THIRTY-FIRST LEGISLATURE, 2021
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO SUGAR-SWEETENED BEVERAGES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that there is a need to continue to invest in the health of Hawaii's keiki and ohana. Sugar-sweetened beverages are the largest source of excess sugar in the American diet, contributing excess calories with little or no nutritional value. Sugar-sweetened beverage consumption is associated with negative health effects such as obesity, costing the State an estimated $470,000,000 in obesity-related healthcare costs annually.
The legislature finds that a fee on sugar-sweetened beverages is a viable means to reduce sugar-sweetened beverage consumption, improve health and generate revenue for the state to support health, prevent chronic disease, and address root causes of disparities in Hawaii. A 2017 study conducted by the Harvard T.H. Chan School of Public Health and the Hawaii Department of Health found that a sugary drink fee has major cost-savings. Passage of a two-cent-per-ounce sugar-sweetened beverage fee is projected to result in lower levels of sugar-sweetened beverage consumption, fewer cases of obesity, fewer deaths and health care savings greater than fifty-nine million dollars over a ten-year period. A two-cent-per-ounce fee would have raised as much as $65,800,000 in 2020 according to the Rudd Center Revenue Calculator for Sugary Drink Taxes.
The consumption of sugar-sweetened beverages is linked to serious health problems, including weight gain, obesity, prediabetes, diabetes, tooth decay, heart disease, and other health problems. In Hawaii, one out of four middle and high school students and more than half of all adults are overweight or obese. Sixty-one per cent of Hawaii adults are living with at least one chronic disease such as diabetes, heart disease, or cancer. A 2016 report found that seventy-one per cent of third graders in Hawaii were affected by tooth decay, making Hawaii the state with the highest prevalence of tooth decay among third graders in the nation. The State also received a failing grade in a series of oral health report cards released by the Pew Center on the States.
The legislature also finds that sugar-sweetened beverage consumption is a health equity issue, as rates of consumption are greatest among those with lower incomes and people of color, due in part to issues surrounding a lack of access to healthy foods and the targeted marketing of these groups by the sugary beverage industry. Lower income populations and people of color also have higher rates of chronic disease due to other social determinants of health, including food and housing insecurity, access to health care issues, and lack of spaces for safe physical activity. The COVID-19 pandemic has drawn attention to these health and social inequities in Hawaii. COVID-19 has most severely impacted the Pacific Islander, Filipino, and Native Hawaiian populations, who have the highest rates of chronic disease and sugary drink consumption. Additionally, regulations to mitigate the spread of the virus have created economic hardships for the people of Hawaii, especially for these vulnerable populations. As the State braces for extreme budget shortfalls, an opportunity exists to implement a sugar-sweetened beverage fee to reduce sugary drink consumption and chronic disease risks, significantly save on healthcare costs, and generate revenue that can be used to reduce health disparities and support health promotion programs during austere post-COVID-19 times. Over the last several years, sugar-sweetened beverage tax policies have been enacted in several cities throughout the United States and dozens of countries globally. Sugar-sweetened beverage tax policies involve the collection of a tax or fee from sugar-sweetened beverage distributors that is passed on to consumers in the form of price increases that influence purchasing behavior. Jurisdictions with sugar-sweetened beverage taxes such as Berkeley, California and Philadelphia, Pennsylvania have seen a reduction in sugary drink consumption, while sales of bottled water and other healthier options increased. Further evaluation results from these jurisdictions show that overall sales and revenue were not harmed by a fee at the distributor level. A sugar-sweetened beverage fee has instead provided a source of revenue that has generated millions of dollars to aid in reducing health and socioeconomic disparities. Recently, some of these locations reallocated their funding to specifically address critical needs resulting from COVID-19, such as assisting low-income families facing food insecurity.
Accordingly, the purpose of this Act is to enact a fee on sugar-sweetened beverages in Hawaii to improve health and generate revenue for the State to support health, prevent chronic disease, and address root causes of health disparities in Hawaii. This Act shall be known and cited as the Healthy Ohana Act of 2021.
