House Standing Committee on Finance

Okay. Good morning. We're going to reconvene the Committee on Finance to continue our informational briefing. Today is Monday, January 13th, and we are in Room 308. And before us today is the University of Hawaii. Welcome.

Morning. Chair Yamashita, Vice Chair Takenouchi, and members of the House Finance Committee, my name is Wendy Hensel, and I'm honored to serve as the new president of the University of Hawaii.

Thank you to the Chair and those of you who I've had the privilege of meeting already and speaking about your hopes and dreams and concerns for the University of Hawaii. I look forward to working with the Legislature to advance the well-being of all of our communities, both within the university and across the State of Hawaii.

Thank you for the opportunity to appear before you today to review our budget request. Although I have officially held my position for less than two weeks, I have--only two--I have been working for the past two months with the leadership at the university and have brought with me today a number of our experts.

From the Board of Regents, Chair Gabe Lee and Vice Chair Laurie Tochiki, from the System Office, Vice President for Budget and Finance Kalbert Young, Vice President for Administration, Jan Gouveia, Vice President for Academic Strategy, Deb Halbert, Vice President for Research and Innovation, Vassilis Syrmos, Vice President for Legal Affairs, Carrie Okinaga, Vice President for Information Technology, Garrett Yoshimi, Vice President for Community Colleges, Della Teraoka, and the Director of the University's Institutional Research Office, Kara Plamann Wagoner.

From the campuses with me today are UH West Oahu Chancellor Maenette Benham, UH Hilo Chancellor Bonnie Irwin couldn't be with us today, but in her stead is UH Hilo Vice Chancellor for Administration and Finance Kalei Rapoza. UH Manoa Provost Michael Bruno is here. UH Manoa Athletic Director Lois Manin is here.

Also Naoto Ueno, the Director of the Cancer Center, Dean Parwinder from CTAHR, Dean Shomaker from JABSOM, Dean Morioka from the College of Engineering are also here, as well as Chancellor Peñaloza from the Leeward Community College and Chancellor Eschenberg from Windward Community College.

That was a long list, but I may inevitably have missed somebody, so we'll certainly introduce them if I do. I can say with certainty, even despite my very short time, that the there are truly transformative opportunities in front of us to shape a brighter future for the university and our constituencies.

Our strategic imperatives, which reflect our vision and provide the backdrop for our budget requests include four major pillars: fulfill kuleana to Native Hawaiians in Hawaii, promote successful students for a better future, meet Hawaii's workforce needs of today and tomorrow, and diversify Hawaii's economy through through UH innovation and research.

We are committed to collaborating with you, the Legislature, the community, and our other stakeholders to turn this vision into a reality, and our budget request today is foundational to that collaboration. Your support for our mission is essential and will make a lasting impact.

To provide context for our request, I'll provide some important information about the system that may be helpful to highlight the scope and importance of our work. There was a request to go a little bit more into detail than usual, so I hope you will bear with me as we go through this.

The University of Hawaii system has a combined student population of over 50,400 students and includes three four-year campuses and seven community college campuses, each with unique strengths and contributions. We also have seven major research facilities on the islands and two very significant institutions on the Kaka'ako Campus that provides services that are unduplicated in this state: the UH Cancer Center, one of 72 NCI-Designated Cancer Centers in the U.S., and the John A. Burns School of Medicine or JABSOM, a teaching medical school.

Of course, our flagship is--of the UH system--is the University of Hawaii at Manoa, which combines world-class research and graduate and undergraduate education. It is literally just one of a handful of land, sea, space, and sun grant universities nationally. 63% of the students are Hawaii residents, ensuring that our local communities are supported, and 18% identify as Native Hawaiian or other Pacific Islander. We have students from every state in the country as well as 122 different nations.

Impressively, 25% of our students are first-generation college students. That is a remarkable number for an R1 research institution and reflects our access mission, something we're very proud of. Enrollment, I'm pleased to report, is thriving with record incoming classes over the last three years. A total enrollment now exceeds 20,000 students for the first time since 2013.

Students are drawn to UH Manoa for nationally and internationally recognized programs in many areas, including, to name just a few, marine sciences, earth sciences, astronomy, linguistics, Asian studies, Hawaiian studies, international business, and tropical agriculture. It is also the home to the state's medical school, law school, College of Engineering, and School of Architecture.

We provide 97 bachelor's degrees, 86 master's, 56 research doctorates, and five professional doctorates. You may have heard it referred to as an R1, which means very high research activity, and Manoa is consistently ranked in the top 100 in the nation in federal research expenditures, providing applied research that's relevant to solving the complex problems and pressing needs of Hawaii and the nation. Last year, the research funding exceeded $460M, which is 40% higher than just four years ago.

UH Manoa is also the most globally focused campus in our system and takes seriously its kuleana to serve our neighbors in the Pacific and Asia. I'm sure that you also also know that UH Manoa is the only NCAA Division 1 school in the state with 21 varsity teams competing in the Big West and the Mountain West Conferences with a full transition planned for the Mountain West in 2026. UH Hilo on Hawaii Island has 2,200 undergraduate students and more than 370 graduate students.

More than 71% are residents of the state and UH Hilo consistently ranks as one of the most diverse schools in the United States. Hilo majors focus on community-engaged, place-based, and hands-on learning, taking advantage of the diverse island environment and the vibrant and culturally diverse communities in which it sits.

Degrees are offered in numerous areas that include agriculture, forestry and natural resource management, arts and sciences, business and economics, natural and health sciences, pharmacy, and Hawaiian language and culture. It also offers two unique PhD programs including the Doctor of Pharmacy and a Doctor of Nursing Practice program with a rural focus.

There are also three master's programs that are unique within the UH system. UH Hilo is also home to the Imiloa Astronomy Center and the Pacific Aquaculture and Coastal Resource Center. We also have athletics there, Division 2, with 12 teams that compete in the NCAA as part of the Pacific West Conference.

UH West Oahu is strongly centered on meeting the needs of the local community for workforce and education, especially on the west side of Oahu. There are 2,800 undergraduate students, 95% of which are from Hawaii with 11% from neighboring islands.

A high percentage of students served there come from underrepresented communities, with 28% Native Hawaiians and 23% Filipino, and it has an average age of 26 which is considerably above the average for the university. In 2023, almost 30% of these students were first generation and almost 30% were transfer students from Leeward Community College.

UH West Oahu offers degree programs in teacher preparation, business and the humanities, including Hawaiian Pacific Studies, and has cutting-edge programs in cybersecurity, creative media, and health professions, including pre-nursing. As you probably know, it is the home of the Academy of Creative Media, the Moving Image Archive of Hawaii, and the Center for Labor, Education, and Research.

The University of Hawaii Community Colleges comprise seven campuses, three university centers, and four education centers strategically located on six islands, currently serving nearly 25,000 students, 23,400 of which are residents of Hawaii. Our focus is to foster access to residents to postsecondary education and workforce training opportunities both in person and in virtual settings to prepare residents to fill the jobs that Hawaii needs.

Each campus offers specialized programs that cater to emerging job markets while celebrating their distinctive heritage. To give you just a few examples, Hawaii Community College on the Island of Hawaii stands out by honoring the region's indigenous culture, reflecting the concept of community in every aspect of its programs.

With a fall 2024 enrollment of nearly 2,300 students, Hawaii Community College was recognized again as a Top Fulbright Producing Institution, which is quite an honor, and serves the largest geographic area of any of our campuses. Honolulu Community College on Oahu has made its mark with robust apprenticeship programs, partnering with local unions and the Pearl Harbor Naval Shipyard.

Established in 1920, it is our oldest community college boasting a fall 2024 enrollment of over 3,400 students with the largest non-credit population in the system. Kapiolani Community College is a hub for healthcare programs and enrolls more than 5,900 students.

Offering a comprehensive range of health sciences, it serves as the sole provider for many programs, including medical lab technician, paramedic, and occupational therapy assistant. It offers numerous clinical partnerships with local hospitals and healthcare facilities to provide students with valuable, on-the-job training and experience. The Culinary Institute of the Pacific is also located there, and importantly, Kapiolani remains as one of the most substantial transfer campuses in the community college system, serving as a vital link between our two-year and our four-year programs.

Kauai Community College, the only higher educational institution on that island, likewise offers diverse programs including electronics technology, which is linked to high paying jobs at the Pacific Missile Range Facility. Notably, this campus has the highest percentage of early college students in the community system with almost 1,400 enrolled, providing our youth with a head start on their future.

Leeward Community College likewise provides both liberal arts and CTE, including for example, online teacher education associate degrees which bridge theory and practice for our emerging educators. With nearly 6,500 students this fall, Leeward makes higher education accessible, boasting various online offerings and educational centers, including the most recently innovative Wahiawa Value-Added Product Development Center for Food Innovation, which I happened to tour a couple weeks ago. It's really quite something if you haven't seen it.

UH Maui College, with nearly 2,800 students and many additional students in non-credit apprenticeship programs, serves three islands. It proudly offers two four-year degrees, a bachelor's in applied Business Information Technology, as well as sustainable science management. It has a number of CTE programs and is known for culinary arts, nursing, early childhood education, and dental hygiene.

The college's regular engagement with community and integration of Hawaiian culture and values into its curriculum and its campus life make students and stakeholders feel connected and empowers them to build successful careers here in Hawaii. The Lanai Education Center and Molokai Education Center are key resources for the college that provide access on the neighboring islands.

And finally, Windward Community College on Oahu, with nearly 2,800 students, offers a range of transfer pathways to bachelor degree students. It is a hub for vet tech and the recently created mental health technician program. It has a nationally recognized theater conservatory program and a certificate in limu culture.

It provides degree pathways, importantly to incarcerated citizens who are in facilities in the Bureau of Prisons, which is really important work that we do. So let me, before we turn to the budget, just invite all of you to come to our campuses and experience it in person, if you haven't been there already. We we'd be happy to arrange a tour of whatever interests you and show you more directly the work that we're doing. The UH operating budget reflects a robust funding support that's essential for sustaining the excellence that we offer.

Annually, we benefit from approximately 637 million in appropriations of state General Funding and we generate about $361M in tuition and fees with another 195 million through enterprise activities in special and revolving funds. I mentioned earlier, we also received revenue from our research endeavors, with externally funded research surpassing 650 million last year.

I urge you to consider the significant items detailed in the University of Hawaii Board of Regents' budget as well as the Governor's budget request, and I'll now ask our Vice President for Budget and Finance, Kalbert Young, to review the specific request with you.

Thank you, Madam President. Good morning, Mr. Chair, Ms. Vice Chair, and members. I'd like to refer to the prepared testimony that the university has submitted and go over the specific budget item request items. I will also be covering those requests included in the Governor's budget proposal, but will also reference those items that are in the Board of Regents' authorized request, even though they may not be reflected in the Governor's request.

To begin, for UH Manoa, the budget request is for 3.2 million to make permanent the current level of subsidy that is provided to athletics. Most of these requests represent one-time funding that was approved by the Legislature last year into the budget or via appropriation bills that need to be put into the base budget in order to be made permanent. This request for the subsidy is also included as part of the same for UH Hilo as well as Manoa.

And second item is related to the Hawaii Institute for Marine Biology for 246,000. This was provided for positions via Act 181 back in 2023. So this request would make it possible for the positions and the functions to be made permanent. Expanded teaching cohort at UH Manoa for K12 teacher education, this was provided.

So this is for 420,000 in year one and 375,000 in year two. This is--this is funding as requested to satisfy Act 141 from 2022. Again, funding currently exists but is not permanently in the budget. Also at UH Manoa, $85,500 each year to make permanent the Pamantasan Council support at UH Manoa.

This was provided via Act 64 in 2023. And then for UH Hilo, I mentioned the athletic funding similar to Manoa, but also to provide funding for the Bachelor's in Education Studies and the Kahuawaiola Indigenous Teacher Education Program for 142,000. And then at the community colleges, for the Windward Community College Mental Health Tech Certificate of Competence Program that was authorized via Act 107 back in 2024, this is for about 210,000, again, to make that permanent.

And then at Maui College, the Maui College Practical Nursing Bridge Program that was initially funded via Act 74 in 2023 for 330,000 per year. And then the Pamantasan Council funding for Act 64 at the community colleges is about 196,000. So all of those items are reflected in the Governor's budget request.

They are items that currently are funded at the university, but the request is that they should be considered to be inserted into the base for recurring funding. Other items that the university requests, I'll first cover on the operating side that was included with the Governor's budget request.

So in the area of student support, the Governor has supported the university's request for ed UH Manoa for financial aid counselors for 199,000 in the first year, 398,000 in the second year, and then at UH West Oahu for admissions and financial aid counseling support for 37,650 in the year one and 75,000 in year two.

There are areas of workforce development that the university is specifically requesting support for, and reflected in the Governor's request, there is a UH Manoa/UH West Oahu Nursing Collaboration. This was actually a request and funded last year by the Legislature. So this would help us advance to the next phase of that expansion for $447,900.

And then at UH Hilo to increase the School of Nursing cohort size, for 357,000 in year one, 475,000 in year two. And then at West Oahu for pre-nursing pathway expansion, of about 107,000 in year one and 215,000 in year two. All of those workforce areas is--last year--was reflected in med industry expansion.

This year, these requests are very targeted around nursing and the nursing programs. There are two items that are the most significant, I think, in the Governor's inclusion is related to our medical facilities at the Kaka'ako Campus. So I'd like to spend a little bit more time on the technical request. So for the medical school JABSOM and the Cancer Center, these requests center around General Fund support to meet debt service. So the medical school was built in the early 2000s. The University of Hawaii was authorized to sell debt to construct the medical school.

The Legislature provided revenues from the national master--Tobacco Master Settlement Agreement, a portion of which comes to the State of Hawaii, statutorily provided to the university to meet debt service at the medical school. That source of funds has been declining and is scheduled to further decline to the state, of which the portion that comes to the university would also similarly decline. It is currently at a level that is below the amount of debt service. Debt service for the medical school runs through to 2033.

So the request in the Governor's budget is for another 1.1 million and 1.5 million, respectively, to help augment and supplement debt service obligations for the medical school. Similarly for the Cancer Center, when the Cancer Center was built in the mid-2000s, the University of Hawaii was authorized to sell revenue bonds to construct the Cancer Center.

