May 4, 1999
Contact: Rep. Ed Case
Phone: 586-8475


The State Legislature today took final action to phase down the "pyramiding effect" of the general excise tax on intermediary (wholesale) services. The measure, Senate Bill 638, Senate Draft 1, House Draft 2, was the top priority of the business community and is a major step in revitalizing Hawaii's economy, according to Rep. Ed Case (D - Manoa), Majority Leader of the House of Representatives.

If signed into law by Governor Ben Cayetano, the measure would take effect January 1, 2000, with a tax rate reduction to 3.5 percent. The rate would be reduced by 0.5 percent each year until 2006, where it will remain permanently at 0.5 percent.

"Our fiscal situation has placed obvious constraints on what is responsible and possible," said Case. "Nevertheless, the House from the outset of this session was determined to focus our efforts on changing our economy and improving the business climate.

"When looked at in combination with the $760 million personal income tax cut we adopted in 1998, de-pyramiding and other tax and economy-related reforms will relieve pressures on the consumer and facilitate increased economic activity."

Another high-priority tax relief measure passed by the legislature, SB 44, would exempt professional services firms from the general excise tax for services performed outside the state. Case said this measure is aimed at making Hawaii entities with worldwide expertise more competitive in the global market and seeks to attract further such entities to Hawaii.

Also adopted and sent to the Governor for signature was House Bill 100, the state's $12 billion budget for the two-year fiscal biennium starting July 1. The budget, which represents a substantial reduction from the Cayetano administration's budget request, cuts spending for most state agencies from current levels. Overall, the budget authorizes a slight increase over current fiscal year spending due to increased demand for core services in education, higher education, public safety, and health and human services, Case said.

It also maintains an adequate cash reserve to safeguard the state's bond rating and avoid increased debt costs.

"It is a fiscally responsible budget which, like so many families and businesses, was balanced through reducing expenses rather than enhancing revenue," Case said. "We are living within our means while fulfilling our mandated obligations, and we are confident that we will be able to protect the state's financial integrity and fund core government functions while giving our economic stimulus measures time to take effect."

The legislature also adopted a range of bills and resolutions that fulfilled most of the House Majority's original goals of improving the economy, government efficiency, education, higher education, public safety, healthy families and communities, and environmental protection.

Case said among them are some "hidden treasures" such as model legislation to develop high technology in Hawaii and to allocate most of the funds from the tobacco settlement toward preventive health as well as reforms in long-term care.

Other "treasures" included adoption of most of the proposals supported by the Women's Caucus, establishment of "New Century" charter public schools, and increased environmental protection authority. Case said the legislature also passed measures to enhance privatization of government services, strengthen child protection laws, and provide more assistance to diversified agriculture.

Measures of broad interest that failed to gain final approval by the House and Senate included fireworks legislation and creation of a civil service reform task force.

Case said that while differences between the House and Senate on the civil service reform task force were not resolved, the legislature expects the Governor to accomplish the legislature's overall intent by convening such a task force through executive action. He said that the House expects to make statutory implementation of civil service and collective bargaining reforms one of its top priorities for the next session.

Legislative differences over fireworks legislation mirrored the split in the community over the issue, Case said. The House proposed a crackdown on aerial fireworks while allowing each county increased discretion to regulate common fireworks. The Senate, meanwhile, wanted a total ban on all fireworks. "We did not believe the Senate's position represented the kind of balance the voters are seeking on this issue," Case said.

The legislature also turned down Cayetano's request to use state bonds to finance a new prison after confirming that the Governor has sufficient authority to proceed with private construction. Case said the legislature fully supports creating more prison space, but declined to go deeper in debt through state borrowing for such a big ticket item. "We reaffirmed that the Governor can move ahead with construction of a new prison by private means and that private financing is available."

Highlights of the measures adopted by the 1999 Legislature include:

(HB = House Bill, SB = Senate Bill, HCR = House Concurrent Resolution, SCR = Senate Concurrent Resolution)

Jobs & Our Economy


SB638 Reduces pyramiding of the general excise tax on intermediary services by 0.5 percent per year over seven years to a permanent rate of 0.5 percent in 2006 and thereafter.

SB44 Exempts from the general excise tax exported professional services and imposes a use tax on imported professional services.

Economic Diversification/Job Creation

SB1583 Major bill to develop a high technology industry in Hawaii. Provides tax and other exemptions to encourage high tech investment and consolidates the various aspects of the existing high technology infrastructure in Hawaii. Puts Hawaii among the leaders in high technology development infrastructure.

HB336 Facilitates development of biotechnology by loosening regulations regarding the importation of raw materials.

SB1321 Facilitates and supports research and development of open ocean mariculture.