SECTION 2. Chapter 321, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:
"PART . SUGAR-SWEETENED BEVERAGE FEE PROGRAM
§321-A Definitions. As used in this part, unless the context otherwise requires:
"Auditor" means the office of the auditor established pursuant to chapter 23.
"Bottle" means any closed or sealed container regardless of size or shape, including those made of glass, metal, paper, plastic, or any other material or combination of materials.
"Bottled sugar-sweetened beverage" means any sugar-sweetened beverage contained in a bottle that is ready for consumption without further processing, such as dilution or carbonation.
"Caloric sweetener" means any substance containing calories suitable for human consumption, that humans perceive as sweet, and includes, without limitation, sucrose, fructose, glucose, other sugars, or fruit juice concentrates. "Caloric sweetener" shall not include non-caloric sweeteners.
"Consumer" means a person who purchases a sugar-sweetened beverage for consumption and not for sale to another.
"Department" means the department of health.
"Dietary aid" means:
(1) A liquid products manufactured for use as an oral nutritional therapy for persons who cannot absorb or metabolize dietary nutrients from food or beverages;
(2) A source of necessary nutrition used due to a medical condition; or
(3) An oral electrolyte solution for infants and children that is formulated to prevent dehydration due to illness.
"Director" means the director of health.
"Distributor" means any person, including a manufacturer or a wholesale dealer, who receives, stores, manufactures, bottles, or distributes bottled sugar-sweetened beverages, syrup, or powder for sale to a retailer doing business in the State whether or not that person is also a retailer as defined in this section.
"Infant formula" means a food that purports to be or is represented for special dietary use solely as a food for infants by reason of its simulation of human milk or its suitability as a complete or partial substitute for human milk.
"Milk substitute without caloric sweetener" means a plant-based beverage in which the principal ingredients by weight are water and grains, nuts, legumes, or seeds. "Milk substitute" includes soy milk, almond milk, rice milk, coconut milk, oat milk, hazelnut milk, and flax milk.
"Milk without added caloric sweetener" means any beverage of which the principal ingredient by weight is natural liquid milk as secreted by an animal, regardless of animal source or butterfat content, or natural milk concentrate and dehydrated natural milk, whether or not reconstituted.
"Non-alcoholic beverage" means any beverage that contains less than one-half of one per cent alcohol per volume.
"Non-caloric sweetener" means any substance that contains fewer than five calories per serving, suitable for human consumption, that humans perceive as sweet, and includes, without limitation, aspartame, saccharin, stevia, and sucralose.
"One hundred per cent fruit juice or vegetable juice" means any liquid consisting of one hundred per cent fruit juice or vegetable juice having no added sugar, corn syrup, or caloric sweetener.
"Person" means any natural person, partnership, cooperative association, limited liability company, corporation, personal representative, receiver, trustee, assignee, or any other legal entity.
"Powder" means any solid mixture of ingredients that contains caloric sweetener, which is intended to be used in making, mixing, or compounding a sugar-sweetened beverage by combining the powder with one or more other ingredients.
"Retailer" means any person who sells or otherwise dispenses in the State a sugar-sweetened beverage to a consumer whether or not that person is also a distributor as defined in this section.
"Sale" or "sell" means the transfer of title or possession for valuable consideration regardless of the manner the transfer is completed.
"Sugar-sweetened beverage" means any non-alcoholic beverage, carbonated or noncarbonated, that is intended for human consumption and contains any added caloric sweetener. Sugar-sweetened beverages does not include:
(1) Beverages consisting of one hundred per cent fruit juice or vegetable juice with no added caloric sweetener;
(2) Milk without added caloric sweetener;
(3) Milk substitute without added caloric sweetener;
(4) Dietary aids;
(5) Infant formula;
(6) Sweetened medication such as cough syrup, liquid pain relievers, fever reducers and similar products; or
(7) Any product commonly used exclusively to mix with alcohol that may exceed five grams or more per serving of caloric sweetener per twelve ounces of fluid that is not a sugar sweetened beverage, including without limitation margarita mix, bloody mary mix, daiquiri mix, or similar products.
