Education Excise Tax; DOE; Political Subdivision of the State
Purposes constitutional amendments making the department of education a political subdivision headed by the board of education and authorizing the board to impose an education excise tax.
HOUSE OF REPRESENTATIVES
TWENTY-SECOND LEGISLATURE, 2003
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO EDUCATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The provision of quality education for the children of Hawaii remains a priority of the entire State. All interested parties must work together to guarantee that our children have the right tools and a safe environment to enable them to become educated, productive individuals. An educated citizenry and skilled workforce are key components of any society, but are especially crucial when society needs to reestablish its economic vitality.
In recent years, Hawaii's public education system has undergone numerous changes, yet the public perception is that graduation from a public high school in Hawaii does not guarantee an educated citizen or skilled worker. Currently, the education system has goals, objectives, and performance standards, but few assessments and little acceptance of responsibility for improving on student performance. Each year, we read of pronouncements by the department of education that it is on the right track, yet the reading scores of Hawaii's students remain among the lowest in the nation.
The board of education and the department of education clamor for increased levels of funding, advancing the perception that the legislature is providing insufficient funds to the department of education, and holding the legislature responsible for the inefficiencies and ineffectiveness of the educational system. Nothing can be further from the truth. While it is the responsibility of the legislature to provide funds to the department of education, it is incumbent on the legislature to balance the needs of the State against limited resources. Even under these circumstances, the legislature has increased the department of education's budget to a level that represents 35.7 per cent of the general fund budget. In addition, all governors have attempted to preserve the department of education's budget to the detriment of other programs of state government. Unfortunately, the result is that Hawaii students scored the lowest in reading among thirty-nine states last year.
It is obvious that the State is at a crossroads with regard to education. It is no longer a funding issue, it is an issue of responsibility and accountability for the delivery of an educational system that assures that every child will be competent in the basic requirements of society.
It is time to develop and support a concept that provides a dedicated source of funding for public education similar to that provided for tourism marketing and promotion. Providing the department with a separate means of financing would guarantee the availability of resources necessary to provide quality educational opportunities, both for students and teachers.
Through this Act, the legislature changes a basic philosophy and seeks to reform the governance of a statewide education system by delineating clear lines of authority and responsibility in all fiscal matters, policy issues, and managerial oversight.
In order to finance this new political subdivision, the department of education would be allowed to adopt an education excise tax. The department would be responsible for its revenues and, therefore, responsible for raising them in the amounts necessary as well as expending those amounts in the manner desired by the public, for the benefit of the educational system.
Through this systemic change, the legislature believes that existing resources will be utilized more efficiently and effectively. The department of education would be solely and directly accountable to the public, with regard to performance, expenditure, and increases in the education excise tax to fund the system. The legislature notes that many school districts on the mainland have their own taxing power and the legislature believes that having this authority will make the department of education more accountable and responsive to the public that pays the taxes.
It is the intent of the legislature to achieve these objectives by providing adequate autonomy to the department of education
The purpose of this Act is to amend the state constitution in order to: make the department of education a political subdivision headed by the board of education, separate and apart from state government but subject to the general laws of the State; and authorize the board to impose an education excise tax.
SECTION 2. Article X of the Constitution of the State of Hawaii is amended by adding three new sections to read as follows:
"DEPARTMENT OF EDUCATION; POLITICAL SUBDIVISION; BONDS
Section 1.4. The department of education shall be a political subdivision headed by the board of education, which shall enact ordinances and govern the political subdivision in a manner similar to other political subdivisions of the State. The department shall have all of the functions, powers and duties necessary to provide for the establishment, support and control of the statewide system of public education, except police powers. The department of education shall be separate and apart from the rest of state government but shall be subject to general law.
The department of education may issue general obligation bonds for the payment of the principle and interest of which the full faith and credit of the political subdivision is pledged and, unless otherwise indicated, includes reimbursable general obligation bonds. All bonds and other instruments of indebtedness issued by the department of education shall be subject to Article VII, sections 12 and 13. For the purposes of determining the department's debt ceiling, the department of education shall follow the provisions of Article VII, section 13. Fees, payments, income, excluding federal funds, and education excise tax revenues shall be considered general fund revenues of the department. The department of education shall be responsible for the payment of all principle and interest on general obligation bonds issued by the State and outstanding for the direct benefit of the public school system on the effective date of this section.
POWERS OF TAXATION
Section 3.4. The department of education shall exercise all functions, powers and duties relating to an education excise tax. The education excise tax shall be limited to the retail sale of tangible personal property. The adoption of an education excise tax and the establishment or change in the tax rate shall require a two-thirds vote of the members to which the board of education is entitled.
Section 7. This article shall not limit the power of the legislature to enact laws of statewide concern."
SECTION 3. Article XVIII of the Constitution of the State of Hawaii is amended by adding a new section to read as follows:
"DEPARTMENT OF EDUCATION; POLITICAL SUBDIVISION
Section 7.1. The amendments made to Article VII, sections 7 and 10, Article VIII, section 3, and Article X changing the functions, powers and duties of the board of education and making the department of education a political subdivision shall take effect on July 1, 2005.
