Hawaii Education Department braces for severe budget cuts

State education officials say that between a new round of possible state budget cuts on top of a looming “federal fiscal cliff,” they are bracing for a triple punch to the funding of Hawaii’s public school system.

All state departments this week have been directed by the state Senate to prepare two proposals for cuts to their general funds — one scenario for reductions of 10%, another at 15%. The reduction proposals are meant to help maintain fiscal balance as costs from the Maui wildfire disaster are especially for shelter.

For Hawaii’s 258 public schools and 37 public charter schools, which usually work under an operating budget of roughly $2 billion, that equates to “significant” reductions ranging from $213 million to $320 million, Brian Hallett, assistant superintendent and chief financial officer in the state Department of Education Office of Fiscal Services, said Thursday.

“To cut it at that magnitude is very reminiscent of, you know, when we have to start talking about issues as horrible as furloughs. … That’s certainly not the first choice, and that’s something that we’ll be communicating,” Hallett told a meeting of the state Board of Education.

But the DOE is also already facing a dramatic funding shift with the Sept. 30 conclusion of $639 million in COVID-19 pandemic federal aid. The shutoff of that historic supplement means the end of an average of about $170 million per year.

All of that is on top of major reductions to the state school board’s initial supplementary of $198.2 million for the DOE’s operating budget for fiscal year 2024-2025, and $273 million for capital improvements, both of which were slashed in Gov. Josh Green’s budget proposal to the state Legislature.

The DOE has been pleading for money for pandemic student recovery and inflation, but some state lawmakers want the DOE to do a better job away obsolete programs.

State schools Superintendent Keith Hayashi said at the Thursday BOE meeting that all state departments were told by the state Senate this week to devise the two scenarios for making state general-fund cuts.

A memo from state Sen. Donovan Dela Cruz (D, Mililani-­Wahiawa-Whitmore Village), chair of the state Senate Ways and Means Committee, directed departments to submit their lists of reductions for the 10% and 15% budget-cut scenarios by 4 p.m. Thursday.

“We’re very appreciative of the governor’s budget. We’ve been working very hard to advocate for additional funding,” Hayashi told the board. “With this new ask of the department, that is very concerning for me.”

Hallett said the understanding is that such cuts would be “a one-time reduction. We understand the motivation is concern about balancing the state’s financial plan, in particular with cost escalations in relation to Maui,” primarily in housing, Hallett said. “So we are looking to come up with a list to meet the requirement.”

Hallett did not provide details about such a list of possible DOE budget cuts. However, to lend perspective to the size of such a budget cut, Hallett said the dollar figures are about the equivalent of 3,000 teacher positions, although he and other DOE officials said cutting so many positions would not be realistic.

The DOE employs about 13,000 teachers.

“There’s no good, easy option for this, and we’re hoping that it will not be necessary,” Hallett said. “We hope it’s just an exercise.”

Hallett said state school board policy calls for the DOE to ask that a budget cut be done in a lump sum and left to the BOE to decide on individual line items. However, to satisfy the requirements, the DOE would submit “a range of options,” he said.

Several board members have pointed out that the DOE continues to work on resolving COVID-19 pandemic-related learning loss and social-emotional trauma among many of its 168, 000 students, especially those in disadvantaged demographics who were affected disproportionately. BOE members also have raised concerns how budget cuts might affect progress on the board’s 2023-2029 strategic plan for improving learning, staffing and operations.

Dela Cruz, in his letter to Hayashi on department budget reductions, said the proposed cuts could come out of the base budget, budget adjustments and existing cash balances within special funds.

Dela Cruz also described how emergency appropriations to the state major disaster fund in the wake of the Maui disaster are reducing state budget carryover to “critical levels.”

“The projected carryover for (fiscal year 2024) has been reduced from a starting balance of $1.5 billion to $611.5 million, ” he wrote. “With the additional funding requests from the Governor to address the on-going West Maui shelter needs, this carryover is projected to be further reduced to down to $154.4 million” at the end of fiscal year 2025. “If additional State expenses are incurred beyond our existing liabilities and commitments for sheltering, this will only be further reduced.”