House Standing Committee on Finance

Good morning, everyone. We're going to convene our Committee on Finance to do our third day of informational briefings. This morning. We have the Department of Labor and Industrial Relations. Please come forward.

Good morning and Happy New Year. Chair Yamashita, Vice Chair Takenouchi and honorable Members of the Committee thank you for the opportunity to provide you updates on the department's budget and operations. As always, it takes, as you can see, it takes a supportive village and a team of dedicated villagers to come up with a Department to begin with.

All of the administrators and managers who I'm going to introduce deserve my gratitude and appreciation for the incredible work that they do every single day. Their unwavering dedication and commitment are a testament to their professionalism and sense of duty. Let me start with my Deputy Director, Bill Kunstman. David Rodrigues is the Legislative Coordinator and Equal Opportunity Officer.

Lynn Araki Regan, Administrative Services officer. Francis Kagawa, accountant 5. Kim Nguyen, human resources officer. Bennett Yap, IT manager. Genesis Finks, she's our Hele Imua intern and she has all the answers. For our Unemployment Insurance Division we have the Administrator, Ann Pereira Ustacchio. And Arthur Barba is a Program Development Officer for the Disability Compensation Division.

I have Joanne Biddenhar. Administrator Royden Koito is a Program Support Chief. And for the Workforce Development Division, we get Mary Carpalitan Pradas, Administrator J. Ishibashi, Job Training Specialist for the Occupational Safety and Health Division, I have Alan Yamamoto, he's the Acting Administrator for Wage Standards Division.

Peter Lee, he's a technical support staff Specialist for the Hawaii Civil Rights Commission. Marcus Kawatachi, the Executive Director. Heather McBay, deputy Executive Director for the Hawaii Labor Relations Board. He's not a stranger to this Committee. Dwight Takamini, he's the new Chair. He also brought along Eve Young, Susan Lin and Janine Abe.

For the Labor Industrial Relations Appeals Board, we have Damian Elephante, he's the chair, Office of Community Services. Ray Domingo is the Executive Director for the Workforce Development Council. Binette Misalucha, she's the Executive Director. The Hawaii Retirement Savings Board. Alani Kiyugi, Executive Director. And last but not least, our State Fire Counsel, Gary Lam, he's the Administrative Specialist.

DLIR continues to focus on recruitment and retention. We currently have a vacancy rate of 14% excluding federal positions for which there is no current funding and 89 day hires. During calendar year 2024, we increased our workforce by 10.5% by filling 189 positions while having 128 job separations and place 516 Hele IMUA interns.

Since the inception of the Hele IMUA program, 62 interns have been hired into permanent positions in the Executive departments and of that, 17 have been hired at TLIR, including two in Hilo and two in Maui.

Before delving into our budget matters, I'd like to bring a few things to your attention, starting with more information on our departmental workforce. We hosted our own in house Job and resource fair on November 22nd to provide hiring managers with a chance to get to know candidates personalities and background beyond their resumes applications.

In fact, the DLIR selected three of five eligibles recruited at the event. We also increased participation at job fairs and attended 13 events in 2024 hosted by the Workforce Development Division, University of Hawaii at Manoa and UH West Wahoo, Hawaii Pacific University and Schidler College of Business and Star Advertising, among others.

We use Facebook, Instagram, LinkedIn X and our own recruitment page to post content about DLIR culture, recruiting events, Department spotlights and job opportunities. I support the administrators and Executive directors who wish to use the state's telework policy as a recruitment and retention tool as they know best how to efficiently operate their programs and maintain accountability.

The DLRI uses all of the system wide tools available to us, including the flexible hiring rate, shortage, differential hiring above the minimum, and using career ladders for certain positions whereby entry level employees may obtain a 29% pay increase within 2.5 years.

Our ASO, Lena Rocky Reagan has developed a newsletter and our PIO posts content on our internal intranet page to bolster our mission, culture and benefits. The Department has two major modernization efforts underway, UI's Hua Kai Project and the Disability Compensation Division's Electronic Case Management System, the latter which I'll discuss because it's tied to budget requests.

The UI Hui Hu Project or the UI Modernization is on track. If the project team keep doing great things, hopefully they'll work themselves out of a job in 2027.

You know, the term working together does not sufficiently describe the extreme collaboration that UI did last year with the modernization project and also launching a new Unemployment Insurance call center and a streamlined web inquiry forum. You know, I was grateful but not surprised when they took on this task.

These updates are designed to improve access to the program for Hawaii's diverse population and enhance the overall customer experience. The Unemployment Compensation Trust Fund exceeds 711.5 million as of November 302024. With this balance, Schedule C will be in effect for calendar year 2025. Now, regarding our budget request.

You know the Department obtain approval from Governor Green for many of our budget requests for fiscal biennium 20252027 and we were spared all the vacancies we wanted to keep, largely due to the largely due to most of those being federally funded positions in our Unemployment Insurance and workforce development divisions and our administrative Service office that are therefore readily available to ramp up hiring children.

Should the Federal government provide funding in the case of a significant economic downturn or Crisis like the COVID 19 emergency? Our big ticket item is the DCD Electronic Case Management System Support Maintenance and Operations budget.

We're requesting 2.9 million for fiscal year 2026 to Fund the maintenance and operations of our electronic gateway management System with associated licenses and cloud services. The budget request ensures that the state's secured infrastructure environment is properly maintained and licensed.

The funding provides the means for injured workers, employers, attorneys and physicians to electronically file and access workers compensation and temporary disability cases in a secured cloud environment. The system supports the Department's mission to increase economic security through efficient online filings and timely benefit payments. The system went live in December 2022 with project enhancements completed in December 2024.

To date we've invested $16.7 million and we're also requesting the restoration of two enforcement specialist positions, one on Oahu and one in Hilo. This position support Administration and enforcement of the workers compensation, temporary disability insurance and prepaid healthcare laws.

Since 2009, the investigation section has lost two enforcement specialist positions on Oahu and three enforcement specialist positions on the neighbor islands. The total number of investigators Statewide decreased from 11 to 6, or a 45% decline in investigation.

Investigating Investigation Staffing the staffing shortage was further exacerbated by the acquisition of the responsibility for DCD to process applications for certificates of compliance for Hawaii Compliance Express. Currently the Investigative the Investigation sections processes 4200 HCE requests per month, especially as many entities now use HCE for other non government purpose like confirmation of business, businesses, insurance and licensing.

Restoring these two positions will provide more meaningful Administration of DCD's laws, help DCDs stay up to date on Hawaii Compliance Express certificates, and increase collection efforts for overpayment and penalties. We're also requesting two human resources specialists to implement the Holo Delegation and Act 186. We currently have 73 designated classes of work delegated by D Herd.

The Recruitment and Examination section of the HR Staff Office that is currently staffed with one HR specialist poor is swapped with requests for recruitment activities. The assumption of additional work by existing staff has created a tremendous backlog.

As a result, the catch up work has been severely curtailing the current HR staff from providing much needed and timely assistance to program administrators and staff.

Two new HR specialists for positions will provide the necessary professional assistance needed to address the backlog and allow the HR staff to provide more timely assistance to the programs and then two labor enforcement specialists for Standards Division in the Compliance Branch there is a continuous backlog of Chapter 104 hrs prevailing wage cases.

The two additional investigators will initially focus on minimum wage, overtime and unpaid wage cases which will allow higher level labor law enforcement specialists to exclusively investigate and catch up on the backlog of Chapter 104 prevailing wage cases.

The additional positions will also provide for a more strategic enforcement program by conducting focused industry compliance checks and for our Office of Community Services for the Immigrant Services and Access Unit, we're requesting two positions to expand the Immigration Resource Centers to provide more direct client assistance.

Act 207 SLH 2024 provided funding for two FTEs to OCS to create an Immigrant Services and Access Unit within its staff, one program staff and one fiscal stab. The Bill also appropriated $12,000 in operation funds and $300,000 in program funds to expand the OCS Immigration Resource Centers.

However, the funding is limited to the appropriation made by the act and non recurring. OCS believes that this budget request is essential for OCS to comply with and promise one of the key statutory mandates and goals that the Legislature prescribed for OCS when it created OCS by Law HRS Chapter 371K in 1985.

OCS was created by consolidating several state agencies, including in particular the State Immigrant Services center, among other responsibilities. Hrs 371k31 directs OCS Executive Director to serve as the official principal official in state government responsible for the coordination of programs for the needy, poor and disadvantaged persons, refugees and immigrants.

On the National Dislocated Worker grant up to 21 million in workforce innovation and Opportunity act funds to provide disaster relief, employment and training activities to minimize the employment and economic impact of disasters.

We contracted with Maui Economic opportunity to provide 300 jobs that may last up to a year or longer, with extensions that are currently focused on assisting with humanitarian assistance. Thank you for the opportunity to appear before you today and we'll be glad to take any questions. Thank you very much.

Members will open up to questions.

Thank you Director. Thanks for being here. Happy New Year to all of you. Your Hayash Section I know for a while Kauai hasn't had an office. Are you still Servicing our island through just personnel from here.

Yes, yes, still, still yet.

So potentially not going to put a person there on island.

Let me ask our acting administrator to Ellen.

Morning.

Yes. Currently we are staffing Kauai with inspectors from Honolulu. Currently we do not have plans to open the Kauai position. The problem with that is we would need someone at the journeyman level to do so. Someone who's going to be independent and work independently.

And currently we don't have anybody at that level or who is willing to move over to Kaua'I at this time. It is a little bit harder to fill those positions, the neighbor island positions, because like I said, it does require a lot of training.

We, we did have somebody who was working from Honolulu, flew in from Kauai and they stayed and then with the intention of moving them to Kauai to fill that position. But that person has since left the division.

I had heard about that. I'm just worried because I'm not sure if there's enough inspections going on on Kauai and you know, pending a disaster. I hate to see that we have to be reactive and not probably. But thank you. Thanks for your answer.

Just a quick follow up to that. You know, when we don't comply and there have been cases where the step, the, where the Fed step in. Are we in danger of anything like that if Kauai does have a problem?

No, we are, we do have guidelines to which we must follow to which we must respond by and we are meeting those guidelines. And so we are not through our quarterly meetings with the Federal Government. We're not in jeopardy of anything like that.

Okay, thank you. Okay, thank you very much. Further questions, Representative, followed by Chair Sayama.

Thank you. Chair. I wanted to ask some of our federal funding for some of the programs we provide through dlir, like programs for refugees and also food assistance program. Within you Administration, do you see or have you have conversations with other folks from the continent in regards to what might happen to this funding in the next Administration?

Yeah, we do. We know that, you know, the President will be sworn in on January 20th and we've seen in the past, you know, that after the swearing in, you know, sooner or later comes the swearing ad and you know, he may, you know, change some of the, you know, the funding.

But until we, so yeah, we, we've been talking with our counterparts from other states follow up.

So have you heard of like you don't know if it's going to decrease or some of these programs will increase or change?

When we had the Meeting, you know, with some of our congressional delegations before even the election, they were already saying it either going to be flat or even decrease if, you know, if the House were to stay with the Republicans and you know, the Administration were going to be the same, you know, for non defense spending.

So I mean with the, you know, with everything, with, you know, with the Republicans now with the, you know, the Administration, the Senate and the House, I think there could be, but I don't want to speculate.

Thank you, Chair Sayama.

Thank you, Chair. I just wanted to follow up with, regarding the compliance issues, specifically with your request for the two enforcement specialists positions on Oahu and Hilo. You mentioned that there has been a substantial decrease in these positions, I suppose since 2009. You noted that delinquency rates on the Big island would increase.

I'm curious, what are the delinquency rates currently across various jurisdictions, including the Big.

Island, to ensure I get both the, you know, the facts and the nuances. Right. So let me, let me ask Joanne Piddenhar, she's our administrator for dcd.

Thank you for that question. Yes, our compliance was generally about 20% and it's up in up to 40% right now.

