Senate Standing Committee on Ways and Means

Hello and welcome to the joint hearing with Senate Committee Economic Development and Tourism and Ways and Means. Today's Thursday, March 5th, 2026. This is our 12:01pm agenda. We are in conference room 211. This hearing is being streamed live on YouTube. With me is Chair. Well I'm Chair- Dela Cruz. We are here for decision making- well and the Committee.

And we are here for decision making on Senate Bill 3169 relating to coastal resilience. First up, decision making on Senate Bill 3169 relating to coastal resilience. Amendment is passed within SD1 by incorporating the recommendation raised by Dr. Patrick Sullivan from Oceanit relating to native Hawaiian bureau sites.

That was prompted by concerns from the start- State Historic Preservation Division making any necessary technical and non substantive changes and defecting the effective date to July 1st, 2050 and the repeal date to July 1st, 2055. Any discussion? Seeing none. Vice Chair Wakai for the vote. Chair votes aye.

I vote yes. Senator Fukunaga is excused. [committee votes]. Chair your recommendations now adopted. Amendments. With amendments.

Thank you.

Ways and Means, same recommendation.

For pass with amendments. [committee votes]. Recommendation adopted.

Thank you. With that, we are adjourned.

Good afternoon. We're convening the joint committees on Water, Land, Culture and the Arts, and Ways and Means on our 12:02 PM agenda, on SB 2001 relating to the Banyan Drive Community Development District. Chairs haven't conferred. Recommendation on this is to pass with amendments.

We'll adopt the HCDA recommended amendments. We'll make the effective date July 1, 2050, add additional tech amendments, and we'll just note, in the Committee report, the continuing desire for community engagement from descendants in the area as the measure is considered in the House. Any discussion? Any questions?

Understand the work you guys did on this, but I still think that lineal descendants and the people in the area shouldn't be on an advisory board. They should be actually on the process of moving Banyan Drive because they have the lineage of the area and the background that wasn't covered before and nobody—they took it out.

So, the House version I think had the, had them in—I think got taken out when it came to the Senate.

So, that's something that I wanted to be put back in moving forward because I don't think it's fair to them every time we're leaving them out when it comes to something to come with the Hawaiian issues in the community, especially as sensitive as Banyan Drive.

So, I don't really feel that, you know, I'm not gonna be able to vote on this. I'm going to be voting with reservations because I think they shouldn't have took those guys off the, off the board.

Thank you. Anyone else? Seeing none. Vice Chair.

[Roll Call]

Ways and Means, same recommendation.

[Roll Call]

All right, thank you. We're adjourned.

Okay. Calling the meeting to order. This is with Senate Bill 3334. You know, we. We overlooked previous amendment which was supposed to be included. So that's where we had to reconsider. So we can further amend the- the measure. The- The recommendation is to pass with the amendments.

The Committee will reconsider its recommendation to pass with amendments and further amend the bill by inserting a blank appropriation out of the General Fund to establish two FDAs in the Superintendent's office for the deputy superintendent positions. Any discussion?

Chair? I'll still be voting the reservations. The concern I still had previously was the evaluation of the cast to the Board of Education. I know there's still time to review that, but I do feel that the amendments are a big change to the bill. Thank you.

Thank you.

Sir. Go ahead.

Thank you, Chair. My feelings are the same as Senator Elefante.

Thank you.

I also like everything that you had put in, but I just want to say that the deputy superintendent should conduct the annual evaluation of the CAS and not the BOE. So I'm not sure if we can talk to the BOE, if they even have the capacity to do it.

So the evaluation is our personal matter and then that they should be shared openly with the legislation through the issues of the DOE, directed by the DOE. So that's the issue I have chair. Reservations.

Okay. We'll note some of that in the Committee report. Okay. If not--

Chair, same reservation.

Okay. Chair Votes aye.

Okay. All Members present. Anyone voting no? I have reservations for Senator Elefante, Kidani, Richards and Fevella. Anyone else? Recommendation is adopted.

Thank you.

