also request assistance from other state agencies as the chairperson deems necessary.

     (h)  The commission shall dissolve on December 31, 2027.

     SECTION 3.  There is appropriated out of the general revenues of the State of Hawaii the sum of $          or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the administration and operational expenses of the select commission on government restructuring, including personnel costs, research, stakeholder engagement, and report preparation.

     The appropriations made by this section shall not lapse at the end of the fiscal year for which the appropriation is made; provided that all moneys from the appropriations unencumbered as of June 30, 2027, shall lapse as of that date.

     The sums appropriated shall be expended by the office of the governor for the purposes of this Act.

     SECTION 4.  This Act shall take effect on January 1, 2525.

Report Title:

Office of the Governor; Government Restructuring; Commission; Reports; Appropriations

Description:

Establishes and appropriates moneys for a Select Commission on Government Restructuring within the Office of the Governor.  Requires interim reports and a final report to the Legislature.  Dissolves the Commission on 12/31/2027.  Effective 1/1/2525.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to government.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that in the mid-20th century, Hawaii's economy was predominantly agrarian, with significant revenues derived from plantations, tourism, and military expenditures.  During this period, the State assumed responsibilities in education, health, public safety, and other sectors that, in other states, are typically managed by the counties.  The intent was to protect rural communities from excessive property taxation and to capitalize on economic pillars centered in Honolulu.  As a result, the State became the primary entity responsible for funding and administering services in these critical sectors.

     The legislature notes that in the 21st century, Hawaii's economic landscape has undergone a dramatic transformation.  Real estate investments have surged, and there has been a notable increase in non-resident property ownership, which has contributed to a housing affordability crisis.  The State's property tax rates, which are among the lowest in the nation, have attracted speculative investments and led to the proliferation of vacant homes.  These properties are often held as second or third homes or used as short-term rentals, reducing housing availability for residents.  Many of these property owners contribute minimally to state revenues since many do not pay state income tax and have limited exposure to general excise taxes due to their non-resident status.

     The legislature recognizes that Hawaii's fiscal structure, where the State predominantly funds education, health, and public safety, has resulted in challenges in revenue generation and equitable service delivery.  The legislature therefore recognizes the need to reexamine and redefine the roles, responsibilities, and funding mechanisms of Hawaii's state and county governments.  This examination and restructuring will help address the State's urgent need to ensure that property tax revenues and other financial resources are equitably utilized and that the responsibilities for public services are appropriately allocated to enhance government and public service outcomes.

     Accordingly, the purpose of this Act is to establish and appropriate moneys for a select commission on government restructuring to examine and provide recommendations on the allocation and sharing of funding and duties between the State and the counties, particularly in the areas of education, health, and public safety.

     SECTION 2.  (a)  There is established the select commission on government restructuring, which shall be placed within the office of the governor, for administrative purposes.  The commission shall comprise the following members:

     (1)  The governor, or the governor's designee, who shall serve as the chairperson of the commission;

     (2)  The director of transportation, or the director's designee;

     (3)  The chairperson of the board of land and natural resources, or the chairperson's designee;

     (4)  The superintendent of education, or the superintendent's designee;

     (5)  The director of public safety, or the director's designee;

     (6)  The director of law enforcement, or the director's designee;

     (7)  The director of health, or the director's designee;

     (8)  Two members of the senate, to be appointed by the president of the senate;

     (9)  Two members of the house of representatives, to be appointed by the speaker of the house of representatives; and

    (10)  Two citizens with expertise in public administration, finance, or a related field, chosen and invited to participate by the governor.

     (b)  Members shall serve until the commission dissolves; provided that any vacancies shall be filled in the same manner as the original appointments.

     (c)  Members shall serve without compensation but shall be reimbursed for reasonable expenses, including travel expenses, necessary for the performance of their duties.

     (d)  The commission shall:

     (1)  Examine the current allocation of responsibilities and funding between the state and county governments, with a focus on education, health, and public safety;

     (2)  Assess the impacts of the State's property tax structure on the affordability and availability of housing, including the prevalence of vacant homes and non-resident property ownership;

     (3)  Explore models for bifurcating and sharing duties and funding between the State and counties to enhance efficiency, equity, and responsiveness to local needs;

     (4)  Consider the potential for structural flexibility to allow counties to assume greater responsibility in certain areas, and the implications of reallocating duties among the State and counties;

     (5)  Develop recommendations for legislative, administrative, or policy changes to realign government functions and funding mechanisms in accordance with current economic and social conditions; and

     (6)  Engage with stakeholders, including government agencies, community organizations, subject matter experts, and the public to inform its deliberations and recommendations.

     (e)  The commission shall submit to the legislature:

     (1)  An interim report of its findings and recommendations no later than twenty days prior to the convening of the regular sessions of 2026 and 2027; and

     (2)  A final report, including its findings and recommendations and any proposed legislation, no later than twenty days prior to the convening of the regular session of 2028.

     (f)  The commission shall meet as determined by the chairperson and shall hold at least one public hearing in each county to solicit input from the county's residents.

     (g)  The office of the governor shall provide administrative support to the commission.  The commission may also request assistance from other state agencies as the chairperson deems necessary.

     (h)  The commission shall dissolve on December 31, 2027.

     SECTION 3.  There is appropriated out of the general revenues of the State of Hawaii the sum of $          or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the administration and operational expenses of the select commission on government restructuring, including personnel costs, research, stakeholder engagement, and report preparation; provided that all moneys from the appropriation unencumbered as of June 30, 2027, shall lapse as of that date.

     The sums appropriated shall be expended by the office of the governor for the purposes of this Act.

     SECTION 4.  This Act shall take effect on July 1, 2025.

Report Title:

Office of the Governor; Government Restructuring; Commission; Appropriation

Description:

Establishes and appropriates moneys for a Select Commission on Government Restructuring.  Requires an interim report and final report to the Legislature.  Dissolves the Commission on 12/31/2027.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 185

Honolulu, Hawaii

RE:    S.B. No. 375

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Government Operations, to which was referred S.B. No. 375 entitled:

"A BILL FOR AN ACT RELATING TO GOVERNMENT,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Establish and appropriate funds for a Select Commission on Government Restructuring to examine and issue recommendations on the sharing of funds and duties between the State and counties, particularly in the areas of education, health, and public safety;

     (2)  Require the Select Commission to submit interim and final reports to the Legislature; and

     (3)  Dissolve the Select Commission on December 31, 2027.

     Your Committee received testimony in support of this measure from one individual.

     Your Committee finds that the State's unique history has led to a distinct fiscal structure and division of duties which has made the State primarily responsible for funding education, health, and public safety, where county governments would traditionally bear responsibility.  However, your Committee recognizes that the State's economic transformation and present challenges to revenue generation have led to issues of service delivery.  To modernize, equitably fund services, and efficiently provide for residents, the State must reexamine and restructure the allocation of funding and duties between itself and county governments.  This measure establishes a Select Commission on Government Restructuring to undertake this analysis and provide recommendations to the Legislature.

     Your Committee notes that this measure, as introduced, contains an unspecified appropriation amount.  Should your Committee on Ways and Means choose to deliberate on this measure, your Committee respectfully requests that it consider inserting an appropriation amount of $50,000 for the establishment and implementation of the Select Commission on Government Restructuring, based on the predicted size and duties of the Select Commission.

     Your Committee has amended this measure by:

     (1)  Inserting an effective date of January 1, 2525, to encourage further discussion; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Government Operations that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 375, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 375, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Government Operations,