HIDOE officials grilled over plan to relinquish funds for 150+ school projects

The state schools superintendent admitted to lawmakers Wednesday that he didn’t know until late November about his own department’s plan to allow $465 million in school construction funds to lapse, bringing more than 150 projects to a halt, even though officials from his department had been working on the proposal since March.

Members of the state Senate Ways and Means Committee grilled Schools Superintendent Keith Hayashi and Deputy Superintendent Curt Otaguro for nearly an hour at a briefing Wednesday. They discussed school construction funds that HIDOE wants to allow to lapse before they expire on June 30. The move would force projects already on the books for years, such as the construction of new classrooms, libraries, athletic facilities and more, to stop and go through the lengthy appropriations process again.

The prospect prompted Senate President Ron Kouchi to stop in and address the department heads. In a rare appearance at the Senate committee briefing, he said, “There are commitments that were made to our communities and people were expecting these projects.

“I’m a little troubled that if this conversation had been going on since March, but the (Senate) Ways and Means (committee), (the House) Finance (committee), the former CIP (capital improvement projects or construction funding) chair (former state Sen. Gil Keith-Agaran), nobody was involved in these conversations so we were prepared,” Kouchi told Hayashi and State Budget Director Luis Salaveria.

“There was just a lack of any information, heads-up, or awareness of what was happening,” Kouchi added.

“It would have been helpful to have been part of the conversation. I think that is what everybody around this table is really saying,” he said.

Hayashi told senators, “The DOE has recommended lapsing $465 million in CIP (construction funding) money or 47% of the total allocation for the biennium 21–23 out of $990 million.

“In determining what to lapse, we have prioritized projects that involved ADA (the federal Americans with Disabilities Act), or Title IX programs (gender equity requirements), because lapsing those funds would have jeopardized federal funding,” Hayashi said.

HIDOE also prioritized projects that already had their building permits or were close to being permitted, he said.

“It’s very unfortunate that we have impacted a majority of our schools, if not all of our schools statewide,” Hayashi added.

HIDOE first notified the state Department of Budget and Finance in mid-March of this year that there was a large backlog of education construction projects “and the possibility that a significant portion of these projects could lapse,” according to a timeline provided to senators by state budget officials.

Here is an exchange between Senate Ways and Means Chair Donovan Dela Cruz and Senate Education Vice Chair Donna Mercado Kim as they questioned Hayashi and Otaguro:

Kim: How long was that list (of school projects whose funding will lapse) being worked on prior to you seeing it?
Hayashi: My understanding is sometime in March was the initial meeting (between HIDOE and budget officials).
Kim: Never before November did you want to see that list and make sure what was going on, as the superintendent?
Hayashi: I wanted to see the list, yes.
Kim: But what? You’re the superintendent. So you never even saw the list prior to November. You didn’t ask? You weren’t curious?
Hayashi: I wasn’t aware, senator, that there were discussions going on relating to the list.
Kim: So you didn’t know in March that there were discussions going on?
Hayashi: No.
Kim: How come? How can discussions take place when you don’t even know what’s taking place on such important projects?
Otaguro: The original intent was a little different. But we did not share that with the superintendent.
Dela Cruz: What was the original intent?
Otaguro: The original intent was to look at the projects that were at risk that we could not do and there are projects that we had already contracted for and we’d issued a notice to proceed so the department has had different statuses of projects.
Dela Cruz: So you were involved since March?
Otaguro: In some kind. Not in the level of detail that I should have been. But I’m aware of what we started.
Dela Cruz: If it’s just DOE staff and B and F (Budget and Finance) staff and they’re processing without any kind of thought as to some of the questions we’re asking, I think that’s probably not a good policy, Not a good process.
Hayashi: You’re absolutely right, senator. We are in the process of re-evaluating our internal processes and we need to do a better job of communicating with all of you.
Dela Cruz: Not just that, your staff has to communicate with you guys so that you know what’s on the list.