Be coming to order, the 12:04 agenda. Starting with SB 2338. No. The recommendation is to pass unamended. Any discussion? If not, Chair votes aye.

[Roll Call]

Thank you. Next item, SB 2431, recommendation is to pass unamended. Any discussion? If not, Chair votes aye.

[Roll Call]

Thank you. Next item, SB 2438, recommendation is to pass unamended. Any discussion? If not, Chair votes aye.

[Roll Call]

Thank you. Next item, SB 2563. You know, we got some testimony on this. The Statewide Office of Homelessness and Housing Solutions highlights in their testimony that there are similar programs like the Honu Program and the Kauhali Initiative that can address the concerns noted in the Bill. So, they don't feel that the Bill is needed at this time.

The Office notes that other solutions are better suited to addressing the longer-term participation proposed in the Bill. We have June here, so if did you want to add anything else to that? No? Okay. So, recommendation, based on their testimony, will be to defer indefinitely. And next item, SB 2593. Recommendation is to pass unamended/ Any discussion?

Chair votes aye.

[Roll Call]

Thank you. Next item, SB 2662. Recommendation is to pass with amendments. We're going to be adopting an amendment from the SPO's testimony to make technical amendments to the bill and will reflect in the coming report AG's and ERS's testimony noting their concerns. Any discussion? If not, Chair votes aye.

All Members present. Anyone voting no? With reservation? Recommendation is adopted.

Thank you. Next item, Senate Bill 2671. Recommendation is to pass unamended. Any discussion? If not, Chair votes aye.

All Members present. Anyone voting no? With reservation? Recommendation is adopted.

And the last Bill, Senate Bill 20- 3296. The House Bill is already coming over, so we're going to defer.

Okay.

Calling to order the 12 noon agenda. SB 3125. Yeah, proposed SD1. Posted- Was posted so the public would be made aware of the changes that the Senate is proposing around the income tax law changes.

The proposed SD1 seeks to preserve all tax breaks passed for our working and middle class households by not repealing the standard deduction increases and only removing the future tax bracket adjustments for joint filers making over 250- $350,000, heads of households making over $260,500 or individuals making $175,000 a year.

We received testimony from Dotax with recommended amendments to ensure that this- that this is the intent so it'll be appropriately reflected in the SD1 and the chair's recommendation will be to take those. So if you're testifying on that, at least you can see what we're looking at considering. Okay. Office of the Governor.

Aloha, Chair, Vice Chair, Members of the Committee. Will Kane, Office of the Governor we'll stand on our written testimony in the supporting the intent of the- of the bill, the proposed SD1 which is did have some comments related to that in our testimony and we're happy to answer any questions. Mahalo.

Thank you. Energy Office.

Aloha, Chair, Vice Chair, Members of the Committee, Munashe Chando for the Hawaii State Energy Office. Sorry about submitting our testimony late. We stand on our written testimony providing comments and I'll be here if you have any questions. Thank you.

Thank you. Dotax.

Good afternoon. Kristen Sakamoto, Deputy Director of Taxation. We support efforts to modify the income tax laws to ensure the fiscal sustainability for the state. As Chair mentioned, we did propose some suggested language for section one of the bill.

We're still working through the revenue estimate for this but I do have some rough figures for certain portions of the bill. For Section one, the income tax bracket changes. Assuming the intent was to freeze the upper limits for the higher tax brackets.

Taking us through fiscal year 31, we estimate about 122 million revenue gain from Section 1, Sections 2 and 3, which extend Act 63 relating to the EITC, the Food and Excise Tax Credit and the Child Independent Care Credit. And assuming a similar proposal similar to the governor's proposal to expand the Child Independent Care Credit.

So we estimated about 600 million revenue loss for that section and then finally the repeal of the credits. We don't have figures except for data for tax year 23. So all of those credits total about $145 million claimed for Section 4 through 10 of the bill.

So roughly takes us to about, I mean just using those figures, about 250 million net gain. I'm available if you have any questions. Thank you.

Thank you. Members, any question? DVET?