That's across the state.

On the Big Island. On the Big island across the state, we're looking at an average of 33%.

Okay, thank you. I'm just curious, is that in context a substantial improvement or is there a little bit more room for, I guess.

Improved compliance across various, put into place certain improvement plans? Part of it is having the records available. And so our modernization project really had helped with that, with automation. But we really need to have the staff. Before in 2009, we used to do active audits. So we'd go and do investigations, excuse me, at the job sites.

But because we don't have the staff to do that, we're not going out and doing these site visits. So there can be improvement, but we need to have the staff to be able to do that.

Understood, thank you. I do want to move on to another, the budget request regarding the two labor law enforcement specialists to address the backlog, the labor law complaints. I'm just curious, what is, you know, how many cases does this division or branch process in a year and what, how many, how much is the backlog?

Right now the backlog is 6065. Backlog.

Sorry, was that 65?

65. And there's 65 cases that are more than 360 days, three cases more than 180 days and eight cases less than 90 days. So there's a. There's.

Okay. And to give again some context, how much cases do you guys process on this matter in a year?

Yeah, well, yeah, let me get back with you on that.

Good morning, Chair, Vice Chair Members. Peter Lee for Wage Standards Division. If it's okay with you, we'll get back to you on that specific answer.

Yeah, I appreciate that. Thank you.

Okay.

I'm curious, regards to the federal funding on the National Dislocated Workers Grants, is it correct that Dir was awarded about 10.6 million in federal funds through Quest and that this was, I think extended? Right. If you could talk a little bit on that.

Yeah, we. It was 21 million and then, you know, with the, you know, and it's provided in increments, so we added for additional. And so we're requesting for additional funding and we expect to, you know, get the full amount of the funding. So, you know, so we're going to have the contract modified. So but we.

Yeah, they give you the money in increments. I think it's in thirds.

Okay. And is there any deadline for the Department to spend this federal funding by.

Good morning, Chair, Vice Chair and Members of the Committee may Carpilitan Freitas. So the National Dislocated Worker Grants are provided to each state to assist with disaster cleanup and humanitarian efforts. So it's funded in incremental phases.

They give you the initial allotment and based on the need, if you're going to be running out, then you can ask for more. So our current Grant ends on September 302020. 25.

Okay, thank you. And is there an expected to be for that to be extended or do you have a plan to spend, you know, all that money by the deadline?

We anticipate spending all the funds by September 30th. If additional services are needed beyond that point, then we will be be seeking extension from usdol. But we need to justify the need for the state and it's not a automatic allocation.

Appreciate the response. Thank you.

Thank you, Chair.

My apologies. A few more questions. Thank you. I just wanted to move on to the Halemua program and here it's a relatively successful program. But I just wanted to clarify, did you mention that there was a.516 interns placed in FY24?

No, not. That's for the total since its inception.

Ah, I see. And so I think in FY24 you had 293 participants placed. Does the Department track, you know, where these interns are? You know, move on to after the internship is completed.

Yes, we do track which agencies they're placed and which agencies hire them after their internship program. As you're aware, there's also that loan repayment. So we need to track the continuous employment of these interns if they're working five years from the inception of their placement.

I see. And are all participants, you know, fully employed or is that up to the department's discretion to employ them or not?

With the regular Hale IMUA program, we still need to follow the civil service process. So some agencies have the flexibility to hire them on the spot because they have positions that are available for non civil service type of appointments.

But after the interns are placed, we encourage them and we work with Department of Human Resources Development to encourage the interns to apply through their NEOGOV system and they go through the whole process to becoming a civil servant like everyone else.

Okay, thank you for the clarification. I think it's a great program. Hopefully continue it. Finally, I just wanted to touch upon the Workforce Development Council regarding their Administration of the Workforce and Innovation Opportunity act grants.

I was hoping if maybe someone could talk a little bit about, you know, how that's been administered, the progress and perhaps results from this grant program.

Well, for, you know, several months now, we've, you know, our. The Executive Director, you know, Bennett Misalucha, administrator for WDD Deputy Director and the aso. They've been meeting regularly to, you know, discuss and delineate all of the roles and responsibilities associated with the.

Okay. And is there any budget increases in this or requests to increase the budget for the Workforce Development Council for fiscal years 26 and 27?

They get a lot of substantial funding, less, you know.

Okay, thank you for the clarification. All right, no further questions.

Chair, thank you very much. Further questions. Members.

Hi. Morning, Director. I just have a quick question about the federal funds that you identified in your initial. The first part of the testimony that you were just flagging as potential areas of reduction. So some of these have, you know, the anticipated amounts that, you know, that we receive and we're expecting, but not all of them do.

It's like the first two, I guess, for example, the hioche what the reduction of the, the 3% or whatever that had to be covered. What is that in dollars? And I guess if we don't have it, if maybe we could get it sent to the Committee.

I think the first two don't have any, you know, anticipated dollars that we would have to cover if we.

We'll get back with you on that. Rep. I mean usually the, the amount on the federal funds are. Those are ceiling.

Okay.

Those are sealing.

Okay. So maybe I guess at least the amount that you guys had to cover for the last one and then because it says that covered the federal shortfalls and then it still hasn't gone back up, I guess just what that dollar amount was.

We'll get back with you.

Thank you. My apologies. If I could. Yeah, please. Following Vice Chair's question actually regarding the Unemployment Insurance, I think you noted here that significant cuts to this grant would require reliance on other funding sources such as Special Unemployment Insurance Administration Fund.

I'm just curious how much is in this particular Fund and I realize this is a hypothetical reduction and so I'm just curious, is there enough money in this Fund to sufficiently replace any reduction in federal funding?

Good morning Chair, Vice Chair, Members of the Committee. Anne Pereira Eustachio, Unemployment Insurance Administrator we have not had the requirement to touch this Fund as of yet. Currently all of our above base funding has covered regular UI operations and any of the pandemic related workload has been covered by ARPA funds.

And so we haven't really had to touch the state unemployment special Fund. And we do anticipate this new coming year since we no longer have any ARPA funds to supplement our regular UI operations that we will be touching that Fund.

We are in the upwards of $10 million in that Fund we currently are receiving for this new federal fiscal year. A little over 15 million for total UI operations in Hawaii.

So assuming those numbers, you'd be Approximately touching what, $5 million of the 10?

I would say that would be a good estimate. Correct.

And is it the state that replenishes this particular Fund?

It's collections from delinquencies from Unemployment Insurance.

So it's employers who have been delinquent on their payments. We collect penalty and interest and that's where the funds go to that Fund.

I see.

Okay, thank you.

Thank you.

Can I follow up on that? So the right. Whenever there's, and especially you know, during the pandemic there was a ramp up and then the funds you needed to ramp up quickly is an issue. Do you have plans to like address that going forward?

Funds to pay Unemployment Insurance benefits?

Well, you know, not the benefits but just to run the operations to ramp up your labor force. Right. It's because the money is delayed. Right. That you get help from the feds from.

That's correct.

So do you have a plan like if something like that happens again, how would you ramp up?

Our plan is to use the Special Fund account to help us supplement any budget shortfalls.

Okay. And then that should be adequate to like ramp up. And then in the meantime, until the feds actually come in to help you.

We would hope so. So 10 million is not going to go far. Right. Especially if we continue to use some of those funds for this new federal fiscal year. We are anticipating a shortfall in what we are going to be receiving from U.S.

Department of labor, not just because of the new Administration, but we've already been cut 50% on the dollar from US Department of Labor this past federal fiscal year. So we have a base budget and then depending on workload, we get above base dollars.

Normally we're supposed to get dollar for dollar on those earned dollars, but we were cut 50% for the whole federal fiscal year of last year, which already had an impact.

I think that's always been your challenge that you know, or the state's challenge. Right. Is the better we do at unemployment, which is good. Right. But at the same time then you have a reduction in revenue. Correct. So and then it's difficult to ramp up if something happens.

That's why I bring up is because I've always thought that we have to start thinking about something else than the current mechanism. Right. So that's why I asked if there.

Is any thought the only other way chair would be would to have a supplemental Fund over and above the penalty and interest funding to kick in if something were to happen.

You know, and you know, Members, we always talk about our Reserve funds and all these kind of different things that we, some people criticize how much we carry in reserves in our General Fund reserves.

But it's sometimes, you know, the rainy day funds and things like that, sometimes to address this kind of issue, we need to carry those large. So I'm firm believer that we still need to continue growing our reserves there to address things like this. I agree. Yeah. Thank you. Thank you Members for any further questions. Really. Okay.

You know, okay. I think speaking of adequate Reserve for ui. So going forward, are you going to do anything to address. Because right now it's. It's a one year Reserve and then in the past it was a 1.5 Reserve and then, you know, the Legislature changed it, which was a mistake. But then.

So going forward, are you going to be addressing that?

We had a legislative proposal.

Okay, okay.

Precisely 11.5.

So I think, you know, if you do that, if you could share with the Committee the impact into the schedule going forward and then if there is a strategy to kind of help. You. Know, ramp it up so that it's a comfortable type of increase to the employers and things like that.

So we'd like to see those numbers.

Thank you for that. We did do an estimate already of what those figures would look like if we increased it from 1% of the highest benefit cost rate to 1.5% on an annual basis starting in 2026. And we do have some pretty good figures.

Do you have numbers where, like if you ramped it up for maybe to one and a quarter for a period of time and then to one and a half?

We also did that 1.25% as well. Yes. Incremental increase.

Okay. Thank you very much.

Thank you.

Any further questions? Okay. Thank you very much. Thank you for coming. And Members will be in recess. Thank you.

[In Recess].

Okay, we're going to reconvene the Committee on Finance, continue our informational briefing. Next up is the Department of Commerce and Consumer Affairs. Morning.

Aloha and Happy New Year, Chair, Vice Chair, Members of the House Committee on Finance; also noting the presence of CPC Chair Matayoshi this morning as well. I'm Nadine Ando. I'm the Director of the DCCA, and I'm here with members of the department relating to DCCA's budget request for the fiscal biennium 2025 to 2027.

We appreciate this opportunity to come before you as you consider our budget request, and thank you for taking the time to review our request and related submissions. We are here to briefly summarize what is in our budget request and to answer any questions members of the committee may have for us.

So in that regard, I'd like to start by introducing members of the Department who are here today. First off, Dean Hazama, the Deputy Director of the Department, Will Nhieu, Communications Officer, Kyle Ladao, our Legislative Coordinator, Michael Wun, our Business Management Officer, Jayson Horiuchi, Program Administrator for Hawaii PostSecondary Education Authorization Program.

Ty Nohara, the Commissioner of Securities in the Business Registration Division, Randy Leong, Administrator for Cable Television Division, Mike Angelo, Consumer Advocate for the Division of Consumer Advocacy, Dwight Young, the Financial Institutions Commissioner, Bryan Kodama, Information Systems Manager of the Information Systems Division, Jerry Bump, who is here as the Chief Deputy Insurance Commissioner for the Insurance Division, Denise Balanay, Senior Hearings Officer in the Office of Administrative Hearings.

Thomas Mana Moriarty, Executive Director of the Office of Consumer Protection, Esther Brown, Compliance and Enforcement Officer with Regulated Industries Complaints Office, Leo Asuncion, Chair of the PUC, and Jodi Endo Chai, who is the Executive Officer of the PUC.

So very briefly, I'm just going to summarize on Table 6 of your packet consists of our budget request items, but just for an introduction--and I know many of you on the committee are new to the Legislature and new to this committee--so as noted in our written testimony and our submissions, all our requests are ceiling increases for the use of special funds. And just for background, the DCCA's funding source is unique among departments as its programs and operations are specially funded by its own revenue generation.

That said, the DCCA is mindful of the Legislature's fiscal oversight of DCCA's funding and seeks legislative approval of requested ceiling increases to expand our department's special funds to meet operational needs and to make improvements in support of the mission to provide important commerce and consumer related services to the public.

