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Updated 2:59 p.m., Feb. 7

Hawaii lawmakers are moving forward this session with bills to fix the state’s broken school bus program.

Student transportation costs have nearly tripled to $72 million since 2006 when bidding among vendors abruptly stopped. Civil Beat’s investigative series Taken for a Ride unearthed the issue in 2011.

Following the recommendations of last year’s scathing state audit and a consultant’s study that confirmed two years of media reports, legislators are looking to give the Department of Education more control over contracting with bus companies.

and its companion legislation, , would repeal a significant section of the law regulating school bus contracts.

The statute currently lays out a list of factors the department has to consider in determining how to provide suitable transportation — ranging from alternative public transportation to the distance a child lives from school. It also includes provisions that allow for two-year contract extensions by mutual agreement.

The bills would delete all this and more, leaving it up to the department to set its own policies.

The state audit said the department should restructure contracts to include specific performance requirements. It also recommended taking more precautions to ensure a single bid on a contract is fair before accepting it. The auditor also said the department should solicit bids for expiring contracts with sufficient time to attract competitive offers, as well as maintain more detailed contract files.

Citing the November study by the DOE consultant, the legislation says the state needs to give the department increased flexibility so it can contain escalating costs.

HB851 cleared the Education Committee last week and the Finance Committee passed it Wednesday. It goes to a House floor vote next, before crossing over to the Senate.

Education Superintendent Kathryn Matayoshi said in her testimony that the department supports the bill because such considerations and provisions should reside in the contract agreement itself and not in statute.

UPDATED The Senate Education and Transportation at 1:15 p.m., Monday.

Sen. Jill Tokuda, who chairs the Education Committee, said the bills moving through the Legislature to fix the student transportation program are important. She said it is good to see school officials responding to their consultant’s recommendations and the auditor’s report.

But Tokuda said passing the legislation may be the easy part. Changing the culture of how the school bus program has been run for years will be the big challenge and will require all stakeholders working together collaboratively, she said.

, and its companion, , would exempt bus drivers and others contracted to do work related to student transportation from a . The statute requires the wages for contractors’ employees to be at least on par with the wages paid to public officers or employees who do similar work.

SB1083 has cleared the Education Committee and is up for decision-making Friday in the Economic Development, Government Operations and Housing Committee. It also needs to go through the Senate money committee before crossing over to the House. The House version of the bill has progressed similarly.

Matayoshi said making wage certification inapplicable to school bus transportation contracts will help to stimulate competition among market vendors.

State Paying Bus Companies’ Taxes

The only student transportation-related bill that isn’t moving forward at this point is , which would clean up an issue that many officials were shocked to discover. Under the current contracts, the state is paying the bus companies’ general excise taxes.

“The State is not liable for GET and it is illogical for the State to pay itself taxes,” Hawaii Auditor Marion Higa said in her report. “However, the DOE estimates it will pay more than $2 million in school year 2012 for contractors’ GET. The department was unable to explain why it pays GET on most contracts.”
HB506 would prohibit the state from paying contractors’ general excise taxes.

Higa said in her audit that by agreeing to pay contractors’ GET liability, the department added another price burden to school bus service contracts and in doing so failed to protect the state’s interest.

House Finance Chair Sylvia Luke has not set a hearing yet for the bill. Her committee was the only one to which it was referred. Luke could not be reached for comment Wednesday.

Rep. Marcus Oshiro, who chaired the Finance Committee until new Speaker Joe Souki shuffled House leadership roles this year, was one of 17 people to introduce HB506.

Oshiro, who has been concerned about the school bus program for the past couple legislative sessions, said he hopes the bill gets a hearing.

“It’s an important measure,” he told Civil Beat Wednesday. “We shouldn’t be paying the GET for a contractor, that’s absurd. We have no business in subsidizing these contracts.”

While HB506 would prohibit the state from paying general excise taxes for any contractor — not just school bus companies — the impetus behind the legislation is clearly the student transportation issue.

The bill notes that school buses provide an important service for students, but “the expense of providing such service cannot increase unchecked.”

The department hasn’t offered any testimony on the bill, and the Board of Education didn’t take it up Tuesday when it considered positions on various pieces of legislation.

Board Chair Don Horner said Wednesday that the board might consider taking a position on HB506 at its next meeting, Feb. 19. He declined to comment on the legislation until then.

The bus companies haven’t submitted written testimony on any the bills related to student transportation.