Lawmakers gave preliminary approval to what is being billed as the biggest tax cut for Hawaii workers in state history on Friday afternoon as the Legislature raced toward a scheduled adjournment next week.

They also approved funding to combat the proliferation of invasive species, and to help put more Native Hawaiians in homes on Hawaiian homelands.

But one major unfinished piece of business remained: What to do about a hotly debated bill to allow Hawaiian Electric Co. to charge a fee to ratepayers so the utility can pay for wildfire mitigation plans.

On Thursday, in a decision that surprised many at the Hawaii State Capitol, Senate Commerce and Consumer Protection Committee Chair Jarrett Keohokalole deferred the so-called securitization measure, Senate Bill 2922, indefinitely. That prompted Gov. Josh Green to intervene directly in the hope of saving a bill he sees as vital to the entire state.

Late Friday the governor’s office confirmed that House and Senate leaders will work through the weekend with the administration to hash out a compromise draft of SB 2922.

Green “believes this is an important issue and has committed to working until the end of session, or even after if needed, to find a solution that could provide stability to ratepayers,” the administration said in a written statement.

But Keohokalole does not appear to be backing down. Lawmakers held multiple hearings on the issue and discussed it at length, he said, adding that HECO had the opportunity to present its case to lawmakers during an hourslong informational briefing last week.

“The conclusion I and several of my colleagues came to was we were being asked to approve an unknown allocation of money for an undefined purpose to be paid for by an undetermined fee that our grandchildren will likely still be paying for with no assurance that HECO will remain locally controlled and operated and no protections provided for the local workers at HECO,” Keohokalole said.

Other senators also expressed worry about the HECO employees who belong to the International Brotherhood of Electrical Workers Local 1260.

“Personally, I support the chair’s decision — that is his committee,” said Sen. Lorraine Inouye, referring to Keohokalole. “But I am concerned about the IBEW workers and how their pensions might be impacted, because they are going to be impacted. And I am also concerned that we have already been having rolling blackouts on Oahu and the Big Island, and things could get worse.”

What might happen next is unclear. One possible scenario is that House and Senate leaders call the Legislature back into conference committee on Monday, which is a recess day.

Less likely is that the Senate and House would pull the bill out of committee and to the floor for a vote. Or they could choose to extend the session beyond its scheduled end on May 3.

And there is the possibility that the governor could order the Legislature back into session. But it’s not clear that there is majority support in either chamber for SB 2922, which if passed as currently written would impose a fee of up to 5% on customers’ monthly bills to finance bonds and raise money in a process known as securitization.

Unsaid but understood by nearly everyone is the fact that the primary election is barely three months away. Running for reelection while appearing to bail out a monopoly company may not be palatable to voters who already have among the highest electric bills in the nation.

Help For The Lowest Earners

There were only a few details available Friday on the new income tax cut proposal in House Bill 2404, which was made public by House Finance Committee Chairman Kyle Yamashita shortly after 4 p.m. Friday.

Yamashita told his colleagues the measure eliminates an entire income tax bracket for the lowest-paid state residents and also adjusts the remaining income tax brackets upward in response to the recent increase in the state minimum wage.

Hawaii’s minimum wage increased to $14 per hour on Jan. 1, and Yamashita said lawmakers are concerned that additional income will cause low-income residents to pay a larger share of their earnings in state taxes.

“If we don’t adjust the brackets, the people that are earning minimum wage will be pretty much paying middle-income taxes, so we have to keep adjusting these brackets,” Yamashita said. “We’re keeping money in the pockets of people that need to keep the money, so that’s the idea.”

Yamashita said the latest version of the bill would also double the standard state income tax deduction for all Hawaii taxpayers for this year, which will translate into savings when it is time for residents to pay their income taxes next spring.

The standard deduction will then be further increased in a series of steps in 2026, 2028, 2030 and 2031, he said. Yamashita did not say how large those future increases in the standard deduction will be for each of those years, and he was unavailable for comment Friday night.

At the committee hearing, however, he said the new bill would also eliminate the lowest income tax bracket in 2025, and then increase the remaining brackets in a series of steps in 2025, 2027, 2029 and 2031.

“Ultimately, by the time we hit 2031, it will be the biggest tax cut to the working people of the state of Hawaii in state history,” he said.

That comment drew a whoop from someone in the hearing room, and Yamashita continued: “I think this is something very big, and both House and Senate have worked hard on this to come up with a compromise.”

House Speaker Scott Saiki has described HB 2404 as “probably the most significant tax bill” of the session.

Meanwhile, Senate Bill 3289 — a much more controversial measure dealing with Hawaii’s estate tax — quietly died for the year.