So I don't know if you want to just move into--I can just briefly go over what's on Table Six, but the first item on our Table Six is the ceiling increase of $12M to complete the King Kalakaua Building Roof Project. That is the building that houses the majority of the offices and employees of the department.

You might know it as the old post office building downtown, but we are in--basically 75% of that building is occupied by the DCCA. Some years ago there was some rain damage and other water infiltration problems. It was determined that we needed to fix the roof, and because of that, a few years ago we came in and requested a ceiling increase of almost $21M to be able to do this roof repair. It's a historic building built in 1913, and because of that it's designated as historic. We needed to comply with certain requirements in in order to do the repairs.

Since we started in earnest on getting the construction of this roof project underway last year, the beginning of 2024, there were discovered additional structural deterioration and exterior damage to areas that were causing water intrusion, and once that happened, then the contractor alerted us to the that there was going to be additional work needed to be able to complete this project. So that is the explanation for why we're asking for a ceiling increase this year of $12M to complete the roof.

On Table Six, there are other--if I'm going to follow it in that way, maybe that makes the most sense--the first item after the roof repair is an additional position for an auditor position for the PUC, and that is to address significant increases in utility rate cases.

And you'll see that as a request for as set forth under the table of that amount. Then the next item is also a PUC request that is $1M for other current expenses to address requests that include corporate restructuring, reorganization of control, change of control, evaluating the Hawaii electric grid effects, etcetera.

These are all related to--and we just generally describe them as Maui Wildfire consultant costs. So in response to the issues that are pending, still pending with regard to the Maui Wildfire and the utilities, this is additional money needed for hiring of a consultant to help with these issues.

There's also--relatedly, the next item is a ceiling increase for the Division of Consumer Advocacy. Similarly for consultant costs, this would be a $900,000 expense and one time. It's a one-time expense to be able to hire consultants, to be able to acquire additional expertise and supplemental resources, to review, analyze, and make recommendations on filings and plans submitted by the regulated industries related to the Maui Wildfire.

So similar to what was being requested for the PUC on consultants, and then because of the way the funding of the Consumer Advocacy Division is done, we asked for a matching special fund ceiling increase for the PUC to cover the DCA Division of Consumer Advocacy consulting costs, and that's another 900,000 ceiling increase on the PUC side.

Then the next item on our Table Six is we have a salary differential of roughly $33,000 because we needed to add to our ceiling to pay for the transfer of a position from one division to another. In this case, it's a position for the consumer--I'm sorry--for the Consumer Protection Division investigator position there.

Next item on Table Six is a PUC request for a position and funding for an additional Engineer V position, and you'll see that on your table. The next item is for the Captive Insurance Branch of our insurance division. This is funding needed to--basically it's IT enhancement.

It's for an increased operational cost relating to modernization of its processes to create a more efficient business environment and attract more captive insurers to the state. This indicates where the request here is to be able to fund this IT modernization project for the branch because otherwise, at this point, as the table indicates, we are looking at improving efficiencies and processes because these are being performed manually at the current time.

And it's just--it needs to be brought up to speed so that--and I have the Insurance Division Deputy Chief Deputy as well as the Captive Insurance Branch Chief here in case there are any specific questions about why this amount is being requested for that project. Then the next item is related to the medical compact that was passed several years ago.

This allows through the state's participation in the medical compact for medical doctors, professionals, to be allowed to--as long as they're part of a, they have license in another compact--state allows them to come into the state to practice medicine here without going through our application process under our Professional and Vocational Licensing Division.

However, in order to kind of stand up aspects of that transition to implement the medical compact, there is an additional cost that we're asking for of $25,000. After that, the rest of what's on Table Six are all fringe benefits for the various divisions, increased ceiling to pay for those increased fringe costs.

So that's something that I think comes up probably every year that we need to match and increase our ceiling to be able to pay the fringe. And the last three are increasing our ceiling for our central services assessment payment to the state General Fund, because if we project, you know, we may have--because it's a percentage and in case our revenues go past a certain amount that has been budgeted for, then we need to be able to have our ceiling increase in place so that we can pay into the state General Fund based on our percentage. So that is pretty much it. Any questions?

Thank you very much. Okay, thank you. Members, we'll open up to questions. Okay, Vice Chair.

Hi. Morning, Director. Very happy to see Medical Licensure Compact on here. I know that was a big priority for industry two years ago when we passed it. Sorry, so the $25,000 for the startup costs, that's to do what? Where are we on? I guess, starting to accept licenses, yeah.

Okay, that I understand--right. I think that--and I'm trying to find the detail on that--I think that had to do with sort of doing certain aspects like the criminal background checks.

So as far as implementing the, the compact, we are ready to go. The funding request is to actually make some minor changes to the automated Hawala system that they have so that we can process those compact requests more efficiently through the system.

Okay, and sorry, you know, the system that you set up, what kind of data are we collecting from licensees who are, you know, applying to come to practice here through the Compact? Do you have any of that information? Because I think industry is going to also want to know, you know, where people are coming from.

I mean, I think there's a lot of data that we can gather because of, you know, like the national shortage in healthcare workers that we're seeing. If I could maybe--follow up you can sent to the committee.

License number, expiration date of the state of principal licensure, there's a ten-digit national provider identification number that each, I guess, physician has, the date of their medical degree, date they completed their residency, name of the qualifying exam that they took, name of their specialty board certification, and well, payment information.

Okay, thank you.

Chair Matayoshi?

Sorry. Was there a contact information as part of that requirement? Did I miss that? It's my fault if I did.

As far as their name and address and things like that.

So there is name and address and...

Yeah. Yeah.

Like email or phone number or something like that to contact them in case of a violation. Okay, thank you. I had a question on the $12M for the roof repair. From my understanding, DCCA is a--not the owner of the post office building, but a tenant. How long is the lease for that you guys are under?

There's no lease for that building. So what happened is because the building is co-occupied by both the federal government and the state, there's a private association that's set up. That association established basically an AOAO rules for--so there's no, there's no lease or timeframe.

The only thing that's in the agreement of sales is that if, I think, if the post office ever decides to vacate their premises or the state does, then either of the other parties has the first right of refusal for that remaining part of that building.

Okay.

So it's basically a co--like a co-ownership relationship and that's why there is no lease, but--so this amount is actually our portion of the funding for the roof. I mean, because it's one roof, right? And so this is our portion of it to pay for our portion and the postal service, U.S. Postal Service, is paying for the other portion.

Okay, then that makes more sense if it's in some kind of--almost like a condo regime kind of thing you guys are doing.

Yes. It is. It's an associate--AOAO. I mean that there's an AOAO for the King Kalakaua Building.

And I'm assuming the AOAO is the actual entity that would be effectuating the roof repairs? Is that right?

That is correct.

Okay, so you guys are paying 12--it's almost like a special assessment on you guys and the post office to pay a certain amount. Out of curiosity, how much of the post office paying? Is it proportionate per square foot or--

Approximately 28% of the total cost.

Of any kind of general repair for the building? Okay. I have a couple more questions here, but I don't want to--not my committee, so...

Proceed.

Okay, thank you. I noticed you've--so you've got a couple of physicians, Auditor V and an Engineer V--or, I'm sorry--Auditor V for the PUC. I've also been getting some complaints that the insurance rates, the processing for those insurance rates, raising insurance rates are going fairly slowly. Has there been any thought to increasing staffing on that too to make that process go quicker?

Are you talking about insurance rate increase requests or rate--

Yeah, I'm sorry. I'm not as familiar with the terminology, but from what I've been hearing from the industry, it seems like the applications to increase their--for the admitted carriers--to increase their rates have been going pretty slow too. I'm glad you guys are putting in more positions for the PUC side. Has there been any thought to do that for the insurance side as well?

Hi, Rep. Yeah--Madayoshi. I'm Jerry Bump, Deputy Insurance Commissioner. So we've had a couple retirements, we had some turnover, so there has been some delay. It's also difficult to find qualified people to do that type of work. We are trying to fill those vacancies as quickly as possible. We have postings on Indeed and other recruiting efforts.

There has been a push since the Commissioner Ito rejoined as Commissioner to try to expedite and get those, the backlog process, but--so at this time, we've looked internally; perhaps there could be some repositioning of from another branch to add a position. That's been discussed, but right now it's more of, you know, trying to fill the positions that are vacant in that area to begin with. So we're working through that.

If we can get all those positions filled and then there's still a need, then we would look at either submitting a request for an additional position or to reallocate another vacant position within our division.

How long have those positions been vacant for?

We have one for about a year and I think the other one was about a year as well. Some--one, civil service, so it takes a little bit of time to get the list and then interview and then--so one was filled internally, but then that created another vacancy. So it does take a little bit of time, unfortunately. And if you know anybody that wants to be a rate and policy analyst, please have them contact us.

No, I'm just laughing because last year's Labor Chair, we went through that whole thing too for lists and how long it takes, so I'm very sympathetic. I believe there are other programs that DHRD and others stood up to try to make that process a little faster. We could talk about that later, though.

That's neither here nor there right now. Okay, so you've had vacant positions for a year. That might be one of the reasons why the--so you don't need more positions, you just need to fill the ones you've got?

At this time, yes. That's the primary, I think. That, and then some of the rate filings themselves have been a lot more complex and there's been uncertain types of insurance that we do have rate authority over. Some of those increases, as you know, have been quite large, and so they require a lot more analysis to substantiate those increases to make sure they're not excessive or discriminatory.

We did also, another big change I guess I failed to mention was, we did get a consulting actuary under contract recently, and that has already started to show efforts in getting that backlog addressed. So there should be improvements that the industry should see on that front.

Okay. Thank you. For the Captive Insurance IT Project, it said in your report, too, but you also mentioned it just now, Director, that you're hoping to attract more captive insurance through this IT program, and I'm just wondering, how--will it make the application process more efficient? Is that how you're--or what is the appeal to this that would attract more captive insurers?

Yeah. So right now they basically have to apply manually, so we don't have, like, an online portal for them to efficiently apply and be able to attach and upload all the required documents.

Is that the bottleneck, though? I mean, is that the barrier to entry?

No, I mean, I think we can process it. We're keeping up with the applications. It's just that we feel that if we make things more efficient and easier for the captives to reapply and register, then possibly more captives will be willing to enter into our market.

Okay. And I'm all for, you know, automating things and modernizing, so I think this is a good project. I'm just wondering whether you think that more captives will actually--whether it'll actually move the needle for this. That was just an interesting claim made here and in your report that I--I'm not sure that's true. I'm wondering if you have any insight.

Good morning, everybody. Sorry, can you hear me? Good? Okay. So by creating a more efficient system, when you say move the needle, I'm not sure how much of the needle will be moved, but it will make Hawaii as a captive insurance domicile more attractive, the more modern and efficient we are.

I think something that's kind of unique, right, with captive insurance is that the companies that are forming these captive insurance companies, they come from all over the world, and they can, at this point, they can choose over 40 different states.

In the past, you know, Hawaii, we're one of the leading domiciles because we started our captive program in 1986. So we've been around for a really long time. But the past five to ten years, we've had a lot of different states enact captive insurance laws and also try to attract captive insurance companies to form in their states.

So I think when you think about different ideas and things that we can do, right, to modernize and make it more efficient from a regulatory standpoint, it's another kind of benefit, right, another plus that we can add when companies are considering where to form their captive insurance, like which state to form their captive insurance company in.

Okay, thank you.

Thanks.

I don't know if I should go--well, why don't we ask about the Maui Wildfires portion too. You're asking for quite a bit of money for a consultant, $1M for a consultant and then a $900,000 ceiling increase for the consultant's budget. Is that--for the $900,000, is that for an existing consultant?

Well, PUC is here and then Mike Angelo can explain their need.

Okay. Okay.