The Legislature provided by statute portion of the state cigarette tax as the revenue stream to pay for or contribute to debt service and operating costs. So the cigarette tax is currently 16 cents per cigarette, of which two of the 16 cents is contributed to the Cancer Center Special Fund which pays for the debt service and operation costs.

Cigarette tax revenues for the state have been declining for several decades now, year over year, and the level of cigarette tax revenue and the portion that comes to the university via cigarette tax revenue is now reaching a point where it will be similar to the JABSOM situation.

The amount of cigarette tax will be less than the annual debt service at the Cancer Center. So the Governor's request for 9.5 million and 9--well, 9.476 million, 9.44 million recognizes the need for General Fund support to help sustain and grow the Cancer Center as a significant resource for Hawaii.

In the area of core functions, Governor's Budget also includes a support for facilities at UH West Oahu. These are not faculty positions, but instead these are positions that are necessary to maintain facilities and building physical plants and especially at the Academy of Creative Media, which is the newest facility constructed at the UH West Oahu.

And then in the--the other area is supporting for athletics, UH Manoa positions in athletics, to help with counseling training for $320,000 in the Governor's Budget. For the total, all areas in the Governor's Budget, it equals about $17M in additional General Fund support, but I would also remind you that a good portion of that is actually funding that currently exists at the Legislature. It's just not recurring funding in the budget. So a good portion of that request is actually just to make existing funding permanent.

I would also like to now, though, identify the Regent approved the requests that were not included in the Governor's Budget request and there are only a few, but some are more significant than others. Most notably will be the university's request to support the expansion of the Hawaii Promise Program.

This is a--the Hawaii Promise Program is a last dollar financial assistance program that exists at the community colleges. It is established by statute. There is legislative appropriation funding to support Hawaii Promise at the community colleges. It's a last dollar program so students who have demonstrated financial need via the federal FAFSA form, after all of their other available aid is provided, if they still have unmet financial need, Hawaii Promise will satisfy that need. So I always refer to it as the 'Effectively Free College Program.'

But this program was established back around 2016, 17, and exists at the community colleges. The university has been trying to expand it to the four-year programs so that students, as they matriculate through the community college program, can have that level of financial support when they should go and--go onto the four-year campuses.

That has not been the case. The university is requesting that for Hawaii Promise, the amounts reflected in the testimony total to just about 11, $12M. That is the estimate that if Hawaii Promise was applied at the four years to the same degree that it is applied at the community colleges, that would be the estimated amount to develop that program at the four-year campuses.

There are other areas that were in the Regents' request for workforce development that are not reflected in the Governor's ask for areas of workforce development outside of the nursing approach.

So these were in areas of at UH Hilo, the expansion of the Administration of Justice Program, a data science program and biocultural science program all at UH Hilo, and then at UH West Oahu, the Teacher Preparation Program. It is not a reflection of the Governor's decision to not support these workforce areas.

The university is satisfied that the Governor's support in all areas of the university budget help to advance those programs at the university. And then, so then I'd like to cover the amount of the capital budget requests that's included for the university. And again, I will just real fast talk first about what's included in the Governor's budget submittal request.

Governor supported a sizable portion of the Board of Regents' budget requests for capital projects to the tune of about 145 million in year one and 114 million in year two. What the members will see is that a lot of that funding is in the area of RIM, R-I-M, which is renew, improve, modernize funding.

So this is to--this is--this would be a source of funds to address major repairs and renovations that are required throughout the entire university system. It would include a number of areas of deferred maintenance for the university. So for, within system and Manoa, 50 million each year, and then specifically for student housing improvements at Manoa, 25 million. At UH Manoa for Holmes Hall, which is the College of Engineering, $9M, and then at Manoa for the Mini Master Plan, which is Kuy--which will include Kuykendall Hall for five million, and then at UH Hilo, 15 million each year for their RIM projects.

At UH West Oahu, 6.5 million and 4.5 million respectively for their RIM projects, and then at the community colleges, rather than RIM described as capital renewal and deferred maintenance, 20 million in each year. And then one specific project for the community colleges, at Honolulu Community Colleges for technology renovations, the second phase for 15 million. So in total, it equates to about 145 million in year one and 115 million in year two of the Governor's request.

For the Board of Regents' request, the Governor chose that amount out of what was requested from the Board of Regents, which equated to 381 million in year one and 331 in year two, 331 million in year two. The big sizable areas for funding that provided by the Governor is in these lump sum areas for RIM projects funding. So the amount that the Governor has included is still very workable and are at levels sufficient for the university to advance a capital program.

If the members would just look at the specific projects that were not included for funding or the amounts of the difference between what the university has requested and what the Governor has chosen to include. And with that, I'll turn it back over to President. And for any questions that you may have on any of the technical items, all of the university personnel, campus executives, and leadership team are prepared to respond to your inquiries. Thank you.

We're happy to take your questions.

Okay. Thank you very much. Okay. And thank you for doing the expansion of what the university does. So members, I did ask them to talk about it a little bit, as you may or may not realize that there are certain departments that have been expanding on what their purpose is and what their mission is and things like that to give you a little more insight. And again, this is to help our committee do our work. So I appreciate that. Okay, so members, we'll open it up for questions at this time. Anybody? Okay, Representative Hussey.

Thank you. And congratulations on your new position.

Thank you.

I have some questions about the report that the university submitted for the Student Scholarship and Assistance Special Fund. This is for HRS 304A. And so do you mind if I kind of go through some numbers? This might be germane for Kalbert. Okay. Let me make sure I understand what I'm talking about. So this report says that the university provides $106 million in tuition differentials and then an additional 28.5 million in tuition exemptions. Is that--am I understanding that right?

Okay. I'm sorry, I'm not looking at the specific report. Which is--is it the tabular?

No, no, no. It's in a report that the university submitted in November to the Legislature. And in fact, Chair, if I'm out of order, I can do this offline. Okay. All right. It's a lot of money, right? It's--and a substantial portion of this is going to non-Hawaii residents.

And I guess, kind of the big picture question that I have is, what is the state's return on investment for this roughly $134 million that we're spending to essentially provide an additional subsidy? And obviously, it's a public university. The State of Hawaii subsidizes the education for everyone. It looks like the cost of education for each student is closer to $27,000 but we're charging $4,000 for in-state and 16,000 for out-of-state.

But we're spending an additional 134 million of our public monies to further subsidize out-of-state tuitions and, you know, some portion of that is in-state or, you know, Native Hawaiians who live outside of Hawaii, etcetera. But my general question is what is the ROI on that additional cash that we're spending on that subsidy?

Yeah, so I'm going to just--

I can begin the answer from a 50,000 foot perspective as somebody who's been in the industry for a while. It brings prestige to the university by bringing top scholars into the university. It creates excitement, it creates diversity from other countries, other places.

It enriches our local students by having the exposure to different ways of thinking. It's very, very common among any public university to have some portion of funding for out-of-state students. So that's just as a philosophical matter. It does advance the reputation of the school and also the academic excellence of the inquiry. I don't know if you have more specifically for--

Yes, sorry Representative. I think we found the report that you're referencing. So I'm familiarizing myself with this specific special fund here. But it looks like the fund and the purposes of what it pays for are things such as East-West Center student grants, GI Bill subsidy, tuition differentials with resident to non-resident students for certain identified populations, IE like Native Hawaiians domiciled on the U.S. mainland.

So it's things like that or also the other big one looks like the Western Regional graduate programs, Pacific Island International Exchange. So I think for--again, if you like, I would happy to discuss with you with this more program after I get to a chance to talk individually with it, but it does look like the commitment is for providing financial resources to attract certain students to matriculate at the University of Hawaii.

How the state or the university views a ROI on what that investment is, I think those are the things I'd like to talk with you more after I familiarize with how this program is reflected.

Maybe another 50,000 foot question is how does the university--and I'm assuming through the BOR--how does it think about setting the relationship between in-state and out-of-state tuition?

Not sure I can answer that 50,000 foot question.

Yes, and if I may, part of the reason I'm asking is our out-of-state tuition is actually quite affordable. You know, it's just north of $16,000, which if you look at U.S. educational costs, that's incredibly cheap. It's an incredible deal that we're providing for out-of-state folks, and that's within the context of understanding that it's a 1.3 billion dollar budget for the university. We have 50,000 students. So our actual cost of education is like $12,000 more than we're charging. And I'm curious, kind of that relationship, why are we still subsidizing out-of-state, I guess is part of that question?

Sounds like something that we should take a look at. There is a--as I quoted some of the percentages for you, most of our schools are overwhelmingly Hawaii residents that we're serving. As it relates to a flagship or one that has an international mission, then there are questions about the value of that to the culture and the educational environment itself, but that's certainly something that we could explore further if you have concerns, and it's not something that I have yet encountered here. So I'm happy to look at that and have that discussion.

Okay, thanks for answering my questions. Appreciate it.

Okay, thank you. As you discover things, maybe you can just share with the committee and we can send that out.

Absolutely. Happy to report back.

Okay, thank you very much. Okay, members, further questions? Representative Lee Loy.

Thank you, Chair. Thank you, Madam President, for being here. I like seeing that. And maybe this is more for, for Kalbert. You mentioned the RIM, which I think is a beautiful way of putting repair and maintenance because you added in the modernization, but you also mentioned the make Manoa athletic subsidies permanent. On the sheet it was 3.2 for Manoa and then another eight--

Another 800,000.

So together would be four? Got it.

Together would be four million.

Great. And so that was your way of just showing where it's going to the different campuses?

Yes. So a little bit of history. So this subsidy, Legislature started appropriating four million to UH system for athletics back in 2000 and just ahead of the pandemic, but the funding has since moved to non-recurring year to year. But it's always been four million. The university system, we don't have athletics at system, so it gets dispersed to the campuses that do have athletics, Manoa and Hilo, and the amount has historically been on this ratio of 3.2 million to 800,000.

Okay, thank you. Thank you, Chair.

Further questions? Okay, Representative Miyake.

Good morning. Thank you. You mentioned that the Cancer Center, the cigarette tax revenue is on the decline annually. How is the Cancer Center planning to make up for the shortfall?

So that's a very big question, and the university and the Cancer Center have been working on a number of things to try to continue to sustain the level of productivity at the Cancer Center, but also, as you'll hear from the Cancer Center Director, there are a number of areas that the Cancer Center needs to grow. We need to do more research, we need to have more applied research, and the Cancer Center is committed to doing that.

Affording that is a bigger challenge in light of the number one source to meet debt service has been the cigarette tax. So I can call up the Cancer Center Director also, but I would just say there are other revenue streams available to the Cancer Center that they are developing as well. There's a Cancer Center Consortium.

So the hospitals and the local hospitals and other companies do contribute money to help support the Cancer Center for their purposes as well. There's a lot of philanthropic, also donation, and there's a lot of extramural research grants and pharmaceutical research that gets done at the Cancer Center and there's greater opportunities for that as well.

So those are opportunities, I think, for the Cancer Center to help address, but in the area of debt service, because that is not one area that can be recovered easily, it is for a facility, it's for a built facility, tenth amount to its mortgage, so that is the reason why the request is to help--for the state to help through the General Funds to help support that.

Should also add that working through a strategic plan to address these issues, to have a forward-looking plan where there are multiple different avenues in which we can go, and the timing coming in now is good because then we can go coalesce around a path forward, hopefully with the Legislator's support on the debt service, but also getting our own strategy in order.

Thank you very much, and this is--I'm the Director of the University of Hawaii Cancer Center, Naoto Ueno. As you mentioned that the debt service is a major issue and the decline of the cigarette tax is very rapid, and currently we're at the 10% level annually going down.

Now that said, that we're very proud of this cigarette tax going down because that is our strategy to decrease the smoking. And so we have been very successful based on our research and clinical activity. There is a significant gap that we have to contribute as a state to improve the overall clinical care, and what I mean by this is currently at the State of Hawaii, there are significant gap of clinical trial access.

As you know, that we have zero phase 1 clinical trials, and as you know, that people who have means to leave the island will jump off the island, and this has resulted in a significant economical loss because family and patient have to spend a significant time at the continent. At the same time, most of the family who have advanced diseases not able to leave the island.

So strategically, currently we have different avenue of how we are looking our situation, one: we do spending a significant effort of realigning the Hawaii Cancer Consortium, which is consist of Whole Health System and HMSA. As of December, the Board of the Consortium has now approved the Hilo Benioff Medical Center to be joining the consortium which will be adding the Hawaii Cancer Consortium budget up to 3.1 or $3.2M.

The second is one of the questions that's been coming from the ledge about addressing how we would be using the Ewa side space that we have. As you know, the Early-Phase Clinical Research Center construction, the phase two construction, started as of September 7, 19, and this is expected to complete towards the late fourth quarter of 2025 or first quarter of 2026. That said, the concern has been that what is the utility of the space?

So we have now actually undergone an agreement MOA with Queen's Health System to develop the third and fourth floor to bring the oncology service of the Queen's Health System into the third and fourth system. Now this agreement is to create a lendering and plan so that we could build out.

So the goal is to have this broader usage that would help us financially as well as bringing in comprehensive clinical care. And this similar discussion is currently ongoing with Hawaii Pacific Health. So I think I'm answering the question about this concern that you have brought to my attention since I started my tenure two years ago.

Now lastly, this is about clinical revenue. The Cancer Center was formed in a way that we will not have any clinical revenue more than a decade ago. And as you know, the growth and really to provide a higher impact, it's not just clinical trial but downstream revenue is needed.

So the plan that we provided as a business plan last year, we have over the five years to increase the clinic--adding a clinical revenue once we opened the Early-Phase Clinical Research Center. So the concern has been that whether can we operate this. So we have done a stress testing on the operation already, and as of this first quarter, we will be opening the first clinical trial related to phase one.

And this is a use of oral agent and we have a small clinic on the Diamond Head side so that we'll be ready to make sure that we'll be able to financially able to run and have a more accurate operation outcome towards the end of this year or beginning of next year.

And so there's a lot about moving component that exists. Now that said, even with every effort that we provide, the Cancer Center is still required support from the state. There is not a single NCI-Designated Cancer Center 72 that is self-sustainable. So the question from my end is my job is to reduce the cancer mortality, and we have a goal that we have to reduce significantly until 2030 or 35, working with the National Cancer Institute, and we have been successfully, because of your support, reducing the overall deaths in the State of Hawaii and USAPI.