Small Business

SB186 Tort reform to discourage frivolous lawsuits.

SB1071 Helps small business raise capital by allowing securities registration for public offerings to be satisfied by the Small Corporate Offerings Registration Form (SCOR).

HB1079 Facilitates the conversion of corporations, partnerships and other business entities into other types of business entities.

SB1149 Establishes greater fairness in determining penalties for non-payment of back wages.

SB1139 Broadens flexibility for limited liability companies.

SB635 Establishes procedures for on-site substance abuse tests as part of pre-employment.

SB 1512 Updates Hawaii laws to conform with national norms on partnerships.

SB776 Permits depository financial service loan companies to invest up to 25 percent of total reserves in the NASDAQ market system.


HB221 Directs the Hawaii Tourism Authority to develop a long-range policy plan.

SB392 Appropriates $2 million for a cruise ship passenger terminal at Pier 2, Honolulu Harbor.

SB816 Extends the life of the Hawaii Convention Center Authority to June 30, 2000.

HCR4/ Urges the United States to expand and make permanent the temporary

SCR20 visa waiver program to include areas of emerging tourist markets for Hawaii.


HB138 Strengthens laws against agricultural trespass and theft.

HB1628 Assists small agricultural enterprises gain greater access to capital through a cooperating lenders loan program.

HB562 Restricts use of additional terms on labels of raw or processed macadamia nut products.

HB1280 Appropriates $400,000 to the Department of Agriculture to develop, promote and market Hawaii-grown products.

HB32 Allows privately funded research into the commercial feasibility of growing industrial hemp in Hawaii.

Government Efficiency & Operations

Collective Bargaining & Civil Service

HB1038 Provides for payment of previously negotiated pay raises for state and county public employees.

SB1518 Implements a two-year pay freeze beginning July 1, 1999.


SB450 Amends Act 230 to enhance development of a managed process for public-private competition to perform certain government services; gives counties flexibility to enter into long-term contracts with private vendors.

Retirement & Benefits

HB1048 Requires retired employee-beneficiaries or dependent-beneficiaries to enroll in the federal Medicare Part B insurance plan as a condition of participating in the Public Employee Health Fund.

HB98 Extends Employees' Retirement System pensioners' bonus to July 1, 2001.

HB104 Seeks to reduce costs of the Public Employee Health Fund by implementing "alternative concepts" in place of the "employer-union trust concept."


SB1145 Combines and deposits funds and fees of the Department of Commerce & Consumer Affairs into a Compliance Resolution Fund to be used to fund DCCA operations; "self-sufficiency" of appropriate government departments and agencies.

HB1198 Enhances tax collections and improves methods to identify tax cheaters by appropriating $17.5 million to the Tax Department to establish the Integrated Tax Information Management Special Fund and the integrated tax information management systems.

SB 1421 Enhances collection of back taxes by authorizing probation as a penalty for tax offenses.

HB988 Appropriates $1.04 million to the Department of Accounting and General Services to support Y2K computer compliance.

HB1111 Provides immunity against Y2K computer errors provided reasonable efforts for compliance are made.

HCR79 Establishes a joint legislative committee on child and adolescent mental health (Felix legislative oversight).


Educational Governance

SB1501 Designates all student-centered schools as New Century Charter Schools and allows up to 25 such schools, with more localized governance, to be established.

HB100 Funds student-teacher ratio reduction, implementation of performance standards, and comprehensive student support services.

SB1307 Requires the establishment of a comprehensive system of accountability, identifying the roles and responsibilities of all partners in the education process.

SB46 Requires the Department of Education to provide to the schools and the legislature a school-by-school report on its budget allocation.

HB1085/ Provides emergency and ongoing funding to meet the federal mandates

HB100 under the Felix consent decree.

HB519 Extends the sunset date for the Hawaii teacher standards board to June 30, 2010.

HB1170 Authorizes the Board of Education to more aggressively recover costs/fees for lost or overdue books and other library materials.

HCR7 Urges the Board of Education and the Superintendent of Education to restructure the Department of Education to ensure accountability at all levels.

SCR145 Requests Hawaii's Congressional delegation to obtain additional funds for the education of military dependents in Hawaii.

Higher Education

HB307 Establishes a Hawaii college savings program for residents and non-residents as a qualified state tuition plan under the Internal Revenue Service Code.

HB252 Strengthens the quality of higher education in Hawaii by requiring institutions be accredited before granting degrees.

Hawaii Public Television

HB154 Modernizes operations of Hawaii Public Television by transferring all assets to a non-profit entity.

Justice & Public Safety

Criminal Justice

HB273 Strengthens child abuse laws by adding three new felony offenses for causing injury to minors 12 and under.