Yeah. In terms of the $1M request for the PUC, we've been tracking, right, the utilities and the like, and one of the things that is going to be coming in, in fact on Friday, is Hawaiian Electric's strategy that we need to--wildfire safety strategy that we would need to review and probably approve.

As you know, there was a bill last year, right, to take a look at, how we would review that bill and the contents of any type of plan coming in, right, that bill did not make it through the Legislature last year, but we provided--the Commission provided guidance to our utilities on what we would like to see in it.

And as a basis, we really looked at California, right, what California did after the fires back in 2017, 2018. They instituted in-law requirements that all of the utilities in California, so kind of mirrored that. But now we're getting to the point of we actually have to review those, and with that, I can tell you, California, when they set up that law, they actually set up a separate office of about 100 people employed just to review those plans, right. We don't have that expertise on staff. So that's why we need the consultant.

The other things that we might--that we foresee is whether or not there's going to be a change in structure, business structure of the utility, right. That still may happen, things are still up in the air, but we want to prepare for that as well.

So it's not like a one-time, like one consultant is going to do everything. This is a number of consultants depending on what comes first. But the first thing to come in is going to be the wildfire strategy, and then I believe two weeks later KIUC is required to turn in their wildfire mitigation plan and we would need to review that as well. In terms of the 900,000, I can let Mike Angelo speak to what they required, but--but it's that quirk in the budget that Director Ando mentioned, right?

Funding for the Division of Consumer Advocacy actually comes out of the PUC Special Fund. That's why on our side it looks like 1.9 million, but 900,000 will go to them and then the million is for us and it's the increase in spending ceiling.

The $1M, is that anticipated to be a kind of a one-time expenditure? Will it take more than a year for the consultants to review?

Yeah. So it'll probably be a multiyear contract with consultants, but it's a one-time, right? We're just asking, this is the estimate that we think we're going to spend in order to do the things we need to do around the wildfire.

Over the lifetime of the multiyear contract?

Yes.

Okay. Okay. Is there going to be some kind of--well, actually, never mind. We'll get to that later. I just have one other question.

I'm not sure if you want--

Would you want to hear from Consumer Advocates?

Oh, sure. Sure.

Morning, representatives. Our request is in line with the PUC, so the DCA is here to represent the consumers' interest. The Public Utilities Commission is provided their guidance to the utilities, the utilities are making these filings, and we'll review those filings. And we also need the expertise for the same reasons for the--to review the wildfire safety mitigation plans as well as to be prepared if there is some filing of some sort of restructuring for the utility.

This sort of like, group, are we paying consultants to review this thing twice just from two different angles? Is that what this is?

Well, we have different considerations, I would say. So the Public Utilities--we both represent public interest, to your point, but we're focused on consumer side and the Public Utilities Commission weighs the broader public interest aspects.

Will there be any coordination between these, these consultants at all or--it just feels, I mean, I understand it's coming at it from two different angles and I can appreciate that, but seems like a little bit of double work, doesn't it? They're the exact same plans getting reviewed. Is that...you might need to talk to the microphone more.

The Division of Consumer Advocacy is charged with a specific task which is to look out for the ratepayers and the consumers in dockets that are on file with the PUC. So just as others may be coming in and weighing in on their perspective on something that may be in front of the PUC to consider, the DCA will be doing the same thing. So we kind of have to keep the--in that sense, I mean the separation between what is submitted and, you know, know what is filed for--through DCA on these dockets that are pending with the PUC.

So it's a--it seems as if the relationship is a little, you know, there's this connection between them and yet there has to be some separation between them as well. That, I think, is why you can't really be looking at--if you think in terms of a semi-litigation mode, you know, you can't sort of have the same expert, you know, who, consultant you're hiring, be the same one that is also advising the decision-maker, in this case the PUC. So it's a little bit of a difference in terms of the way things are set up between the two, the division and the agency.

Okay, that makes sense. Thank you.

Just real quickly, members, just so you know, this isn't something totally new. This is something that we tried to address last year in Senate Bill 3068 and there was an appropriation for $1M in 900, so--but unfortunately there was some technical problems with 3068 so it was vetoed by the Governor. But this isn't new.

I just have one more question and this is a little related to the captive insurer idea. Well, maybe it's not; maybe I shouldn't even link it. Admitted carriers, I know we don't--condo insurance is going to be coming up a lot during this session. Right now we don't have very many admitted carriers writing policies here. What is the DCCA doing in order to attract more admitted carriers into our market for condos, but I'll broaden it to kind of generally, real property insurance?

Thank you for the question. Obviously, we're trying to create a regulatory environment that will attract them. Additionally, you know, the Commissioner himself is, you know, looking to try to see if there are other insurers who write--let me, let me back up a second.

The big part of the crisis right now is related to hurricane insurance, as you're aware, and so we need to find other carriers who are willing to write hurricane insurance on condominium master policies. It's very specific to that.

So there are other carriers who write--that don't write in our state that write perhaps in other Gulf states or Florida that perhaps, you know, we can attract them to come to Hawaii, diversify their risk portfolio, but right now, you know, it's--we don't have any other, like statutory incentives.

There's no tax breaks or anything of that nature for them to come and set up in Hawaii. Obviously, you touched on the rate filing issue, so we would want to, you know, if we can attract those companies--which we've done for hurricane. There has been a--maybe not on the condominium side, but on the homeowner side, there's been a few new carriers who have come in.

We've tried to expedite their application to write and to get their rate filings processed because we know that that's still a big need on the homeowner's side as well. So just internally, you know, we're very aware of the availability crisis and we're trying to do anything we can to attract those companies.

That did kind of confuse me because you, you're asking for more money for a captive insurance IT project with the stated intent to attract more people into it, but yet we have this insurance--we have a lot of slowdown in the insurance rate-paying side and I'm assuming the application process side too, which theoretically, if you did it faster, would also have the same attractive effect of other travelers, Hartford, Progressive, some other companies coming here, right?

The Insurance Division itself did--so separate from our captive branch because they have a separate set of needs--the Insurance Division already went through an IT project and we just went live--I would think it's about 15 months ago--on that new system. That system is also utilized by 35 other state insurance regulatory entities.

So it's very well-known, it's very easy to use, and it's gone very smooth. So there's no barrier there per se of if insurers want to come and operate in the state. They're pretty familiar with utilizing that system.

And you mentioned statutory, there's no statutory incentives. Do you have any statutory incentives to suggest that might attract more admitted carriers to Hawaii? Because we're such a small market. I mean, I understand, you know, spreading risk for--it's just, we're so small compared to Texas, Florida, those kinds of things.

Do we need some kind of initial setup incentive, some kind of--I mean, I'm not sure we need an ongoing basis one, but what are the barriers to entries that you see when talking to these people or talking to these companies that might attract more admitted carriers here?

Yeah, I'm not sure. We maybe can get back to you on that. I can talk to the Commissioner. Maybe he's had discussions with certain carriers on what they see as the barriers. Some could just be they're not familiar with doing business in our state, the isolation from the mainland or, you know, the location of where they typically operate.

We do have--I think there's a premium tax incentive for companies who on certain lines of insurance, if they actually have employees here and operate here. So there is a precedent for creating certain, maybe a tax credit. I think it was like a 1% tax credit off of their 4% normal premium tax rate. So there is a precedent for creating incentives, but there's nothing that exists on the property insurance side that I'm aware of that would be enough of an incentive to start writing in Hawaii.

What are other states doing to attract these--are there--is there a model we can follow for other smaller states to attract more admitted carriers for these kinds of things?

Well, not as many states have the large condo population that Hawaii does, especially on the smaller sides--states. Every state is going through this same type of crisis, though. Even more so, you know, on the homeowners' side. Fortunately, we're okay at the moment, but on the condo side, you know, prime example is Florida and California and, you know, they're having the same issue.

I think what the, one of the big barriers is, most of the carriers, in order to issue this type of coverage on these buildings that are worth multimillions of dollars is they utilize what's called a reinsurer, and those reinsurance rates have skyrocketed.

And so I think that's really where the access to capital is, and their willingness to write, they have to have a reinsurer who's willing to also back them coming into the Hawaii market, and I think that's where it also gets tough. And it's not an easy answer, it's actually quite complex but--

Yeah, that's fair. And I know 2024 was a pretty good year for reinsurance, but with the California fires happening right now, do you anticipate 2025 being a rougher year? So, I mean--

I mean, even 2024 was, it was a good year for reinsurance because they were charging more, but it still wasn't necessarily a good year for disaster payouts, right? I mean, we had the hurricanes and wildfires and tornadoes and other things, and so we don't know, you know, we don't have a crystal ball and know exactly what's going to take place in 2025, but yeah, we're not off to a good start, especially with what's going on in California right now.

Okay. Has your division or others at DCCA been in contact with the Hartfords, the Progressives out there to try to get them--I mean, I'm wondering if there's any communication right now or if we're just kind of guessing what they might want or might need.

I would have to get back to you on that. I'm not sure which carriers Commissioner Ido has contacted or, you know, what discussions he's had. I know...yeah. So I'd have to get back to you on that.

By total coincidence, we are also meeting with you folks later this afternoon, so hopefully we can follow up at that time. Okay, thank you. Thank you, Chair.

Okay, thank you. Further questions, members? Okay, thank you very much. We appreciate you coming in, and we look forward to working with you. So, members, we are adjourned. We are in recess till 1:30.

We're going to reconvene the Committee on Finance to continue our informational briefing. Next we have the pleasure of having our Lieutenant Governor.

Good afternoon. Good afternoon, Chair, and happy New Year to the Members. I just wanted to say, you know, this is always one of the favorite things I want to do because you know, I've been on the other side and you know, it's almost like coming home. So congratulations to the newly elected representatives.

It's kind of a remarkable time for the House because just knowing that half of your membership have been elected basically two years and this year or last year, you know, that provides different type of insights at the same time. You know, it provides different opportunities. So congratulations to everyone.

And Finance Committee, the Chair will tell you the Finance Committee is really important in that you get to see so many different aspects of issues and this is a really great opportunity for you to gain knowledge.

And you folks have a really great leadership team in both the Chair and the Vice Chair, new Vice Chair and CIP Chair. So thank you for being here today. Let me just start by just introducing my staff. So I'm Sylvia Luke. I'm the Lieutenant Governor for the State of Hawaii.

And on my right I have Chief of Staff Riley Fujisaki. Riley Fujisaki was also my budget chief when I was Finance Chair. Along with that I have the Deputy Chief of Staff, Staff Julie Yang. Michelle Kurihara Klein is my senior advisor back. Alyssa is my ASO Comms Director is Sherry Nishijima Kaleo Chang is External Affairs.

Sunshine Che will be the person who will interface doing lot of the public services like apostles and name change. So that's Sunshine Aldrich is my policy Director. Aldrich and Jared, who is also in the policy office have also have finance background. So please reach out to any of these individuals.

They bring in significant amount of both legislative experience and experience in my office. So please feel free to reach out to any one of these individuals. Thanks to the generosity of the Legislature, I don't have any budget requests or new budget requests. We are fortunate that we have been assigned some significant roles with your indulgence.

If I could just quickly go through some of the things that our office has been doing. Slides we're awaiting and you have the slides in your testimony. So I'm not going to go and read through every one of the slides. You can do that at your leisure.

And at the same time, if you have any questions about specific things, please reach out to me or any of my staff. Our office has several statutory functions and the one that we know is name change and name change in 2024. It will give you some perspective, historical perspective from 2020.

It has been pretty consistent over the years.

And the reason why a lot of folks come to our office for name change is because either you know, when you were bor the revitalization of Hawaiian language and a lot of individuals are taking closer look at their lineage and heritage and sometimes the okina is wrong or it was misspelled and that could be an opportunity.

Another thing is real ID. The Federal Government has a requirement that all your documents have to be aligned, especially for travel. And they've noticed that some people have noticed that their passports may not be the same as your driver's license.