"Syrup" means a liquid mixture of ingredients that contains caloric sweetener, which is intended to be used in making, mixing, or compounding a sugar-sweetened beverage by combining the syrup with any one or more other ingredients.
§321-B Registration required. (a) Every distributor shall register with the department on forms to be prescribed, prepared, and furnished by the department.
(b) No retailer may sell at retail, or hold out or display for sale at retail, any sugar-sweetened beverage acquired by the retailer on or after June 30, 2022, unless the sugar-sweetened beverage was acquired by the retailer from a registered distributor in the State.
§321-C Sugar-sweetened beverage fee. (a) Every distributor selling sugar-sweetened beverages in the State shall pay the department a sugar-sweetened beverage fee that is imposed at the following rates:
(1) Two cents per fluid ounce of bottled sugar-sweetened beverages sold or offered for sale to a retailer for sale in the State to a consumer; and
(2) Two cents per fluid ounce of sugar-sweetened beverage that can be produced from syrup or powder, calculated according to the manufacturer's specifications for the use of the syrup or powder sold to a retailer for sale in the State to a consumer.
(b) A distributor shall add the amount of the fee imposed by this section to the price of sugar-sweetened beverages, syrups, and powders sold to a retailer, and the retailer shall pass the amount of the fee through to a consumer as a component of the final retail purchase price. The amount of the fee shall be stated separately on all invoices, signs, sales or delivery slips, bills, and statements that advertise or indicate the price of the beverages, syrups, and powders.
§321-D Exemptions. The following shall be exempt from the fee imposed by this part:
(1) Bottled sugar-sweetened beverages, syrups, and powder sold by a distributor or retailer expressly for resale or consumption outside the State; and
(2) Bottled sugar-sweetened beverages, syrups, and powder sold by a distributor to another distributor who is registered pursuant to section 321-B, if the sales invoice clearly indicates that the sale is exempt. If the sale is to a person who is both a distributor and a retailer, the sale shall also be exempt from the fee and the fee shall be paid when the purchasing distributor who is also a retailer resells the product to a retailer or a consumer. This exemption shall not apply to any other sale to a retailer.
§321-E Payment. (a) Every distributor or retailer liable for the fee imposed by this chapter shall file a form identifying all sales of sugar-sweetened beverages made on a periodic basis as determined by the department and submit payment of the fee to the department. The form shall be prescribed by the department and contain any information that the department deems necessary for the proper administration of the sugar-sweetened beverage fee program.
(b) The revenues from the fee shall be deposited into the healthy ohana special fund.
§321-F Healthy ohana special fund; established. (a) There is established in the state treasury the healthy ohana special fund into which shall be deposited:
(1) All revenues generated from sugar-sweetened beverage fees established under section 321-C;
(2) All revenues collected from penalties pursuant to 321‑M;
(3) All interest and earnings accruing from the investment of moneys in the healthy ohana special fund; and
(4) Appropriations made by the legislature into the fund.
(b) The healthy ohana special fund shall be administered by the department. On a periodic basis as determined by the director of finance, the moneys in the healthy ohana special fund shall be expended or deposited as follows:
(1) per cent shall be expended by the department of health for implementation and evaluation of the sugar-sweetened beverage fee program to address state obesity prevention and oral health promotion services for Hawaii's ohana;
(2) per cent shall be expended by the department of health for the purposes of supporting primary prevention and chronic disease prevention programs and supports; and
(3) per cent shall be deposited into the healthy ohana trust fund established pursuant to section 321-G.