HB1497 Requires extended prison terms for repeat violent and sexual offenders; adds life without parole as the extended term for second-degree murder.

SB588 Requires that participating agencies provide criminal, parole, psychological or mental health records of sex offenders under supervised treatment in the custody of the state.

SB1118 Imposes stronger sentencing for repeat misdemeanants.

HB955 Defines first-degree violation of privacy to include the use of videotape, photo or other devices to observe or record a person in a stage of undress or sexual activity without that person's consent.

SB1119 Changes burden of proof of mental or emotional disturbance in murder cases (Kimberly Pada case).

SB21 Increases penalties for assault on persons contractually hired by the Department of Education for school programs, activities, and functions.

HB300 Makes assaulting a police officer on duty a first degree, Class C felony.

SB592 Modifies firearms laws to remove exemption for law enforcement officers convicted of abuse of family or household member.

SB889 Bans an on-duty law enforcement officer from possessing firearms if the officer is the subject of restraining order.

HB996 Creates a Class C felony for specified money laundering.

HB999 Makes persons who willfully fail to report income derived from racketeering or loan sharking activities guilty of a Class B felony.

SB919 Includes animals as a "dangerous instrument" for robbery in the first degree.

Judicial Administration & Civil Justice

HB20 Increases salaries for judges by 11 percent in each of the next two years and reforms the judicial retirement system to change "10 years and out."

SCR45 Urges the United States Government to restore funds to compensate individuals of Japanese ancestry who were unjustly interned during World War II.

Election Process Reform

HB165 Limits "soft money" contributions by political parties and political committees.

HB72 Defines and limits total monetary contributions to no more than $100 during any period for candidates receiving matching funds.

SB1502 Requires candidates to disclose disbursements for electioneering communications over $2,000.

SB630 Requires late contributions in excess of $500 be filed within three days of the election.

SB628 Limits campaign contributions by a candidate's immediate family to $50,000.

SB631 Expands participation in the political process by relaxing requirements for qualified political parties.

HB1471 Makes permanent the office of elections and the elections appointment and review panel.

Transportation Safety & Infrastructure

HB32 Raises the minimum age to 16 years in order to obtain a driver's license and requires drivers education for all teens as a condition to licensing.

HB1 Requires children under four to occupy child passenger restraint seat while in moving vehicles.

HB212 Increases penalties for persons convicted of DUI with a minor passenger.

SB700 Defines low-speed electric vehicles and prohibits their use at speeds greater than 25 mph or on highways with posted speeds higher than 35 mph.

HB765 Increases the rental car surcharge to $3 per day from September 1, 1999 to August 1, 2007, for the purpose of replenishing the state Highways Special Fund for road maintenance and repair.

HCR6 Encourages alternative access routes to major communities currently served by a single access roadway.


Healthy Families & Communities


HB1663 Authorizes the state health director to contract with private psychiatric facilities for the care of patients currently housed at the Hawaii State Hospital in Kaneohe.

SB822 Requires health plan providers to include contraceptive devices in their group coverage. Permits religious employers to request plans without such coverage to comply with religious tenets.

SB102 Requires the Department of Health to develop a statewide rural health plan.

HCR219 Urges the United States Congress, the President, and the Secretary of Health & Human Services to support the Hawaii Congressional delegation's effort to amend the Social Security Act in order to increase Hawaii's federal medical assistance percentage (FMAP).

Long Term Care

HB170 Allows individuals to claim a state tax deduction on premiums paid for long-term insurance policies.

HB172 Authorizes the Department of Health to license hospice service agencies and set licensing requirements.

SB1452 Requires unaccredited managed care plans to submit to the state Insurance Commissioner a plan to achieve accreditation in five years. Plans must be submitted by January 1, 2000.

HCR12 Urges the Executive Office on Aging, in partnership with Hospice Hawaii, to educate healthcare providers and the public on the benefits of hospice.

Women's Issues

HB532 Provides that no person shall be excluded from participating in any athletic activities offered by any public high school on the basis of sex.

HB177 Facilitates the granting of a temporary restraining order in harassment cases. Similar to SB590.

HB266 Prohibits employers from preventing lactating employees from expressing breast milk during meals or breaks.

SB829 Conforms the Hawaii Rules of Evidence in civil cases to the current rape shield laws regarding a victim's past behavior.

SB646 Authorizes the establishment of Individual Development Accounts for persons of limited individual financial means to accumulate assets.

SB616 Enacts the Prostitution Coercion Liability Act allowing individuals coerced into prostitution to bring action against their coercers.

HCR15 Urges the United States Senate to ratify the United Nations Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW).