So that is one of the concern that we have, and I recognize that this is not something that we could solve by ourself and we ask for your help, and I'm happy to take any other questions.

Okay.

Thank you, Director, for your report.

Okay, thank you. Okay, real quick, just to follow up--and you're right, because I kind of remember that it was Queen's that kind of blocked the clinical trials at JABSOM. And so these new agreements in place now allow you to move forward?

That is correct. Okay, so in the past, it was blocked with all the agreement that we will build this building without no clinical activity. And we have also agreed to put cigarette tax, and cigarette tax is supposed to be aspirational and grow so that we could do a better job in our region, but from my perspective, unfortunately, there was probably a good reason for it, but from the Cancer Center Director's perspective, cigarette tax using for service debt, it's something that I cannot agree and it's hindering our growth.

Okay. Yeah, I'm kind of--so there is an agreement with Queens now and it changed everything. Can you send that agreement to us?

Yes.

Okay, thank you.

I just want to make sure that--I have to confirm this with Queens because this is a private entity.

Well, it was put in place when--originally with, you know, the medical center and JABSOM, and the Cancer Center was supposed to be built in Wahiawa where all the growth is going, and then, and then now--and so if we built it in Kaka'ako, it was Queens that said, well, if you're gonna build it there, then they didn't want somebody competing against them because they had their own. But, but this is very--this is--this changes a lot. So that's why I want to see the agreement.

Yes. So we are--since my arrival, or even before that, the direction is more harmony and synergy is needed.

Okay, very good. Thank you. Okay, any further questions, members? Okay. Representative Grandinetti followed by Kitagawa.

Good morning. Thanks for your presentation. I just have a quick clarifying question about the Hawaii Promise expansion. Would that expanded program apply to students who've matriculated through the community colleges and are trying to continue at the four years or does it, does it--would it be eligible to students who are beginning their education at our four-year institutions?

Thank you, Representative. That's a good question. So the amount that is reflected in the university's ask is if Hawaii Promise was available at the four years to the same degree it's available at the community colleges, that's the amount--so let's say it's 12 million on the amount ask--that means that at that dollar amount, it would be available to, say, freshmen, sophomores if they went if they chose to go to the four years program.

In the past, I know Legislature has considered different variations of the Hawaii Promise, including if it were only available for years three and four, per se, at the four years, and continue to commit to years one and two at the community colleges. So that is a viable approach and it would be significantly less to fund that than the amount that's in the budget ask.

Do you know how many, roughly how many students are benefiting from the existing Hawaii Promise Program?

I don't. I'm going to just turn around and look to see if somebody--

2,500 as an order of magnitude at the community colleges.

Thank you.

Okay. Representative Kitagawa.

Thank you. I have a follow-up to that question, actually, about Promise Programs. So you mentioned the Governor didn't approve the community college? Or he did--

The expansion, the budget request that the university have is actually to expand it to include the four years.

The four years. Okay. So currently it's at the two years, and do you have data, I guess, on how successful it's been? So, like, as far as graduation rate or transfer rate, those who have received the Promise Program, how many--you know, what's the percentage of that?

We absolutely have those stats and--and we can--if we can provide them to you and the committee after this meeting. Yes.

Okay.

Very much. Further questions? Okay. Vice Chair.

Hi. Morning. Thank you to the university's commitment in, you know, to growing our healthcare field professionals and particularly the nursing expansions. I saw in the testimony that the estimated positions for UH Hilo would expand the program by 40 people in the cohort.

Do you guys have estimated numbers for the phase three expansion between UH Manoa and West Oahu and then also the West Oahu Pre-Nursing Pathway? How much capacity are we building with those new positions?

Aloha. Maenette Benham, Chancellor at the University of Hawaii, West Oahu. Our Pre-Nursing Program, since we began it three cohorts ago, has expanded, I'd say at least 200%. We now get over 90 applications for 35 to 40 positions in our Pre- Nursing Program.

This coming cohort, we have 45 students, which is actually pushing our capacity, given we only have two faculty. Now the number of students that test into the program and are accepted by Manoa in their second year as BSN students are approximately 24 to 26.

They can literally go up another--ten?--ten students, but we just don't yet have the faculty capacity in order to be able to push that number up. We get a number of nursing students from Waipahu, Kapolei, Wahiawa, Mililani coming into our program on the west side. That's how fast we're growing.

Thank you.

Thank you. Further questions? Okay. Representative Templo.

Morning. I really think that the Hawaii Promise Program is great, and I look forward to the expansion, but my question is, in regards to retention, did you guys think of possibly having students who are willing to, I guess, work or stay in Hawaii? Are there stories like that that they stayed and so we kind of have some type of, you know, it's a good investment for our state, economic-wise? Do you guys have data on that or do you guys plan on having that as a requirement? Are there talks around that?

So there are a number of scholarships or aid programs that exist within the state and applied at UH that do have requirements similar to that, years of working in-state, so there's student loan programs for student loan forgiveness if they, in certain careers or industries, Med Industries 1. There is not that requirement for Hawaii Promise, though.

And in the current--applying it to the four years, the university currently does not have a thought around making that such a requirement in the Hawaii Promise Program, even if it was applied to the four years. That being said, I think the program would still need to be structured.

Hawaii Promise for the community college is established by statute, so it would be similarly--could be established by statute at the four years and there could be different provisions if there was a difference, a constructed difference, between the community colleges and the four years.

Okay, thank you.

Representative Templo, I think your your question, the underlying piece, I don't have the specifics as it relates to this, but I've been in two states that have done extensive programs that are very similar and I think you're asking what is the return on investment for for the state.

And in the two states that I've been, it has been overwhelmingly in excess of the amount of money that's been invested for these students, particularly because most of these students, it isn't a question of do they come to our university or do they go elsewhere. It's do they go anywhere, and this kind of access and entry point literally propels students into the middle class, not just for themselves, but literally generations of their family.

So, so look forward to getting you that data, but can tell you in other states that this is replicating at some level. It is an overwhelming--overwhelmingly positive impact on the state's economy, let alone the human capital, obviously, which we care about the most.

Thank you. Thank you, Chair.

Okay, thank you. Further questions, members? Chair?

Thank you, Chair, for the courtesy of allowing me to sit in on this briefing. Morning, President Hensel. Congratulations on your appointment.

Good to see you.

Good to see you as well. Just 50,000 foot questions and, Chair, I promise I'll get into some budgetary requests too, but I know the, obviously, we have a new president taking office next week and there's been talk about potentially abolishing the federal Department of Education. There's been talk about this kind of a whole-scale retreat on DEI programs. How do you expect the university to navigate this new landscape?

Yeah, it's a great question and we've been talking a lot about it because the stakes are very high, obviously, and in my last role during President Trump's time in office, I was in a red state. So had a bit more of a preview, I think, of what is possible and saw the evolution there. What I would say the important thing to remember is what our mission is, and that is to educate people and propel them into the middle class and to be part of society.

And we can do that and remain--keep our commitment to equity and diversity, all the while trying to be as responsive as possible to federal policy, which by the end of the last Administration was quite significant in terms of its restrictions both for Title IX--it's already beginning to change--but also in terms of what type of programming we could do and how we could talk about certain issues.

So I think the important thing from my perspective is where it immediately comes up against our educational mission. We need to speak about the significance of the values that we're protecting and where we can comply and be good partners without intruding into those values. We need to be a good partner and work within the system. So we are already taking an assessment of what the potential impact might be in certain areas and trying to minimize any negative impact.

Okay, thanks for that. My next set of questions is regarding housing. I know the Legislature passed, I think it was Senate Concurrent Resolution 143, which asked the university to come up with a comprehensive plan to address faculty and student housing. Could you folks give us an update on that?

Sure. I'll ask Jan Gouveia to come up, and I will say while she's coming up here, I did a tour of every facility that we have last week and spoke with students on the ground and viewed--just to see it myself, and the one thing that was really powerful with the students that we spoke to is not just the importance of having excellent facilities, but the importance of them being affordable. And sometimes those two things are in conflict when it relates to how pretty it is. You know, is it a cosmetic concern or is it a health, wellness, and safety concern?

And I know that we've been talking about, we absolutely will address every health, wellness, and safety concern, but want to remain committed to that entry access point for our students who don't--who will not be able to afford the housing the more modernized it gets. So I turn it over to you, Jan.

Thank you, President. President Hensel does hit the highlights of the report that we submitted trying to balance or bring a balanced approach to providing affordable housing at a service level that we are all at least proud of and are confident that we provide safe spaces for our students to thrive in.

So the report that we submitted addressed the existing inventory that we have for student housing and set forth and highlighted what a seven-year CIP plan would look like to maintain that current level of inventory, but also identified other opportunities where we could increase inventory through either a public-private partnership arrangement or another balance type approach between perhaps funding from the Legislature and funding that the university could bring to the table to, again, not only finance its CIP program, but also to expand the inventory available to students.

Specific to Hale Noelani, I know there's been a lot of attention on the fact that that complex has been shuttered since 2018. I think there's about 550 beds that have been taken offline. What do you think is the best path forward with that? Do you see value in just perhaps demolishing the structure altogether and then perhaps looking at a P3 partnership that I know that UH has had, had some success in to replace those units?

Yes, um, the P3 model has been the preferred route for how we address the Hale Noelani footprint. Um, demolishing it would be great. Uh, it, I think we estimated it to be about 6.5 to $8M to demolish. We did not have funding available to do that up to this point, but at some point in time we are going to have to address the fact that it does remain uninhabited, right, and we have to--we've boarded it up to prevent people from going in, but we do believe that that site is best utilized to increase density and increase our inventory, and again we look to a P3 partnership to deliver that method of housing.

Anything you can share in terms of concepts for that property, if it is cleared, whether you're looking at potentially taller towers, more density, how many more units that might be able to host there?

Yep. We have explored roughly at an additional 1,500 units through two towers with a mix of housing units that can support freshman housing as well as non-freshmen living. We do have new graduate student housing available coming up through Hale Haukani, which is the old NOAA site. So really is, we are looking at efficient use of a tower type footprint that can deliver close to 1,500 beds.

Okay, thank you. Regarding the RIM process, repair, improve, modernize, I know as you folks mentioned, the Governor only approved half. What is the current backlog in terms of repair and maintenance for the entire system?

It's close to a billion and we run roughly 100 to 150 million in preventive maintenance that's on the schedule that needs to be done every year, and every year that we do not do that preventive maintenance program, those spaces fall into a state of disrepair and into the deferred maintenance category, and so our RIM funding does really help us stay ahead of that cycle of just building on the deferred maintenance, but, but that is our, that is our backlog right now.

That seven-year CIP plan will get us to zero one point--some point down the line or is there always going to be a deficit, you think?

I think there will always be a deficit. We don't--I'm not sure it's the best use of funding to get to zero. I think there are some industry standards where you can get maybe closer to 15 or 20% might be an acceptable rate, but we are far exceeding that when you look at the facility condition index and the cost to replace.

Thank you. Another item that was not included in the Governor's budget was nine million for--let's see, where was it?--a new administration office and parking on the upper campus. Can you explain the vision behind that campus? You know, in addition to being the Higher Ed Chair, I also do represent the Manoa community. Street parking is always at a premium. We get a lot of calls about that constantly, but can you explain the vision between or for building a new parking structure on the upper campus?

Yes. Thank you very much for the opportunity to share with you the idea that we had which was adding inventory to our parking that allows--that makes more parking available to students as well as eliminating all of the interior roadways within the main Manoa campus.

I don't know if many of you are familiar, but there's lots of little roadways coming here and there, and so the idea would be to be a pedestrian-friendly, walkable campus where the perimeter of the main Manoa campus would be the only place that vehicles can have access. And if we put a parking structure where the current--near the current Korean Studies Building is, we'd look to add anywhere between 1,500 to 2,000 stalls.

That would allow us to, again, eliminate all of the interior parking and vehicular access ways as well as make all of that available to employees, which would allow us to dedicate the lower campus parking structure, which is about 2,500 parking stalls, to student spaces.

Okay, thank you. And then what do you anticipate the final cost would be for the structure itself? I know you have nine million in planning here.

Well, it's about $60,000 a stall. We are looking at maybe anywhere between 100 and 120 million, possibly, but the programming money would allow us to take a look at possibly putting together even a public-private partnership arrangement to help offset some of the costs, not 100%, but some of it so that the parking rates could be affordable as well.

Okay, thank you, Jan. Just a few more questions, if I may, Chair? For President Hensel, I have to ask this since there was a lot of discussion about the athletics program and the Athletic Director specifically. Can you share what your plans are to fill that position?

Sure. So there will be some discussion at the Board of Regents meetings. My understanding is that I will receive instructions and guidance from the board as to their expectations, but what I can tell you, my goal and my conversations have all led to the same place, which is to move forward expeditiously in a national search to ensure that we find the best possible person that we can in the most transparent way that we can, so that the community has an opportunity to engage in that process, that it is not just internal stakeholders, but also external stakeholders that will be part of the, of the Search Committee. So I expect that there will be more information forthcoming very shortly on that.

Thank you, President. And just one final question for the Board Chair. Chair Lee, if I may? This question predates your service on the board, but I know right now the president also serves as the chancellor of the Manoa campus. Is the board considering separating those two positions at any point?

Right now, the board is still in the assessment process. We had to go out with a job description with the president and chancellor combined, but since we have the president now, we can start that assessment process. There's a few things, but there is a cost to separating it and also some benefits, too, but we have to weight both sides.

What is your timing for that assessment?

I think the last year when we had a separate chancellor position and then we put it with the president, I think that whole assessment process took a few years.

I'm sorry, I meant to ask, like where are you in that assessment now?

Oh, we haven't started it yet.

You haven't? Okay. So you expect it'll take a few years if past practice holds. Okay, thank you. I think that's it, Chair. I failed to mention at the beginning, I just wanted to thank you, President Hensel, and your team for hosting the Higher Education Committee on various site visits. I know you said you've been on the job for two weeks. I think I got word that I'll be the Higher Ed Chair about a month ago, so I can totally appreciate what you're dealing with, but especially as Stephanie Kim was very--been very helpful in allowing the committee to visit the UH Hilo campus.

