Lots of the controversy swirling around the ballot measure seeking to impose a “surcharge” on investment property to support public education involves our Department of Education (DOE). The DOE currently receives an appropriation from the State’s General Fund of about $2 billion and is also able to pull from other funding sources such as federal funds.
But did you know that the DOE can also impose tax?
The Hawaii Revised Statutes contains twelve sections relating to “school impact fees,” starting with section 302A-1601. The law states, in part, “New residential developments within identified school impact districts create additional demand for public school facilities. As such, once school impact districts are identified, new residential developments shall be required to contribute toward the construction of new or expansion of existing public school facilities.”
Builders of large projects within school impact districts are required to provide land for school facilities depending on the numbers of students expected in their projects and the amount of available classroom space in existing area schools. Smaller developers and individual home owner-builders are required to pay a fee instead of land, when their project is too small to entertain a school site. All home builders or buyers must pay a construction cost fee.
This law, which we have discussed before, recently has been used to create a “school impact district” that goes from Kalihi to Ala Moana. It’s defined as the areas served by the following elementary schools: Fern, Kalihi Kai, KalihiWaena, Linapuni and Puuhale in the Farrington Complex; and Kaahumanu, Kaiulani, Kauluwela, Likelike and Royal in the McKinley Complex. Yes, the impact district “tracks” the path of the new Honolulu rail line, pardon the pun.
In a news release, the DOE announced that the fee, which goes into effect on October 1, will be $3,864 per unit.
That fee is considerably cheaper than the $9,374 proposed two years ago, but it’s not chicken feed by any means. Multiplying the current fee by the 39,000 additional dwelling units that the DOE is anticipating yields more than $150 million, many times more than the $4.7 million in school impact fees it has collected to date for districts in Leeward Oahu, West Maui and Central Maui.
These fees, of course, are going to have to be paid by someone. If you think they are all paid by wealthy, fat cat developers who are going to be swimming in money because of the transient oriented development, think again. These costs get passed along to home buyers or renters, in one form or another.
According to its audited financial statements for fiscal 2017, our DOE’s total revenues were $2.915 billion and total expenses were $2.817 billion. A recent Star-Advertiser article (Aug. 19, 2018) raises questions about whether the DOE is entitled to tens of millions more in federal reimbursements (and we will write about this next week). And, of course, it is the only state agency with independent taxing power.
Let’s now turn our attention to making sure that all entitled revenues are being properly claimed and those billions of dollars are being spent efficiently and wisely
Guess Which Agency May Be Forgoing Millions in Federal Dollars?
One article that recently appeared in the Star-Advertiser was titled, “State forgoing millions in federal reimbursements.” The state agency referred to in that article was our Department of Education.
We have children from indigent families in our school system. Some of them, especially in special education, can and do benefit when they receive services from health professionals. When that happens, the school can bill Medicaid for those services.
According to the article, many states have done this. In 2016, according to federal data, the average reimbursement that Medicaid sends to states was about $48 million. The federal data says Hawaii got around $0.26 million, but the DOE says the total is closer to $0.5 million. Which is one percent of what the average state receives.
As an example, one clinical psychologist’s report on the DOE system in 2006 noted that all students on Medicaid “are entitled to EPSDT (Early, Periodic Screening, Diagnosis and Treatment), a benefit that includes both a health screen and a mental health (social-emotional-behavioral) screen periodically between the ages of 0-21. This can be done in physician’s offices, or in some states, it can also be done by Public Health nurses, even within the school setting.” Catching psychological problems early in our student base is of course important so that they don’t later become complicated and costly, and if we can get Uncle Sam to pay for such services, so much the better for us locally.
When questioned, a DOE spokeswoman quoted in the article said that the Department is “aggressively going to seek reimbursement for every service and every eligible child that we’re able to. We are committed to doing that.”
But will they? It’s a lot of work going after Medicaid reimbursements. The services for which Medicaid is billed need to be deemed medically and educationally necessary, they need to be performed by a licensed provider, and they need to be properly documented. It’s hard for doctors and their own medical staffs to keep track of all this, and there are even specialized shops who claim to be proficient in medical coding, which is the way the medical professionals are supposed to tell the federal government what was done, why, and how much it cost. How do we expect schools, which aren’t in the medical business, to wade through all that federal government red tape? Obviously, this is a nut that the typical school with typical educators is not going to be able to crack easily.
Besides, under federal law the Legislature is supposed to be adequately funding special education, period, so it’s irrelevant whether the DOE seeks out federal dollars. It is very tempting for a DOE administrator to think, “There’s no benefit for us if we do all this work because the Legislature needs to fund us anyway. The only thing we can expect the Legislature to do if we get this money, is to reduce our general fund appropriation. Who needs that?”
Providing appropriate medical services isn’t within the expertise of a “typical” school, but these days we require our schools to go beyond simple education, especially in the special education realm. Because the DOE must, and does, provide these services, the DOE should have infrastructure to take advantage of federal benefits to pay for them. That would be helpful for us taxpayers, who are supposed to be whom the DOE is really working for. Let’s make sure they keep their word and go after whatever available monies there are.