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STATE OF THE STATE ADDRESS
GOVERNOR BENJAMIN J. CAYETANO
Before the Joint Session of
the Twentieth Hawaii State Legislature Economy | Education | Diversification | Technology | Prisons | Government Reform | Conclusion
Mr. President, Mr. Speaker, distinguished members of the House and Senate, Lieutenant Governor Hirono, Senator Inouye, Representative Abercrombie, Chief Justice Moon, Mayors Apana, Harris, Kusaka, and Yamashiro, Members of the Consular Corps, Members of the City and County Councils, Distinguished Guests and Friends.
For the first time ever, viewers on the World Wide Web are watching this address at their desktops in Hawaii and throughout the world. For getting us on-line, we thank PixelWorld, the University of Hawaii's Department of Information and Computer Science, and the High Technology Development Corporation. To all of our on-line viewers, aloha and thanks for logging on.
This morning it is my privilege to make my sixth address to you on the State of the State.
I am struck by the historical significance of this moment. As Governor, and as members of the legislature, we have been given the honor of being the first to lead our state into the dawn of the New Millennium. For this, I thank the people of Hawaii for giving me the privilege of serving them for the past 26 years.
I thank my wife and our First Lady, Vicky, our children, our family and all of our supporters who helped make this day possible.
HAWAII'S ECONOMY
When I took office in December of 1994, Hawaii's economy was stagnant -- absolutely zero growth since 1991 -- with severe dislocations in tourism, construction and real estate. Japanese investment in particular, dried up, pure and simple.State government faced its worst fiscal crisis ever with a projected shortfall of more than $600 million -- approximately 20% of its $3.1 billion general fund budget.
We needed to make tough decisions. And we did. We cut spending and implemented policies to make state government more efficient and productive. We protected lower education from budget cuts, but at the expense of other departments.
To boost tourism, we built a world-class convention center, created the Hawaii Tourism Authority and gave it 60 million dollars to market Hawaii.
We gave one of the biggest tax cuts in the nation -- $2 billion over six years. And we reformed workers compensation, cutting premiums by as much as 30-to-50%.
We developed new, aggressive strategies to diversify Hawaii's economy with a focus on industries such as biotech, high tech, healthcare, and multimedia.
Well, I am happy to report our efforts have borne some fruit.
Recent economic indicators reveal:
And last month, the Council on Revenues surprised all of us by increasing its revenue forecast by an average of a full percent each year for the next five years. Compared to the Council's September projections, this adds nearly one-half billion dollars by 2005.Personal income is up by more than 2% since 1997.
A year ago, few of our economic experts acknowledged even a hint of recovery. Today, all of them agree that Hawaii's economy is in recovery. Some, like Bank of Hawaii's Paul Brewbaker, believe Hawaii's economy is past recovery and is now in the expansion stage. What a difference a year makes!
We are on the right track. But now is not the time to rest. We still have much more to do. The work of government never ends. And as the leaders of this New Century, we have a tremendous opportunity to build a New Economy for our children's future.So let me share with you my priorities over the next few years.
EDUCATION
Education has been, and will continue to be, my highest priority. Over the past five years, we've increased -- I repeat, increased -- education's budget. We've built a record thirteen new schools, added more than 900 classrooms, gyms, cafeterias, and libraries, extended the school year by seven days, and increased teachers' pay.This year, our supplemental budget gives the Department of Education nearly 400 new positions and $21.7 million in additional general funding. This includes $2.7 million for the DOE's Hawaii Content and Performance Standards, and $4.4 million for additional regular education teachers, who teach special education in their classrooms.
In addition, I propose a three-year, $210 million repair and maintenance program for our schools, university and public buildings.
Last year, the National Education Association ranked Hawaii 21st in the nation for per student spending. This year we're spending $6,229 per student. Next year we'll be spending $6,865 per student.
It is important for all of us to realize that 38.4 percent of our general fund budget is going into lower education and 12.7 percent of the general fund is going into higher education. This represents 51 percent of our general fund.
All of us would like to provide more funding to our schools. But the funding debate should not detract from the real issue. No matter how much we fund education, little will change unless we hold people accountable for their performances.
In my twenty-six years in elected office, I've seen many educational reforms developed with high hopes -- Three on Two, The Hawaii English Program, School Community Based Management, Rollover Savings -- to name a few.
In spite of our well-intended efforts, we have yet to show really satisfying results. To be frank, we all know our taxpayers are not satisfied with our public schools; and too many educators are demoralized by the state of affairs in education.