We'll be at JABSOM and the Cancer Center tomorrow. Unfortunately, because of the thunderstorm on Friday, we had to cancel our UH Maui College visit, but to the rest of the chancellors in the room, we are planning on a pretty robust schedule in the interim to come see for ourselves the state of your campuses and to hear from you folks directly. So thank you, President. Thank you, Chair.

Absolutely. We welcome your engagement, and anytime we can arrange something, we would love to do that.

I think, you know, during the interim, the Finance Committee usually does a lot of site visits, so we'll take you up on that.

Great.

Thank you. Okay, further questions, members? Okay, real quick, Garrett, can you come up and update the committee on where we are as far as--there was a lot of money that came in for deployment of broadband, and I know that, you know, you were--well, the money went to B&N and then you were assigned to move forward on it, but there is also funds that went to Hawaiian Telcom as well as DHHL and how that is coordinating with you and then what the status as far as your part goes.

Thanks, Chair. I appreciate the question. So the great thing is that we have Lieutenant Governor Sylvia Luke coordinating on behalf--

Right. So she gave us a slight briefing on that, but maybe from your perspective.

We have--so the university has direct responsibility for execution of two of the largest programs in that space the BEAD Program, which represents about $150M in federal funds, and the Capital Projects Fund out of U.S. Treasury, which represents another 115 million. So we are executing on both of those. We have projects already in flight and in play. We are on schedule on execution of all of the...

As those of you that are used to handling federal funds know, there's typically a bunch of process that the federal folks push us through to make sure that we both plan for and expend the money according to the rules of the various programs.

So we are on schedule in terms of the program execution, as we have gotten both deliverables as well as process steps approved by the NTIA, by the federal government, as well as the U.S. Treasury. The Treasury money funds primarily the deployment of new interisland submarine cable activities. The process is well underway with a contractor.

The BEAD money prioritizes last mile connections. Those--we are actually already released--we have already released RFPs to seek out the partners for implementation of last mile deployment on all islands. Those RFPs are scheduled to do their initial close at the end of this month, end of January, and we do anticipate being able to provide selection of partners no later than June of this year with the expectation that actual implementation activity would occur starting the back half of 2025.

A lot of the states have been having and running into some difficulties in execution to make sure they can get to the end result, but we are--I think we're very fortunate in this state to have a number of good private partners as well as cooperation across of all of the public entities, both state and county, to be able to help us move the projects forward.

So we are very encouraged in terms of the activity and the level of execution that we're undergoing now, and we look forward--looking forward to seeing actual implementation activities occur soon. The Capital Projects Fund had two pieces, if you folks will remember from some of the earlier briefings.

Besides the subsea cable activity, there's also a project that we are soon to announce agreements going forward for the Hawaii Public Housing Authority, and then on the BEAD side, again, we are very pleased with the effort moving forward. It is a little bit--I hate to use the word bureaucratic--but there's a bunch of process that we are needing to go through to make sure we check all the boxes with the federal funding authorities, but we have gotten lots of support from our federal program partners as well as, again, from our state and county partners to move that forward. So pretty pleased going forward. Happy to provide details in any of the projects if you'd like.

I think, you know, so at the end of the day, I think you have a third party vendor that's going to be deploying the execution of it and then with that they are tasked to like operate and help maintain it going forward through revenue that is coming through, but at the same time, these are federal monies that are coming in, and at the end of the day the--it is to help the state a little bit, right? So could you explain to us what's the benefit the state gets out of this?

Yeah. So the great thing with the federal funds is that it essentially it flips the capital equation for investment in what is traditionally private sector infrastructure. So with a bunch of the deregulation activities that occurred over the last 80 or 100 years actually, the majority of U.S. telecommunications infrastructure has been privately funded with private rates of return, and as you can imagine, in particular for some of our highly rural locations, the numbers simply don't pan out.

I mean, just realistically speaking from a commercial return perspective, it is difficult to make large capital investments to fully satisfy all of the remote locations, in particular in Hawaii.

The great thing with the federal funds is it directly addresses the CapEx difference to make sure that we can build out those facilities to reach all of our highly remote residents, highly rural residents, as well as, particularly in the case of this interisland submarine cable, it provides a capital injection to make that project happen, whereas it's difficult to say when it would have happened without that capital injection. So it really creates that benefit and then the benefit accrues to all of the residents on a statewide basis, which is really--

Part of the issue was the aging infrastructure as well as redundancy. So the landing sites will be in different areas to address, right, so that we have that redundancy, but at the same time, many of them are landing or connecting to UH campuses.

And I just want to understand the--I think we talked about it a little bit, but to help us understand a little bit more why those sites were chosen and then what is the, again, the benefit to the state?

Correct.

Yeah, really good question. So when we did some initial design work several years back with the help of some ARPA funds by the previous Administration, so the important thing for us was to make sure that when we made this investment of public funds into what is traditionally commercial telecommunications assets, we felt it was critically important to make sure when we chose the endpoints for those locations.

So as you noted, several of the submarine cable locations show up on UH campuses. It was critical that the locations that we chose were publicly managed locations and to the greatest extent possible, open access, so that the facilities that were built would benefit all industry or all industry partners so that we could really promote both access as well as affordable competition in this space to help bring the cost of the--in particular for the high-cost areas--our neighbor islands, in particular. The rural areas of the neighbor islands definitely stand out as areas that we should make sure we pay attention to.

So the choice of the public facilities was to make sure that we could ensure that open access over a long period of time. Those facilities were also chosen because they also have existing fiber infrastructure for our incumbents, so that we would not disadvantage any of the folks that already made investments in the area, but really gave both the incumbents as well as any new entrants the ability to do so on an open access basis.

Like I said, I think we talked about this briefly, but I think maybe what would be helpful going forward is maybe any kind of detail into the agreements with the third party vendor exactly what their role is. My understanding is, right at the end of the day, the net revenue out of that is shared?

Right, and exactly what the shares state portion is and how is that going to be deployed from there--and exactly, the vendor exactly with their share, I understand they're for-profit companies so they have to make money, but but at the same time, right, what are they going to be maintaining and all those different things.

Yeah. Be happy to share that--

And how are those numbers...?

Happy to share that with you. The starting point is 20% equity on the part of the state so the starting point is 20% share, but as those, as the details of the agreements develop, happy to share them with you.

Okay, thank you. There are other questions that I have but I think those are the big money ones that I think are important. We'll have our staff continue to work with you and we appreciate, President Hensel, that your presence here today and all your people and we look forward to working with you. So thank you very much. Okay.

Thank you.

Thank you. Okay, members, we are in recess.

Okay, we're going to reconvene the Committee on Finance. Next up, we have the Department of Transportation. Welcome.

Thank you very much. Chair. Hello. Chairman, Vice Chair and Members. Ed Sniffin, Department of Transportation here with me today. I have all the program leaders. We have Kurt Otoguro who runs airports, Drakeley, who runs harbors, Camillee, our first deputy who runs Administration, and Robin Shishido who runs our highways program. Behind them we have some of our staff.

Larry Dill, who's our highways administrator. We have Lynn and is that Robert? Yeah. Lynn and Jason who are on our finance side for airports. For our project management side for airport, Sandra and Ryan. And then of course we have Melissa Miranda Johnson, who is our legislative lead.

Just to talk a little bit about our programs for.in General, we're a special funded organization that's self sufficient for highways. We have 2,500 lane miles that we manage.

And we make sure that we're pushing the priorities to ensure that we're pushing a State of good repair, making sure that our system that we have works better than it did before.

Robin's been doing a great job of not only managing the program, but also attracting more federal funds to the program to ensure that we don't have to raise our fees to our public in this area when we get our jobs done. On the airport side, we have 15 airports, five commercial, 10 General aviation.

Make sure that we use the airport funding to the extent possible to make sure that we can upgrade as much as possible. Now, that being said, we're getting limited on funding.

We want to make sure that we minimize the amount that we increase to our airline partners because once we increase there, those are pass throughs to all of our passengers here. We don't want to affect the public from Hawaii and the harvest program as well. In General, it's funded by wharfage and demridge.

That's the biggest portions of the harborist Fund. Dre's been doing an amazing job of making sure she's taking some of Robin's money on the discretionary Fund side to ensure that we can push more improvements on the harbor system again without impacting our residents here.

Priorities on the airport side, you can see a lot of our requests are going to be for airfield pavements. We want to make sure that we're keeping our airport safe.

Some of you who've gone on the tours, the airport tours, have seen the degraded condition of our airfields and want to make sure that that's the piece that we focus on. Then we move into the terminals to make sure, we improve our experience for all of our travelers coming through.

Of course we want to make sure we take over our tourists, but primarily we want to make sure we take care of our residents. For us, airports is an extension of the highway system. Our residents can't go anywhere between islands or to the mainland without jumping on a plane.

On the harbor side, we want to make sure that we upgrade the system to build efficiencies to the extent possible because every dollar we can save on the ports saves money to all of our constituents. Here. We sent a package to just show the General funding mechanisms for our programs.

If you'd like, I can just run through them real quick, please. On the airport side, you can see if you go to that pie chart on the third page, the majority of our funds, our revenues, comes in from airlines rates and charges.

So those are landing fees and the charges that we for the space rentals and the like that come through. For airports, 28% come through concessions. That's our parking, our food and beverage, our retail in those areas and are duty free and non terminal rentals.

These are all properties that airports owns outside of the terminal area that we lease out to different businesses. Our funding that comes from FAA for airports, very small compared to the program. It's just 40 million bucks a year. That's an entitlement. We have discretionary grants that we can go for in addition to that.

And airports has done a great job of increasing that amount of money that we've been getting for those pieces. That's the General revenue field for airports. One of the things that I should mention is for airports, you can see just from the bar charts below, everything dipped, of course, during COVID Everything's coming back now except duty free.

Duty free, that used to be the big piece of our revenues internally because it took into account the duty free that was being sold at the Waikiki store is gone and is generally not going to come back. That business model is kind of ancient now and we don't expect it to come back significantly.

Also, anytime we are short on funding in General because of our lease agreements with the airlines, the they're required to make up the difference. So say this year. Last year we made roughly $280 million. We spent 300 million. That 20 million Delta has to come from the airlines by increasing rates and charges.

We try not to do it as much as possible because once we increase those rates and charges, it starts hitting our residents as well when they travel. So that's the airport piece on the harbor side, that pie Chart on the fourth page you'll see about three quarters of our funding there is for wharfage and demeridge.

That's when ships call, they start storing. When they store their containers on our facility that warfrage they have three to four days of free time that's included in their warfage. If they go beyond that time frame then I'll charge themerage. That's going to be a lot more expensive.

We generally offer them storage if they ask us for it up front but if not we'll charge them the damage. We have about 15% of our funding from lease rentals. Those are properties that we rent out to different agencies out there.

We got some storage amount that when people come in and ask us for storage we'll charge them that instead of demerage. And we have some dockage fees that everybody pays when they come through. Especially for the cruise ships.

Cruise ship numbers, those are big comparative to normal times because of the pent up demand that we had from from the continent to the US we don't expect to see those numbers staying up there for a long time. That's Harper's on the highway side. On the sixth page you'll see another pie chart.

I've got to thank the Legislature for the increases that we've had in the rental car surcharge over time. Because of that. That's our largest portion of pledged revenues right now when we start going to our bond floats. So. So it's about 105 million per year.

That's seven bucks per day on rental cars that are being surcharged specifically for highways in the past. There is a portion of it, the two to $3 that was committed just to capacity, another $4 that was committed to the program in General to make sure that we could match our federal funds that came through.

And of course we tried to balance out the program to ensure we hit all the needs of the public. You'll see that every year is about 80 million bucks for our fuel tax and, and you see that number coming down now. So we're at about 76 now and we expect that number to continue going down.

Great thing for the environment, great thing to move towards clean energy. Not so good for our program when we see those reductions. Which is why we again appreciate the Legislature for helping us to push forward on our road user charge program. That's going to help us at least stabilize those amounts as we go.

Registration fees and weight taxes are collected at registration and you'll see it generated about 80 million to about 40 million. 80 million for weight and 40 million for registration. We know that that's not capturing all of the vehicles that are out there.

We know that there's issues with people not registering their vehicles, which is why we're supportive of sheriffs who are pushing for the potential of using our red light cams and our speed cams to start managing or enforcing registration and safety checks on the system.

And I believe they're going to drop a Bill this year just to have the conversation.

We get interest on the funding that we give to BNF to hold for us and in General, our miscellaneous side that includes the enforcement funds that you guys have provided us and other collections that we have just very small portions of our account. Another big portion is the FHWA funding $225 million.

In General, that amount is restricted to 90%. That's the authority that we have until August comes around when we talk about the redistribution piece and generally get it back. So that's the overall kind of overview of the program itself. And we're open for any questions you might have. Thank you, Chair.

No, you can go into your budget at this point.

Let's start off with airports. Okay.

English to the budget Press yeah, good. Morning, Chair, Vice Chair, Members of the Committee, Kurt Otaguro, Deputy Director for Airports. First and foremost, congratulations to the representatives who just got into office. Appreciate it. I look forward to working with you.

And like Director said, thank you for some of you for taking the time to visit the airports and seeing some of the projects and the needs that we have for this fiscal, the next biennium. What we're asking for is operating and maintenance budgets of 368.6 million in fiscal year 26, followed by 368.6 million in fiscal year 27.

On the CIP side, we're asking for approximately 868 million in CIP monies and 911, say 912 million in the following year. And so that's our General request. We are working with Director and the team to issue revenue bonds in the upcoming year. Working with Budget Finance, the estimated amount that we're Targeting is approximately 650 million.

So this week we are having the rating agencies come down. So we'll do a credit presentation to show the strength of the state as well as the airport system. And hopefully we get a good rating from that.

We can set the price of the bonds and then in mid early February will be taking a trip to the East Coast to then talk to investors and sell those bonds. So lots going on with regard to the financial side. As Director said, being self funded, we rely heavily, well, exclusively on revenues that are generated.

And so the requests that you're seeing in front of you are intended to supplement our operations. One note that you'll see, or maybe not in the budget, but the airport is financially sound, it's liquid. And as Director knows, during the pandemic, the revenue stream temporarily halted due to no passenger fees and what had landing fees.