Aloha, Chair, Vice Chair, Members of the Committee. My name is David Keliiholokai. I manage the Research and Development Tax Credit program under DVET and we stand by written testimony. I just want to share a few things. So the total spend for 2022 was about 53.6 million. 2023 was 63.5 million and for 2024 43.3 million.

Just wanted to share the importance of the R and D tax credit program. Thank you.

Thank you. Par Hawaii.

Aloha, Chair, Vice Chair, Members of the Committee. Marc Inouye from Par Hawaii. Thank you for allowing us to testify. We are respectfully opposing SB 3125, especially if it impacts Section 7, which is repealing the renewable fuels production tax credit. And just kind of want to make just a few comments about that.

And you know, this month is an important month for- for Hawaii and some of our customers as well. We'll be in a commissioning mode of one of our renewable fuels production unit, and a lot of our customers have been asking for these renewable fuels.

Again, respectfully, if we can retain Section 7, which is a renewable fuels production tax credit, that would help bolster a lot of the adoption of new renewable fuels for state customers as well. So thank you for allowing us to testify. And if you have any questions, I'll be here. Thank you.

Thank you. Okay. Grassroots Institute.

Aloha Chair, Vice Chair, Members of the Committee, Ted Kefalas with Grassroots Institute in opposition to SB 3125 and the proposed SD1. I do want to note it was a bit disappointing that the Committee was rescheduled. I understand you have to do this, but many of the testimonies we had to resubmit our testimony.

So I'm just concerned that some other testimonies that were submitted originally may have been lost in that process. As you guys know, this is a pretty controversial bill, and I think it's important that we consider all different opinions. The state already struggles to attract and keep professionals like doctors, entrepreneurs, engineers.

So rolling back the promised tax relief sends the wrong message, and it could make that problem worse if revenue is tight. The solution is not necessarily to scale back the tax relief. It's to control spending. So passing the tax cuts would raise about $250 million in 2028, the original version of the bill.

But the state could find that amount through different budget reforms without cutting vital services. So I sent a document to all of you all. It's also included in my written testimony with some options, I guess, almost like a menu of ideas to potentially cut the budget again without cutting any sort of essential services.

The money is there, but I think the real question is the political will. And so, as you all know, families across the state have had to tighten their belt because of inflation. And so we think that the government should do the same and not walk back tax relief that was already promised to- to many individuals.

So we hope you defer this bill and mahalo for your consideration.

Yes, thank you so much for your testimony. I certainly agree with you. We shouldn't go back on our word. However, have you folks testified on a number of bills that try to bring Government try to cut off the top layers of bureaucracy that would save us money.

We've- We've been trying. Yes, ma'am. I mean we've been, you know, consistently I think trying to look at limiting government and that's why we tried to come up with this list as well just to- to give options to find some additional monies without hurting, you know, some of the lower class and middle class families that are--

Several bills in Education Committee as well as others which, you know, I haven't seen testimony from a lot of people. So yeah, there's a lot of waste going on. There's a lot of inefficiencies going on.

Yes.

But until we target them with bills and you know, so you become more vocal on that instead of just coming up for this one bill and giving us a list that, that would be helpful.

Yes.

Thank you.

Good point. Okay. Hawaii's Children's Action Network speaks.

Aloha Chair, Vice chair, Members of the Committee, I'm Nicole Wu. We originally submitted testimony and support and then we saw the SC1 proposed and kind of like Dotax, we were really concerned about section one the way it had been written. So we switched our testimony to opposed.

But hearing what you said and looking at the testimony with Dotax's amendments we could support those. So I don't really know what my position is but I guess with Dotax's amendments we're good with it.

And then as a children's organization, we certainly support improvements to the Child Independent Care Tax Credit and extending the sunset on the other tax credits for working families. So yeah, I don't know what my position is.

Thank you. Yonghee.

Chair, Vice Chair and Members of Committee, thank you for this opportunity. My name is Yonghee Overlee and I'm representing myself but also Indivisible Hawaii today at this hearing. Indivisible Hawaii is a 14 chapter statewide network. You may know us from the No Dictators rally back in October and coming up March 28th.