We need to ask ourselves why. Accountability. Or rather, the lack of accountability is the answer. Study after study shows that every state which has made significant improvements in student performance, has a strong accountability system. And we simply don't have one here in Hawaii.
Fortunately, we have a Superintendent of Education who understands this only too well. And I've come to the conclusion that a system of accountability is what Hawaii's public school system needs most of all.
Therefore, I propose the following:
First, that we support Dr. LeMahieu's proposal to implement a system of accountability along with the authority necessary to make it happen.Second, that we implement teacher competency testing by the start of the 2001 school year. Teachers who are not knowledgeable about their subjects are of no help to their students. It's unfair to the teacher, and it's unfair to our children.
Establishing competency testing should not be difficult. After all, Hawaii and Washington are the only two states in the nation that do not have competency testing. And so there are 48 models from which to choose. We do not have to reinvent the wheel to do this.
Everyone agrees there should be some system of accountability. But some say accountability is a subject of negotiation in collective bargaining. On this issue, I respectfully must disagree. Setting performance and accountability standards to educate our children, cannot -- must not -- and should never be negotiated.
ECONOMIC DIVERSIFICATION AND EDUCATION
In his book, Work of Nations, former U.S. Secretary of Labor Robert Reich, said that the nations, states, cities which will prosper in the new century are those who have a highly skilled and educated workforce. This holds true for people as well. This is why I have given education the highest priority.Today, I'm very happy to announce our plans for bringing Hawaii's educational institutions -- and the people they serve -- into step with the competitive challenges of the new century. These plans call for a number of strategic investments in new programs at the Department of Education and the University of Hawaii.
Our children, Hawaii's future leaders, must have the best K-12 education in reading, writing, science, math, and technology. Therefore, I propose investing $1 million in the Hawaii Networked Learning Communities Program, an innovative e-school approach using the latest technologies for students and teachers. This is a joint effort of the DOE, UH, and the private sector, that is attracting the attention of the National Science Foundation.
At the UH, there are exciting things happening. The University has recruited academic leaders of bold vision who are nationally renowned in two of our high priority areas: Healthcare and Technology.
A first rate medical school is fundamental to our desire to make Hawaii the Premier Healthcare Center of the Pacific. A first rate medical school sets the standards which others -- physicians and scientists -- aspire to.
Dr. Edwin Cadman, the new dean of the medical school proposes to establish the Asia Pacific Center of Medical Biosciences. According to Dr. Cadman, this center will transform the University's medical program 'into absolutely one of the tops' in biomedical research.
Dr. Cadman, formerly from Yale, brings with him a distinguished national reputation. Moreover, he is the extreme optimist. With community support, he believes we can develop a medical school and a bioscience program that in 5 to 10 years will become one of the best in the nation. The school will be an economic boon for our state.
I propose to give $1 million to the medical school to help Dr. Cadman build his center. I ask that you join me in supporting Dr. Cadman and the UH School of Medicine.
Guy Kawasaki, local grown Iolani graduate and one of the pioneers at Apple Computer, is now a nationally known hi-tech consultant and evangelist. Guy once told me if Hawaii wanted to develop a high tech industry, it must have a world-class engineering school.
We are fortunate to have Dr. Wai Fah Chen, the new dean of the College of Engineering. Dr. Chen hails from Purdue University and is nationally renowned in the field of engineering.
Dr. Chen tells me that UH already has a fine College of Engineering. He leads an all-star faculty. Almost 25 percent of the school's professors have earned the National Science Foundation's Presidential Young Investigator award. This award only goes to the nation's best and brightest young faculty. Our ratio is better than many of the best engineering schools in the country, and demonstrates the quality at our engineering school.
Dr. Chen also believes that the College of Engineering can become even better, in time one of the best in the world. As a start, he proposes to build the Hawaii Wireless Communication Center. I am inspired by his enthusiasm and vision. Therefore, I propose that we give an additional $1 million to build his center. This first-of-its-kind facility will enable the school to integrate cutting edge research and development with teaching.
In 1998, the internet economy generated over $300 billion in revenue and 1.2 million jobs. By comparison, it took the automobile industry 100 years to scale such heights. For this reason, Hawaii and its workforce must be competitive in global e-commerce.