And so that required the airports to accumulate more cash. And so that is something that is turning out to be in favor for the state as well as the airport system. As we go into this bond issuance, the more liquidity we have, the more confidence the investors will have. And so you'll see that in the airport system.

But the good thing about the airport system is that the revenue needs to exceed expenses. It's obvious accounting 101. And they have done that. But as Director said, should the revenues not do that? We do have that agreement with the airlines.

But just to give you a little bit of background, last fiscal year we did generate 763.7 million off expenses of 604 million. So we're able to come out with a net position of 140 million, which goes into cash. We do have some.

We had some capital grants from the Federal Government, as Director said, but nevertheless, we're dependent on our own revenue bonds to sustain our airport system with regard to specific projects. On the operating side, I don't know whether any Member had any questions with regard to any specific O and M requests.

We're going to go through all the. Testimony first and then we'll take questions at the end. Thank you.

So, yeah, in General, you'll see a larger number for security, and that's because of a couple of things. One is our increased security requirements at each of the airports. So we have a contractor that does that. So it's about 12.0 almost 13 million that we're requesting incrementally on top of the contract.

We're also mandated by TSA to do a worker screening, aviation worker screening process, which is unfunded by the Federal Government, by tsa. But airports across the country are mandated to do this. And so we're looking at purchasing equipment, staffing it, so forth at all of the commercial airports as we speak.

So those are some of the larger requests that are. One time that was not planned, but yeah, happy to answer any questions. Awesome.

Okay, thank you.

Thank you. I'd like to just go through our operating budget request first and then walk through our CIP request. But just walking through table six. I think our operating additions really fall into just a handful of different buckets, if you will.

So one is, since the transfer of our harbor police personnel to deal occurred in January 12024 we're asking for additional funding to pay for some of the new positions and higher salaries for some of those deal positions to serve our commercial ports. The other is we do provide contracted security at our facilities statewide.

And we found a discrepancy in the security services that we were providing that were compared to, I'm sorry, services that were being provided by our harbor users that rightfully should have been provided by the state. So the increases that you see for facilities statewide for facility security at our inner island barge terminals is to account for that.

We are also seeking additional funding for our special maintenance projects. As we testified last year, the cost of these projects are increasing with inflation, cost of materials, and even cost of labor. So whereas we are carrying out roughly the same volume of projects, just the costs are increasing. So we're asking for that budget increase.

In addition, one of the biggest items in our budget request is for $19 million in fiscal year 26, and that's to buy out our energy savings contract. We found it did not pencil out the way we anticipated it would when we entered in that agreement in 20162017.

And so we think it's more efficient not only for our finances, but for our harbor users finances also, if we just buy it out and then not have to worry about the escalations in that agreement. And then the last item, I'm sorry, we do have our ask for our debt service.

That is actually the largest ask in our budget. And then we are pursuing a federal loan through what's called the TIFIA program. And we anticipate that we might incur or we might have to start paying the loan as early as this biennium. And so we do have that in our budget.

And the loan proceeds would actually go to pay for redevelopment that we have planned at Hilo harbor and Kahului harbor following the ongoing land acquisitions that we have at both ports. And we are, this will be our first time pursuing this federal loan program. But we do like the flexibility that it offers compared to a bond sale.

We also appreciate that a federal discretionary grant, should we get one for either of these projects, could be used to repay that debt service. And the rates are really good for us, especially for our projects on the neighbor islands.

And then the last two items that I'd want to call out are just increased funding so that we can reclass and redescribe some of our existing positions and make those positions just a little more functional for our current operations. With that, I want to turn to our CIP request.

If you look through our CIP numbers, the descriptions are pretty broad, but I'll walk you through what we're intending to do with those specific costs.

So for our harbor Administration, where you see those budget requests, it's really to cover the staff cost for our harbor modernization program and then you'll see $15 million for each biennium and that's to cover our open ended contracts.

It's a lot faster and more efficient for us to run projects when we can easily access like a civil or structural engineer or even electric engineer. So that request covers that for Honolulu Harbor.

As we complete the Kapalama Container Terminal project, which is scheduled for this year, there are some projects that were descoped earlier in the project that we do need to come back and do so. That includes some modifications in and around Awiki street where KCT connects to the Young Brothers Inter Island Barge Terminal.

So that includes replacing a box culvert that's part of the city's storm drain system to allow cargo to pass between the two terminals without having to go onto a week street and Libby Street.

We also are looking at two land acquisitions in Honolulu harbor that will help square off our property lines along the Nimitz highway corridor and gives us just more opportunity for yard expansion at a future date. So the cost for the or the budget for the those land acquisitions in Honolulu are included.

At Klaailoa harbor there is quite a bit of erosion occurring at Pier 3 where Morisco operates its dry dock. And so for fiscal year 27 we're asking for $35 million to help shore up that that erosion that's occurring. We are also pursuing federal funds.

So if we are successful in getting those funds, the actual amount needed for that CIP will be decreased. For Kahului Harbor. While I mentioned we are looking at that land acquisition, there are some site utility improvements that need to happen much sooner than we can do that larger redevelopment. So that's $10 million request for 27 fiscal year.

@ Noiliwili we have a couple of projects including a gate improvement at Pier 3. We've got a widening the gates just better accommodate some of the truck turns into our facility. And and then speaking of erosion like we have at Klailoa at Jetty road along Pier 1 of Nawiliwili is something we need to take care of.

And then the last item in our CIP project is actually for Kamalapao harbor on Lanai. And there's some sewer improvement that we'll need to do, but I think we're. I think, waiting for some guidance from EPA on closing the cesspool and converting that. So that is our CIP request as well as our operating. Awesome.

Thank you.

Thank you.

Good morning. Robin Shishida with Highways. So the first line item you see on our O and m is a $15 million request for fire mitigation.

So last year, after the Lahaina fires, we utilize our own money and we cut fire breaks within our right of way and also on other state agency right of ways and even some private properties.

We coordinated with all the fire departments, got where the priority areas were, and we just utilized our forces or contractors to go ahead and cut fire breaks. So that's what the $15 million there is for the $5 million. That's the statewide homeless cleanups that we've been doing. And again, that's a statewide effort.

You know, all state departments come to us and we can go on their properties and do that cleanups. And part of the money is also used for storage of all the items that we collect. So that's a big chunk of it going down.

Some of the other bigger items pertaining to the different districts on Maui, our MS.4 program, that's for doing covered cleaning. We also have some other equipment purchases like a boom crane. We have an aerial net, you know, it helps with also with tree trimming, traffic signal maintenance and other items to do.

On Kauai, we also have some traffic signal parts, traffic control and a lot of vegetation management that we have going on different islands. So you'll see those line items there. We also have our debt service increase, our central services. On Kauai Island, there's establishment of the contra four lane unit that they have going on right now.

And also just going down to the O and M, there's other small pieces where it's maintaining our software programs that we have in place and also adding on more like our Google platform that we utilize for our resiliency and our safety analytics.

Jumping to our CAP requests, so our CIP requests, we have a lot of lump sum appropriations. And these lump sum appropriations covers various projects. There's a detailed list for it. But generally we have these lump sum appropriations to do our pavement system preservation, as Ed mentioned, to keep our system in good repair.

We also have our bridge program in here. And some of these programs, especially the bridge and pavement, they're mandated by the Federal Government. So when we get the federal highways funding, we need to maintain a State of good repair. If not, we get penalized or they will tell us what to do with the funding.

So we need to keep up with that. The lump sum appropriations is a traffic signal operations planning and other highway system safety enhancements and projects. There are specific line items for projects if you go down towards the end of the table 15 we have the H3 mitigation work. I think that was when the H3 was constructed.

PUA Nako on Hawaii island, that's up by the school and that will add that center left turn lane to help with the traffic mitigation during so school times. Commonly highway improvements, that's on Kauai to add capacity on there interstate H1.

That improvements, that's part of our products that we've been doing with developers in order to help affordable housing. We've been partnering with a lot of developers where we will take on their infrastructure improvements and in exchange they will provide more affordable housing above and beyond, you know what the county or is required.

And these improvements are what was required by the land use Commission, you know, when they went for their approvals. Last line item on the first page is our highway research statewide. So that's with our lab as various statewide projects that we do.

And Paakea Road, so that was part of emergency access route down the area that we're going to be taking over and having that route permanently open that can be used as a secondary route. And lastly PI Lani highway, that's another project where we're partnering with a developer to take on the infrastructure while they provide more affordable housing.

Awesome.

Good morning. Unlike the other mos, Airports, Harbors and highways, the Administration doesn't take any revenues. So we're funded through the pro rata share that Airports, Harbors and highways pays into. And that's based in statute according to expenditure from the previous year. So for this biennium in FY26, we are requesting 7.2 million and an FY27, 7.5 million.

And for the Administration a lot of the budget requests are going to process improvements.

For example, on the human resources side, developing a pilot project for our frontline supervisors and managers to get training on labor relations if there's a workplace violence issue or an issue that they're unfamiliar, can load all of the collective bargaining agreements, all of our past arbitration grievances into artificial intelligence type bot.

And the supervisor, the new manager can query the bot if an incident happens so that they can get direct kind of guidance on what to do on the next steps. So some of the priorities for the Administration, the first one is our greenhouse gas reduction plan. In it we're asking for $1 million to develop this plan.

And it's in response in part to the Navajine settlement. That plan, the draft is coming out towards the end of May of this year. Also related to that we developed a volunteer youth council on transportation.

Before the plan is finalized, we, we are going to get input and feedback from the public of course, but also from this youth council education and training. That's the third priority is what I talked about, the labor relations artificial intelligence bot.

A lot of the asks are going to be some technology based improve process improvements, an IT platform. So of course every year we have our goals and priorities and performance measures. In our 100 report for highways, we've gone through dashboard reporting since about 2019.

So what this is going to do is roll it out to airports and harbors so that instead of reporting as PDF it can be dashboard taking data from other sources. The fifth priority, sorry it was the labor relations under number six is a career path development.

So for the human resources side, we know that we have to do better at retaining our existing employees. And I think not to speak whatever about D Herd, but we feel like when you go to the D Herd website, it's very distinctive.

You know, you're looking for a specific job, you're going through all of the classifications and seeing where you fit for this career pathways. It's more like you're already in the system, you're working for the DLT. An example could be an engineer 3 wanting to take the next step.

But what is it and what are the opportunities not only for the modality that they're in, but if there's an interest in moving from highways to harbors or harbors to airports. We found that we did these all staff meetings and we did it statewide. We went to all major islands, we had several here on Oahu.

And what we found is that our employees at times get the information of what our projects and priorities are through the news.

And so we thought we should be developing this engagement internal at first and managed that way and then pushed out into the public our next ask and then we have some Attorney General, transportation division add ons. So the biggest ask at priority number 11 is this IT modernization.

And we put that in as a placeholder for the rest of the molds to upgrade their legacy systems. And then finally the salary increases for the planner shortage, the engineering new salary schedule. We also last session took over DOT land dispositions. And so that $100,000 additional is for live broadcast, live broadcasts of streaming the hearings.

Awesome, thanks.

That's, that's everything. Thank you Chair. Thank you very much. Okay, Members, we'll open up to questions. Representative, Good morning.

I got it. I got a couple thank you folks for coming out. You guys run a great Operation. And I love the can do of the Department of Transportation. I wondered in airports, what is your total cash position? There was a lot of data flowing.

So forgive me if I missed that you mentioned you had about 160 in cash for the last financial year. But just. Do you have an overall cash position?

Yeah, we do. It fluctuates, but it's been building. It's about 160 million right now. We'll end the fiscal year and add it up. And the intent will be to continue to add to that Fund because we will need to increase our bond revenue, bond issuance in a much bigger way.

I think you saw some of the needs out in the airports. And so what the airports manages to is the cost. The airlines obviously have a stake in all of this. The ACH is called the Airport Airline Committee of Hawaii which was formed way back in the 60s. And so their signatory airlines, they're obligated by.

By that agreement to subsidize that. So anytime we're expending funding, as you know, we need to get their concurrence.

So just on top of that, when we try to manage our S and P and our budget, try to make sure that we have a number that we roll over to the following year to ensure that we have enough cash to cycle through throughout the year.

We never want to get to a point where we don't have enough in that revolving Fund and that we have to either shut down contracts or potentially defer payment. So we make sure that we're at about 100 million or so for airports. Well, 40 million or so for highways and about 20 million for harbors.

In that General range, in addition to the cash on hand, there's another 700 days of cash that we have with BNF in case there's an emergency situation. Not only does it help us recover fast, but it also helps us with our bond ratings as well.

Zero yeah. And that's where the interest income part comes in. Okay, that's correct. Great, thank you. The other one I had, if chair couple sorry was the increased security costs and the growth of dle.

And I was wondering if you guys have any communication in there or if we're able to allocate more of that Department to offset private security or any comments or thoughts.

That's the goal. I think both sides are having trouble filling all of their positions right now with the relationship with dle. We're trying to bring in as many sheriffs as possible to secure our airports. And at this time we're kind of short, we would love to expand more. We're supportive of DLE taking on more of those responsibilities.

It just depends on how quickly they can fill in.

Okay, thank you. And then, you know, you had talked about technology that was required by Homeland Security and stuff like that with the recent fireworks revelations on avenues that that kind of contraband is coming in. And I know DLE was talking about scanners for the airports that could do packages better. And there was.

There were some technical limitations for, or like jurisdictional limitations. But are you folks looking at any of those upgrades or how does that relationship work to better serve? Because it's, you know, I think it's pretty disturbing to think about fireworks. 200 pounds of fireworks in the hold.

Yeah, I think it's working pretty well right now. I mean, those 200 pounds of fireworks that they're talking about are those that are being captured when they're coming in, which is a really good thing.

We're working with other ports of entry to ensure that it gets better on their side as well, so that we don't have to intercept them here. But ensuring that we move forward on increasing security here is a big thing. We know we cannot get those scanners in tomorrow, but we can get more dog teams in tomorrow.

So we're already subsidizing the sheriffs about 250 grand a year or so for dog teams. I think there's three of them now. We're trying to add more, another three to make sure that we have more opportunities for our sheriffs to be doing more of our explosives or fireworks mitigations out there.