§321-G Healthy ohana trust fund; established. (a) There is established the healthy ohana trust fund as a separate fund of a nonprofit entity having a board of directors and qualifying under section 501(c)(3) of the Internal Revenue Code of 1986, as amended, into which shall be deposited moneys received as provided under section 321-F(b)(3). The director, with the concurrence of the governor, shall select, pursuant to chapter 103D, the entity based upon its proven record of accomplishment in administering a similar trust fund. The director, with the concurrence of the governor and in their sole discretion, may rescind the selection of the entity that administers the trust fund. If the selection of the entity is rescinded, moneys in the healthy ohana trust fund shall revert back to the State and shall be deemed to be trust moneys.
(b) The department of budget and finance shall have oversight authority over the healthy ohana trust fund and may make periodic financial audits of the healthy ohana trust fund; provided that the director of finance may contract with a certified public accountancy firm to conduct the financial audits.
(c) The entity selected under subsection (a), for each fiscal year, may expend up to ten per cent of the total market value of the healthy ohana trust fund on the preceding June 30, for the prevention and control of obesity and chronic disease on behalf of families in Hawaii. These activities may include comprehensive programs and methods to support access to healthy food, active living and healthy eating, school and work based health, nutrition and physical education, oral health, programs supporting farm-to-school, locally grown, and sustainable agriculture practices, school gardens, and obesity and chronic disease prevention.
(d) The healthy ohana trust fund may receive appropriations, contributions, grants, endowments, or gifts in cash or otherwise from any source, including the State, corporations or other businesses, foundations, government, individuals, and other interested parties; provided that any appropriations made by the legislature to the healthy ohana trust fund shall not supplant or diminish the funding of existing chronic disease prevention programs or any health-related programs funded in whole or in part by the State.
(e) The assets of the healthy ohana trust fund shall consist of:
(1) Moneys deposited pursuant to section 321-F(b)(3);
(2) Moneys appropriated to the healthy ohana trust fund by the state, county, or federal government;
(3) Private contributions of cash or property; and
(4) Income and capital gains earned by the healthy ohana trust fund.
(f) The aggregate principal sum deposited in the healthy ohana trust fund shall be invested by the entity selected under subsection (a) in a manner intended to maximize the rate of return on investment of the healthy ohana trust fund consistent with the objective of preserving the healthy ohana trust fund's principal.
(g) If the entity selected under subsection (a) is dissolved, the director, with the concurrence of the governor, shall select a successor entity pursuant to chapter 103D. If the healthy ohana trust fund is terminated, the moneys remaining in the healthy ohana trust fund shall revert back to the State and shall be deemed to be trust moneys.
(h) The healthy ohana advisory committee established pursuant to section 321-S shall provide advice to the department regarding the administration of the healthy ohana trust fund.
§321-H Records to be kept. Every distributor and retailer, in addition to any requirements under chapter 321-I, shall prepare or maintain documents involving sugar-sweetened beverages, syrups, and powders, as required by the department.
§321-I Audit authority. The records of the distributor and retailer shall be made available, upon request, for inspection by the department, a duly authorized agent of the department, or the auditor. Any proprietary information obtained by them shall be kept confidential and shall not be disclosed to any other person, except:
(1) As may be reasonably required in an administrative or judicial proceeding to enforce any provision of this chapter or any rule adopted pursuant to this chapter; or
(2) Under an order issued by a court or administrative agency hearings officer.
§321-J Contract for administrative services. The department may contract the services of a third party to administer the sugar-sweetened beverage fee program.
§321-K Management and financial audit. The auditor shall conduct a management and financial audit of the sugar-sweetened beverage fee program on fiscal year 2022 to 2023 and fiscal year 2023 to 2024, and for each fiscal year thereafter ending in an odd-numbered year. The auditor shall submit the audit report to the legislature and the department no later than twenty days prior to the convening of the next regular session. The auditor may contract the audit services of a third party to conduct the audit.
§321-L Administration by director; rules. The department shall adopt rules pursuant to chapter 91 to effectuate this part.
