STAND. COM. REP. NO. 1075

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1061
                                        H.D. 2
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B.
No. 1061, H.D. 2, entitled: 

     "A BILL FOR AN ACT RELATING TO GRANTS AND SUBSIDIES,"

begs leave to report as follows:

     The purpose of this bill is to specify that funds
appropriated for grants and subsidies are to be used only for the
public purpose for which the funds were appropriated and shall
lapse if the recipient is unable or unwilling to provide the
specified services.

     In particular, this bill specifies that contracts to
disburse grants or subsidies are to specify that the expending
agency may withhold or recover the remaining balance of the grant
or subsidy if the recipient can no longer or is unwilling to
continue to provide the services for which the grant or subsidy
was appropriated.

     With respect to capital improvement projects or the
acquisition of personal property, equipment, or vehicles, the
bill further provides that the recipient must satisfy the
specified public purpose at least until the improvements,
property, equipment, or vehicles have been fully depreciated.  If
the recipient can no longer or is unwilling to satisfy the public
purpose for which funds were appropriated, the contract must

 
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specify that the State shall recover the pro rata share of the
grant or subsidy of the depreciated value of the improvements,
property, equipment, or vehicles.

     Your Committee received testimony in favor of this measure
from the Director of Finance.

     Your Committee agrees with the intent of this bill, and
finds that this bill will assist in the recovery of grants and
subsidies where the recipient is no longer able to provide the
service for which the grant or subsidy was appropriated.

     Upon further consideration, your Committee has amended this
bill by:

     (1)  Adding language to require the expending agency to:

          (A)  Negotiate contract provisions to ensure that the
               recipient of funds complies with the public
               purpose for which the funds were appropriated; and

          (B)  Secure compliance with the contract and section
               42F-104, Hawaii Revised Statutes;

     (2)  Deleting language providing that the funds shall be
          lapsed if the recipient is unable or unwilling to
          provide the specified services;

     (3)  Requiring, rather than allowing, the expending agency
          to withhold the remaining balance or recover the grant
          or subsidy if the recipient can no longer provide the
          services for which the grant or subsidy was
          appropriated, and deleting language regarding the
          recipient's unwillingness to continue to provide the
          services; and

     (4)  Deleting language that applied this recovery language
          to operating and capital improvement project
          appropriations.  The deletion of this language does not
          reflect an intent that the expending agency ignore
          recovery from the recipient.  Rather, your Committee
          finds that these matters of recovery should be covered
          through the contracting process to allow flexibility to
          departments and agencies.

     As affirmed by the record of votes of the members of your
Committee on Ways and Means that is attached to this report, your

 
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Committee is in accord with the intent and purpose of H.B.
No. 1061, H.D. 2, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as H.B. No. 1061,
H.D. 2, S.D. 1, and be placed on the calendar for Third Reading.

                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
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