The department of education shall contract with the department in the executive branch responsible for collecting taxes to collect education excise taxes for the board of education until July 1, 2012. The executive department shall be reimbursed for direct and indirect costs in collecting education excise tax revenues for the board of education."
SECTION 4. Article VII, section 7, of the Constitution of the State of Hawaii is amended to read as follows:
"COUNCIL ON REVENUES
Section 7. There shall be established by law a council on revenues which shall prepare revenue estimates of the state government, except the department of education, and shall report the estimates to the governor and the legislature at times provided by law. The estimates shall be considered by the governor in preparing the budget, recommending appropriations and revenues and controlling expenditures. The estimates shall be considered by the legislature in appropriating funds and enacting revenue measures. All revenue estimates submitted by the council to the governor and the legislature shall be made public. If the legislature in appropriating funds or if the governor in preparing the budget or recommending appropriations exceeds estimated revenues due to proposed expenditures, this fact shall be made public including the reasons therefor.
The council on revenues shall also prepare revenue estimates of the department of education, and shall report the estimates to the board of education at times provided by law. The estimates shall be considered by the board of education in preparing its budget, recommending its appropriations and revenues and controlling its expenditures. All revenue estimates submitted by the council to the board of education shall be made public. If the board of education in preparing the budget or recommending expenditures exceeds estimated revenues due to proposed expenditures, this fact shall be made public including the reasons therefor."
SECTION 5. Article VII, section 10, of the Constitution of the State of Hawaii is amended to read as follows:
Section 10. The legislature, by a majority vote of each house in joint session, shall appoint an auditor who shall serve for a period of eight years and thereafter until a successor shall have been appointed. The legislature, by a two-thirds vote of the members in joint session, may remove the auditor from office at any time for cause. It shall be the duty of the auditor to conduct post-audits of the transactions, accounts, programs and performance of all departments, offices and agencies of the State, the department of education and [
its] political subdivisions[ ,] of the State, to certify to the accuracy of all financial statements issued by the respective accounting officers and to report the auditor's findings and recommendations to the governor [ and], to the legislature and to the board of education at such times as shall be provided by law. The auditor shall also make such additional reports and conduct such other investigations as may be directed by the legislature."
SECTION 6. Article VIII, section 3, of the Constitution of the State of Hawaii is amended to read as follows:
"TAXATION AND FINANCE
Section 3. The taxing power shall be reserved to the State, except so much thereof as may be delegated by the legislature to the political subdivisions, except the education excise tax given to the department of education under Article X, section 3.4, and except that all functions, powers and duties relating to the taxation of real property shall be exercised exclusively by the counties, with the exception of the county of Kalawao. The legislature shall have the power to apportion state revenues among the several political subdivisions."
SECTION 7. Article X, section 2, of the Constitution of the State of Hawaii is amended to read as follows:
"BOARD OF EDUCATION
Section 2. There shall be a board of education composed of members who shall be elected in a nonpartisan manner by qualified voters, as provided by [
law,] ordinance of the board of education, from two at-large school board districts. The first school board district shall be comprised of the island of Oahu and all other islands not specifically enumerated. The second school board district shall be comprised of the islands of Hawaii, Maui, Lanai, Molokai, Kahoolawe, Kauai and Niihau. Each at-large school board district shall be divided into departmental school districts, as may be provided by [ law.] ordinance of the board of education. There shall be at least one member residing in each departmental school district. The Hawaii State Student Council shall select a public high school student to serve as a nonvoting member on the board of education."
SECTION 8. Article X, section 3, of the Constitution of the State of Hawaii is amended to read as follows:
"POWER OF THE BOARD OF EDUCATION;
GENERAL FUND EXPENDITURE CEILING
Section 3. The board of education shall have the power[
, as provided by law,] to formulate statewide educational policy and appoint the superintendent of education as the chief executive officer of the public school system. The board of education shall have jurisdiction over the internal organization and management of the department of education and the public school system and shall exercise its jurisdiction in a manner consistent with general laws.
GENERAL FUND EXPENDITURE CEILING
Notwithstanding any other provision to the contrary, the board of education shall establish a general fund expenditure ceiling, which shall limit the rate of growth of general fund appropriations, excluding federal funds received by the general fund of the department of education, to the estimated rate of growth of the State's economy as provided by law. No appropriations by the department of education in excess of this ceiling shall be authorized by the board of education unless the board of education, by a two-thirds vote of the members to which the board of education is entitled, shall set forth the dollar amount and the rate by which the ceiling will be exceeded and the reasons therefor."
SECTION 9. The question to be printed on the ballot shall be as follows:
(1) The powers, functions, and duties of the board of education to manage and control the public school system be independent of legislative and gubernatorial review so that the department of education is a political subdivision; and
(2) The board of education be allowed to impose an education excise tax?"
SECTION 10. Constitutional material to be repealed is bracketed and stricken. New constitutional material is underscored.
SECTION 11. This amendment shall take effect upon compliance with article XVII, section 3, of the Constitution of the State of Hawaii.