Isle voters likely to get their say on a property tax for schools

By Nanea Kalani

The Honolulu Star-Advertiser

April 19, 2018

Following a two-year lobbying effort by the Hawaii State Teachers Association, a proposed constitutional amendment asking voters if the state should be allowed to tax investment properties to benefit public schools is all but set for the November ballot.

If ultimately approved, Hawaii would join the 49 other states in using property taxes to finance public education. Hawaii’s statewide school district is state-funded primarily from the general fund, which is filled by revenue mostly from general excise and personal income taxes.

Senate Bill 2922 calls for a constitutional amendment to authorize the state to establish an unspecified surcharge on “investment real property … to support public education.” An amendment is needed because the state Constitution gives counties the exclusive power to levy property taxes.

Specific tax rates and subject properties would have to be decided by lawmakers if voters approve the amendment.

An earlier Senate draft of the bill would have specified that the surcharge apply only to second homes — those that are nonowner-occupied — valued at $1 million or more. That requirement was removed by House lawmakers, who contended those details should not be incorporated into the state Constitution.

Lawmakers also removed language prescribing exactly how the collected revenue could be spent.

An earlier version of the bill would have imposed a surcharge on visitor accommodations to fund public schools, which the hotel and tourism industry opposed. That provision also was removed by House lawmakers, who said the state already has authority over the transient accommodations tax and how it is spent.

Under the final version of the bill, the ballot question would be: “Shall the Legislature be authorized to establish, as provided by law, a surcharge on investment real property to be used to support public education?”

The Senate previously passed its version of the bill on a 24-1 vote and sent it over to the House for consideration. The House made changes and approved the revised bill by a 50-0 vote before returning it to the Senate.

The Senate initially disagreed with the changes, setting the bill up for what’s known as conference committee, where House and Senate negotiators hash out differences. But the House refused to appoint negotiators, signaling it would not reconsider its amendments.

Senate Education Chairwoman Michelle Kidani on Wednesday asked her Senate colleagues to reconsider and agree to the House draft. A final floor vote is set for Monday and the bill is expected to easily pass, allowing the question to proceed to the general election ballot.

The governor does not have the power to veto proposed constitutional amendments.

“I’m just totally stoked that this is going to happen,” Kidani (D, Mililani-¬Waikele-Kunia) said. “We would have preferred it if the language that the Senate had had stayed in so that homeowners and voters are well aware that it’s not the intent of the Senate to tax homeowner-occupants but to look at high-value residential properties being rented out and owned by non-residents.”

Sen. Gil Riviere, who cast the lone “no” vote, called the bill bad policy with “potentially hazardous side effects.”

“I am concerned about education and making sure it’s adequately funded and properly funded. And this is a creative idea, but it’s bad policy and this is not the solution,” he said, noting that his wife and sister are teachers.

Riviere (D, Heeia-Laie-¬Waialua) said he believes the state would be tempted to tap into the surcharge for other uses. He added that any property tax increase is likely to be passed on to renters.

“There is no pot of money safe in this Legislature,” he said. “Money is very fungible, it doesn’t stay where you want it to be. We create special funds, and then we raid the funds.”

Corey Rosenlee, president of the 13,500-member Hawaii State Teachers Association, said Hawaii is the only state that doesn’t use property taxes to pay for schools.

“And there are 36 other states that use a state surcharge on top of property taxes for schools,” Rosenlee said. “One of the things we cannot lose in this debate is the why — we’ve got to fund our public schools. Hawaii spends the least percentage of both state and local revenues toward education in the entire country.”

House Speaker Scott Saiki said Wednesday that the ballot question “gives the public an opportunity to decide how far it wants to go in terms of funding public education.”

“In prior years the premise has always been that the public supports increased funding for schools, and that has shown up in public polls that have been taken over the years,” Saiki said. This question will give the public an opportunity to weigh in on that question, he said.