With just minutes to spare before an internal deadline, state House and Senate negotiators Friday reluctantly agreed to allow private redevelopment projects on up to three public-school sites over the next five years.
The 21st-century schools initiative was among Gov. Neil Abercrombie’s priorities this session, but lawmakers, still sensitive about the backlash over the failed Public Land Development Corp., are afraid to rush into any new public-private partnerships.
Lawmakers added explicit language to the 21st-century schools bill — up for final votes next week — that redevelopment projects would not be exempt from land-use regulations. The language was meant to appease the Honolulu City Council and environmental activists who have claimed that the concept, which is intended to generate revenue to retrofit aging public schools, is too close to the PLDC.
"We want to recognize that this needs to be something that the community accepts, the community feels comfortable with, because we definitely know that we’ve got to re-earn the trust when it comes to land development, especially in the area of public lands," said Sen. Jill Tokuda (D, Kailua-Kaneohe), the lead Senate negotiator on the bill.
While the 21st-century schools bill barely survived after a 3-2 vote among Senate negotiators, House negotiators rejected a bill that would have created a new Public-Private Partnership Authority that would have overseen a potential film production studio on Maui, a main street redevelopment project in Wahiawa and a county-initiated project. The new authority would not have had any regulatory exemptions, like the PLDC did, but it had been tagged by critics as a PLDC clone.
House and Senate leaders strictly enforced an internal deadline of 6 p.m. for conference committee negotiations, which in previous years had routinely been extended until midnight and, occasionally, the wee hours of the morning.
Lawmakers failed to reach a compromise on a bill that would have reconfigured a solar tax credit that has proved costly to the state. The lack of an agreement means that temporary administrative rules imposed by the state Department of Taxation in January to contain the tax credit will stay in place. Environmentalists have sued the state to try to overturn the rules.
"I think it’s really unfortunate that there wasn’t enough time to finish out the bill. We were really close," said Rep. Chris Lee (D, Kailua-Lanikai-Waimanalo), the lead House negotiator on the bill, who vowed to try again next session.
House and Senate leaders also did not find room for income tax relief, but lawmakers did agree on several tax incentives that could help stimulate the economy.
A film production tax credit would increase to 20 percent on Oahu, up from 15 percent, and 25 percent on the neighbor islands, up from 20 percent. A cap on the tax credit per production would be raised to $15 million, up from $8 million. Lawmakers also agreed to extend the tax credit to 2019.
"This is a pretty big message to Hollywood that Hawaii is open for business when it comes to film and movies," said Rep. Angus McKelvey (D, Lahaina-Kaanapali-Honokohau).
Lawmakers also chose to restore a high-technology research and development tax credit, hoping to encourage job creation in science, technology, engineering and mathematics.
Worried about the impact a cap on itemized deductions for higher-income taxpayers has had on charitable giving, lawmakers agreed to carve out an exception for charitable donations. Lawmakers had imposed the cap on itemized deductions in 2011 to help contain a projected budget deficit.
Eager to replenish the state’s emergency reserves that had been depleted during the recession, lawmakers would pump $50 million into the rainy-day fund and $50 million into the hurricane relief fund in fiscal year 2014. Credit rating agencies look at the health of a state’s cash reserves when setting bond ratings.
In what could be a significant step toward addressing the state’s $16 billion unfunded liability in the public-worker health care fund, House and Senate negotiators agreed on a bill that would establish an annual payment schedule for the state and counties to get to $500 million a year — the amount budget analysts believe is necessary — by fiscal year 2018. Lawmakers have already put aside $100 million in fiscal year 2014 and $117 million in fiscal year 2015 in the state budget.
Sen. David Ige (D, Pearl Harbor-Pearl City-Aiea), the lead Senate negotiator on the unfunded liability issue, said Hawaii could be among the first states to commit to a firm payment schedule. After fiscal year 2018, under the agreement, the state would have to use general excise tax revenue and the counties would have to use hotel-room tax revenue to make up the difference if they fall short of the annual payments.
"Every state in the country is wrestling with the unfunded liability. Nobody has found a solution," Ige said. "I’m trying to make sure that the annual required contribution is a priority off the top. If you don’t make that contribution, then we’re going to take it anyway."
Negotiators also agreed on a bill that would create a new captive insurance company that would manage the administration and financing of the public-worker health care fund. Many lawmakers remain skeptical about the idea, but Rep. Romy Cachola (D, Sand Island-Kalihi-Airport), the lead House negotiator, said he believes a captive insurance company would establish a better administrative structure, potentially reduce operating costs and complement the annual payment schedule.
"The way I look at it is that you should at least have something to complement what they’re doing to save taxpayers money," he said.
Ending a few days of behind-the-scenes drama, lawmakers deferred a bill that had been drafted for the Native Hawaiian Roll Commission but was radically altered to also include a regulatory structure for geothermal development. Several sources said Sen. Malama Solomon (D, Kaupulehu-Waimea-North Hilo) had privately tried to hold other bills as leverage unless the geothermal language advanced, but House negotiators refused to go along.
Good-government advocates had cited the bill as an example of the kind of "Frankenstein" bills that undermine public confidence in the legislative process.
After a series of intense exchanges between Rep. Della Au Belatti (D, Moiliili-Makiki-Tantalus) and Sen. Josh Green (D, Naalehu-Kailua-Kona), and the intervention by House Majority Leader Scott Saiki (D, Downtown-Kakaako-McCully), House and Senate negotiators were able to agree on legislation that would transfer the medical marijuana program to the state Department of Health from the state Department of Public Safety by January 2015. The legislation would also increase the amount of marijuana patients can possess to 4 ounces — up from 3 ounces — but would require patients to obtain medical marijuana certificates from their primary care physicians, rather than any physician.
Drug policy advocates have long wanted the Department of Health to oversee the medical marijuana program, taking it out from under the law enforcement umbrella.