Okay, thank you. And then this is Harbor's. But you could probably. So what's the advantage when you take a loan versus the bond? Are you. I know part of Hilo, you're buying a lot of property or you're moving on a lot of that next door property.

With the loans, are you getting a favorable rate and using the land as collateral versus a bond where it's based on your ability to repay and your cash flow.

So for all of our transactions, just try to find the best rate with the most flexibility. So we're looking between bonds and different types of loans that we can get.

So for that federal program that I described, the rate is actually one half of the US Federal rate. So compared to a bond sale, and I think it could be the same level of effort.

So getting the attorneys and bond counsel involved, it's the same level of effort, but there's a little more security when it's a federally backed loan. Program, so that's why we're considering it. I think in the past, the rates just weren't as competitive. So that's why in the past we've gone with a bond sale.

I think, you know, with the all the federal infrastructure money that's become available, Harbors has gotten a lot more accustomed to federalizing a project as we hadn't been in the past.

So some of these other reductions to barriers to us accessing federal money, including loans, these factors have kind of converged, and that's why we're looking at the loan program as opposed to a bond sale.

Yeah. One of the big advantages of that, of that program is discretionary grants that come in. The federal discretionary grants could potentially be used to offset that loan. So it's a really good advantage for us.

Okay, so it's with the Federal Government and you're collateralizing that property that you're buying, or what is it collateralized by?

I think the collateral is still like our revenue stream and our ability. So it's just similar. It's just similar.

Yeah. Got it. Okay, thank you. No further questions.

Thank you for the question. Members representative.

Hi, Director. Happy New Year. Good to see you. I'm sad I missed the airport tour, but I just had one question. Around airports got all the numbers, got all the fees. I wasn't seeing anything around where our private jets and how they're impacting the airport.

Because if you can afford a private jet, I'm sure you can afford a bigger fee.

For us, we don't collect on the private jets. What we collect on is the leases to those FBOs, the facilities that support those jets. And we set those leases based on appraisals based on the federal requirements.

One of the shortcomings that we have right now and that we're trying to address is once we lease it out, we don't control the rates that those FBOs put in place. They can charge whatever they want from there, and we don't get anything from it.

So we're trying to see how we recapture those in the new leases that come through to ensure that if there's price increases, the airport should get a piece of that. Now, when you look at the impacts of those jets on our runways or our facilities, very small comparative.

But if they're making money, I'd love to see how we can potentially share in the profitability. Sorry, go ahead.

Yeah, thanks, Kirk. That's exactly correct. So we have. We run the contracts and we bid it out. So we have several as you're well aware of on the neighbor islands and here, the fair market value of a lease versus the fair market value to land a plane and park it probably are different.

And so as directors asked us to take a look at how we recapture some of that so that the funding, if there's an increase by the FBOs, these facilities, like Millionaire Signature Atlantic, whoever they may be, a portion of that increase can be subsidized back to the state so that we can improve our airfields and taxiways and things of that nature.

Those are also part of the airfield project. So they benefit from that. Absolutely.

Yeah. Thank you for that and thank you for letting me lean into that, Eric, because Kona is packed and then they overflow into Hilo, which is amazing that we have that many private jets in Kona. Thank you. Thank you, gentleman, for being here.

A quick follow up. So, you know, similar to like the. The car parking vendors, right. You guys have a say in what they are charging, right. As they go through that process. So the private jets, you don't.

Yeah, car parking, we do. The private jets, we don't. And it's all in the way we write the leases. So in the past, those leases never included some kind of mitigation of either price increases or subsidies to the state from there. So there's something you're looking at to change.

Absolutely. Okay, thank you, Members. Further question. Okay.

Thanks, chair. And this was around highways, 2,500 lane miles. God, that's a lot. And I'm sure you have a schedule.

It's on the Big island, by the way. That's like 2,200.

I was just really curious about that repair and maintenance because Quantico heavy use dki just kind of wanting to understand the delta that you're using as far as resurfacing and that timeline of resurfacing. Yeah.

So Robin came up and we have everything scheduled out on our system based on existing condition and based on volumes. And we update every year because things change throughout. Point of came up as a concern three years ago. And we went through the resurfacing on the lower side to make sure we addressed it.

Upper side, we're still trying to see how we address just based on the schools being in that area. But we have a schedule that we work through.

Yeah. On our website soon you'll see we are updating our good fare poor quality map. So you'll see a lot of work we've done over the last couple years. We've developed a pavement management system and we've been collecting data on our roadways, scanning with lidar and everything to help prioritize all that roadway.

So on our website you'll see the prioritized list of all the pavement.

And again, it's priority based on the system that we use, not priorities based on Legislature. So of course we're going to recommend that to the Legislature on the priorities and see where we come from there, what we're doing to make sure that we don't keep chasing our tail.

In the past, we would use this normal mix on the system and it was just a mill and fill. Really what the program was doing was using its CIP as its maintenance. So every seven and a half years or so it required a repaving. Instead of doing that in 2015, we changed out the materials that we're using.

So you'll see a lot more polymer trained asphalt, a lot more stone matrix asphalt that gives us that 20 to 25 year life. So now we can start really improving the system and then moving on to the next one rather than going back again every five to seven years.

Great. And then just planting the seed with the HIROC program because I know that's going to come online, involved at a national level for transportation. Really a big fan of induction roadways as a way to charge our electric vehicles.

I would love to see some of those innovative ideas kind of dumped into and even other funding that might be out there to create a roadway system that actually charges our electric vehicles, buses, you name it, as they drive.

Absolutely.

Great. Thanks.

Director Ayuk, thank you for the questions. Representative Grandin.

Eddy, thank you so much for your presentation. I just have a question. I was wondering if you could tell us a little bit more about the $5 million for homeless services.

I know you talk about how most mostly be used for contracting for stored property and equipment, but can you break it down a little bit more for us?

So when we started looking at that program Initially in 20142015 each agency had their own enforcement program and each of us weren't doing it that efficiently. So we worked with the Legislature and asked that we get funded so that we can help take care of it for the state.

And we even work with the counties to ensure that we are coordinated in our approach. The whole goal of the program is to make sure that homeless are not in areas of danger in their state rights of way or county rights of way, especially along the roadways.

And then second to make sure that we can adjust and move them to areas that are surrounded by social supportive services.

This ties in directly with the governor's initiative for Kauhale to make sure that there's a place for them to go, a place for them to get the services that they need and hopefully get them up and included into that housing ladder. That's the whole goal. So when we start coordinating our efforts, we work with all of you.

Of course, many of you have, I mean, many of you have my cell phone number, so you can let me know where there's different concerns in different areas so we can address them sooner rather than later because nobody should be living in the roadway right of way.

And then we start working with the governor's office to ensure that we have enough units in different portions of the island that are commensurate with the number of homeless we see in those areas so they have someplace to go rather than just pushing them out into another right of way.

So we work with DLNR and DHHL primarily on the state side and with all the counties, especially their parks and their transportation groups on the county side, just to make sure that we take care of all the pieces for everybody.

Okay, thank you. Further questions? Chair. Chair Kelo thank you.

Chair Yamashita thank you. Director Sniffin, I just want to thank all of you folks probably for the last month of just making us come into the fold. Serving as the Vice Chair, the last two years with you folks has been a really engaging process.

And I'd just like to share with the Finance Committee that DOT is one of the few agencies that rarely return any funds to the money we expend to them. So. So every dollar that they get, they do spend it. Director Sniffin, just for the Finance Committee to know, obviously we are changing administrations at the federal level.

Can you just give a quick update on how we still plan to pursue federal funding with the change?

Absolutely. You know, during the Biden and Harris Administration, the big push was towards mitigation, GHG emissions, climate change, sea level rise. We pushed a lot of funding and resources into electrification, alternative fuel, and making sure that we focus on the environment. With the Trump Administration, that doesn't change, but the way we talk about it does.

All of our pushes towards electrification and towards clean energy helps us push towards our energy security. That's the big thing for Hawaii.

When we start talking to our military partners, army and Navy, their biggest concern is if we ever get cut off because of tensions in the west or a natural disaster, we need to be able to sustain ourselves here. Pushing forward on reducing our dependence on fossil fuels being imported in.

Right now we have imports every seven to 14 days. And if we don't get those imports in, there's portions of the economy that get shut down or to get impacted. So we want to make sure that we can move forward on energy solutions that we already can create.

Our clean energy is one, or green energy is one big one. Pushing forward on hydrogen fuel usage is another, because we know we can create that here already, hopefully to build up another economy, but also, I mean primarily to make sure that we push on that energy security side. That's why we're important to the United States.

We are the buffer. We're the Pacific theater for them in their protection. So we want to capitalize on that. We've been working really well with our military partners to ensure that we are tied in lockstep in our initiatives.

So when they get more money like they did during the last the first Trump Administration, we're there to make sure we help them. Part of the ways we're doing it, our Air Force has an airfield that hasn't been upgraded for 13 years or so. Now they needed $700 million in improvements that they couldn't do themselves.

So we're going to be their contractor now. We'll take care of the improvements for them because we wanted the 700 million in Hawaii. Definitely improves their readiness, definitely improves their airfield. But it is also $700 million in Hawaii for Hawaii.

So those are the kinds of pushes we're making to ensure that we're tying into this Administration who have very aligned goals when it comes to infrastructure and transportation.

Thank you, Director Sifin. And then to kind of loop into what Representative Deloy was mentioning as we transition into a much more electrical vehicle. Electric vehicles, I think for context, for Members to know that they are much more efficient. But an electric vehicle almost weighs just as much as a modern day Chevrolet Tahoe.

So the damage is still much more increased than the roadways. In page 2122, can you just kind of highlight how the highway usage fee is study worked out for.

For electric vehicles? Yes. Yeah. So for. And that. That's the push towards our road user charge program. So for overall, when we started looking at electric vehicles, knowing that we're looking at heavier vehicles going into the future, we're designing all of our systems like that.

In the past, the reason that you saw degradation of the roadway very quickly, one, the wearing course that was going in was just not, not the best material. But second, we were just overlaying on top of a system that was built in the 60s initially in that Waimalu Pel City Viaduct area.

It was designed for 60 to 90,000 vehicles per day. We have 280,000 vehicles now through that area. If we had left that base in place without upgrading it, regardless of what we put on top, you'd never see that area in good condition.

So we're upgrading all of our facilities to ensure that we're designing for electric vehicles and heavier vehicles as we move forward. That being said, we still want to make sure that we capture fairness or equity across the system. Electric vehicles, right now, they pay their $50 on top of their registration fee.

In General, most of us, if you get 22 miles per gallon in your vehicle, you'll pay about 75 bucks a year. So they're still getting a $25 break if they drive that General area. What we'd love to do is make sure everybody's capturing. We're capturing everybody's usage fairly.

Last thing we want to do is make sure we balance the budget on the people who couldn't afford to upgrade. So when we started looking at our study, we started looking at generally how much everybody drives, generally where they come from, and generally how much we should be capturing.

And we set our rate for our road to charge based on that. So it's 0.8 cents a system.

And also for weights, the registration is also based on the weight of the vehicle. So that additional weight for EVs is accounted for in there.

Yeah. So overall, we just need to enforce it. Now. We still see a lot of vehicles on the road that are not registered and don't have safety check. We want to make sure that the sheriffs can help us out with that piece.

Thank you. And last one, Chair Machita for the finance Members. Director Siffin, can you talk about the fire mitigation request and the 7030 thing that you folks did? And just briefly, how DOT operates in open contracting.

Yeah. So generally what we did was we looked at $50 million because it generally will keep us whole in making sure that we can move forward on cutting fire brakes. Of course, after the Lahaina event, we wanted to make sure that no other community had to worry about something like that.

So we worked with our local fire departments, all of them, and had them give us a list of all the areas they're concerned about. And whatever that area was, whether it's state property, county property, or private property, didn't matter.

We just did it, Made sure we went in to ensure that we cut fuel to minimize the potential for fire. In other areas, we cut fire breaks to ensure that if there is a fire Our fire departments can get in there a lot easier in a lot of areas.

When we cut those firebreaks, we're trying to see if we can use them as secondary access routes or emergency access routes in those areas. The good thing about that is we have a governor's proclamation that allows us to move forward on that. We don't have to build a road.

We can just gravel it up and make sure that people can use it at this time while we study in the future how best to do that, provide that emergency access route to route.

It was just moving forward faster rather than waiting for the bureaucracy to make sure we can get this done so that the public can feel safe when we start doing our projects. We initially before this IJA Bill, we were doing about 60% of our projects in House and contracting about 40% out.

Because of the significant increase in funding and because of the need for us to move fast, it flipped. Now we're doing 30% in house and 70% by consultants in General. It increases the cost a bit, but it also increases our ability to get projects out really fast.

Thank you. And then the biggest agencies that use dot's help was DHHL and dlnr. So thank you, Director Sniffin, for that. Thank you.

Thank you, Chair. Further questions, Members. Okay, thank you. You know, along Those lines, the 15 million for the fire and then even the $5 million for the homeless at some point so that we can place plan is there.

And I know you're working on a plan, but you have any idea as far as what would be needed recurring?

Yeah, we're putting that together now. So once we hit all these areas, as there's still another 20 on the list that the fire Department wanted us to get, we can give you a better number for recurring funds. When do you expect that we can. Get that by next month.

Zero, okay. Then even the homeless one is. It's a 5 million. Like that's been a number that's been around for a while. Is that what we can expect?

The difficulty for that one is we've not seen a reduction in homeless and we've not seen a reduction in incidents. It's moved from primarily state in the past to now state and county in our mix. So that 5 million number is still relevant. It's just the percentage that's going to either agencies.

Thank you. On your earlier presentation, as far as where revenue is coming for the airports and then Deputy Director Otoguro, we talked about this real briefly, but when we did one of the airport sites is I talked about revenue coming from advertising. And you said you're going to be putting more effort into that area.

I think we have a billboard law where we cannot put billboards up, but inside the airport, you guys get them all over the place. One of the opportunities we have to generate revenue out of advertising.

Right. Thank you for that question, Chair. We have two contracts, one for Honolulu and then another one for all neighbor islands. And so, yeah, what you saw at your airport in Kahului is exactly that opportunity and the potential for us to do different things based on the advertising.