Under the direction of Dr. David McClain, the UH College of Business Administration is developing the Asia Pacific Center for E-Commerce and Entrepreneurship. I am excited by this project and I propose to give $1 million to this program. This will give students the skills they need to take advantage of business opportunities in the explosive Internet industry. I ask your support for his program.
Hawaii's community colleges are also preparing our workforce for the challenges of the future. Their new Pacific Center for Advanced Technology Training will provide the rapid re-training needed for workers to compete for better, higher-paying technology jobs. I propose $1 million for this program as well.
Each of these initiatives contribute to our vision. Hawaii's education system will be a network of complementary institutions producing a skilled workforce to compete in the new economy.
We want to build a more flexible, more responsive education system in Hawaii, one that will work in close cooperation with both public and private sectors.
How will we pay for these projects?
As a start, I propose to use funds from the $27 million the state realized from its Digital Island investment. The success of Digital Island was a grand-slam home run for the State. Digital Island was started at the State's Manoa Innovation Center by a fourth-generation 'local boy' named Ron Higgins. Today, Digital Island is a global corporation valued at more than $3 billion.To encourage more Digital Islands, we must attract more venture capital to Hawaii. And we can't expect to do this without first investing in Hawaii ourselves.
Hawaii has many assets attractive to technology companies, quality of life, a fine college of engineering, and a world-class communications infrastructure. But, venture capital is not one of our assets.
The availability of venture capital to finance entrepreneurial start-up companies is vital to building our technology industry. Hawaii needs more venture capital.
Therefore, I propose establishing a new $50 million state venture capital fund called the Hawaii Technology Fund. This fund will be comprised of proceeds from the State's Digital Island holdings, together with an investment from the Employees' Retirement System.
I believe these funds can be leveraged with Small Business Administration Programs up to $90 million. And we will encourage our labor unions and private and charitable trusts to invest into the fund.
I ask you to support our legislation to establish this Fund.
ACT 178 -- TECHNOLOGY OMNIBUS BILL
Hawaii's landmark Technology Omnibus Bill, Act 178, was passed last year and creates a framework to move Hawaii's technology industry into the new century. Private industry, including national corporations, have given this new law high marks. Compared to other states, it is one of the most progressive in the nation.At this time, I'd like to thank the legislature for passing this bill, and I would like to acknowledge its key authors, Representative David Morihara and Senator David Ige for their vision and fine work.
Act 178 calls for the consolidation of the state's technology agencies. I propose a plan which takes the best of these agencies and consolidates them into a single new entity. This new entity will work in close partnership with the private sector.
Act 178 also calls for integrating technology into government. I am pleased to announce that we have developed a state web portal called Access Hawaii. Access Hawaii is a great public and private partnership. Beginning next month, state on-line services will be delivered to the public at no cost to the state.
In six months, every state department will offer services online. My long-range goal is to work closely with the mayors of each county so in two years, state and county information technology services are completely integrated. This will result in a more efficient state and county government.
Recently in the news, Adtech -- the best in its field in the world -- was having trouble finding thirty to forty engineers to work in its business in Hawaii. AdTech's experience reveals there is a shortage of technology workers in the state.
To address this problem, we have launched a plan to bring our brightest technology minds back to Hawaii. We have established an online expatriate recruitment website. It can be found on the web at http://www.techjobshawaii.org.
Let your loved ones and friends on the mainland know where to log on to find a technology job in Hawaii. Lets bring our kids back home.
A few weeks ago, a business executive said that the technology industry in Hawaii is but a dream -- like Alice in Wonderland. I disagree. Hawaii definitely has a future in technology industries -- no ifs, ands, or buts about it.
Although economic revitalization remains our primary focus, we have also been concentrating on addressing other needs of our people.
For example, Hawaii's homeless program has been held up as one of the best in the country. Since 1992, the number of homeless in the state has declined by nearly 40 percent. Moreover, we've partnered with the private sector to develop more affordable housing than any prior administration.
And for our Native Hawaiian community -- our Department of Hawaiian Homelands has designed, built and developed more homesteads during this administration than at any time in the history of the Program.
For the fifth straight year, the federal government has ranked Hawaii among the top three for accuracy in managing the Food Stamp program -- a feat for which the state was awarded a $900,000 bonus. We've moved more people from the welfare rolls to the workplace on a per capita basis than any other Western State. Our work in this area, however, is not over.
