Honolulu, Hawaii



RE:    S.B. No. 1297

       S.D. 1




Honorable Donna Mercado Kim

President of the Senate

Twenty-Eighth State Legislature

Regular Session of 2015

State of Hawaii




     Your Committee on Ways and Means, to which was referred S.B. No. 1297 entitled:




begs leave to report as follows:


     The purpose and intent of this measure is to place ceilings on the total amounts of cigarette tax revenues that are presently deposited into certain special funds.


     Your Committee received testimony in opposition to this measure from the University of Hawaii, Friends of the Medical School, and three individuals.  Your Committee received comments on this measure from the Tax Foundation of Hawaii.


     Your Committee finds that under the present tax structure, certain special funds receive a specified number of cents per cigarette with no limit to the total amount of tax revenue that may be received per fiscal year.  Your Committee further finds that placing a cap on the amount of cigarette tax revenues received by these special funds will promote budgetary planning and transparency by:


(1)  Making forecasts of general fund revenues more reliable;


(2)  Increasing legislative oversight of the agencies and programs supported by those special funds; and


(3)  Increasing competition for limited public funds among agencies and programs seeking funds additional to those automatically distributed to their special funds.


     Your Committee further finds that the practice of automatically earmarking funds that fluctuate over time to not be in the best interest of either the State or the recipient program.  Without legislative involvement in the distribution of funds, determinations as to whether or not programs are receiving too little or too much resources are often not made in a timely manner.  This has resulted in some programs requiring additional funds and other programs building up large reserves that could have been better utilized for other programs and services.


     Your Committee has amended this measure by setting out the new tax structure as a new paragraph to the existing statutory section on the disposition of the cigarette tax revenues, rather than as amendments to the presently applicable paragraph of that section.  This is consistent with recent legislative practice regarding this statute and preserves the record of cigarette taxation amounts and disposition.


     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1297, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1297, S.D. 1, and be placed on the calendar for Third Reading.


Respectfully submitted on behalf of the members of the Committee on Ways and Means,