During the past several months, according to a budget department memo, officials from the education and budget departments discussed lapsing certain school projects “that could not be realistically undertaken before the upcoming lapsing date of June 30, 2024, due to various reasons (i.e., permitting and/or other required approvals, insufficient funding, lack of clear scope, insufficient time to procure and award contracts, etc.) as a first step in this process.”

Funding for state construction projects is usually valid for three years, after which the money lapses and the appropriations are no longer available. State lawmakers then have the option to vote to re-appropriate the money to make it available for a longer period, or divert the funding to other projects and programs.

Superintendent: ‘We need to do a better job’ at project and construction management

Dela Cruz and other senators at the briefing were clearly upset at the situation.

“So there’s no oversight or evaluation saying, ‘Hey you have too many projects and that are not moving.’ What’s going on here?” he asked.

‘There’s no communication with us saying, ‘Hey, we need more money.’ It’s just piling up on somebody’s desk,” Dela Cruz said.

Senators asked top HIDOE officials what’s wrong with their construction process that may cause nearly half a billion dollars in school projects to lapse.

Kim: Does one person oversee (each construction) project from the beginning to the end?
Otaguro: No
Kim: Why not?
Otaguro: It’s a process that’s currently the state’s process.
Dela Cruz: It’s us. (state lawmakers) So we have to go from one desk to another if we’re interested in making sure these projects go through.
Kim: It’s crazy that you folks are not aware of the billion dollars of projects that’s sitting there and you don’t have all the funding. Why didn’t you guys come in and ask for that? Did you even know that you didn’t have the funding, superintendent?
Hayashi: Senator, as Curt has shared, we do recognize the fact that we do have areas within our facilities branch, that although we have individuals that are working tremendously hard, we have processes that need to be re-evaluated and reassessed and we are working on that now, together with the Board (of Education).

“This is definitely an area that is prioritized and that we need to do a better job at,” Hayashi added.

Kim told Hayashi, “You need to improve the processes, you need to improve this, you need to improve, it’s like everything. At what point did you determine this wasn’t working? Until such time this has happened? You wait until the problems arise before being proactive to know that it’s not going to work.”

Hawaiʻi State Teachers Association President Osa Tui, Jr. said, “Legislators have worked very diligently over the past few years to make sure funding has been provided to tackle critical building and infrastructure needs at our schools throughout the state. The fact that HIDOE is unable to bring these projects to fruition not only leaves our school facilities hundreds of millions of dollars in the hole, it seriously jeopardizes future funding from legislators who will find other projects to fund because of their distrust of HIDOE to fully use limited funding.”

“This is a serious problem that the department and the Board of Education need to address immediately to ensure our keiki are provided the facilities they deserve,” Tui added.

Testifying Thursday before the Board of Education, Tui said the Senate Ways and Means briefing the day before highlighted a number of problems with the department.

“Many tough questions were posed to the superintendent and the deputy superintendent. As the Board of Education, you should also be taking up these and other difficult issues and asking similarly tough questions. Too often, it’s just highlights, pats on the back, and rubber stamping that take place here,” Tui told board members.

“Legislators seemingly find the lapsing of millions of dollars in CIP funding despicable based on their comments yesterday. The integrity of the department, which is overseen by this board, is on the line as legislators become increasingly distrustful of what they hear from the department,” Tui said.

Top facilities official fired earlier this month in an office plagued with vacancies

Randall Tanaka, HIDOE’s assistant superintendent for facilities and operations, was fired Dec. 6, sources said, the same day that Civil Beat broke the story about the $465 million in lapsed school construction projects. Civil Beat reported that HIDOE facilities and operations branch employees were told Tanaka had been terminated during an internal meeting on Dec. 7.

Tanaka had held the post overseeing school facilities since January 2020.

Earlier this month, HIDOE’s Deputy Superintendent of Operations Otaguro said it’s “unacceptable” that 10% of the state’s public schools failed fire inspections last school year and 24 schools need repairs to their fire alarm systems. Some schools haven’t had working fire alarm systems for years, a situation which the now-fired Tanaka also oversaw.

