Report Title:

Hawaii State Constitution; Amendments; Board of Education


Amends the State Constitution to authorize the Board of Education the power to set income tax rates.


H.B. NO.









proposing constitutional amendments to allow the board of education the power to set income tax rates.



SECTION 1. The legislature finds that the future of this State is dependent on the provision of a quality education for our children. Under Article X, section 1, of the Hawaii State Constitution, the State is required to establish and support a statewide system of public schools, a state university, public libraries, and other educational institutions. Meeting this constitutional mandate requires a significant investment in both human and financial resources. Currently, the department of education receives its funding through the traditional budgetary process, involving input from the governor, department of budget and finance, and the legislature.

The legislature finds that this method of funding is outdated and insufficient in meeting the needs of Hawaii's public schools. The traditional budgetary process results in a situation where various state agencies must compete against each other for a limited amount of funds. In addition, this process sometimes results in politicization of agency budgets, including that of the department of education, as other entities such as legislators and lobbyists influence the decision-making process. This political infighting may result in a budget that does not necessarily reflect the best interests of the department and the children that the department must serve.

The legislature believes that another source of funding should exist to provide the children of Hawaii with the best possible education. By depositing all income tax collections into a special fund, where these moneys are to be expended by the board of education, and allowing the board of education the power to raise or lower income tax rates as it sees fit, the department of education will have the needed flexibility and autonomy to properly allocate funds to programs in a timely and efficient manner. The department of education will also be held more accountable for its actions since its funding will be much less affected by political factors outside of its control.

Finally, by tying revenue streams for the department of education with income tax revenue, an important philosophical point is made theoretically, a stronger educational system facilitates a smarter more dedicated workforce which can improve corporate productivity leading to a growing, vibrant economy. This generally results in higher income levels and higher income tax collections that will in turn benefit the department of education even further. A virtuous cycle is created.

The purpose of this Act is to provide an alternate source of funding for the department of education by depositing all income tax collections in the department of education special fund and authorizing the board of education the power to expend funds from this special fund and to raise or lower income tax rates and brackets as it sees fit. The legislature intends to meet these objectives through this Act and the statutory amendments proposed in H.B. No. ____.

SECTION 2. Article VII of the Constitution of the State of Hawaii is amended by amending section 2 to read as follows:


Section 2. In enacting any law imposing a tax on or measured by income, the legislature may define income by reference to provisions of the laws of the United States as they may be or become effective at any time or from time to time, whether retrospective or prospective in their operation. The legislature may provide that amendments to such laws of the United States shall become the law of the State upon their becoming the law of the United States. The legislature shall in any such law set the rate or rates of such tax[.], or delegate the setting of the rate or rates of such tax to the board of education. The legislature may in so defining income make exceptions, additions or modifications to any provisions of the laws of the United States so referred to and provide for retrospective exceptions or modifications to those provisions which are retrospective."

SECTION 3. Article VIII, section 3, of the Constitution of the State of Hawaii is amended to read as follows:


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 for the setting of the income tax rate given to the board of education under article X, section 3, 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 4. Article X of the Constitution of the State of Hawaii is amended by amending section 3 to read as follows:


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 shall have such power to set the rate or rates of a tax on, or measured by, income as provided by law."

SECTION 5. The question to be printed on the ballot shall be:

"Shall the board of education be granted authority to set the rate or rates on income taxes?"

SECTION 6. Constitutional material to be repealed is bracketed and stricken. New constitutional material is underscored.

SECTION 7. This Act shall take effect upon compliance with Article XVII, section 3, of the Constitution of the State of Hawaii.