It also goes with the look and feel of how each airport wants to advertise. And that's an important part of it. We don't want to lose sight. We don't want to be too gaudy or glitzy and things like that.

So in Honolulu, we're working with our vendor here to look at different ways that we can do advertising electronically. That's something that I think that vendor need. Our contractor needs to step it up just a bit. In my personal opinion. We've met with them. They're willing to do that.

And then as we discussed as Director, Sniffin has asked us to also incorporate Wayfinding, which is not quite advertising, but it is a way for passengers to find their way around the airport a lot easier.

And you'll be surprised that even as small as you think the airports are, passengers do need to know where to go for baggage claim checkpoints and things of that nature. So we are absolutely working on those projects as we speak.

Thank you. Yeah. It's an area that I think, you know, as I mentioned to you there, when we visited some airports in Japan, they were subtle forms of advertising. It was just embossed in the chair. Panasonic or whatever. Right. And I mean it. But they were all over the place. But it was.

So they did understand that, you know, you don't want to be too gaudy. But it was all over the place. Yeah.

Those are good suggestions.

Yeah. So let's see. The agreement that you have with DLE to lease out space for them to use part of your facilities at airports. You know, how does that work? From. To some degree, they provide services for you, but you're leasing out space. How was that agreement created?

Yeah, so all of our leases got to be passed by faa, and FAA requires that everything be leased out at fair market value. So when we set up the lease, we made sure it was based on an audit.

And I understand that, but at the same time, there's. There has to. Right. Anything we do at the airport has to be a function of the airport. So to some degree security is a function of the airport. So I was wondering how that.

Yeah, so when we lease it out to agencies that are that have a function there like AG with the pets that come in, we can lease it out after we justify to faa we can lease it out at the least rate rent and that's what we got for dle.

So there's gotta be some kind of rent consideration in there to fulfill FAA's requirements. We have, we have done the discretion to get it down as Low as possible but it is a number though.

Thank you. Okay, further questions. Okay, thank you very much for coming in. We appreciate it. And it's been 11:30 so this is perfect. Thank you. Okay, thank you very much. Members, we are adjourned till 1:30. We are in recess till 1:30. Sorry.

[In recess].

Okay, we're going to reconvene the Committee on Finance to continue our informational briefing. This morning we have the pleasure of having the Governor before us. Governor, welcome.

Thank you very much. Aloha, Chair. Aloha, members. Great to see you. Quite the start to the new year and thank you for being supportive. You know, as everyone knows, our community's gone through quite a lot. Some of the work that we're going to do this year will reflect that.

I'm kind of commenting on the combos of dealing with fires and explosives and so on. So anticipate some meaningful bills that may require, you know, definitely your manao, and I don't know yet if it's going to require resources--most of them will be changes to penalties--but today I thought I'd come and give you just a quick overview of the budget and then be here to riff with you.

Governor, because a lot of our members are new, maybe you introduce your team?

Yes. Okay, of course. Well, I'll hand it off to Brooke here. Brooke's my Chief of Staff. And let's see, who do we have?

Aloha. I'm Brooke Wilson, Gov's Chief of Staff. With us we have Will Kane, Gov's Advisor, Special Advisor. We have Tia Hartsock from the Office of Wellness. We have Scott Glenn who's representing the housing team. We have Lori Abe, who's the Deputy Chief of Staff for the Governor's Office.

We have the Governor's policy team and Office of Wellness team back there. Dan Kouchi back there. See anyone else? And from our team over here we have Cameron Deptula and Julian Juarez. Thank you.

Thank you.

Yes, everyone's available to you and each in their own space can get the team's information right fast as we go through session.

Thank you.

Great. Perfect. So good to see everyone. You know the budget, as you have a handout in front of you just for a quick purview, this is just an overview and some kind of key concepts. What we want to do is continue to fight for the values that we have, the shared values, and so we're going to continue to stay very focused on housing and affordability just as the broadest overview, okay?

So right off the bat, you can see our goals are to reduce the cost of living. You guys have already taken extraordinary strides by passing last year's landmark tax legislation. I mean, it is just a big, big deal, and people are going to, across the state, start, start feeling that in a positive way. Mahalo for that. We continue to cover healthcare and social services costs. We are keeping a mindful eye on Washington, D.C. That's one of the reasons I was there last week. We'll go into that in a, in a moment.

I do anticipate potential cuts in Medicaid. So we're watching. That was what happened in the previous iteration of the Trump Administration. So we're, you know, we're happy, and I'll go in, I think, the next slide to talk about our surplus, but, you know, you guys are going to have to decide where you want the financial priorities to be.

These are just a lot of ideas that we have based on what we've been doing. We continue to fund education, of course. We are talking robustly about our natural resources and environmental capacity. That's the work that's coming out of the act--the CAT, the Climate Action Team. I'll break all these things out as we go forward. We have to be ready for future disasters. We just saw what happened in Los Angeles, which was like a terrible sequel to what we had in Lahaina.

So our priorities still, like I said, are affordable housing, the infrastructure needs that we have ongoing, homeless work, which has been successful and increasingly is going to need help. We're going to have a lot of climate discussions and mental healthcare has to be supported in an ongoing way. People are still on the street.

They're still having difficulties with behavioral health challenges. Some things that you will see in our budget, just for clarification, in case anybody didn't get the memo afterwards, there was a small error that was reported by the press that we were adding an additional $500M to the Rainy Day Fund. That was just an accident that they wrote.

That was a mistake on their part. We have not touched the Rainy Day Fund. It's been growing incrementally through, you know, just its interest and growth pattern, but we don't have any anticipated extra 500 million to put there. That was just a mistake. We do think, though, that maybe you should look at the Rainy Day Fund and we'll talk about that as far as working on some of these climate impact issues. Okay, so the next page shows where we are currently with the budget.

$10.4B of state funds in this fiscal year 26 coming up, then fiscal year 27, 10.5 billion. It's about twice that, as everyone knows, because of federal funds and special funds. We have listed here for capital improvements, GO bonds at 1.3 billion in 26, 601 million in 27, and if you look at what our carryovers are, they're still good. It's over a billion dollars going through June 30th of this year.

Following year, it would be about 1.2 billion and then 1.3 billion for the final fiscal year, which, of course, once we do collective bargaining and once you decide what the additional priorities are and you craft our priorities and add your flair to them, it's going to come down, but we do have good resources there for you to govern with, and we wanted to make a point of keeping a significant carryover balance because of the uncertainty of the incoming Administration. The Rainy Day Fund will be at 1.56 billion by June, subsequently 1.61 and then 1.67 billion in coming years.

My personal feeling is that, you know, the interest, that which is over 1.5 billion may very well be a relatively non-painful way to start really amping up what we're going to do on climate and deal with any number of challenges that usually are difficult to fund for DLNR. Just being direct.

And so you can see that Rainy Day Fund interest there. Now, I went to Washington last week, number one, because I'm pissed that they nominated RFK Jr. for the Secretary of Health. And this is not political. This is not partisan. This is based on public health questions, and I'm very concerned what will happen if he pivots away from vaccination programs, for example.

You saw in the paper today that we, like everybody, is seeing a slight decrease in vaccination rates, but that's very problematic because you need to keep vaccination rates in the mid to high 90 percentiles or else you start losing herd immunity and then you get outbreaks of measles or meningitis, rubella.

And I diagnosed a person with pertussis this morning. So this is still a problem, right? You know, just hearing them cough in the, you know, fifth floor. So we have real issues and we're going to have to tend to that, and I'm hopeful that he will go serve in some different capacity. I don't have anything against the person, I just have something against the policies which will hurt children.

But I took the opportunity to go there and make that case to many Republicans and Democrats both, you know, just what is necessary, but also to go talk to the Biden Administration down the stretch to make sure that our monies were okay. They are.

The federal delegation did a very good job; over $1.6B coming to the Maui Recovery through DR money. Additional 350 million, we're told that's going to go towards water systems. Can't wait to, you know, put that in your hands and tell us how you'd like to work with us to spend that money, and frankly, it's a good situation.

So that combined with what is also going to be the settlement, which I'll come to in a moment, which is the settlement from the lawsuits, you know, we're going to wrap up some of the fiscal questions, but we have lots of work to do.

I did, like I said, speak with a bunch of Republicans and Democrats both, they're very receptive, and just wanted to represent us at President Carter's service and ceremony, which I have to say was extraordinary. It was extraordinary to see people for basically three days lining up around the Capitol and it was--there was a snowstorm there, which was unusual, but seeing people come together like that was something.

Now, our budget requests: we kept our budget requests very modest. We didn't ask for a ton of different positions because we really want to deliver on what we've been talking about, which is housing. So most of our budget is built around, you know, appropriations for housing and so on, but there are a couple of things that we're asking for for your consideration: a total of six positions so that we can have a better Federal Affairs presence.

Five positions, three in D.C., two here, and then one additional commission's position where we're managing about 1,300 or 1,400 volunteer members of the community through either boards, commissions, or other advisory panels, and it's a lot for Wendy to do, so we'd like to have an additional person to help her. They do a lot of great work.

Some of us have served in those capacities before we became legislators, so it's a good thing. But that federal dollar spend would be probably very valuable because we continue to try to amp our position in D.C. Most other states have this kind of thing going and they're obviously closer, so they have a big advantage over us, for your consideration.

Also, we would transfer the Office of Wellness and Resiliency over to DHRD because it's been two years, the six positions there and $470,000. Tia has been doing extraordinary work and just thank you guys for that. Our proposals on the next page, if you take a glance at them, they're the CAT recommendations, the Climate Action Team. You probably read at least the headlines and the report is a 66 page report. Very good, actually, super good.

It talks about what it would really take to deal with the impact of climate change and all of the things, kind of the pure wish list, if you will, of getting ahead of climate change and adaptation. It's about $500M a year. We believe that--which is a huge number, of course, right--we believe that--and it'll be per your prerogative--that some of the recommendations are more essential than others.

And if we generate, we hope that it'd be somewhere toward $200M from a combination of the scrape off of the Rainy Day Fund, some increase in the TAT, and impact fees, targeted impact fees, and you guys can come up with absolutely any other idea that could generate $200M pretty comfortably and would make a huge difference, remembering that we can bond some of this money then, and there's just a lot to do.

And this ranges from protecting the shoreline to dealing with fires and mitigating risks, building in technology, paying for the positions that the Fire Marshal and so on, right? So take a good hard look at the bill that we have. We'd be honored to, of course, just riff all the way through the session to see what you prefer.

But I'd hate to see us ever struggle to take this out of pure General Funds. It's just a lot of money, even though it's, of course, hugely important. And we all know if we miss the mark, we get what we got, which was a natural disaster, which is costing us, and I'll get to that next page, at least $872M, and it looks to me like what happened in Los Angeles is going to be a $250B minimum disaster.

So obviously, we hope and anticipate we'll never have that again because we have so much more mitigation in place, but it would be really nice to solve this problem once and for all. So I told you the kind of different ideas we had there. The budget continues, as I said, to support all our state priorities. We balanced the budget per our constitutional requirement and incorporated the tax relief completely.

The next slide will show you how much money we put towards housing and infrastructure, which is kind of consistent with what your approach has been these last several years. The healthcare workforce slide, I'll build to. That's the HELP Program, which has been wildly successful. Homeless solutions, we're grateful to continue to build Ka Hale. We're at 17 now.

We'd like to get it up to 30 total by the end of this term, and we're game for putting them wherever--it is, you know, it's a request at $50M a year. My feeling was always it was going to cost us about 2% of what our Medicaid spend is, which is--this is still well below that--to handle this issue.

We have gotten an 1115 waiver finally approved and we'll let the Medicaid Director come in and describe all the details of that, but it's a flexibility on Medicaid, but beware of what they may propose out of Washington. They may come in with big cuts, they might come in with block grants.

Ironically, block grants could possibly work for us as long as they don't shrink the money because it's doing things like this that are creative. Fire mitigation, State Fire Marshal, and wildfire settlement dollars are in the budget, as is significant education money. So there's about three slides left. The slide that you see next is the affordable housing slide.

$100M for Rental Housing Revolving Fund, 150 for the Tier 2 Rental Housing Revolving Fund, 40 million for DURF, 30 million for Aloha Homes, 50 million for student housing, 56 million to convert Mayor Wright or improve it to like 2,000 plus units, and then West Oahu infrastructure to build housing out there.

But needless to say, it's an enormous package on housing and shape it however you want, of course. You know, just make sure that you hold us to account to build housing, which we are doing. The second or third to last slide is the healthcare workforce slide. This is a critically important project that we've been doing.

As everyone knows, we've had a shortage of healthcare providers for a long time, and it was reported yesterday though that our shortage dropped from 17% to 14%. It's absolutely working. We've done over 900 scholarships. We have $15M in each of the two years of the budget. I have a commitment for $5M from philanthropy.

Again, we had that before. I'll go for another five million, and we hope to have some really good--pull some really good rabbits out of our sleeves for major funding and endowment of JABSOM and the Cancer Center in the coming months. But I don't want to get too far ahead of ourselves.

That would be from the private sector. But these scholarships, they kill it for us. They really provide a lot of support so that social workers, nurses, nurse practitioners, PAs, docs, everyone can stay in the state. The rural healthcare system subsidy still is in our budget. It's a lot of money, of course, to keep the safety net intact, and that includes anything from Ka'u outpatient healthcare to Kona to Maui.

We continue to subsidize basically the payer mix of Medicaid and Medicare to keep those facilities open. The Maui Wildfire cash settlement, this is now at the Supreme Court level. They'll make a decision sometime toward the end of February or early March.

And I believe they will ratify the fact that the settlement was needed fair and has to go forward with a rejection of the insurance claims. The subrogation where they would like to take--they asked for 1.6 billion of the, of the settlement is just outrageous.

So I think that will be rejected and they'll have to work within this settlement. I think that the insurers have bigger fish to fry now, now that they have to deal with Los Angeles. So I'm going to try to finish this off. Our piece was the same as Kamehameha's piece at 872.5 million.

That includes the 72 million that we already did for the One Ohana for the victims that passed away. HECO's at 1.99 billion, and they are obviously going to come to us with legislative questions and proposals. This is not that.

