Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1628
                                        S.D. 1

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committees on Economic Development and Commerce and
Consumer Protection, to which was referred H.B. No. 1628


beg leave to report as follows:
     The purpose of this measure is to create a program that
enables cooperating lenders to provide loan funds, with the
Department of Agriculture (DOA) providing credit, underwriting,
and loan servicing.  This measure also allows the Employees'
Retirement System to invest in obligations secured by mortgages
on farm land, as well as obligations for the repayment of loans
guaranteed by the DOA.

     Your Committees received testimony in support of this
measure from the Department of Agriculture.  The Employees'
Retirement System (ERS) presented testimony in opposition.

     Your Committees find that under current economic and fiscal
conditions, a range of alternatives other than State funds is
needed to provide loan assistance to farmers.  This measure would
utilize cooperating lenders' funds to expand the agricultural
loan pool at reasonable rates and terms, while minimizing the
risk to lenders through DOA guarantees for up to ninety percent
of the loan.

     Your Committees have also heard the concerns expressed by
the ERS regarding the loan rates in this measure.  ERS investment

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                                   Page 2

decisions are based on a policy of securing prudent, maximum
returns for the ERS and its members, and the proposed loan rates
in this measure are below those the ERS would consider at the
present time.

     Your Committees find that the concerns expressed by the ERS
require additional discussions in order to reach a decision that
would jeopardize neither the proposed agricultural loans nor the
investment policies of the ERS.  Your Committees have amended
this measure accordingly, by deleting Section 3 of the measure,
relating to ERS investments.

     Your Committees believe that further discussion regarding
the policies of the ERS can be appropriately considered in the
Committee on Ways and Means.

     As affirmed by the records of votes of the members of your
Committees on Economic Development and Commerce and Consumer
Protection that are attached to this report, your Committees are
in accord with the intent and purpose of H.B. No. 1628, as
amended herein, and recommend that it pass Second Reading in the
form attached hereto as H.B. No. 1628, S.D. 1, and be referred to
the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Economic
                                   Development and Commerce and
                                   Consumer Protection,

____________________________       ______________________________
BRIAN KANNO, Co-Chair              LORRAINE R. INOUYE, Chair


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