SB1034 Establishes the Hawaii Tobacco Settlement Special Fund to receive and disburse funds. Portions of the fund will be used for tobacco prevention and education, children's health insurance program, and an emergency and reserve fund for the state.

HB1008 To work in conjunction with SB1034, requires all tobacco manufacturers selling cigarettes in Hawaii be a participant in the Master Settlement Agreement, or place funds in an escrow account based on the quantity of cigarettes sold.

SB788 Enhances state collection of tobacco taxes and addresses the cigarette black market by establishing a state cigarette tax stamp to be applied to each package of cigarettes sold in the state after January 1, 2000.

HB294 Prohibits distribution of sample tobacco products, coupons for tobacco products or tobacco promotional materials in public streets, sidewalks, parks, or within 1,000 feet of any public school.

Children's Health

HB1117 Provides permanence and stability to adopted children by bringing the state into compliance with the federal Adoption and Safe Families Act of 1997.

SB1003 Strengthens child support enforcement laws by allowing direct payment on agreement.

HB260 Establishes a means for children to be screened for psychological and physiological development within 90 days of the child's third birthday.

HB274 Improves protections for foster children by the Department of Human Services.

Domestic Violence

SB823 Increases penalties for domestic violence crimes committed in the presence of a minor.

SB590 Strengthens penalties for persons violating temporary restraining orders, including uniform sentencing.

Life Decisions

HB171 Allows adults or emancipated minors to issue individual instructions or execute powers of attorney for health care, including naming of a surrogate.

HB547 Establishes the Hawaii Organ and Tissue Education Special Fund, sets July 1, 2000 as the starting date for collecting $1 voluntary fee, and repeals the donation fee on June 30, 2003.

HCR 14 Urges effective pain management programs be required in all healthcare institutions.

Consumer Protection

SB947 Protects against unfair and deceptive practices by telemarketers and other telephone solicitors.

HB351 Protects the privacy of health care information by describing conditions under which such information can be disclosed by health maintenance organizations and mutual benefit societies including insurance policies issued by these entities.

HB1361 Strengthens requirements for registration and bonding for persons who accept money for charter tours.

HB8 Prohibits the use of social security numbers on state issued driver's licenses

HCR12 Requests the Governor to direct the Attorney General to vigorously pursue civil litigation of the gasoline prices case.

HCR22 Requests the Public Utilities Commission submit a status report on instituting a proceeding on electric competition and an investigation of the electric utility infrastructure in the state.

Special Purpose Revenue Bonds

Miscellaneous measures to facilitate financing of private health care facilities and creation of health care industries. Includes House Bills 877, 970, 971, 972 and 973.

Our Environment

HB1012 Makes permanent the Clean Hawaii Fund, a special fund within the state treasury to be used to market and promote the development of local processing and manufacturing industries for collected recycled materials.

SB953 Establishes an environmental special fund under a land stewardship and partnering program to facilitate between development and natural/cultural resource concerns.

HB582 Encourages development of a statewide trail system by limiting governmental liability on unimproved government-owned trails.

SB1091 Authorizes the Department of Land & Natural Resources to specify bag limits, sales restrictions, seasons, and regulation of fishing gear.

HB1183 Establishes a Beach Restorations Special Fund to restore beaches.

HB424 Establishes a forest stewardship special fund to provide for the reforestation and maintenance of timber management areas.

SB1024 Allows the Department of Health to establish a permanent ecological risk assessor position.

SCR30 Requests the Legislative Reference Bureau to conduct a policy and issue study on the undergrounding of overhead utility facilities.

Hawaiian Issues

SB1635 Requires the state auditor to identify all lands contained within the public land trust and to complete an inventory of the lands with a final report by December 31, 2000 and increases the state's ceded lands payments to the Office of Hawaiian Affairs.

HB1675 Extends the term of the Hawaii Home Land Trust Individual Claims Review Panel one year to complete claims resolutions.

Assistance to Counties

SB1518 Assists counties in meeting retroactive pay raises and other costs through a one-time use of specified investment earnings of the Employees' Retirement System in excess of 10 percent.

HB753 Permits counties to create special improvement districts by ordinance to restore or promote business activity and by providing and financing supplemental maintenance and security services.

HB161 Permits government entities to seek reimbursement of the costs of search and rescue operations under certain conditions.

Other Bills of Interest

SB365 Prohibits the use of laser pointing devices by persons over 18 years of age to harass another person or animal. Prohibits the sale of such devices to minors.

SB36 Enhances the ability of associations of apartment owners to collect delinquent common areas assessments from tenants/apartment owners.

HB1575 Appropriates $250,000 for the Millenium Young People's Congress, an international gathering of young people to be held in Hawaii and sponsored by the United Nations.

The 1999 Legislature adjourned today as originally scheduled.