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The Legislature closed out its session for this year Thursday with an impassioned but ultimately unsuccessful rebellion by a handful of House progressives who wanted changes to the new state budget.

The House also voted to override Gov. Josh Green’s first veto, and lawmakers disclosed that last-minute negotiations between the House and Senate produced an agreement that gives Green unilateral authority to restore funding to the Hawaii Tourism Authority if necessary.

House Finance Committee Chairman Kyle Yamashita praised the two-year, $38.3 billion state budget as a document that “focuses on healing and investing in our future.”

He cited appropriations such as $72 million earmarked to increase reimbursements to medical providers who serve people on Medicaid, and $100 million in extra funding for state agencies to upkeep parks and beaches to preserve natural resources.

He also cited $38 million in new money committed to the Preschool Open Doors program, which will allow 3-year-olds to participate and increase the number of low-income children served by the program from about 1,200 to about 4,000.

But critics such as House Higher Education and Technology Committee Chairwoman Amy Perruso refused to support the saying it will result in a “massive budget shortfall” for the University of Hawaii system.

The state began the year with a budget surplus on the order of $2 billion, but Perruso said the new budget reduces spending on the university system by $95 million from what the governor had proposed.

She said that is “ridiculous” when the state has an enormous surplus, and “at a time when we pay lip service to the idea of stopping the brain drain and keeping our young people here in Hawaii.”

Rep. Jeanne Kapela, another left-leaning Democrat, launched into her own scathing criticism of the new budget, saying it “continues the historic underfunding of our public education system.”

Kapela said leading lawmakers reduced the budget for public schools by $167 million over the next two years from what the governor requested, and pointed out that is almost the same amount as the new teachers’ contract awards in raises to teachers over the next two years.

“We have a $2 billion surplus,” she said. “It is immoral for us to pit the (Department of Education) against teachers by cutting school services to pay for a very modest pay raise for hardworking teachers that deserve so much more.”

House Health and Homelessness Committee Chairwoman Della Au Belatti acknowledged that there are “many good things” in the new budget, but said the document “fails both on substance and process.”

“This underfunding of education and higher education comes at a time when we have a budget surplus,” even as the Legislature is exceeding the constitutionally mandated spending cap that is tied to the annual growth of the economy, she said. Exceeding that cap requires a two-thirds vote by lawmakers.

She also criticized a portion of the budget that creates what she called a $200 million “slush fund” that Green can tap into to transfer additional money to any state department he chooses.

Belatti said that provision was added into the budget after the House-Senate conference committee agreed to the terms of the document and voted on it April 26.

Yamashita confirmed for reporters after the floor session the provision dealing with the $200 million had been added after the conference committee voted.

Lawmakers said Green will be able to use some of that $200 million pool of unallocated funding to cover the cost of operations for the Hawaii Tourism Authority, for example.

The HTA is responsible for promoting Hawaii as a tourist destination and managing the impacts of mass tourism on the state, and normally receives about $60 million a year to do so. However, the Legislature this year seriously considered abolishing the authority.

In the end the bills to dismantle HTA failed to pass, but lawmakers also failed to include funding for the authority in the state budget. The so-called “slush fund” allows Green to cope with that problem, but the budget required that Green report back to lawmakers how he uses the money.

Rep. Elle Cochran, a former Maui County Council member, objected to the rushed and opaque House-Senate negotiating process where final decisions are normally made on the budget.

“I know this is how it has been done, but for me it hasn’t shaken out quite well for a lot of us, and so, something’s got to change. We can’t keep doing things the same way expecting different results,” she said.

Critics also noted that the new budget banks $1 billion over the next two years in the emergency budget reserve fund – better known as the rainy day fund – which is money that could have been used for education or social services.

But Yamashita defended the decision to hold back that money, rather than spend it. He pointed out that maintaining a large pool of reserves demonstrates the state is fiscally responsible, which can help increase the state bond rating and reduce the state’s borrowing costs.