That's not a promotional rally by the way. And I don't know where we stand in here because yesterday we submitted in support of the original SB 3125 and then this morning we submitted opposition of the SD1 proposed. And then like Nicole said, we just heard amendment you like to make.

And then yesterday House Bill 2306 HD1 is also very much favoring working families. So frankly I'm very confused. And then as a person looking at SD1 crunching some numbers this morning, it personally benefits me starting 2028. However, I would rather you don't give me the additional tax cut because we could use the money. Federal budget cut.

If you see governor's testimony, you'll see that we received $3 billion federal budget cut last year and we could really use the money. So text me, please. Thank you.

I'm not going to ask you your household income. Okay. I think we already had Apple Seed.

Good afternoon, Chair, Vice Chair, Members of the Committee, thank you for the opportunity to testify offering comments on this bill. We support the original intent of the bill and with the proposed corrections, we support that as well.

And I just want to highlight the fact that truly the state is in a time where it needs revenue because of the federal spending cuts combined with these income tax cuts that are passed in 2024. We're talking billions of dollars over the years and the state has no easy options for plugging these revenue holes.

So really, pausing these income tax cuts is so important. And we see it again, as, you know, not taking away these tax cuts. Folks are still going to be receiving tax cuts. It's just they will be receiving a little less in terms of those tax cuts. So folks are still benefiting from it

across the income spectrum, low and middle income people will be benefiting. And we- we believe that pausing these cuts is going to be essential for preserving services, though, for these- these Aldous families that desperately need help. Thank you.

Anyone else wishing to testify, please come forward and state your name. No. Then she's.

Thank you.

Aloha, Chair, Vice Chair, Members of the Committee, I'm Betty Lou Larson with Catholic Charities Hawaii. We did submit written testimony, but late this morning, so you probably don't have in your packet. I think what we're concerned about is how will the state maintain the capacity to serve.

It's not only the federal tax cuts, which are huge and which are going to have an impact over the next at least five years, but how will we be able to maintain our current needs of affordable housing, education, Lahaina, and the food insecurity that's already so prevalent among our state.

We have bills like for school lunches, free school lunches, and other things to address those. So we know it's a hard job, we know there's different ways to do it, but we just, you know, have to throw it in your lap to say, please maintain that capacity.

And having the tax income is a major part of how the General Fund works. And so that's why we supported the first bill, because we felt that, you know, everyone did get something. We got some tax relief. Now let's look at what the needs are and maintain that for the long term.

And in 5-8 years, depending on what happens, I think it's going to be a long term. Then we can relook at how do we look at the middle class and you know, maybe put those back in but maybe now is not the time.

So thank you very much for hearing our testimony and- and carrying on with the hard job that you have.

Another question?

Yeah, thank you.

Do you support us continuing the way we spend money?

I think there are things you can limit but you also have to look at what the needs are, you know, for housing.

Right. We notice that, but we continue to be in the situation because we don't control spending. So I think that until we go through these tough kind of situations that nobody thinks it's, you know, they want to limit their-their spending.

And so we see this, this kind of bureaucracy continue and government keeps growing and so we just continue to tax the people. And yes, you know, services are important, but people are living from paycheck to paycheck as well. So I think we really have to have a balance.

So I would just hope that a lot of the- the non profits and those of you who really want to support those on the bottom that control spending and I hope that you folks come out and start to look at those bills and-and propose ways in which we can limit the types of programs, some programs.

We can't be all things to all people, which we try to do and there's no way we can sustain it. But so. Thank you.

I just. There was a testimony by a young man, I don't know his name at the finance hearing on their bill and he said, you know, the $400 I'll get as a tax havens, I'd rather have help with my food. I'd rather, you know, that's not going to go far.

Sure.

Could I make a comment?

400 a year with SNAP benefits, maybe be reduced or lost. So that, you know, on the low end it really is a case of survival. On the higher end it's a case of well, it would be nice who doesn't want more money. And so that's why we're looking at that. Thank you.