§321-M Civil penalties. (a) Any person subject to this part who:
(1) Fails to pay the entire fee imposed by this part by the date that payment is due;
(2) Fails to register as a distributor as required by section 321-B;
(3) Fails to file a form that identifies all sales of sugar-sweetened beverages during the time specified by the department as required by section 321-E;
(4) Fails to make payment to the department at the time specified by the department as required by section 321-E;
(5) Fails to prepare or maintain records required by this part; or
(6) Violates any other provision of this part,
shall be liable for the amount of the fee that is due, a penalty equal to fifty percent of the fee due, and administrative fees and costs incurred by the department in enforcing its claims.
(b) The director may determine the amount of the fee and the penalty due under subsection (a) in the event of any nonpayment or underpayment and demand payment of all sugar-sweetened beverage fees and penalties. Interest shall accrue on nonpayment or underpayment of the fee at a rate of eight per cent per year from the date the fee was due, until paid. The director shall have the authority to revoke the distributor registration as a penalty under subsection (a).
(c) Any criminal penalties for a violation of this part shall not be deemed to preclude the State from recovering additional civil penalties.
§321-N Enforcement. (a) If the director determines that the sugar-sweetened beverage fee, penalties, or interest are due, the director shall notify the person of the amount by certified mail.
(b) Any notice issued under subsection (a) shall become final, unless not later than thirty days after the notice is mailed, the person named therein requests in writing a hearing before the director. Whenever a hearing is requested, the amount owed shall become payable only upon completion of all review proceedings and the issuance of a final order confirming the fee, interest, and penalty in whole or in part. Upon request for a hearing, the director shall require the requestor to appear before the director for a hearing at the time and place specified in a notice.
(c) Any hearing conducted under this section shall be conducted as a contested case under chapter 91. If, after a hearing held pursuant to this section, the director finds that all or a portion of the fee, interest, or penalty is due, the director shall take action to collect the amount due as provided by subsection (d).
(d) If the amount of any fee, interest, or penalty is not paid to the department within thirty days after it becomes due and payable, the director may institute a civil action in the name of the State to collect the fee, interest, and penalty. In any proceeding to collect the fee, interest, or penalty imposed, the director need only show that:
(1) Notice was given;
(2) A hearing was held, or the time granted for requesting a hearing expired without a request for a hearing;
(3) The fee, interest, or penalty was imposed; and
(4) The fee, interest, or penalty remains unpaid.
(e) In connection with any hearing held pursuant to this section, the director shall have the power to subpoena the attendance of witnesses and the production of evidence on behalf of all parties.
§321-O Distribution of revenues. One hundred per cent of revenues collected from the sugar-sweetened beverage fee, interest payments, and penalty payments imposed pursuant to this part shall be paid to the healthy ohana special fund, established in section 321-F.
§321-P Evaluation. The department shall develop criteria and components for an independent evaluation to assess the impact of the sugar-sweetened beverage fee on consumption of products subject to the fee. The evaluation shall seek to determine the impact of the fee on sugar-sweetened beverage prices, consumer purchasing behavior, and health outcomes. The reasonable costs of evaluation shall be paid from the healthy ohana special fund and be considered an implementation cost of this part.
§321-Q Costs. The costs to implement this part may include:
(1) Administrative, contractual, audit, independent evaluation, and compliance activities associated with collection and payment of the sugar-sweetened beverage fee program;
(2) Personnel to implement the sugar-sweetened beverage fee program;
(3) Communication and education activities to inform the public and distributors about the sugar-sweetened beverage fee; and
(4) Associated office expenses.
§321-R Annual reports. The department shall provide annual reports on the sugar-sweetened beverage fee program to the legislature and the governor no later than twenty days prior to the convening of each regular session for the period beginning when the program is in effect following the adoption of rules pursuant to section 321-L. The reports shall address:
(1) Measures of effectiveness;
(2) Amounts of revenues collected in the prior fiscal year;
(3) Distributions and expenditures from the healthy ohana special fund in the prior fiscal year; and
(4) The status of program activities.
If administration of the program is contracted to a third party pursuant to section 321-J, a copy of the contract shall be appended to the next applicable report and the contractor shall comply with the reporting requirements.
