STAND. COM. REP. NO. 235

Honolulu, Hawaii

, 2005

RE: S.B. No. 1698

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Media, Arts, Science, and Technology and Business and Economic Development, to which was referred S.B. No. 1698 entitled:

"A BILL FOR AN ACT RELATING TO TECHNOLOGY GROWTH,"

beg leave to report as follows:

The purpose of this measure is to assist the Economic Development Alliance of Hawaii, Inc., and the four county economic development boards in their support of Hawaii's growing technology sector.

Specifically, the measure provides an incentive for taxpayers to invest in creating and maintaining school technology laboratories by establishing a tax credit for moneys, goods, or services donated to public schools in the furtherance of such programs. The tax credit would be equal to ten per cent of the donated amount, up to a yet to be determined maximum.

The measure also appropriates $250,000 in matching funds as a grant-in-aid to the Economic Development Alliance of Hawaii, Inc., so that it may expand its Project EAST program to four additional schools on two, yet to be determined, islands.

Testimony in support of the measure was received from the Department of Education; the Department of Business, Economic Development, and Tourism's Office of Planning; the Economic Development Alliance of Hawaii, Inc.; the Hawaii Island Economic Development Board; the Kauai Economic Development Board; and the Maui Economic Development Board.

The Department of Business, Economic Development, and Tourism and the Tax Foundation of Hawaii submitted comments on the measure. The Department of Taxation submitted testimony in opposition to the measure.

Your Committees find that training a technology savvy workforce is the State's key to ensuring a future that embraces a robust technology-based economy. To help meet this need, Act 218, Session Laws of Hawaii 2004, established the Hawaii 3Ts School Technology Laboratories Fund. Modeled after the highly successful Hawaii 3Rs School Repair and Maintenance Fund, the 3Ts Fund encourages public-private partnerships for the establishment and maintenance of technology laboratories in Hawaii's public schools.

The 3Ts concept is an expansion of the Project EAST (environmental and spatial technology) initiative started as a pilot program in the Maui district high schools during the summer of 2000, that later moved to Hawaii county, and then a middle school on Kauai. Project EAST holds great potential for assisting Hawaii's public schools in developing important critical thinking, problem solving, and analytical skills in Hawaii's young people that are necessary for these individuals to succeed in high technology based jobs. Project EAST integrates cutting edge technology, such as computer assisted drafting, geographic information systems, global positioning systems, as well as computer graphic applications, such as soft image, into the educational curriculum. The goal of this initiative is to prepare students for the information technology age by providing a comprehensive project-based and student-centered learning program where the students are responsible for their own learning.

Seven Project EAST labs have already been established in Hawaii – Chiefess Kamakahelei Middle School on Kauai; Maui High School, Baldwin High School, King Kekaulike High School, Lahainaluna High School, and Kihei Charter School on Maui; and Kea'au High School on Hawaii. Since 2001, Hawaii students have won a number of awards at the National EAST Conference, competing successfully against approximately two hundred schools in six other states.

Your Committees also find that the Economic Development Alliance of Hawaii, Inc., is responsible for administering the 3Ts Fund, and every dollar of state funds must be matched on a fifty cents basis in the form of in-kind services or monetary donations by nonstate sources.

Your Committees further find that the Economic Development Alliance of Hawaii, Inc., a nonprofit umbrella organization for the four county economic development boards, estimates that the economic development boards miss as many as one hundred United States mainland exhibitions and conferences in which the Hawaii technology story could be presented. Currently, presentations are limited by budget constraints and simply do not match the market emphasis or level of other technology sites such as the Raleigh Durham triangle, San Antonio, or San Diego, much less Silicon Valley.

Your Committees also heard concerns raised during the public hearing on this measure over the uncertainty of how the value of goods and in-kind services will be determined, as well as how much tax revenue will be lost to the establishment of the tax credit.

In response to these concerns, your Committees have received assurances that:

(1) The Department of Business, Economic Development, and Tourism will work with the Economic Development Alliance of Hawaii, Inc., and the county economic development boards to resolve concerns on contributions of goods and in-kind services from the private sector for school technology laboratories;

(2) The Department of Business, Economic Development, and Tourism will work with the Economic Development Alliance of Hawaii, Inc., and the county economic development boards to establish a formula based on federal certified wage/hour rates, materials, and supplies; and

(3) According to the Department of Business, Economic Development, and Tourism, the Economic Development Alliance of Hawaii, Inc., and the county economic development boards, the anticipated value of moneys, goods, and in-kind services donated under the tax credit would be between a minimum of $2,000,000 and a maximum of $5,000,000, which equates to an estimated cap on the annual tax revenue lost attributable to the tax credit at between $200,000 and $500,000.

Your Committees have amended the measure by:

(1) Adding sections to the measure that clarify that moneys or the value of goods or services donated to technology-based educational programs in public schools shall not be claimed under both the new tax credit established under this measure and the tax credit provided under section 235-110.2, Hawaii Revised Statutes (the School Repair and Maintenance Tax Credit); and

(2) Adding a section that appropriates $250,000 in matching funds to the Economic Development Alliance of Hawaii, Inc., to coordinate marketing, with emphasis on representing Hawaii's technology companies and opportunities on the United States mainland.

As affirmed by the records of votes of the members of your Committees on Media, Arts, Science, and Technology and Business and Economic Development that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1698, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 1698, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Media, Arts, Science, and Technology and Business and Economic Development,

____________________________

WILL ESPERO, Chair

____________________________

CAROL FUKUNAGA, Chair