As a result of the reforms to the federal welfare laws -- December 1, 2001 -- will be a date to remember. On that day,
3,000 of our families will be moved off the welfare rolls, whether they like it or not. Thereafter, every month 90 to 100 families will lose their benefits.Many of these people work. Yet, because they are earning minimum wage -- they are below the poverty level and qualify for welfare. We must help these people help themselves.
Therefore, I propose an increase in the state minimum wage. Our bill will follow the lead of Alaska, and tie our state wage to the federal minimum wage.
My friends, this is not a partisan issue. A few years ago the federal minimum wage was increased by a Republican Congress with the support of a Democratic President. Congress is currently looking to increase it again. And so should we -- because it's the right thing to do.
Nothing is more important than the care of our children, and we are taking better care of them.
Working with our private sector partners, we've achieved great success in finding loving homes for many of them. Our state posted the highest adoption increase in the nation and received a half-million dollar federal bonus for doing it.
Though we have one of the highest rates of health-insured children in the country, we've set a goal to enroll 100 percent of all eligible children. Through a performance partnership entitled 'Boost for Kids,' we intend to reach this goal.
On July 1st, we'll take another step toward children's universal health insurance in Hawaii. The new program, known as 'CHIP' (Children's Health Insurance Program), will expand coverage to another 4,000 children.
One area where we fall short, however, is dental care. Hawaii's children have one of the worst rates of tooth decay in the nation. We can, and we must, do better. We need to fluoridate our water. For every $1 we spend fluoridating, we'll save $80 in dental expenses down the road.
Last year we approved landmark legislation that will enable Hawaii to significantly expand its role as the Health State.
With sixty percent of the tobacco settlement earmarked for health promotion, we rank among the top nationally in our use of settlement monies for health-related purposes.
We will establish a 'Healthy Hawaii Initiative.' This program will include everything from replacing candy bars in school vending machines with healthier snacks -- to innovative programs to tackle problems such as tobacco use.
PRISONS AND DRUG REHABILITATION
Substance abuse is one of our greatest social problems. It is an issue that affects both public health and public safety. We need to step up our efforts at rehabilitation and prevention. Therefore, I will submit proposals to expand drug treatment programs for those on probation and parole.To fund these initiatives, I ask that you increase the tax on alcohol and tobacco. Doing so will help us raise $4 million in revenues to expand the Judiciary's Drug Court and drug rehabilitation programs in our prisons.
For several years we've been weighing our options on the issue of a new prison. Two years ago you gave me the authority to locate a site, but no money to build one.
While there may be a resurgence of community support for a prison in Hawaii -- there's no getting around the fact that building and operating a new prison in the islands is too expensive. That's why we've been exploring the possibility of building one on the mainland.
I will not support a prison in Hawaii without the authority to fully privatize it. Give me that authority, and I'll immediately begin the search for a new site here in our state.
Time does not permit me to do proper justice to our plans on a number of other issues vital to our future: Agriculture, transportation, the environment, the revitalization of Waikiki, and SWAT figure prominently among this administration's priorities.
But there is one subject that demands our immediate attention -- and that is modernization and reform of our state government.
MODERNIZING STATE GOVERNMENT: PUBLIC EMPLOYMENT REFORM
As we enter the new century, Hawaii has its best opportunity ever to create significant, meaningful change in the way government operates.I am energized by the possibilities that lay before us, and I invite each of you to join us in creating a government that is more responsive to our people's needs -- and one we can afford.
Our civil service system is outdated. If we are to successfully compete in the new century, we cannot continue to operate with a structure geared to the Industrial Age.
An inefficient civil service system takes a tremendous toll on business, residents and the taxpayers of our state. And it robs our state employees of the dignity that comes with being part of an organization respected for its productivity and work culture.
We have made significant progress in bringing about a major, strategic shift of resources.
We reduced the number of fulltime state employees significantly. Compared with when I took office five years ago, the number of positions has declined by 5% from 45,604 to 43,248. And we accomplished this even while adding 900 educators to the Department of Education, and meeting increasing health and welfare obligations in the area of prisons, health, and diagnostic services.
It is not so much the size of the state government, however, that concerns most taxpayers. I don't think there is any question in most people's minds that government will one day grow again -- as school enrollment grows and the state's population increases. Rather, I believe that our people want a government that does its job well, is responsive to community needs, and is easy to interact with. We have been working hard to create that kind of government.
For example, the Department of Commerce and Consumer Affairs' incentive plan, which awards modest bonuses to employees for superior performance has paid big dividends in terms of boosting employee morale and performance. By the end of this year, DCCA is 100 percent self-sufficient.