§321-S Healthy ohana advisory committee. (a) There is established a healthy ohana trust fund advisory committee within the department for administrative purposes.
(b) Members of the committee shall:
(1) Be appointed by the director, and shall serve at the director's pleasure;
(2) Have background and expertise in chronic disease prevention; and
(3) Serve at the director's pleasure.
(c) The healthy ohana advisory committee shall advise the department on the administration of the healthy ohana trust fund.
(d) The healthy ohana advisory committee, in collaboration with the department, shall develop a strategic plan for chronic disease prevention, including:
(1) Developing and implementing effective and cost-efficient policies and programs, including health promotion and disease prevention;
(2) Developing adequate standards and benchmarks by which measures of chronic disease prevention policies and programs may be appropriately evaluated; and
(3) Assessing the effectiveness of policies and programs engaged in chronic disease prevention.
(e) A simple majority of the committee members shall constitute quorum."
SECTION 3. No later than June 30, 2022, the department shall adopt interim rules without regard to chapters 91 and 201M, Hawaii Revised Statutes, to implement the sugar-sweetened beverage fee program. The interim rules shall remain in effect until January 1, 2024, or rules are adopted pursuant to section 321-L, Hawaii Revised Statutes, whichever occurs sooner.
SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $250,000 or so much thereof necessary for fiscal year 2021-2022, and the same sum or so much thereof as may be necessary for fiscal year 2022-2023, to be deposited into the healthy ohana special fund established pursuant to section 321-F, Hawaii Revised Statutes.
SECTION 5. There is appropriated out of the healthy ohana special fund the sum of $250,000 or so much thereof as may be necessary for fiscal year 2021-2022 and the same sum or so much thereof as may be necessary for fiscal year 2022-2023 to carry out the purposes of this Act, including the establishment, hiring, and filling of positions and contractors to carry out the purposes set forth in section 321-F, Hawaii Revised Statutes.
The sums appropriated shall be expended by the department of health for the purpose of this Act.
SECTION 6. Not later than July 1, 2023, the department of health shall establish a repayment plan and schedule to repay the general fund for the sums deposited into the healthy ohana special fund established pursuant to section 321-F, Hawaii Revised Statutes. The department of health shall use only moneys from the healthy ohana special fund to repay the general fund.
SECTION 7. Not later than March 15, 2022, the director of health, or the director's designee, shall submit a report and provide an informational briefing to the legislature concerning the progress of implementing the provisions in this Act, including the status of rulemaking by the department of health pertaining to the sugar-sweetened beverage fee program.
SECTION 8. For the purposes of effectuating this Act, the personnel hired and the contracts entered into by the department of health, pursuant to this Act, shall be exempt from chapter 76, Hawaii Revised Statutes, for a period beginning on July 1, 2021, and ending on June 30, 2023; provided that:
(1) All personnel actions taken pursuant to this Act by the department of health after June 30, 2023, shall be subject to chapter 76, Hawaii Revised Statutes, as appropriate; and
(2) Any employee hired by the department of health to effectuate this Act, who occupies a position exempt from civil service on July 1, 2023, shall:
(A) Be appointed to a civil service position; and
(B) Not suffer any loss of prior service credit, vacation or sick leave credits previously earned or other employee benefits or privileges;
provided that the employee possesses the minimum qualifications and public employment requirements for the class or position to which appointed; provided further that subsequent changes in status shall be made pursuant to applicable civil service and compensation laws.
SECTION 9. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.
SECTION 10. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating and referring to the new sections in this Act.
SECTION 11. This Act shall take effect on July 1, 2021.
Healthy Ohana; Sugar-Sweetened Beverage Fee Program; DOH; Appropriations
Imposes a fee for selling sugar-sweetened beverages at the distributor level to be collected by the Department of Health. Establishes a special fund into which revenues are deposited. Establishes a trust fund in the private sector to receive revenues from the special fund. Establishes a healthy ohana committee to advise the department on the administration of the trust fund. Makes appropriations.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.