And we anticipate a rise on name changes because in May of 2025 that's when all the changes will go into effect. The next thing is aposto and certification. And some people might think, zero, what is this apostille and certification?

And aposto and certification is for instance, if you want to do business in a foreign country or say that you went to secondary education here, University system and you want to go back home and they want to make sure that your University of Hawaii degree was legitimate, you come to our office and we will certify that the document that you have is a legitimate state document.

And that one, you can see that it has increased over the years. And I think it's because probably during COVID a lot of the travel has decreased. And so from 2022 you see a stark increase.

The thing about both the name change and certification is that Sunshine has done a terrific job to push a lot of these programs or services online. So name changes, you don't even have to fill out a paper form. You can do it online. And this year we successfully, successfully launch name changes for minors.

So now before both parents had to come in and then verify, now you can do everything online. So even for these type of statutory functions, we're always trying to see how we can modernize and how we can make it more user friendly for our consumer. So that highlights some of our statutory functions.

In addition to that, we have policy initiatives. As you know, thanks to the legislation, the Ready KK was really born out of the Legislature. It was not born out of the Executive branch. This is something that the legislative leaders work really hard to ensure that our 3 and 4 year olds have access to pre K.

And this has been something that CIP chair and many others have fought really long and hard for. So I'm grateful to continue the Vision and the work that was grown out of the Legislature so Ready KK initiative after we launched it two years ago, this is just by the numbers. We're going to skip that.

We have successfully opened in the last two years over 50, close to 60 new classrooms. Audrey said yes. So in the first year, 13 new classrooms. In the second year, 44 new classrooms. And this is now providing so many more opportunities for our kids. Just kind of as an anecdote, we open a pre K classroom in Nanakuli.

And when we did that, there was a parent who said the child was wait listed at Kamehameha Schools. And so because of that, the auntie or grandma was watching her son and she just didn't know what to do.

And she said, you know, she was just kind of thinking about, okay, whether I need to take a part time job because preschool is so important. And she thought that kind of socialization was so important for her child.

So when we were able to open Ananakuli Elementary Preschool, she thought, wow, you know, she never had a situation where you, you provide these free service for the kids and it's gonna help her family so much. So it's these type of anecdotal stories that inspire us to do more.

And thank you to many of you, Representative Lee and Representative Lama Sao, Representative Miyake, especially Representative Kitagawa and many others for joining us. When we open these classrooms, your participation, when we go and visit these schools, your participation in being there makes a huge difference.

So our office may call you again with your assistance as we open more preschool because the teachers appreciate it, the principals appreciate it, and just seeing these 3 and 4 year olds be able to take instructions and answer questions, it's just incredible.

And Representative Reyes Oda, you know, you being a teacher, I know you probably sympathize and have a lot of stories about that too. So we really appreciate the Legislature's cooperation when we call you. And then when we open one in your district, if you'd be willing to come and visit the school, that would be terrific.

So let us know. So we would like to continue to do that. We're going to go through the next slide. The Ready KK initiative is not a linear initiative.

What that means is when we take a look at opening preschool seats, we're not only opening public preschool, but we're also trying to support private preschools and private childcare facilities for lower income families. So because of that, again, thanks to the Legislature, you folks increased the preschool Pandora's funding from $12 million to $50 million.

And just by these numbers, you can see in the last year, several years when the funding was at $12 million, we were taking care of about 816 or 666 kids. But now with the increased amount of funding, we're now taking care of 2000 kids.

And 2000, that's basically 2000 families who are able to send their kids to a private childcare facility or private preschool. So this is all because of the funding that you committed, ensuring that you folks are helping to support our working families. So I just wanted to thank you for your commitment to helping our working families as well.

Everything that we do, One of the things I learn in the Legislature was that it's easy to just take on an initiative and say, hey, you know what, let's put more money in it and let's just open classrooms. What we learned was that we cannot just think about opening classrooms. We have to think about growing teachers.

We have to make sure that we have enough space, the facilities, and we have to have teachers. We have to have qualified teachers, qualified teachers assistants and all the support staff around it. So again, thanks to the Legislature, you folks funded what's known as a stipend program through the University of Hawaii.

The good news is 12 awardees have since completed their program. So now these are individuals who you directly have help by defraying their tuition at the University system. And now they're full fledged teachers and teachers assistants.

So it is very meaningful that, you know, it's one thing for you to dedicate or appropriate money, but it's to know that, hey, it's going to lead to something, it's really rewarding.

And this year, and I would like to invite some of you if you folks would like to attend, this is the first year where Kamehameha Schools and Chaminade, they've committed. How much did they commit? One point, I think 1.5 million.

They committed about $1.5 million and they were able to give up 50 free scholarship to Chamina for three years. This is the first year that the first cohort of classes will graduate. And that's super exciting. And the interesting thing is they only had 50 scholarships every year. 250 people applied clockwork every year.

So we're currently working with Kamehameha Schools and CHAMINA to see if we can do an extension of that program. Because one of the things that we want to make sure is that financial challenges will not be an impediment if people want to go into the work of teaching and teaching assistant.

I wanted to turn over to the next initiative. It's called Connect KKO and Connect KKO really is three things. It's about connection. So it's about being connected to Hawaii, connected to the world. The second thing is you can't just do it with connection. The second thing is devices.

During COVID one of the things that Department of Education with federal funds, what they did was they provided a lot of WI fi, pocket WI fi because, you know, we wanted to make sure that people had online access.

But one of the things that we learned coming out of COVID is you can give the connection, you can give the devices, but if you don't know how to turn on the computer and you don't know how to use it, then it's becomes a wasted, wasted investment. So Connect Kako depends and is working on all three things.

So when people ask you, zero, what is broadband? Just think of three things. It's connectivity, it's about devices and it's about know how it has to be all three things. We continue to be very thankful to the Federal Government.

The Federal Government, along with state match of 46 million, provided close to half $1.0 billion of investment into broadband and Connect Kako. If you take a look at the State of Hawaii, this is something that Sherry Yamashita has been working and has focused on over a decade ago.

When you look at broadband and our connection, even our phone system, it's because we're wired to the rest of the world. So this tells you some of the the undersea cable that is coming to the State of Hawaii. The darker lines are new systems that will be built in the next few years.

So this will give you some ideas of what's coming ahead. Kanakaku Initiative we try to engage with the public. A lot of times this is kind of a fun thing that you folks can do on your own time.

What we did was we work with the public charter school and DOE to see if the middle schoolers can take the speed test. Because how do we know people don't have a good system or devices? And we know that through testing people's speed.

So if we know in Naalehu, certain pockets have good connection, but certain pockets don't have any connection. How do we know that? So we ask middle schoolers and community Members to do a speed test. So if you do a quick speed test, even right now, you can scan that already aggregated. We're waiting for the result.

And from that result we will figure out a better way to deploy federal funds so you can take the speed Test now and then this is the download speed. The optimal Download speed is 100 megawatt. What is PS megabits per second? Upload speed is 20 megabytes per second. Certain areas are better and certain areas are not.

So sometimes, you know, you're going to be somewhere and you're going to think, okay, you know what, my computer is still loading. And then you just do a quick speed test and it'll tell you if it's, you know, if it's working or not.

In addition to our policy initiatives, we do a lot of collaborative work with the community or between departments. So these are some of the listing of some of the things that we've been working on.

For instance, working very closely with our AG partners, having a relationship with usda, we been focused a lot on workforce development because for our kids, I think the best way to help them is to pave the pathway and show them what's available to them. So these are some of the sampling of things that we're working on.

Of course, you know, we're always available to partner with any individuals or any legislators and work on issues. So I'm going to stop there and then turn back to you folks.

Okay, thank you very much. Yeah, you really don't have any budget as. But Members, if you have any questions for the Lieutenant Governor, informational briefings is the one area where we give a little more latitude in what you asked. So we'll open up the floor for questions.

Just one quick question. Thank you. You know, your Chaminade initiative, is there conditions attached to that, like do they have to stay in Hawaii or.

Let me see. I don't really recall the conditions, but I think there were some requirements. It's a, a partnership that Shaminade and Kamehameha Schools had. Yeah. But we can get back to you on that.

Thank you.

Okay, thank you.

Hey, thank you for the questions. Assembly Loy thank you.

Chair thank you, Lieutenant Governor. Happy New Year. Thank you for being here. I was just really curious about your preschool numbers and any data collection that you might have around the entering of children with special needs.

And I think about this because the development of that type of housing for them will probably take the time for them to age out of education and into a housing or housing ecosystem that supports them. So my question is, has the program, has this initiative collected any information around that?

We are still kind of in early stages. But, you know, one of the things that I am passionate about. Ready Keiki Is the impact of inclusion classroom. So for many, many years, the Department of Education has had special ed and special need classrooms for 3 and 4 year olds.

But of course they are separated from the gen ed and the regular education.

And so that I've always felt that for kind of equity and inclusion so that people, kids even at that age can learn from each other and have a better understanding is so important because even my son, when he was growing up, for you to be exposed to different cultures, different heritage, it's understanding differences that leads to better human and better experience as well.

So one of the things that many of the principals have said is the fact that we're opening a lot of classrooms, they're able to integrate and, and have inclusion classroom, which is really terrific. But one of the things that we do want to work on is a lot of data.

How do we ensure that inclusion classrooms and the services that we're providing will lead to something? So I think that's a really good question. So we will continue to work with you on that.

Yeah. And just in that same space, as you develop more partnerships and philanthropic dollars for stipends, for the education of the teachers, that component for education for our special needs community, for that inclusion piece, I think that I'm on board with this.

I mean, this is how we transform communities, but also transform the trajectory of our kids through this. Thank you so much. Thank you for your work.

No, and I know you've been working really hard on those issues as well. So thanks for being a champion. Thanks, Chair.

Okay, thank you for the questions. Members.

Thank you again for coming. Lt. Governor on that, piggybacking on that. We've talked a lot about other departments is data collection and understanding what our objectives are and how we're achieving them.

And I think an important component with preschool that's often sometimes glossed over, but it's like hugely important, is if you are able to shape that data to find out what did the parents do with their kid in school? Like was the mom able to resume a career or start one?

I think that's really important data collection point to collect as well. Because there's a huge economic benefit when half of our population can then resume their jobs or careers and you know, not interrupt or interrupt that trajectory as little as possible. So that would just be my input.

Yeah, no, that's a really good point. One of the things that the Department of Education, when the Legislature passed the 2020 law, which made the commitment to ensure that all 3 and 4 year olds have access to pre K, one of the things that you folks pass was a kindergarten assessment and the Kindergarten assessment.

The Department of Education has done a kindergarten assessment for the last two years. The unfortunate reality is when you take a look at that number, only 29% of our kids pass the kindergarten readiness assessment. So the kindergarten assessment, they test four things. They test, of course, language and math skills, but they also test social behavior.

And then the last thing is. No, I don't remember what that was. zero, yeah, physical development, because that's also important. And for us to have early intervention, to have different sets of eyes on kids, it's really, really, really important.

You know, I was talking to the Kapaa elementary principal, and she said the kids that went to her Pre K tested 100% ready. And so at a young age, to be labeled that early, when you're entering kindergarten and you're already labeled as ADHD sometimes or you're mislabeled, it impacts a child's life from that early on.

And, you know, it's through preschool, you're giving them confidence, you're giving them the ability to engage with each other. So preschools, you know, I mean, initially we believe it was educational readiness and equity issues, but it's touching so many other things. So that's why we continue to be very inspired and engaged in these initiatives that we're doing.

But thank you, representative.

Okay, thank you.

Further questions. Hey, Representative, can I make a comment or does it have to be a question? Okay. Please. Okay. Thank you. Hi. Thanks for coming. So I just wanted to share about preschool.

I am the mother of a special ed student, but also, you know, for my other kids, and I was a young mom, and they were diagnosed in the Department of Health 0 to 3 Program, which is how they got to be diagnosed much younger.