That's what we're looking at too.

Yeah.

Okay. Yeah, go ahead.

Sorry that's a little late, but we stand on a written testimony and we're available for questions.

You got to explain to Will why you're late, not us.

One more.

Go ahead.

Aloha Chair, Vice Chair, Members of the Committee. I'm Rocky Mould. I'm the Executive Director of the Hawaii Solar Energy Association. I come here in opposition to one part of this bill. Part four- Part two, section four repeals the renewable energy technologies income tax credit. I am respectfully opposing that part of this bill.

In addition to providing for significant public policy goods, lowering energy costs for everyone, providing renewable energy, this is a positive, positive investment for the state. The dollars that go out, for every dollar that goes out from the Treasury, $3.25 come back in from outside investment.

That money then recirculates through our economy and has multiplier effects that create jobs, create economic growth and- and also create a net positive fiscal balance ultimately. So I'm here for any questions. Thank you for the opportunity to testify. We oppose the repeal of the renewable Energy technologies income tax credit. Thank you.

Okay. We're just taking the same approach that Betty Lou mentioned. Instead of revisiting the income tax in several years, we want to revisit the tax credits in several years. There's the same approach. That doesn't mean that it's going to end.

Committee chairs can introduce legislations to extend the sunset or remove the sunset on an individual basis, but it allows us to review each one and the effectiveness of each one.

I appreciate the intent to keep our fiscal house in order. This tax credit is a positive investment for fiscally and I'll say that it's very important for the market and the- and the outside money that's coming in to have a stable investment environment with what's happening at the federal level right now.

We're seeing a lot of change in the market, a lot of disruption. So even changing something out a few years is causing some pain in the market.

I don't think people disagree. It's just the timing of when we're going to start to review it. Right.

We would love to. We want to be part of that conversation for a transition plan. And so we look forward to that discussion. Thank you.

Aloha Chair, Vice Chair, Members of the Committee, Nate Hicks with the Hawaii Public Health Institute. We had submitted testimony before the bill got changed. Apologize. It's not here today. We look at this bill as a great opportunity to reverse course and really identify where our priorities lie.

Half of our families in Hawaii are struggling to make ends meet. Making less than the survival budget here in Hawaii. Act 46 tax cuts cut, put a budget hole of $1.4 billion in our revenue.

100 million, which was going to just the families in the top 1% of the income threshold, 600 million of which is just going to the top fifth of income earners. And so when we look at this, these are investments not made into making Hawaii more affordable for our working class households.

Programs like building more affordable housing, universal childcare, paid family and medical leave, livable wages, free school meals. These are the programs that are extremely popular, extremely effective and are absolutely necessary to make sure our families can make ends meet.

And so when our tax cuts are going to these high income households, we are not investing in these programs. These programs in total cost less than the tax cuts that this bill has implemented.

If we want to make sure Hawaii is affordable, we need to not only pause them, but reverse these tax cuts, especially at the high end, and start investing in these programs. This is a question of where our priorities lie.

And I hope we can look back at today as an opportunity to say this is where we pivoted and made sure that our priorities lie with our working class families. Mahalo for the opportunity to testify on this bill in support.

Thank you.

Aloha, Nahelani Parsons on behalf of the Hawaii Renewable Fuels Coalition. In opposition, as much like Rocky said to 1 section, Section 7, relating to the renewable fuel production tax credit. And given the Chair's comments, I'll just leave my testimony at that and available if you have questions. Thank you.

Thank you. You sat too far in the back.

Hi Chair, Vice Chair, Members of the Committee. I do work in solar. I also happen to work at the Capitol, but here as a private citizen in opposition to SB 3125, specifically the section that would repeal the solar tax credit in 2029.

You know, the federal tax credit was just repealed in 2025 years before its intended sunset date. And it did cause the industry to convulse. You know, even a stage reduction in the rate of the credit would have been preferable to an abrupt repeal.

It caused demand to skyrocket customers to try to have systems installed within the few months before the credits were set to expire.

