Answers on spending backlog sought

Gov. David Ige’s top staff was warned Tuesday that lawmakers expect them to find out why state government has been so slow to spend federal funds, and find a way to fix the problem pronto.

House Finance Chairwoman Sylvia Luke said the state departments of Health, Transportation and Hawaiian Home Lands are “terrible at utilizing federal funds.”

“What state agency cannot spend money? That just completely baffles me,” Luke said during a briefing for lawmakers on the budget for the Governor’s Office.

Ige appointed Elizabeth Kim as his special adviser on federal funds maximization, and members of the House and Senate money committees wanted to know what Kim is doing to get state departments to move more quickly to put federal funds to use in Hawaii for transportation, housing and clean-water programs.

Federal agencies are asking state departments why they are not spending the federal funds they have been given, and “that’s just clearly embarrassing,” said Luke (D, Punchbowl-Pauoa-Nuuanu).

Luke aimed special criticism at the Department of Hawaiian Home Lands, which she said fumbled the effort to spend $10 million a year in federal funding under the Native American Housing Assistance and Self Determination Act. That funding for housing for Native Hawaiians had been arranged by the late U.S. Sen. Daniel Inouye.

“NAHASDA money was no strings attached, $10 million they can do whatever they want, and the federal government pretty much told us they could have spent it on staff, they could have bought equipment, they could have done anything,” Luke said. “All that the federal government wanted us to do was was to spend the money.”

“But what does DHHL do? They don’t spend the money, and they put it in some kind of a loan program or investment. Why are we investing when there’s people on the wait list?” Luke asked, referring to the list of Native Hawaiians who are waiting to receive land under the department’s homesteading program.

Senate Ways and Means Chairwoman Jill Tokuda (D, Kailua-Kaneohe) said it is “absolutely unacceptable, the hundreds of millions of dollars we are leaving on the table, and the fact that there are unmet needs out there.”

Kim said she has been meeting with officials in all three departments, and said she feels comfortable working with transportation and health officials along with other agencies to try to “streamline” processes to address the backlog.

However, Kim said the problems in DHHL “seem to be a little bit more complicated” and that “in all honesty, Rep. Luke, I haven’t been able to fully unwind what some of these issues are.”

Luke said Hawaiian Homes has already lost a year of federal funding because it was too slow to use the federal funds, and said she would rather the department start handing out cash to people on the wait list “because clearly they cannot spend anything.”

“It is your responsibility to make sure that we continue to get those funds, and you crack down,” Luke told Kim. “You need to be the one to be in their face and say, ‘What are you doing?’”

Senate Ways and Means Committee members last year heard testimony on several bottlenecks in the state bureaucracy that delayed the use of federal funding for construction of Hawaii highways, housing projects and drinking-water infrastructure.

By far the largest of the backlogs in unspent federal money involves highways. The Federal Highway Administration has warned the state Department of Transportation that Hawaii could lose out on federal funding unless the state processes its highway projects more quickly and reduces the backlog of unspent federal transportation money.

The highways funding backlog peaked in 2010 when the federal government had earmarked $940 million for Hawaii in highway projects, but the money remained unspent because the state was unable to move the projects forward.

By last October the state had reduced that to $656.5 million. Hawaii receives about $160 million in new federal highway funding each year, and the federal government wants the backlog reduced to no more than $450 million over the next three years.

DHHL had a $75 million backlog in 2012, and DHHL officials say they have reduced that amount by spending money on infrastructure to prepare for the construction of homes in Kealakehe in North Kona on Hawaii island, and in Kapolei. Money from the federal Department of Housing and Urban Development will also be used to install infrastructure for homes in Kula, Maui.

However, the backlog in unspent funds prompted HUD to suspend the flow of additional housing funding into Hawaii under the Native Hawaiian Housing Block Grant program.

The state had been receiving $13 million a year in federal funding under the Native American Housing Assistance and Self Determination Act of 1996 for housing for Native Hawaiians on Hawaiian homelands.

That funding was reduced to $9 million in federal fiscal year 2015 and was wiped out entirely in the current fiscal year, according to records provided by the U.S. Department of Housing and Urban Development.

Tokuda has said she was told HUD interrupted the funding for the block grant program because the state wasn’t able to spend down the federal funds that have already been set aside for Hawaii.

The federal government also announced last year it is withholding $8 million that was earmarked for repairing Hawaii’s drinking-water infrastructure because the Hawaii Department of Health has been too slow to spend federal funds, according to the U.S. Environmental Protection Agency.

The annual allotment is usually deposited into the Health Department’s Drinking Water State Revolving Fund and lent out to the counties to fix water mains and leaking pipes or to clean contaminants from drinking water.

Kim said she understands the urgency of the problem, but she only recently returned from the mainland and has spent her first year learning the processes and the issues. “I kind of wanted to start on more cooperative footing and not really crack the whip right away,” she said.

Luke, meanwhile, said the problem is not limited to just the three departments.

“There are so many types of federal funds available, and we have been frustrated, especially with the Department of Education, not being able to grab down the impact fees,” Luke said, referring to federal money that is available to support local schools that military dependents attend.

Luke argued that when Mark Takai was a state lawmaker, he was more effective than the DOE at drawing down federal impact funding. Takai has since been elected to the U.S. House.

“The expectation of this office was to maximize the federal money that is available for the state of Hawaii to use,” she said. “If Mark Takai can pull down this money, then you can, too. And the state of Hawaii can, too, and the Department of Education can, too.”