And with that, I was lucky to get them into the DOE special ed preschool. You know, in my early 20s, I probably was in a.

No, I was in a much different economic and academic situation that probably if I didn't have the DOE taking them in special ed, that it would be a different situation of me today, I probably won't be here.

And so for some parents, I think about that, how important the preschools that you're making, that their kids don't have to be special ed to be qualified in there. So please keep it up. Thank you.

Thank you. And you know, the early intervention services at Department of Health, over the years, they've been on the chopping block. So if, you know, we can continue to be on the lookout for that, because that's so important.

Even my son, he went through one of the testings only because the preschool thought that he was developing kind of slower than others. And so they were able to catch that. Hey, you know, no, he was actually extremely shy at that point.

If you meet them now, you know, you're not going to believe that, but, you know, it's. But in order to have that kind of services, it's so important.

So thank you for bringing your personal stories and your personal experience through this space, because that's how we learn from each other and how we can better serve other people who are in similar situations.

Okay. Thank you very. Thank you very much, Representative, for sharing. And thank you, as a side note, for asking if you can make a comment and not a question. You know what? Tell the guy that sits next to you that he's supposed to ask, too. But thank you very much, Members.

Any other questions or comments at this point? Okay. Governor, thank you very much for coming in. It's always good to have you here.

I actually miss working with you, but thank you very much. Thank you.

Thank you.

Thank you.

Thank you, Members, we're going to be in recess.

Okay, we're going to reconvene the Committee on Finance. Next is hhsc. You're going to start. Thank you.

Perfect. Good afternoon, Chair, vice chairs, Members of the Committee, good to see House Health Chair Takayama and Vice Chair here as well for our briefing today. So thank you for having us. We appreciate the opportunity to tell you about hhsc. I first did want to introduce Members of our team here that we have with us.

So I am Edward Chu. I'm the President and CEO of HHSC, which just means I'm a glorified janitor for the most part, but that's okay. Also with me are the regional CEOs and Members of their staff. So we have, first of all, Dan Brakeman. He's our east Hawaii region CEO.

We have Clayton Mcgann and Members of his staff. He's the West Hawaii region CEO. Also Lance Segawa, he's our Kauai region CEO. And we have from Oahu region, we have Derek Akiyoshi, who's the regional CEO, and Sean Sonata, who's the regional chief administrative officer and Members of their team.

We also have Kahuku Medical center, who will be doing their own testimony in front of you folks after I'm done. And we have Matt Mamizuka and his team here for that. And we also have Maui Health Systems, and they'll be doing their own testimony at the end as well. So thank you for that.

I just wanted to give for those Members that may not be entirely familiar with HHSC and how we're organized, just a sense of what we do and where we're located. So. So first off, we're basically the rural healthcare provider for the state and for underserved populations. So primarily we're a neighbor island system.

Most of our facilities are on Hawaii island or Kauai Island. And I'll obviously go through our Howard structures. So we have different regions. East Hawaii region is comprised of Hilo Benioff Medical center, which is the major acute facility on that side of the island. We also have Honoka'a newly renamed Honoka'a hospital and skilled nursing facility.

They take care of the Honaka'a area of the island. And we also have Kau Hospital in that region. So those are the three facilities. So that's the eastern half of Hawaii Island.

Then we have the western half of Hawaii island, which is Kona Community Hospital, which is a major acute facility there, and Kohala Hospital, which is a critical access hospital on the northern side of the island. So those are facilities run on Hawaii island, we also have associated clinics that are part of those regional systems as well.

And then for Kauai Island, we have two facilities there. Kauai Veterans Memorial Hospital in Waimea, which is on the west side. And then we have Samuel Mahelona Memorial Hospital, which is on the Kapaa side of the island. So we run those two facilities. They're both critical access hospitals, both doing very well at Oahu.

We have two facilities in the Oahu region. One is Leahi Hospital which is in Kaimuki, right by kcc. We have Malahia which is in the Liliha area up on the heights. Those are both long term care facilities primarily.

Leahi has a hospital in its name primarily because way back in the day, and there still are tuberculosis beds there, so it qualifies them as acute beds. So that's why they're named hospital. But the bulk of the business is long term care. And Koku is here as well.

The Koku Medical center is a critical access hospital located on the north shore of this island. And they have a separate program ID and they're a subsidiary of hhsc. Okay. So that's how we're organized.

Just to give you some background on us also, we are, although we are a state agency and we're also a corporate corporation, we are a pretty big player in the healthcare landscape of the State of Hawaii.

So our all combined, our acute care discharges are about represent about 13% of all the acute care discharge in the State of Hawaii. And our emergency Department visits are about 19% of all the emergency Department visits in the state. If you look at it by island, the percentages go even higher.

So for the County of Hawaii, we account for about 70% of all acute care discharges and about 81% of all emergency Department visits. County of Kauai, our facility represent about 22% of all acute care discharges and we have about 40% of all emergency Department visits there.

So, you know, on the islands we are a critical provider of healthcare services primarily again in the rural areas. Yeah.

Also wanted to mention some of the challenges we face, you know, as a hospital system running primarily rural facilities, you know, there's a scale to the operations that are hard to basically hard to support with the revenues that come in. A lot of that is driven by our payer mix.

So we do serve a large proportion of Medicare, Quest and uninsured patients. So our payer mix is about 74% comprised of government payers, which includes Medicare and Medicaid and Quest. That's pretty high when you look at regular private hospitals, so we're about 45% Medicare, about 29% Medicaid Quest. So it's quite high.

And obviously those are the worst payers we have in the state. We also suffer from labor costs well above industry norms. So as a state agency, we are bound by, you know, the state collective bargaining rules and benefit packages. So our fringe benefit rate, you folks probably know this already at the state, is about 64%.

And we pay for that out of our own special funds or collection that we get from patient services. The average private hospital in Hawaii has a fringe benefit rate of about 30%. So, you know, that's a 34% difference.

So if you look at our funding request, just given our salaries and benefits level, that's about $90 million of our NEFA General Fund just comes from that differential. The differential primarily comes as a result of the state pension obligation and also the retiree health insurance program.

So that's something that private hospitals don't necessarily have those same kind of arrangements. Most of them don't have pension plans anymore. That's kind of a retirement plan of the past. And then the retiree health insurance benefits, they may offer a small amount, but it's not nowhere near as generous as what the State of Hawaii offers.

The other point of some of our challenges are the need for capital investment in medical technology and particular electronic medical records. So for those of you that don't know a hospital, electronic medical record is pretty much the backbone of the operations for the hospital.

Basically, all the processing of patient care information, patient data, billing, all runs through the electronic medical record system. Back in the mid to late 2000s, Medicare basically told all the hospitals in America, you don't have an emr, you're not going to get full reimbursement from Medicare. So they try to incentivize hospitals to implement electronic medical record systems.

So we did implement a System back in 2010 and 2011 for the system, but that system is no longer going to be sunsetting, it's no longer going to be supported. So we do have several different EMRs at our hospitals now. But there is an opportunity we have to improve our electronic medical record system.

East Hawaii region is planning on switching from the Meditech system to epic. And EPIC is the medical record system that's used by the major health systems here in Hawaii. So Queens has epic, Hawaii Pacific Health, other facilities have epic.

So, you know, in order for us to keep up with the challenges going forward, a lot of physicians across the nation are used to epic. So if we, you know, recruit from the mainland, it'd be helpful to have a system that they're familiar with to operate on.

So it's very important for us to be able to keep up with that capital investment in the new technology. So you'll see in our operating request, there is a request for operating funds to help support some of the EPIC implementation. And there's also some capital that's going to be capital request that may be used later on.

We're hopeful that, you know, in the future that other regions will be able to join in on this EPIC electronic medical record system. So the Kauai region has a request in for some capital funds to help implement that as well once East Hawaii goes live.

So given that, you know, our budget request does look a little large, but I did want to give you some context to the amount of the request. So you can see in, I think on page four of our testimony, there's a chart there for HTH 212, which is basically comprised of East Hawaii, West Hawaii and Kauai region.

For fiscal year 2024 and fiscal year 2025, we received about $160 million each year in General funds. For fiscal year 26 and 27, we requested 216 million in fiscal year 26 and about 200 million in fiscal year 2027. The Governor recommended, is recommending in his budget $151 million each year in his budget.

But when you look back at where we were during the pandemic period between 2020 and 2023, between in those three years, we were very fortunate to be proactive enough to get a lot of federal funds to help offset our operations.

So we received about $100 million in federal funds between provider relief funds, which were the system that the Federal Government used to supplement all hospitals during that time.

Small Business Association Paycheck Protection Program loans were a big part of that as well, and also some increase in federal funding due to the increase in federal matching percentages for state funds. So all of that was about $100 million that we could then use to help offset some of our operational costs.

And that helped defray our need for General Fund appropriations from the state. As stewards of federal funds, we want to be cognizant of the steward of state funds. I should say. We want to be cognizant of not asking for more than what we need to sustain our operations at the level that we're currently providing.

So, you know, we. We use those federal funds to try to supplement as much as we can and you know, that allowed us to keep it Low for fiscal year 2024 and 2025. So for 2026 and 2027 we do need more to help offset the loss of those federal funds.

But when you look at the percentage of what our General Fund appropriation historically has been compared to all of our operating expenses and our non operating expenses, historically it's been about 22%. And our request based on our budget projection over 2026 and 2027, we're asking for about 24% in fiscal year 26 and 22% in fiscal year 2027.

2027. So not really out of line too much. And we'll explain some of the reasons why the 2026% is a little higher as they go on.

So again, one of the things I wanted to mention is that the part of our Aspect fiscal year 2026 is $13.2 million for General Fund appropriations to help Fund the EMR implementation at East Hawaii region for the EPIC system that will help develop a backbone and a structure for potential future regions to jump onto that platform so they can help support the system.

So that's the reason why our 2026 request looks higher than our 2027 request is because of that 13 million for the IT infrastructure we need for the EPIC implementation. And then for our CIP request, we have three large ones we wanted to inform you folks about. The first is the $25 million spread over two years.

So 12.5 million in fiscal year 2612 and a half million fiscal year 2027 for the KLAU Benioff Outpatient Health center. That's going to be much needed project for that side of the island.

If you ever been down to the KL area and then the Puna District, there's not a whole lot of health facilities down in that area and that's a growing population that's growing very quickly.

And the good thing about this request is that we're anticipating if we do get the funding provided by the Legislature, that the Benioff's Mark and Lynn Benioff will be providing $25 million in matching donations. So that would help minimize the cost of the state greatly for a service that would be greatly needed in that community.

So that's one of our major requests out there. The second one is for Kona Community Hospital. We are asking for funds and it's detailed in our request. I won't go over the exact numbers, but about a little over $11 million fiscal year 2027 and some planning money fiscal year 2026 for emergency room reconfiguration redesign.

If you've ever been to Kona Community Hospital in the emergency room, you'll see that when a patient comes through there and trying to get through the hallway, everybody has to stand up because they can't quite get it's not wide enough for people to work and still have the patient run through there.

So it's going to be important for that emergency room to be expanded and to meet Ada requirements as well. So that's another big request. There is one item for Kauai region that's in our CIP request. It's 7.5 million for fiscal year 267.5 million for fiscal year 2027 for it's mentioned for electronic medical record system.

Right now it's a placeholder. We're still trying to do more diligence in terms of what the actual cost is going to be in terms of what Kauai region implementation costs to jump onto the EPIC system. So that is just a placeholder for now.

But it's something that we feel they'll need in order to be able to afford the implementation cost and training that's involved with implementing a large system like epic. So those are the three CIP requests that I wanted to mention there for Oahu region, which is HTH215.

Oahu again is comprised of Leahi Hospital and Malahia, both long term care facilities. You'll see in their funding request that they have in fiscal year 2024 they received about 20.1 million in General Fund appropriations. Fiscal year 2523.4 million in General Fund appropriations. For fiscal year 26 they're asking for $8 million and fiscal year 27 $14 million.

