Voters will decide this fall on a tax for education

Hawaii voters will decide in November whether they want to tax investment property to help pay for public education after a proposed constitutional amendment sailed through the Senate in a 23-1 vote Monday.

“We really believe this bill is a win-win,” Corey Rosenlee, president of the Hawaii State Teachers Association, said after the vote. “For years we’ve said education is a priority. But this will be the first time that the people of Hawaii will get a chance to properly fund their keiki. ”

Senate Bill 2922, SD1, HD1 previously passed the House 50-0. Constitutional amendments do not need the governor’s approval, so the proposal will go directly to voters in the Nov. 6 election.

Currently, public education in Hawaii is funded by the state, which relies on the general excise tax, income taxes and the transient accommodations tax. The 49 other states rely largely on property taxes to fund public schools.

The proposed property tax surcharge for Hawaii is intended to supplement the state’s base budget for education. Hawaii’s Constitution now gives the counties the exclusive power to levy property taxes. The amendment would authorize the state to establish “a surcharge on investment real property to be used to support public education.”

“It really is the voters’ choice, and that’s why we’re putting it on the ballot,” said Education Chairwoman Michelle Kidani, a champion of the bill.

If voters approve the amendment, the issue will go back to the Legislature next year to set the parameters of the tax, including which investment properties will be taxed and at what levels. Kidani stressed that it is aimed at high-priced investment properties.

“The public should be assured that the Senate has no intention of taxing the homes you live in, that is homes for which resident owners receive a homeowner’s exemption,” she said. “The public should further be assured that the Senate has no intention of approving any surcharge on investment properties valued at less than $1 million, and further, no consideration has ever been given to a surcharge on commercial properties.”

The state Department of Business and Economic Development &Tourism issued a report in October that found that combined spending by Hawaii’s state and local governments on education, as a fraction of overall current operations spending, was the lowest of all the states.

Education accounted for 27 percent of current operations spending by state and local governments in Hawaii, as compared with 37 percent for the national average in 2014, according to the report, “An Analysis of Real Property Tax in Hawaii.”

“We’ve been underfunding the education system for a really long time, and this is one step to getting more equitable between public schools, charter schools and private schools,” said John Fitzpatrick, a science teacher at Kihei Charter School. HSTA represents teachers in all public schools in Hawaii, including charters.

State Sen. Gil Riviere (D, Heeia-­Laie-Waialua) was the only dissenting voice in the Senate. He called the proposed constitutional amendment “a very creative idea” but decried it as “bad policy” that furthers the tug of war between the state and counties over funding.

“The property tax is something that we have specifically given to the counties,” he said. Allowing the state to enact a property tax, he said, “inhibit the counties’ ability to raise funds as they see fit and as they need” for county responsibilities, including fire, police, parks and repaving city roads.

Riviere warned that the surcharge could ultimately hurt renters if the tax is passed on to them by property owners.

State Sen. Maile Shimabukuro (D, Kalaeloa-­Waianae-Makaha) countered that most renters don’t live in million-dollar homes, at least in her district.

“In my district the vast majority of rentals that are occupied by working- class are definitely worth less than a million,” Shimabukuro said. “So I think if we craft it to specifically target luxury homes, maybe they need to be $2 million or more and maybe exempt multifamily homes. … I think then we would hopefully avoid hurting the renters.”