That measure would have exempted more people from Hawaii’s estate tax. But critics said the measure would only benefit the wealthiest 0.2% of Hawaii residents, and lawmakers rejected it.

DHHL Gets More Time To Spend Funds

Among the many measures that were moved to the last day of conference committee — the final major deadline ahead of session’s end — was Senate Bill 3109, which extends the deadline for the Department of Hawaiian Home Lands to use $600 million in funding approved by lawmakers two years ago.

While the department has encumbered much of the money, it was at risk of losing tens of millions of dollars by June 30. Under SB 3109, though, DHHL will now be allowed to lapse $129 million, which will be placed into a special fund.

“I know the Department of Hawaiian Home Lands has been doing a very good job in encumbering these funds going forward,” said Rep. David Tarnas, the lead House negotiator on SB 3109. “And this will enable them to have the flexibility to carry out our desires to get more Hawaiians on Hawaiian homelands.”

Lawmakers also reached agreement on a bill that will give the University of Hawaii’s chief financial officer procurement authority over construction and related professional services.

That authority had long been with the UH president, but in 2013 state senators shifted it to the Hawaii State Procurement Office. Senate Bill 2499 initially sought to permanently reinstate that power with the UH president.

But Sens. Donna Kim and Donovan Dela Cruz changed the bill earlier this month to instead give the procurement power to Brennon Morioka, the dean of the UH College of Engineering. No rationale was provided, and it came after the public comment period on bills had passed.

On Friday, Rep. Scot Matayoshi said that the agreed-upon draft designates the university’s chief financial officer as its chief procurement officer effective June 28 and inserts a four-year sunset date, meaning it will again be revisited in 2028 — an amendment supported by Kim.

The Demise Of A Water Bill

UH will also get $1 million to set up a two-year program to develop a statewide wildfire forecast system using artificial intelligence.

UH supported Senate Bill 2284 and testified that the UH Manoa College of Engineering’s research capabilities in AI would be a key part of the program.

Not making the cut Friday afternoon, however, was a major water bill that was supported by the Office of Hawaiian Affairs, the Board of Water Supply, the grassroots group Lahaina Strong and the Sierra Club but was opposed by the Attorney General’s Office and the Department of Land and Natural Resources.

House Bill 2690 called for setting up a water policy coordinator and other positions within the Commission on Water Resource Management to coordinate the Red Hill Water Alliance Initiative, or Red Hill WAI.

CWRM, as the commission is known, would still be administratively attached to the DLNR but have greater independence. It would also create a Red Hill special fund for the remediation of pollution and appropriate money for it.

The bill was inspired by both the recent Red Hill Bulk Fuel Storage Facility fuel spillage and the Lahaina fires.

Inouye, chair of the Senate Water and Land Committee, said she was “greatly disappointed” that the House would not support the Senate amendments but said the issue would be introduced again next year.

She said there was agreement by both chambers that the bill was “urgently needed and very important — not just for Red Hill, but also for Lahaina,” noting the issue of water rights is all the more important now because of the giant task of rebuilding the West Maui town.

Tax Dollars At Work

One of the final bills to be approved early Friday evening was House Bill 2340, the annual claims-against-the-state bill. Civil Beat reported on several of those claims this year including a $750,000 settlement of a lawsuit over the death of a 3-year-old boy in state foster custody in 2017 on the Big Island.

The claims bill is introduced at the beginning of session in January but lawmakers do not approve the payments until the Attorney General’s Office has finalized them. The bill, which passed easily, contains 41 claims that total $18.8 million.

Since the bill was last amended, two new claims were settled for an additional $71,500.

The claims require the state to pay the Sierra Club $35,000 for attorney fees and costs in a 2022 case involving the Board of Land and Natural Resources regarding stream water diversion, and for the state to pay $35,000 in settlement with a deputy sheriff who was involved in an accidental gun discharge incident in 2020.

And there is a lot of money going toward ridding the state of invasive species. Lawmakers approved Senate Bill 2401, which helps counties pay for feral chicken control programs. Money will also go to the Department of Health for a campaign to educate the public about the importance of not feeding feral animals.

The funding is secured through a measure that passed Thursday that appropriates almost $20 million to help control and eradicate little fire ants, coconut rhinoceros beetles, coqui frogs, rose-ringed parakeets, two-lined spittlebugs and brown tree snakes.

“A major focus this year has been invasive species, and of course, feral chickens are a part of that issue,” said Rep. Cedric Gates, adding that lawmakers are hoping the omnibus bill will help “really get a grip on the invasive species issues that we see statewide.”