The Office of Facilities and Operations of HIDOE has four different branches that are responsible for a wide range of activities from school busing, cafeteria and food services, to construction and maintenance of school properties and campus security. The facilities office is plagued with more than 70 staff vacancies, HIDOE officials said.

For school construction projects, Otaguro told senators, “You have a planning department, you have a project management department, and project management does all the contracting. And when you get to actual construction, we have a construction management arm. That is the entity that does the monitoring of the construction.”

Dela Cruz told Otaguro, “This is overwhelming. And I think the discussion has to lead to some point is what’s the reorganization? And if the department doesn’t do that, then we should suggest how we should reorganize. Because we tried once with SFA, the School Facilities Authority. The Legislature was frustrated with the movement of projects, so they did SFA. And now there’s quite a bit of frustration with SFA. So now we’re frustrated with both.”

“We have to pass something this year (during the legislative session that begins in January) to help the superintendent achieve his goals of getting this a lot cleaner,” Dela Cruz added.

Otaguro said, “The facilities organization is large with the number of projects that they have: bus, food, security is a whole different game, so to have one individual oversee all of it at the level of detail that we need to communicate is where I believe we can make a difference on.”

Hayashi said, “This is a definite priority for us. This sense of urgency, definitely. And we are working together with our Board (of Education), on a plan to do better at what we’re doing. Definitely, this is not where we want to be.”

“Are you gonna be providing a restructuring to us or do we have to provide one that you’re going to react to so we can get something passed this session?” Dela Cruz asked the HIDOE leaders.

Otaguro responded, and said, “We have concepts that the board chair is reviewing and has engaged actively.”

150+ school projects will stall if their funding lapses later this year

Some of the largest school projects across the state whose funding HIDOE is willing to allow to lapse early, stalling the work indefinitely, include:

• $57.4 million to design and construct phase two of a master plan for new classrooms, a music building, physical education facilities and a gym at Farrington High,
• $24.6 million to design a new administration-library building and make ground and site improvements, and purchase new equipment at Pukalani Elementary,
• $22.5 million to design and construct a new classroom building, make ground and site improvements and purchase equipment at August Ahrens Elementary,
• $17.8 million to design and construct athletic complex improvements, such as bleachers, locker room, stadium and general field lighting at McKinley High,
• $13.3 million to design and construct a black box theater and supporting functions for the existing performing arts center at Kekaulike High,
• $7.9 million to design and construct a new band room and renovate the current band room for other curriculums at Washington Middle,
• $7.4 million to design and construct a multi-story parking structure and make ground and site improvements at Hilo High,
• $6.2 million to design and construct a new state-of-the-art culinary program and new multipurpose room in the cafeteria and renovate Building C at Aiea High,
• $5.7 million to design and construct physical education and athletic facilities at Baldwin High, and
• $3 million to plan, design and construct new athletics and physical education facilities at Molokaʻi High.

Read a complete list of the proposed lapsed construction projects in this memo.

A $16.8 million project at Pā’ia Elementary on Maui is also on the list of projects whose funding is proposed to lapse.

State Sen. Lynn DeCoite (D, Hāna, East and Upcountry Maui, Moloka‘i, Lāna‘i) told HIDOE officials, “It’s frustrating because I have to go back and tell my constituents why we don’t have one school for Pā’ia now that we’re using closets for classrooms. I mean, that’s why we put our trust in you guys.”

The Maui wildfires adversely affected the state’s general fund financial plan in two ways, said Salaveria, the state budget director, in a memo to the Senate Ways and Means Committee.

The fires contributed to a significant decrease in projected general fund revenues as forecast by the Council on Revenues while causing large increases in estimated expenses for response and recovery, Salaveria said.

“Although the proposed early CIP project lapse effort was not initially undertaken in response to the wildfires,” Salaveria wrote, “it will materially help to address these adverse impacts by reducing the amount of increase in GOB (general obligation bond) obligations,” needed to fund the supplemental construction budget for the next year and the interest on the funds to carry it out.