And the Governor has recommended those amounts and that's in his admin package as well. The reason they're able to lower their ask is because the Legislature approved a increase in funding for the Medicaid rate for long term care facilities. And about 85% of Oahu region's patients are on Medicaid.

So with that increase, the reimbursements went up over 60% of what they had been before. So that helps offset their need for state General Fund appropriations. They also have CIP requests of about 5.6 million in fiscal year 26 and 5.1 million in fiscal year 27. The Governor has also recommended that as well.

But those are probably more R and M type projects that help upkeep the State of the facility. So you know Gooku and Maui Health Systems well, you know, as I mentioned earlier, they'll be doing their own testimony in front of you folks.

But I just wanted to mention that, you know, in terms of how we operate, we are trying to be a very collaborative organization. And I think if you look to your communities and see what we've been doing lately, you can see a lot of that.

Hilo Benioff Medical center, you may have heard they got $50 million from the mark Lynn Benioff to start several programs.

One is to Fund part of the ICU expansion, but there are also opportunities to improve neurosurgical coverage, collaborating with Hawaii Pacific Health and also getting access to specialists from Hawaii Pacific Health and even from University of California San Francisco Medical center as well. So those collaborations are going to be in place soon.

We also have collaboration with West Hawaii Region where they implemented, they worked with Queens to implement the Queen's version of EPIC already. So that's in place. So that's helping unify the care portals on that island. You also see we're committed to working with the communities. We have started doing Meals on Wheels in a lot of our regions.

We also use locally grown produce to the extent possible in our facilities as well. So we're trying to support the local communities there. Samuel Mahelona Memorial Hospital has a master Campus plan project in place which Speaker Nakamura has been very supportive of and has been championing. That is going to be a very good community project.

It's not just a hospital project. It is intended to include housing, affordable housing, and places to operate for other social service agencies and community organizations on the island of Kauai. So I think it's going to be a very good project there.

Oahu Region has several projects which, you know, we can go into more detail about, but they've been working with the city and county, they've been working with Queens, they've been working with Adult Mental Health Division in various initiatives.

So, you know, we are being trying to be a very collaborative organization, realizing that as again, a steward of state funds, if we were to do it all ourselves, it would cost the state quite a bit of money. But being in partnership and collaborations helps to offset the cost to the state.

So with that I wasn't planning on going to the table unless you have specific questions about them. But that's all I had for this briefing at this point. Happy to answer any questions.

Okay, thank you. So at this point you're speaking on behalf of all the regents?

Yes, HTH 212210 and 250 in Oahu region.

Thank you. Okay, Members, if you have any questions, we'll open it up to them at this point because then we'll bring Kahuku and Maui after. So this would be just hhsc. Yes.

Representative Kusch, thank you for coming in. This evening or this afternoon. In one of the presentations I had at Hilo Benioff Medical center, we talked about that EPIC introduction, and there was a series of efficiencies with the introduction of that that resulted in some dollar savings. Do you, are you privy to that information?

We have Dan Rickman here who could probably offer more than I can give you, but I can just give you some of the benefits that EPIC brings to the system. So one of the things that EPIC is known for is being on the technological forefront of things.

So when you start looking at, looking toward the future, things like artificial intelligence, how they can help clinicians using predictive AI, those kind of things, EPIC is at the forefront of that. So the technological advances will be way beyond whatever we can get from this current system from Meditech.

Also, from a revenue cycle perspective, trust, charge capture, which is a big thing for hospitals, you know, making sure that you're being maximized at the highest rate for what services you provide is something that EPIC has been known for and been, you know, that's part of the selling points is that, you know, they, they help improve revenue cycle efficiency.

And like I said, that that's how we collect cash. That's how we help supplement our expenditures and lessen the need for state General funds. So those are only a couple areas. And Dan, you want to speak to some of the other benefits.

Happy New Year, Committee chair. Rep. Kush. Yes. I don't want to sound like I'm a sales rep for epic, but epic, there's a reason it's in the majority of hospitals. It's In, I think, 11 of the 13 acute hospitals in the state. We're not on. Excuse me, it's 10. We're not on, but going on.

Hopefully Kauai can come on with us. And Casel is actually transitioning, so we'll have one EMR for the state. But from the patient safety perspective, being able to share records for care from place to place, and, you know, we all get our care usually in more than one location for different reasons. That's crucial.

And it's something that if you have too many barriers, have to log into too many systems, providers just can't do it. So that's really helpful. The other thing I'm really excited about is it's a way to standardize practices of care. So, you know, we all are human. We do care in different ways.

We may think we should treat pneumonia the way you learned it, 1980 or 1990 or in 2000.

One of the ways good EMR, especially Epic does is that they support the physician to know what the latest best practice is and also to let us who are responsible for the care know when we have people who are substantially deviating from the best career.

And that's a really big deal because if you think about it, you want your providers, the people caring for you, you want to know that they know what they're doing and not only that, that you're supporting them well and that it's consistently happening.

And one of the big things EPIC does is gives you insight into that in almost real time. So I don't get that report a month later where you go, I don't even remember the patient. You can actually give feedback as you're in getting treated.

So a lot of financial reasons, a lot of great patient experience reasons, if any of you use a thing called MyChart, you can really see insight into your care. So we're fans. It's a big investment for us, but I think it will really pay off for our patients. And really our organization sounded like a rep for epic.

Sorry.

Thank you. Zero, yeah.

Just one more question, please. So the $25 million over two years for Cal, that's going to be matched and that's going to get us where that $50 million combined over two years. That's the planning. Where's that going? How far does that take us?

Well, we're two thirds of the way through design and architectural engineering. And last year we got some some money in which we spent a good bit of it to do the design. So when I tell you it's $60 million, give or take a few million in 2028, that has been adjusted for inflation.

And also we've actually had cost takeoffs by cost estimators because sometimes you just kind of guess. So that's where we came up with those numbers where the Benioffs agreed to. They're very much into partnering and matching, and the Governor, I think, was convinced of that.

To put in the 2525 we have set aside 10 million for that project. So that's the 60. So I think that's not vaporware or hope. I think we really can make this happen. We do have to work with the community.

The site requires county approvals and we have to hopefully get some of our neighbors on board because it will increase traffic in some of those areas. But we hope the overall benefit and some of our mitigation of that will make it acceptable for folks. So I'm cautiously optimistic that we'll have some serious health care down in Puna.

Thank you. Thank you. Okay. Questions?

Zero, yeah, I had one more. One. Sorry, not for you, Dan. Maybe, I don't know. So the Kona ER improvements, I can appreciate that. I was EMT there when it was like half the size of this room, maybe, maybe a third, and it was pretty busy Doc Rogers days.

But I also am wondering, there's a new hospital that's going to be built over, I think it was in Koloko, Ahupuaa, that how's that going to work? If we do a big expansion in the Kona ER and then probably 90% of your traffic is going to shift north.

Hi, everyone, my name is Clayton McGowan. Happy to be here. You know, that expansion or the new hospital is anticipated anywhere from seven to 10 years down the road. It's a, you know, 50 year old facility.

And when we say expansion in the ER, a lot of it's repositioning what's currently in that footprint to make it more accessible. So that's, that's the plan there. We're always going to have a need for our southern population and always having access to an ER is going to be essential for that.

So with the anticipation of a new hospital, we know there's still going to be a significant need for our southern population.

Thank you. Yes. And their emergency rooms are most often full. Yeah, I mean, they always have been.

Thank you, Representative.

Thank you, Chair. Thank you for being here. I think I need Dan back. But I also wanted to talk a little bit about the EPIC system and timeline. If you could reshare the implementation timeline and when it actually goes live.

Sure. So we're, we started, we signed a contract with EPIC back in July. So we have a hard go live date of November of 2025.

The reason I say it's hard, that it actually is kind of built into our contract and there's actually penalties if we don't hit those timelines because to do the switchover requires a lot of people and effort to actually come to the mainland to get you to do that.

So I think, I don't think it will happen in November, barring some crisis. So there generally is a stabilization period of three to six months after that and then you're pretty much on your own. To clarify, we're setting up an enterprise emr so it covers Kaufman, Honoka, Hilo, Benioff Medical center.

And then eventually we hope to get Kauai region on with us because we can basically pod on facilities all our clinics would be on. And in Kauai's case, their Clinics would come on too, and it would be a way to leverage that big upfront investment. So I'm pretty confident that we'll have it implemented.

Okay, great. Digging in a little bit on the Keal facility, the new, potentially new. Where are you on the regulatory permits? And chair, if I'm too far down in the weeds, where are you on the regulatory permits?

Because I understand that we're doing a 2525 but I'm not certain where we are on the, on the actual approval of the property, meeting the conditions of approval and the actual spend down.

So where we are with that whole process is that we have a buyer's contract on a location that is not prohibited from having that medical facility on it, but requires a special use permit. So the way that works in the county is you have to initially do an environmental assessment.

You have to hopefully get what they call a Fonsi or a finding of no significant impact published. Then you apply for your special use permit. You may or may not. Hopefully we don't have to go to a contested case hearing.

And then the Planning Commission, well, the Planning Department will do a recommendation and then the Planning Commission gets to decide whether to grant the permit and they generally put some conditions on what happens. So our EA has been published, there was a Fonsi, so we didn't have any significant impacts. That's not an approval.

So now we're in the process where we'll start interfacing with the neighbors and the people around and hopefully answer enough of their questions where we won't have a contested case hearing, but earliest would be June if it's not contested to get a special use permit.

We have a buyer's contract, so we have a predetermined price and a land to buy the actual site and are doing all the design and site work and planning and testing of that site.

So the environmental assessment includes like soil testing, utility assessments, all those things, and then also working with Department of Transportation to determine how people can access it.

So building anything in Hawaii is a years long process, hopefully because no place is perfect, especially in Puna where a lot of infrastructure doesn't exist, is just to find a place that could, you know, where you can do more than just drop a little clinic.

So I'm reasonably confident that we won't run into issues and we're determined to build something there. So I don't. If we waited till everything was completely done, we might be more like 2030. So that's just how.

And just to summarize, entitlements by June of 2025 and then designs along with meeting various conditions of approval 24 to 36 months after that.

So as far as the actual design of the center, the building, the site and so forth, we're actually about two thirds through. So our goal is when by the time we get our special use permit to be able to go into permitting right soon after that. So. So then we're looking at eight to nine months.

Usually the county kind of prioritizes our projects. So construction. So that would put us in the middle to end of 26 is 18 month Bill. That's where you get the 28. Hopefully to open. Now if it's contested case that might take another 67 months. I hope we don't get a denial, but there's always the risk.

But if we don't. So really we're talking 2829. I think 28 is still realistic though. But the farther in the process, the more firm we can get when something would happen.

Great. And then the conversation. And so much gratitude to the Benioffs because they've been amazing philanthropic partners for Hawaii Island. Switching over to Kona emergency room repairs. I know that's been taking a long time, especially the construction permits and some of the edits because it's an old building.

And bringing it up to current codes to our 2018 code and then onto the 21 model codes. What's the timeline from this project to remodel to we're opening the doors to a brand new emergency or modified emergency room. Yeah, switch.

I think planning and design money isolated for fiscal year 26. That's when it's being asked for. And then the construction money will be going primarily in fiscal year 2027. That's 11. Little over $11 million.

Okay, thank you. I agree.

You can tell we didn't rehearse this. It's off the cuff.

And then just more of an overarching question because so many of us are watching the federal Administration and some of the signals being sent about the loss of Medicare, Medicaid, Social Security Dollars. And I heard through your testimony, Director, that there was a number of areas where these reimbursables were kind of helping basically keeping those centers open.

What's that forecast look like for you guys? And not so much year one, because we've heard from our chair not to worry too much about year one. It's year 23 and 4 of this next Administration. What's that forecast look like?