This is simply our part of the appropriation as part of the responsibility which I shared last year, to kind of keep the whole deal together, to keep Maui from becoming bankrupt or going bankrupt and keeping HECO from suddenly going bankrupt, too, and possibly forcing us to totally restructure our energy system. Great challenge to do.

So, that's the Wildfire Settlement, and then I talked to you a little bit about the Ka Hales. The nice thing about the Ka Hales is that over ten years, they will save us about a half a billion dollars because we're keeping people out of the Emergency Department, and we're keeping them from dying on the street, and we're keeping people from experiencing extra violence on the streets. So that projected savings is enormous, and we've been taking care of a lot of people that have pretty serious challenges out there.

Most of the individuals I'm talking about have a mix of trauma or schizophrenia or both, plus some drug addiction to, you know, to deal with, but we're very proud of this program and we're taking care of a lot of different groups.

Our kupuna are very important in Ka Hale, so we're focusing on that. We have a youth Ka Hale. We had a--just so you know--I think we had a request from someone to bring back the, the healthcare Ka Hale in the region, even toward the campus here. I love that. Personally, I'm totally game.

You know, I'm a little Wild West on that kind of thing, but say the word, okay? We'll put one in front of the mayor's place if you want, whatever. You, you tell me, okay? And then a slide on fire mitigation. That's going well.

You know, not good. We had a fire season that came and went without any significant loss this year. A lot of technology went in. Ed Sniffen, you know, the Wild One of the Wild West, he's out there doing his thing, all right.

And mitigation, fire breaks, 20 positions, 27 positions to increase our base at HIEMA for long-term preparedness, they're going to get a lot of money also from the FEMA folks, and the Fire Marshal--we're still having this discussion. We are open to what you recommend. The idea is to put it in the Department of Defense where we do all of the response and recovery work.

Right now it's in DLIR, and I just think it's better here. We'll probably excitedly build out some new facilities for them from some of the FEMA monies. So, you know, stay tuned for that. They'll have to come in front of you with their proposals to make sure it's, you know, it's good.

And that's pretty much what I had, just as way of overview. Just mahalo for listening. We tried not to reinvent the wheel, you know. We really want to focus on the core needs of our people. I could argue that we need more money still for behavioral health in the State Hospital, but I'm trying to keep the lid on. Could argue that we need a lot more teacher housing. You know, there's lots of different permutations of this, but we wanted to give you the flexibility to guide us.

Okay, thank you very much. Okay, members, we're open to questions. Okay. Representative Lee Loy.

Thank you, Chair. Thank you, Governor, for being here. Happy New Year.

Happy New Year.

And I agree Tia has been just a pleasure to work with. I'm actually a little bummed that she's going to slide over under another department because having her in your office has been just a pleasure. I wanted to walk into some of your housing goals, and you mentioned the fires in California, and then also appreciate the pause that you did for our construction codes.

And just thinking out loud--and I know we have a housing specialist here too--if any consideration was given about what that off-ramp might look like because we're going to see huge supply chain issues because of those fires, we're going to see huge insurance spikes because of those California fires.

And I'm asking that question around the suspension of our construction codes was because there are innovative housing solutions in the 2021 code, which would be container housing and some other models and how your office felt about maybe reaching forward into the 21 because these housing numbers are great, but I know in a couple of years they're highly likely to increase in cost just because of what happened.

No, it's great. It's a great question, Rep. Obviously, the LA fire is, it's very fresh in our experience right now, and I am working with Governor Newsom already and some of the things that we did just to brace them for some of the, you know, the expected challenges like land grabs, challenges with any number of things, firebreaks and so on, you're right.

We're going to have, we already have a workforce shortage, a personnel shortage even to help rebuild Maui, and we are super amping our building all across the state. We've had thousands and thousands of good home starts. So it's, it's working. We do have partners, interestingly. For example, I think some of the work is modular right now.

There's been some partnership between the carpenters folks and the nonprofit developer community, Mr. Lam. So they're doing some of that right now. Look, from my perspective, as long as it meets code and it's safe and good, we're bringing our guys together between the union teams and the public workforce. So that is very, very good.

I can't tell the difference in many cases now, which there's been so many advancements and if we see things that are further like sucking out some of our workforce out of Hawaii, you know, we can't stop. We need 50,000 units over the course of the next, you know, going backwards two years when we started to the what's hopefully going to be through 2030, to get to do this job. So. Yeah, absolutely.

I don't have a problem, but I do always, you know, I always ask our partners if they'll collaborate with us because I don't want to ever alienate anyone because those are the guys that will be doing, you know, a lot of the work of traditional housing.

Yeah. And for, for Oahu, which is a lot more urban than some of our neighbor islands, I think some of those housing solutions, like container homes and just some innovative models that are in the 2021 code, including Indigenous architecture, is a way for us to lean forward and really tailor the housing to the communities that they serve.

I always liked that for Big Island, you know, going back to maybe PAHO was a bridge too far, a little bit, some of my old buddies, the way they built certain things, but, you know, we did get to housing for a lot of people. Pahoa for those who aren't over in Big Island grew faster than any other place in the whole state, but they're not fully decoded in some cases.

Okay. Yeah. I just love the amount of money that's being packed into there. I just kind of trying to see around the corner a little bit, just acknowledging what's going on in the larger 48. All right.

Yeah. They're going to have more than 100,000 people displaced in California. Just so no one gets spooked at all, we talked a little bit about where some of those families are going to go, and I'm convening four other states with us. So a five-state initiative to potentially look at hotel vacancies.

And we're talking about our kind of standard 20% fixed vacancy rate. And if there are ways to string together 30 or 60-day options for people, they would pay for them, you know, or FEMA dollars would pay for them, but not to take away any of our long-term housing, not to take, you know, a single house away from our community, but instead, in these five states, to see if we can take down some of the pressure. You know, they helped us quite a lot. I think this would be good for everyone. We would have no vacancies then and that would mean revenue, which is good, but more importantly, help our neighbors.

And Scott Glenn from our team is happy to follow up with you on some of these specifics.

Yeah, we've been having some conversations.

And then on the Fire Marshal Program and some of the Firewise programs that I know, DLNR, Ed Sniffen, who's just been phenomenal at asking for forgiveness rather than permission, just wondering how we can message some of that work.

Okay. Thank you.

Because what we saw in the past with the Paradise fires in California was these Firewise programs that actually leaned in on our insurance carriers to then demonstrate if they put in all of these Firewise things, it would create a better or lower risk, right, for fire insurance, and I'm just wondering how we can message that even better as we start to feel the impacts on the insurance.

That's totally critical. So we are going to see spikes in insurance costs because of what's going on everywhere, especially now California, and we have a couple of wins. We have what we did as a state, we have this additional formalized plan.

We have the study that showed or investigation that showed where we had shortcomings, which we're filling in, and then finally HECO has been responding to our requests to make sure that they have a, you know, a statewide fire plan. So now the likelihood of having an enormous fire has dropped really significantly.

Only caveat I would make is if we get a storm that's got 140 mile per hour winds and we've had a campfire or--interestingly it was shared with us today that they do now think that it's possibly, possibly fireworks that set off the fire and started the embers in Los Angeles. God help us. I think we have a few fireworks going on here, you know, every New Year's and Fourth of July.

Thank you, Governor.

Thank you. Further questions, members? Really? Okay. You did a good job. Governor. You know, I, I, we will be going through your, your requests and as far as your package, I, I know that, you know, many times there are, when we looked at your financial plan, there are things that are missing and I'm sure it's going to be in bills when you do your State of the State, so I'll let you save the thunder for then.

Thank you.

But at the same time, I think there are things that I've been discussing with your other departments, and one area that we tried to do like a couple years ago was to address the huge backlog on preventive maintenance, the type of maintenance that we do, cash, CIP, and not necessarily GO because it doesn't last the life of the bond.

So two years ago it was about 1.2 billion. Today it's like 1.7. So historically, we've always said that if we do nothing, it grows at a rate of about 50 to 75 million a year. Based upon what we saw just in two years, I think it's over 100 per year.

Yes.

So every time we do nothing, we fall behind. And preventive maintenance is, I believe, an area that--and you know this--it's an area that when we're, when we get into hard times, it's one of the areas where we cut and it is at the expense of something minor becoming major.

And then we have buildings that we actually maybe have to do major renovation to or at some point have to knock down because we're just doing a bad job of maintaining our own building. So everybody wants to build new, but I've been trying to press that we need to take care of what we have.

There are new mechanisms that are being discussed where we do plan design, build, maintain, right, where we build it into it and then you hopefully build to a different standard that can be maintainable, but at the same time, I also believe that it just takes discipline on our part to do the unpopular things, to just paint the building and to just maintain it so that it doesn't get really bad.

I think we'd--the house anyway--I would like to see more movement in that area going forward or some kind of plan. So we brought it up with your B&F Director and we brought it up with DAGS, and we brought it up with DOE.

DOE tried to put it into their budget where they tried to have $250M in A Funds in year one, and I think 200 in year two, but I think in your budget, you've chosen to put 20 into GO, which in my opinion is the wrong form of funding because it's--and the whole idea is that some of these repairs do not last the life of the bond, right? So it's the wrong form of funding.

We're gonna get some really good paint, long lasting paint.

Well, no, and like, and you know, we have to reevaluate because you're right; maybe there are things that can last a little longer and things like that, and a good example of that is there was a point in time, long time ago, where we used to say, well, we're not going to fund computers with GO, but, you know, now we know that, you know, we have an old system that lasts 55 years. So, right. So, right...

We look forward to that. We'll spend some money for sure. It's so unsexy that we leave it out, but we know it's gotta be done. So it's practical and important. And you know that, I think, Chair, that's the, that's the product of trying to make sure that we have at least locked in all the priorities that we know that you will demand, that the Senate will demand, people demand, and then, it's just a lot harder for people to understand that, but giving you the flexibility with these extra billions of dollars, it's good. You know, I hope that you'll just tell us what your priority is. Put it in.

You know, at the end of the day, I think, you know, we want to work with you too, because at the end of the day you have to execute, and these--you know, I did the CIP budget for a number of years, right, and it's because of the--and it started during the Lehman Brothers downturn where we started cutting it a lot.

But we never, from that point on, right, we never really put it back. And there's many things that happened during that time when we had Furlough Fridays, right, when it was really bad that we didn't put back in place. So what we're looking at, what I'd like to focus on is things that we did during that time because we needed to, right, that we just didn't have money. We were laying people off and all those things.

But going forward now, we have to relook at all of that and look at the best practices to how we spend our money, what kind of money we spend it on, and then try and maintain our buildings and maybe they'll last a little longer and then our CIP budget maybe can be for other things, right. That's my hope.

Yeah. No argument from me at all. I look forward to that, and we know we're going to come up with a really good balanced budget. Just, you know, push it certain directions as you, as your wisdom allows. Of course. No problem at all. You know, the--we tried not to get, you know, kind of--we didn't want to go off the reservation and come in with crazy balloon changes in housing or homelessness or anything. We tried to keep it kind of where it's been.

And that's also a reflection of what we feel that we have the capacity to do because we still have shortages of personnel and everyone's working as hard as they can. So, you know, it'll be interesting to see. So there's some other interesting bills out there that we'll talk about, whether or not we let people vest earlier.

Could that bring more people into state government? I leave that to you to see what makes the most sense, but we'd love to do that. We'd love to do that for schools and universities too.

Okay. I think we wanna continue conversations with you in that area. I think part of what I'm struggling with is--and I'll just say this because I've talked about this here and there--but rarely do I have a--well, I do have access to you--so--

Anytime you like. I'd be happy to--

But rarely do I have with--we can have this conversation in a forum that is not only where you and I are talking, but also where, you know, one of the things that I've been talking to the committee about is that, right, out of the 51 members in the House, 27 of them will be with two years experience or less, right.

So to get them up to speed quickly has been part of my goal, right. So to-- that's why--and I thank your Administration. I've been asking some of your directors to give background on their department. So some of our informational hearings have been a little lengthy at the beginning is because I've asked them to give some background to the committee and things like that.

But, you know, one of the things that I'd like to talk about with you is that I believe over time, we've evolved into something that is difficult for us to sustain, and I know that's why you're looking at other means of funding and things like that.

But you know, during the early years of statehood, during the 60s, 70s, where we used to sustain government operations with what we had and our main subsidy was to social services, right; so to the social issues. So to the poor, to the homeless and things like that.

So, you know, way back then, it wasn't as big an issue. I think government kind of took care of that, and then as you know, moving into the later years, into the 70s, 80s, when we lost sugarcane and pineapple, our focus became diversifying our economy.

So we started putting a lot of money into trying to figure that out, right? There was a point where when we first both of us got into office and we put there was a focus on high-tech industries, right? So we put about $1.4B into that, and then we had the Lehmam Brothers downturn and many of them left, right.

So that was, in my opinion, money wasted. But then, you know--and it did stir up some new businesses, but at the end of the day, we could have been more strategic in how we spent that, was my point.

And then later we expanded to environmental purposes where we started subsidizing environmental purposes, right. We did solar credits, we did all these different things and things like that, and it is my belief that we have over time, expanded beyond what we can sustain.

And that's why we, you know, we've made headway, but we do not very good job of taking care of our social services and social issues. We haven't really diversified our economy and we're not really protecting the environment, right. So we've gone, we've spread, but we haven't like focused and try to be good at one.

And I've always believed that it is the safety net should be our focus. I don't know what your thoughts are on that, but I just wanted to put that out there for you to...

Look, I love it. You know, I spent all of my other hours outside of government working in the healthcare safety net, and frankly, I think that our money's best spent on prevention in social services and supportive housing where otherwise people would be housing unstable.

And that is really at the root of kind of at the core of what our proposal is. Of course, it's very difficult to pull back from any other priorities without giving people some warning, but the most important things that we can do in my opinion are make sure that we have a good housing system going and that we have a lot of good primary healthcare and mental health care, if I could only choose, like, two things, and a lot of good results occur once we do those things.

Also, it's killing our people to see housing be as expensive as it is, and so to the extent that you feel it appropriate using state lands to, you know, overall decrease--not conservation lands, of course, or important Ag lands, perhaps--but using lands that we can use for housing to support housing, take that burden off of families, and let them flourish--I love it. And then we have had this explosion of people that are, you know, challenged, they're destitute, and they, you know, they're really struggling.