In the end the House passed the budget with a 41-8 vote, with Democratic Reps. Belatti, Cochran, Sonny Ganaden, Natalia Hussey-Burdick, Kapela and Perruso voting no along with Republican Reps. Elijah Pierick and Kanani Souza. Reps. Nicole Lowen and Rose Martinez were absent.

The public criticism on the House floor from Democrats on Thursday is rare during the budget debate, and Yamashita told reporters he plans to review the complaints to see if some of the items actually were funded in the new budget. If not, he said lawmakers can try to address those concerns next year.

Sen. Donovan Dela Cruz, chair of the Senate Ways and Means Committee, acknowledged that the state budget was imperfect – leaving much to do for future legislative sessions.

“There were key Senate priorities that did not make it out of conference,” Dela Cruz said Thursday on the Senate Floor. 

Among others, he listed examples like broader tax relief for the middle class, cost of living increases for nonprofits through the Department of Human Services, the Department of Agriculture’s DaBux program, the Banyan Drive master plan, and cesspool conversion tools.

“These vital programs, services, and resources remain important Senate priorities, and they reinforce our resolve and commitment to the work ahead,” Dela Cruz said.

The House also voted to override Green’s first veto, which dealt with an unusual scenario in which condominium owners sued the developer of their project for construction flaws more than a decade after construction was finished.

Existing state law does not allow such lawsuits once 10 years have elapsed from completion of the project, and was intended to make an exception to that law.

Green said in to state lawmakers that the measure “is objectionable because it appears to have the unintended consequence of increasing the costs of housing.”

But the Senate voted to override that veto Tuesday, and the House followed suit Thursday.

Preschool Funding

The preschool community was one of the big winners this legislative session, with priority access to the state’s Open Doors program extended to three-year-olds and with badly needed facilities given a more manageable pathway to accreditation. 

Now just awaiting the governor’s signature, would greatly expand the Open Doors program, which provides funding for low-income families to send their children to preschool.

Far more money will be allocated than in previous years. The current annual expenditure of $12 million will rise to $50 million, with that money going towards both boosting the dollar amount of each subsidy and boosting the number of families who can receive those subsidies. 

Beyond the educational and social benefits that come from preschool, the bill also allows parents an easier return to the workforce, a point noted in written testimony by the Hawaii nonprofit which works with vulnerable families.

“Many of our families benefit from the POD subsidy program and express their gratitude for the existence of the program,” the organization wrote. 

The bill also allows the director of the Executive Office on Early Learning to be more flexible in deciding which accreditation programs a facility can use, working towards the effort to expand the supply of available preschools. This problem of supply is so significant that lawmakers appropriated $200 million last year to build new preschool facilities. 

The accreditation process – which nonprofits including Parents And Children Together “expensive, intensive, and time-consuming” – is also aided by . 

Pending governor approval, this measure would establish a child care accreditation program. Facilities aiming for accreditation could then apply for funding to perform minor renovations and cover the cost of accreditation. 

To receive funds for the Preschool Open Doors program, facilities previously had a 2024 deadline to begin the accreditation process, and SB 239 extends that deadline to 2029. The deadline to finish the process was also extended, from 2029 to 2034.  

Before gaveling to signal adjournment, Senate President Ron Kouchi delivered concluding remarks to the rest of the Senate. He brought up that there were new senators as well as a new governor, and that navigating these new relationships can take time. Look no further than Green’s three failed nominees for evidence.

“With the governor, we took our advise and consent role seriously. And when we found nominees that we thought could not stand up to the standard we set, we indicated that by voting no,” Kouchi said. 

Some nominees who stumbled during their initial hearings, he added, came back better prepared during subsequent hearings. 

Like everyone, some of his preferred bills died during the session, he said. 

“But when I look at what we passed – wow,” he said, pointing to a bill that codified and expanded abortion access as well as a bill that clarified how prosecutors can initiate felony charges.

Sen. Glenn Wakai performed his usual role of motioning to adjourn the session. 

“And let’s do it all again in eight months,” he said.