The teachers union has again set its sights on generating more taxes to increase funding for Hawaii public schools. This time, it’s eyeing residential investment properties and visitor accommodations.
HOW IT BREAKS DOWN
The teachers union wants voters to be able to consider allowing the state to tax residential investment properties and visitor accommodations to increase funding for public schools. The surcharges would raise an estimated $500 million per year, according to the Hawaii State Teachers Association.
Property tax surcharge per $1,000 of total value of investment properties:
>> Under $500,000: $3.50
>> $500,000 to under $750,000: $4.50
>> $750,000 to under $1 million: $5.50
>> $1 million to under $2 million: $6.50
>> $2 million or more: $7.50
Surcharge on all visitor accommodations:
>> $3 per day for each visitor accommodation offered for less than $150 per day
>> $5 per day for each visitor accommodation offered for $150 or more per day
The Hawaii State Teachers Association has drafted a constitutional amendment that, if approved by voters, would allow the state to collect a property tax surcharge on residential investment properties and a daily surcharge on all visitor accommodations at hotels, timeshares and vacation rentals. The money would be set aside in a special fund for education.
An amendment is needed because the state Constitution exclusively authorizes the counties to levy property taxes.
If lawmakers agree to place the amendment on the 2018 ballot, it would ask: “Shall the Legislature fund a quality public education for all of Hawaii’s children, including the recruitment and retention of teachers; lower class sizes; special education programming; and career and technical education, art, music, Hawaiian studies, and Hawaiian language instruction by establishing a surcharge on residential investment property and visitor accommodations?”
The union, which represents 13,500 members, says the proposed surcharges together would raise an estimated $500 million a year that it wants to make available for four priorities related to hiring and retaining teachers.
“With that $500 million we think we can start solving the systemic problems that we have in Hawaii schools,” HSTA President Corey Rosenlee said in an interview. “At the core of it, as long as we have a teacher shortage crisis and we don’t have a surplus of teachers, it’s going to make it very difficult to attack a lot of those other problems that are affecting education.”
Rosenlee said the approach received broad support in public polling by the union.
‘Going after speculators’
The surcharge on residential investment properties — homes or condominiums that do not serve as a primary residence — would be tiered based on a property’s assessed value, according to companion legislation to the proposed constitutional amendment.
“If you have a home and that is your one home, you will not have to pay this tax,” Rosenlee said.
Owners of investment properties valued at less than $500,000 would be taxed $3.50 for every $1,000 of their total property value. The rate would be $4.50 for every $1,000 for investment properties valued at between $500,000 and $750,000; $5.50 for properties valued at between $750,000 and $1 million; $6.50 for properties valued at between $1 million and $2 million; and $7.50 for homes valued at $2 million or more.
Under the proposed rates, the annual surcharge would amount to $3,150 for an investment home valued at $700,000, and $6,500 for a property valued at $1 million. The proposal includes more than a dozen exemptions for investment properties, including affordable housing that’s rented for less than $1,500 a month; properties rented to low-income seniors or disabled veterans; Hawaiian homesteads; and properties used exclusively for charitable purposes.
“Our basic philosophy behind this is: It’s a way to make sure that we fund our schools, make sure that we have quality teachers in the classroom, and at the same time, going after speculators that have made affordable housing in Hawaii almost impossible,” Rosenlee said.
Hawaii, which is the only statewide school district in the country, is the only state that does not use property taxes to finance education. Isle schools are state-funded primarily from the general fund, which is filled by revenue from the general excise tax, personal income tax and others.
On the mainland, where property taxes are often the main source of funding for schools, a deep divide exists between schools in rural or economically depressed areas and schools in wealthy neighborhoods with higher property values.
A model for the nation
Rosenlee said the union’s approach could serve as a model for other school districts because the revenue collected would be spent across all schools.
“So Kalani wouldn’t get more than Nanakuli,” he said, referring to an East Honolulu high school where the surrounding median household income is $102,844 versus a West Oahu school where the median household income is $68,716 and 76 percent of students qualify for free or reduced-price meals.
“We really could be a model for the nation in that we would be a system that properly funds its schools at an equal rate,” Rosenlee said. “That doesn’t happen anywhere else.”
The visitor accommodations surcharge, meanwhile, would tack on a daily $3 fee for transient accommodations offered for less than $150 per day. The fee would increase to $5 a day for accommodations offered for $150 or more per day. A week-long stay at a $500 per night hotel, for example, would incur a $35 charge.
The daily fee would apply to all visitor accommodations subject to the state’s transient accommodations tax — those offered for less than 180 consecutive days.
Inadequate funding
Although the state Department of Education has one of the largest operating budgets among state departments, with about $1.6 billion allocated from the general fund this year, Rosenlee says schools here are inadequately funded.
Nationally, state averages for per-pupil spending on instruction and support services at public schools ranged from a high of $20,610 in New York to a low of $6,500 in Utah during fiscal 2014, the most recent Census data Opens in a new tab show. Hawaii’s spending was at $12,458 that year, above the national average for states of $11,009.
When broken down to the school district level, however, Hawaii — the 10th largest district in the nation — fares worse. An analysis of per-pupil expenditures among the nation’s largest school districts ranked Hawaii 227th for per-pupil funding.
Last legislative session, the union was unsuccessful in its effort to raise the general excise tax to create a dedicated funding stream for public schools. Rosenlee said that by putting the issue to voters through a constitutional amendment, lawmakers would not be put in the position of voting for a tax increase.
Up to the voters
The heads of the education committees in the state House and Senate say they plan to give the proposals an initial public hearing.
“First and foremost, this bill allows the voters to decide. It has to go on the ballot, and it’s only if the voters approve, it would pass,” said Sen. Michelle Kidani, chairwoman of the Senate Education Committee. “We always say that children are our future, that it’s important to educate our children. So this is a time when we would leave it up to the voters. Is it important enough to them to do this?”
She added that providing all students with a high-quality education will require increased funding. “We can’t do that if we don’t have the funding that it takes and if we can’t attract the best teachers,” she said.
Rep. Roy Takumi, chairman of the House Education Committee, said he’s in favor of increasing the Department of Education’s budget but isn’t convinced this is the best route.
“I’m not opposed to it. It’s an intriguing idea, but there are far more questions than there are answers at this point,” he said.
For one, he believes it could “flip collective bargaining on its head” by allowing one public worker union to have a special pot of funds from which it could negotiate for pay raises.