Without addressing systemic problems -- it's difficult to bring about significant change. We have developed an omnibus reform bill which we will submit for your approval.
I know there is a natural tendency to resist change. But let me say at the outset that we will not propose anything that compromises the benefits promised to current state employees.
Fairness and merit are at the core of our reform proposals.
We propose to decentralize the collective bargaining system. Our counties operate in different market conditions, and the people they serve have different needs.
We believe each county should be able to make their own decisions and bargain independently.
We propose a more timely and flexible recruitment and job classification system. There are more than 1,700 job classifications today, and it takes far too long to hire new employees or process changes.
With the exception of police and firefighters, we propose to restore the right of our public workers to strike and to eliminate the designation of essential workers.
Experience has shown that the mandatory binding arbitration law passed four years ago is seriously flawed. It is too vague and broad, and gives arbitrators too much discretion to make decisions that have no relationship to the state's true fiscal condition.
At the very least, we must reform the process by redefining the existing criteria an arbitrator must consider. Collective bargaining works best when it is balanced.
We cannot continue to condone a process that gives arbitrators the power to award pay raises, and compels the state to increase taxes or cut programs to pay for them.
Beyond civil service, there are great inefficiencies and costs throughout the system which we simply cannot afford.
Take the state's employee health fund. In 1988, the State paid $44 million for Employee Health Fund premiums. This year the cost will escalate to $240 million. Under the current system, a child born this year would see the health fund costs soar to more than $1 billion by his or her 13th birthday. We cannot afford this, nor should we let it happen.
To make the system more efficient, we propose to replace the Employee Health Fund with a Union-Employer Trust Fund. We believe this approach benefits both sides: The State will make a defined contribution and the unions will negotiate collectively with insurers for better rates. Our talks with public labor unions indicate they are very open to this proposal.
For prospective state employees, we propose a new schedule of benefits which will help provide good healthcare at reasonable costs. And for these employees, we will also propose a new schedule of vacation and sick leave benefits which, unlike the current system, will be phased in over a scheduled period.
We propose measures that will implement the concept of 'managed competition' making it easier for the state to privatize and give the affected employees alternatives to being laid off.
These are just some of the 24 reform proposals we will submit for your consideration.
The fundamental challenge before us, however, is to change the existing government culture. Too often, the needs of the community become secondary to an almost mindless deference to 'the system.'
The taxpaying public deserves better. Our state employees who perform deserve more.We must create a workplace that inspires workers to take ownership. A workplace where employees know their purpose, and perform their duties with passion and accountability.
It is important that we do not pursue the illusion of security by avoiding change. In today's fast changing world, the status quo offers the least security of all. It is, indeed, a prescription for failure.
As Franklin D. Roosevelt once said, 'Wise and prudent men have long known that in a changing world, worthy institutions can be conserved only by adjusting them to the changing time.'
Last year was unlike any other. Our reaction to two events that brought the century to a close revealed the true nature of our community.We were inspired and united in pride when June Jones and our Rainbow Warrior football team achieved one of the greatest sports comebacks in history. And we came together as one when the worse workplace tragedy in Hawaii's history stunned our community, devastating the lives of seven families.
And through it all, our spirit of aloha, our humility and character as a community, shined bright. That is the difference. That is what sets Hawaii apart from the rest of the world. Now, and from this moment forward, let us never forget it.
CONCLUSION
Let me close with these thoughts. This is an election year. There will be all kinds of interest groups who will lobby us, hoping to influence our decisions. There is absolutely nothing wrong with this. It is the American Way and this is America.What I believe has sustained me in my 26 years of public service, what has helped me make decisions which I believe to be in the public's best interests is this thought:
There is no greater calling than public service. I believe this with all my heart.To be given the privilege of leading this State into the new century, to be the first generation of elected leaders of this century whose decisions will set the direction for our State's future is something few people will experience, something which can't be bought.
There are 76 of you, one lieutenant governor and one governor. What a great privilege, what a great honor it is to represent the future of 1.2 million people. What a great duty we have been given.
These thoughts have sustained me in difficult times and they have inspired me during my proudest moments.
We owe it to our people not to coast. We owe them the courage and wisdom to make sound decisions. We owe them a better and greater Hawaii. We owe them hope.
And working together, we will make it happen.
Thank you.
Economy | Education | Diversification | Technology | Prisons | Government Reform
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