I think if you look at the, you know, the way the, let's say The Trump Administration, back when he was in his first term as President, there was a lot of discussion back then about block grants in terms of how the he was looking at trying to Fund Medicaid for the states, you know, that never, you know, good or bad, he didn't end his, he didn't get a second term.

So those things didn't come into fruition. But, you know, you can probably expect those kind of same discussions to be, you know, coming forward in the future. Now, how fast that can happen, I don't know.

But you know, just to answer your question about the impact it has on our facilities, you know, our critical access hospitals are have that designation for a reason. And the reason is that they get cost based reimbursement because they're so far set apart from the major acute facility in that area. Right.

So to the extent that block grants could then curtail some of that cost based reimbursement, it would be a huge hit to our critical access hospital facilities, like I said, because we're a small scale operation. But the fixed costs are very huge. Staffing, especially for all the clinical staff, aging facilities, those kind of things.

Those costs are gigantic for those facilities. As compared to the revenue source, the revenue source is going to be primarily Medicaid and Medicare, not so much commercial. So that's why the federal reimbursement has a huge impact on our facilities. Even for a facility like Kona and Hilo, they are classified for Medicare as what's called sole community hospitals.

So they get a higher reimbursement rate as compared to a regular, a commercial private hospital gets that hasn't been rebased for a while.

But prior to the current Administration, I guess leaving office, there were bills in Congress, the Patch act, that would rebase that Seoul Community Hospital reimbursement back to more current levels, which would be a huge benefit to places like Hilo and Kona and Mount Memorial as well, because they're also Seoul Community Hospital.

So, you know, if you look at the loss of that, potentially that could be a huge negative for our facilities. And you know, that's where it's a little scary, actually.

Thank you. I heard the impacts. But just to follow up and lean in, assuming all of those negative impacts, what's the strategy going into the 252627 calendar year is are we looking at you guys coming to us to help backfill those losses?

I think in the short term you probably will see an increased need for General Fund appropriation. Now, again, that depends on how quick and how if These things even happen in the future. But yes, I mean, in terms of increasing need for General Fund in the short term, I think it's unavoidable.

In the longer term, there may be some things we can do to try to offset that, and we'll probably be as part of a strategic planning process. One of the things we look at very closely is financial sustainability.

And that's one of the things that we need to try to look at to see how best we can survive given the type of facilities we run and the type of patients we serve.

Great. Yeah, it's challenging. We love the Big island, but it's big. And so those facilities are far apart. Thank you, gentlemen, for being here. Thank you, Chair Ayo.

Thank you, Representative.

I was hoping that you could just. Try to quantify a little bit what. Those numbers might look like.

I'd have to get back to you in terms of the magnitude of that. I mean, you know, like I said, 70% of our revenues are Medicare, Medicaid, and those are the primarily ones that will be impacted. So if you look at total revenues now, we're at about maybe in the $500 million range.

So if you look at 70% of that, you know, that's $350 million or so that might be impacted. Now, the degree to which that changes is going to be is hard to say, but, you know, that's about our share of the total. That's about how much we get from those federal types of sources.

Okay, thank you for the questions. Hey, Vice Chair.

Hi. Question for Oahu region.

Good afternoon, chairs. Vice chairs. Sean Sonata, Chief Administrative Officer for the Oahu region.

Hi. Just wanted to get a quick update on the CNA training program that I now started at Malachia. When was the first class graduated again? Are we still within the first year?

No, I think the first class graduated last year, maybe sometime in the middle of last year. And when I talk about first, just two programs that we're participating and one is through the Good Jobs Hawaii Grant, that one we're not actually facilitating the program, but we are beneficiaries of it.

The other is at Maluhia where we offer the training. We pay for all of the training, including their prometric exam for CNAC to get certified. And then after that they commit to us for at least one year of employment. We've graduated one full class.

And then we are, I think, in the middle of the second class right now.

So that first class, are they coming? When are they coming up on their one year of required?

Zero, one year, probably not until, I would say the ending second half or third quarter of this year, 2025.

Okay, sorry. I was just going to ask if we feel like they are going to stay past that one year because I know retention is so hard at the facilities.

For the most part, historically with the Oahu regional facilities, retention has been pretty good. It's all about bringing them in in the first place. But one of the challenges that we face is with a CNA program, people are always trying to elevate. Right.

Some people want to be CNAs forever, but most people, they want to be CNAs, they go to LPNs and then maybe RNs. And so it's really trying to find that balance. When we have CNAs in the past who came on board, this is pre pandemic.

A lot of them chose these as their careers and they would follow through and be retained because again, the state does offer great benefit packages and compensation. But the pool that we're targeting now are normally the younger population.

So under that demographic, a lot of them are interested more so than prior people who entered the field in advancing their careers. So it's really hard to tell at this point in time given who we're targeting for these programs.

Yeah. And I know it's still kind of new. Is there still the issue where most of them are wanting to be placed at Maluhia rather than at Leahi?

I think over time we found quite a balance because we're also balancing people who just apply for these jobs and then they obtain their certification elsewhere. And initially, yes, there was an issue there, but it was less so because of the environment, because the environment is relatively very similar between facilities.

But a lot about location, because Maluhill is in the more Kalihi Area. Right. And then you have Leahi on the east side in Waikahala. So location was one of the primary reasons for it.

But I think when you look at the way that the hours are set with the 38 schedules, the traffic doesn't really play in as much. And the distance, if you really think about it, for General standards, it isn't that far.

So I think once people get into it and they are placed and they get accustomed to the drive and the traffic isn't as bad, then I think they're content with the placement that they get because they make friends and they establish themselves in the various facilities and they just get that comfort level that makes it okay.

Yeah, because I think. Right. I think in the past I've asked and we've talked about how a big limitation I Think of the existing space that is usable at Leahi was due to staffing issues.

So have we been able to add more beds now that people are more willing to go there or are we just kind of still holding the line? Where are we at kind of expanding that program.

So where we're at right now is at both facilities they're both facing similar shortages in staff. But because each facility has their own administrator, they have different approaches. So at Leahi we've been keeping the census on a higher level, not full capacity, but higher based on the limited staff that we had.

But because the need in the community is always there and if we were fully staffed, we would be fully occupied. But because of the staffing issue, there's two different approaches. @ Malihia, they've been kind of suppressing the census a little bit to accommodate the staff. So we're not overstressing the staffing levels.

Whereas at Liahi, the they've been admitting a little bit more and filling up the census to a little higher level with the similar limited staff. But that entails more overtime and more cost, but it's still fulfilling more need.

So because of those different approaches in admissions, we're just trying to find a proper balance while at the same time trying to increase our staffing levels in the first place so that way we can just admit more freely and not stress the staff as much.

Okay, and sorry, go ahead. Thank this conversation about, you know, you mentioned again, I think we're all kind of seeing and hearing about the need as our population's aging for the need for long term beds in the community.

So in your testimony you mentioned kind of going back to the strategic plan to kind of grow that bed space, is growing that bed space, you know, generating more revenue to renovate those unusable areas of Leahi to create that capacity or high level, I guess, what are we doing?

So the nature of our operations at Leahi Hospital in Malihia are not ever because we're so reliant on Medicare, Medicaid in particular, that the labor cost and other overhead is always going to exceed the reimbursement rate, even despite the recent increase to the Medicaid rate.

So from fiscally responsible approach or perspective, what we're doing is we're just trying to protect the beds that already exist at both facilities.

On top of that, if we were to take the dilapidated spaces at Leahi and renovate them for more long term care beds, there's new CMS regulations that came out that say if you do these renovations, you're not grandfathered any longer for the rest of your facility into certain, I guess, privileges that we had.

For example, at both facilities we have four bedroom, I mean four bed quad rooms and under the new regulations, maximum two each. Right. And there's bathroom requirements. So if we were to do that, we would have to arguably renovate everything and that would come at too high a cost.

So by expanding the bed space for long term care with massive renovation, that would jeopardize the existing operations for the other facilities. So our approach is with the bed space that we already have, we're trying to just protect that and use those for meeting the long term care needs of the community.

But on the other side, this hasn't been mentioned yet, but there's also the Daniel Kiakaka State Veterans Home that recently construction was completed and we're working on securing licensure for that facility. It won't be operated directly by the region and we do have a private operator to operate the facility.

But the target for that facility, it will address 120 beds long term care for the community, same target population, except military veteran based. But that program, because of the federal reimbursement rate through the va, it will generate over after the first one or two years a positive revenue stream.

But that positive revenue stream can be reinvested in the long run into our safety net operations to try and elevate the care that we can provide there.

Okay, and so for send some of the, and then for the other two programs are running through DoH and with core at the city. Do we charge them anything for those spaces?

We do not. It's kind of a zero sum situation because there are other government agencies and they're providing a public benefit service. Our arrangement is basically the $1 rent, you know, per year, it's nominal rent, but at the same time we are reimbursed for any additional cost to us.

So utilities, if we were to provide meal service for them, then we get reimbursed for that. If we provide maintenance services, things along those lines, ancillary services will get reimbursed for. But it's meant to be a break even situation because of the public benefit.

But we're not investing any more money, so we're not going in the red because of these programs. It's at a minimum of break even.

Then any claim money that those programs that Dohr Corps get, it goes straight back to them for that instead of nothing to you guys.

Right. So the thing about these programs, at least the core program, it's there's no reimbursement. So there's no Medicaid federal funds involved in keeping those programs afloat. Maybe there might be grant money that the city is receiving, but for the most part it's pure public benefit.

But it's coming at the cost of, you know, the city's expense, not the state. And for those reasons we have no claim to. There's nothing to claim in terms of reimbursements. Okay, thank you, Vice Chair.

Thank you, Chair Tam Kam. Sean, I have a follow up question to Vice Chair's questions about Leahi Hospital. I was interested in your testimony about a group home at Liahi that focuses on those with mental health problems combined with some substance abuse disorders. And it sounds like you have about space for 29 people. Yes.

And given that this is such a severe problem finding bed space in the community for individuals facing these combined problems, what's the potential for expansion of that program?

There is potential, but the potential can only be realized more so in the distant future, as I'll explain. The program that you're referring to is the Polykonna Mental Health Program that's facilitated by the Department of Health and they have a operator running that program that's CARE Hawaii.

The population that occupies that space would be just like you mentioned, which would be very Low acuity mental health residents who come from the AMHD program. And they're not a danger. And they are.

There's potential for them to actually rehabilitate to a certain extent where they could either go to a step down program or maybe even be released back into the community.

We started as a pilot program I think in 201920182019 and started with six beds and then we expanded it to the maximum capacity which is about 28 beds. And there's people. It's not static. It's not a static 28 people. People.

People have done well and then either transition to a step down or the community and then new people would come in and replace them. That occupies a separate building on the Leahi campus and only half of it, the other half is currently occupied by that core program that Vice Chair mentioned earlier.

So we have all of our spaces on the Laihi campus pretty much occupied at this point in time. But in prior testimony last year we mentioned there's a lot of dilapidated space. These spaces really need a lot of work. People have come to visit and they saw how bad a shape that these spaces are.

So when I meant the long term potential, it would be if instead of renovating these spaces in order to expand the long Term care bed space.

Our plan is to renovate these spaces so that we can move programs around and if we can somehow find a logical, reasonable and safe way to move, for instance, the core program into these dilapidated spaces, which will no longer be dilapidated, then we could then expand about 22 more beds of that Polycona program to expand the program.

So right now we can't do that because there's no usable space. But once we can develop the usable space, that creates the potential for expansion.

Well, it seems to me like this Polikana program provides a perfect solution for the problem the state hospital has of discharging patients with nowhere to go.

So can we maybe look to you to work with the Department of Health in developing a long term arrangement for providing the space that you described as a long term solution for this?

Right, so there's a short term and long term approach. We have been working with the Department of Health very closely over the past several years. There's another Bill that will be coming up that deals with, with that whole situation.