STAND. COM. REP. NO. 265

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1171
                                        S.D. 1




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

Sir:

     Your Committee on Education and Technology, to which was
referred S.B. No. 1171 entitled: 

     "A BILL FOR AN ACT RELATING TO THE INTEGRATED TAX
     INFORMATION MANAGEMENT SYSTEMS ACQUISITION BY THE DEPARTMENT
     OF TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to create a special fund to
pay for the integrated tax information management systems, and
for the operation, maintenance, monitoring, and improvements to
the automated tax system.

     Testimony in support of this measure was submitted by the
Department of Taxation.  Information regarding this measure was
submitted by the Tax Foundation of Hawaii.

     Your Committee finds that Act 273, Session Laws of Hawaii
1996, allowed the Department of Taxation to enter into
performance-based contracts to acquire an integrated tax
information management system, including computer hardware and
software, for the administration of taxes.  The contract, which
has been negotiated by the Department of Taxation, specifies that
the vendor will not get paid unless there is an increase in
revenues collections and/or cost savings realized from and
attributable to the implementation of the automated tax system.  

     This measure would establish a special fund which would be
used solely as a means of paying the vendor.  The special fund is

 
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needed to facilitate timely payments to the vendor, thereby
minimizing interest costs to the State.

     Your Committee has amended this measure by:

     (1)  Clarifying the statutory language to reflect the
          overall spending limit of the integrated tax
          information management systems special fund for each
          fiscal year;

     (2)  Amending section 237-31, Hawaii Revised Statutes, to
          include the tax information management systems special
          fund as a deduction from general excise tax revenues.
          This avoids the conflict established by creating a
          special fund without amending that section;

     (3)  Deleting the amendments to sections 36-27 and 36-30, as
          unnecessary since the Director of Taxation may request
          moneys up to the limits established for the special
          fund to reimburse any administrative or other expenses;
          and

     (4)  Setting a sunset date of July 1, 2004, for this special
          fund to be repealed to ensure the timely implementation
          of the integrated tax information management system.

     Testimony from the Tax Foundation noted that in general,
moneys from special funds are not subject to the general fund
expenditure limitation.  Furthermore, special fund appropriations
do not receive the same degree of review as appropriations from
the general fund.  Because of this, your Committee encourages
further discussion on the necessity of creating this special
fund, and the possibility of funding the integrated tax
information management system with an appropriation from the
general fund in the Committee on Ways and Means.

     As affirmed by the record of votes of the members of your
Committee on Education and Technology that is attached to this
report, your Committee is in accord with the intent and purpose
of S.B. No. 1171, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as S.B. No. 1171,
S.D. 1, and be referred to the Committee on Ways and Means.


 
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                                   STAND. COM. REP. NO. 265
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Education and
                                   Technology,



                                   ______________________________
                                   DAVID Y. IGE, Chair

 
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