It caused shortages, price increases and uncertainty that the systems they were trying to install would be eligible for the credit if not completed in time, at times causing them to compromise by changing out equipment to ensure the project was completed by the end of the year. There was a lot of inequity for how this was done.

Chiefly, it makes investment in PV systems harder for low to medium income homeowners, pricing them out of what would save the average family over $100,000 over 25 years. So I just think that repealing the tax credit after this shakeup in the industry would be pretty brutal. Even at 2029, people are slow to realize these policy consequences.

And by the time the deadline comes around for most people it would be too soon to have funds available to have a system installed in time. Lastly, I just want to make the point. It is a really big driver of jobs. I used to work in retail.

When I made the switch to solar I was getting paid more than I ever had been paid before and it made a really big difference in my life. Thank you.

Can you state your name for the record?

Kamana Hanapi-Lopes.

Thank you.

Thank you so much.

Okay. Okay, I gotta go back work.

Aloha Chair, Vice Chair and Committee. My name is Chris DeBone from Hawaii Energy Connection. A lot of people know us by Kumo Kit, our brand name. A local solar contractor and testimony before me kind of took some stuff off my table. But I would like to stand on my written testimony in opposition.

But I'd like to add a couple more comments and just on the back of what you just heard about the one big beautiful bill impacts we already had just recently had a layoff at our company because of this issue.

There's a big adjustment going on in renewable energy right now because of the impacts on the federal side and chair you mentioned some which now I'm thinking not knowing too much about this how it all works but I think the optics of the re- retrieval of this bill is the biggest thing even though it might be in 2029.

What it sends that message to the industry is a- is a big issue because it's like that's what everyone hears, oh the state tax credit is going to go away now in it. It- It does not allow other people and entrance to come in because of the optics of maybe these things going on.

On top of the industry already going through turmoil as it is. The industry is doing our part on trying to be as efficient as possible and take out as much soft cost to make it still affordable. Couple more comments.

The unrest in the Gulf regions recently are probably going to have a pretty big negative impact on the cost of energy in Hawaii due to oil prices very soon. So now there's an affordability. Solar renewable energies is here. Show of hands, how many people had a power outage?

Just continue.

Okay. All right. Just the power outages, right? Just we've had a lot of power outages lately. The grid needs help. Clean renewables and batteries will definitely help in this and we need to new move faster and the retrieval of of the tax credits in this one I think is just going the wrong way.

Thank you so much.

Anyone else wishing to testify? Okay, I'll read my recommendation. So I want to thank the Governor's Administration and the Department of Taxation for working with the Committee to provide language to ensure that the Senate position of protecting tax breaks for Hawaii's working and middle class families is secured.

The Committee did diligently work to find a way to preserve a portion of Act 40 for Hawaii's working families so that families can continue to receive the immediate financial benefit that the tax breaks provide. Protecting the tax cuts to working families is a shared responsibility and we must all do our part.

The additional amendments in the proposed SD1 are part of a larger package that will help the Legislature balance its financial plan while also delivering on meaningful tax reform that was promised to the taxpayer by making amendments to the bracket adjustments in Act 40 and maintaining the standard deduction increases.

In addition, the Committee is looking at other ways to address the revenue shortfall that need to be made up due to the changes and uncertainty in federal funding and the state's economic outlook.

These include common sense measures such as reducing long term vacancies, cutting redundant or duplicative programs, making strategic investments to grow Hawaii's economic base, and as others on this Committee have mentioned, tax collection receivables, excess special funds are other things that we should be looking at.

With that, the Chair recommends to adopt the proposed SD1 with additional amendments adopting Dota- Dotax's taxes amendments to ensure that the tax bracket adjustments in taxes 27 and 29 are preserved only for the brackets under 350 for joint filers and under 262,500 for head of households and under 175,000 for individual filers and inserting into the current report that the Committee is looking at other tax and budgetary means to balance the state's budget to deliver on the promise of tax relief.

Any discussion? If not, Chair votes aye.

SB 3125 all Members present. Anyone voting no? With reservations? Recommendation is adopted.

Thank you.