Standardless Spending
By Tom Yamachika, President We are feverishly trying to spend federal dollars for the common good and busily preparing for a historic election. There are, however, other huge projects in the wings where government agencies are setting up to spend record-setting amounts of money in public-private partnerships. One of them is the Aloha Stadium project, which we have previously written about. Another is the Honolulu Rail project, which has often been the subject of press coverage. Assuming (with some foundation) that the procuring agencies for these projects want to keep their discussion under wraps, does the public have a right to make them disclose details before a deal is reached and papers are signed? Sadly, the answer appears to be no. Remember, we aren’t even operating with a full deck of laws. Our Governor has found fit to suspend a 20-page-long list of statutes in the name of coping with the COVID-19 pandemic. That’s because one of the emergency powers statutes, HRS section 127A-13(a)(3), gives the Governor the power to suspend “any law that impedes or tends to impede or be detrimental to the expeditious and efficient execution of, or to conflict with, emergency functions.” The suspension is supposed to expire in 60 days, but nothing prevents the Governor from making another proclamation on the 59th day saying that we are still in an emergency and the laws are suspended for another 60 days – we are on the 13th such proclamation so far. One of the casualties has been the State Procurement Code, HRS chapter 103D. The Code was suspended in full. Another is HRS chapter 92F, the law governing public access to government records. That one used to be suspended in full, but in May the Governor relented a little, and said that agencies only had to acknowledge receipt of a public records request; deadlines were ripped up so agencies didn’t have to respond to the requests, or produce documents, until they were good and ready. (Anyone want to take bets on when that will be?) Technically, that means agencies don’t even have to go through any competitive bid process. They can just spend money and sign contracts. What if you are a taxpayer who wants to know how tens of millions of taxpayer dollars are being spent? Pretty much out of luck there. “We need to give agencies the maximum flexibility and resources to respond to emergency conditions,” they will probably say. Which means they don’t have time to be bothered by pipsqueak members of the public. So, after acknowledging your request for information, they can put it in a side drawer somewhere, where it may never see the light of day again. What about if you bid on one of these projects and you are told that your bid wasn’t selected? Can you contest the decision like many companies did in the past? Well, no, the law authorizing bid contests (part VII of the Procurement Code) has been suspended too. We need to give agencies the maximum flexibility and resources to respond to emergency conditions. But what do Aloha Stadium and Honolulu Rail have to do with the pandemic? We need to give agencies the maximum flexibility and resources to respond to emergency conditions. Do the Aloha Stadium Authority and HART engage in emergency functions whatsoever? We don’t care, we need to give agencies the maximum flexibility and resources to respond to emergency conditions. I am okay with allowing agencies to buy things for pandemic response. If some government official were to certify that the purchase was related to the pandemic, I would look the other way if the agency wanted to cut some corners in the procurement process. But ripping up the whole procurement law and allowing multi-billion dollar purchases to skate? Please! Doesn’t it sound like anarchy here? Can we stop the insanity?
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Veto of the "Revolving Door" Bill
By Tom Yamachika, President On September 15, Governor Ige released his final list of bills he is vetoing from the 2020 legislative session. The list included House Bill 2124, which some people have called the “Revolving Door Bill.” Currently, the State Ethics Code, in HRS section 84-18, says that after leaving state employment, a person may not represent a client for compensation before that agency for 12 months after employment. It does allow a former state agency employee to become a lobbyist and represent clients before the Legislature, or to represent clients before another state agency. The definition of employee in the ethics code is broad and includes members of volunteer boards and commissions. Thus, a volunteer member of a State Board of Taxation Review can’t practice before the Department of Taxation for the duration of the person’s term and for one year afterward. Tax professionals thinking of joining the Board of Review may find it tough to have their practices restricted for multiple years, which makes it hard to find qualified people to be on that type of volunteer board. We have written about that problem before; that problem still is unresolved. HB 2124 apparently is targeted at people who go from an agency to being a lobbyist or vice versa and wants to make sure that there is no appearance of corruption or impropriety. Under the bill, a variety of elected and appointed positions, including most department heads and all members of the: OHA, agribusiness development corporation, campaign spending commission, Hawaii community development authority, Hawaii housing finance and development corporation, Hawaii tourism authority, and public utilities commission, will not be allowed to represent clients before the legislature or any executive branch agency for the 12-month period after leaving the State. The Governor vetoed the bill because the “additional restrictions imposed on volunteer board and commission members who fulfill an important role in protecting our community through their service without compensation will make it significantly more challenging to attract and recruit the most qualified individuals for service on boards and commissions.” Many of the people at whom the bill was directed, elected officials and department heads, are compensated and are not volunteers, so the objections in the Governor’s message are largely inapplicable. But it seems to us that the bill is flawed for a different reason: it goes too far. The bill is not concerned with preventing corruption, for there are different laws making corruption illegal. The bill addresses the appearance of corruption. If an agency director’s job ends in November and he turns out to be a lobbyist in January, it may seem like something fishy is going on (the appearance) although nothing of the sort is happening (the reality). Ethics laws exist to promote trust in government, and the avoidance of impropriety, in appearance as well as in fact, is important to that objective. But that must be balanced against the reality of the talent market. For the position of Director of Taxation, for example, we probably want someone who knows about our tax laws. Probably the most common way to acquire that knowledge is to work as a tax professional. If we are going to tell potential candidates for such a position that they won’t be able to work in their chosen profession for five or nine years after taking the job, many candidates will rightfully wonder about how they are going to feed their families after their limited term ends. The bill will make the economic pain more difficult to avoid, which may well result in more candidates walking away. If we want to have talented people leading our departments and populating our commissions, we should make their exit strategies easier, not harder. Perhaps if we attract more talented people, we will move toward restoring trust in our government – more than would be possible by heaping restrictions and prohibitions on those people (especially volunteers) who have a genuine desire to help our lot through government service. Govs. Abercrombie & Waihee on Leadership
By Tom Yamachika, President On Tuesday, September 8, the Tax Foundation was pleased to welcome former Govs. Neil Abercrombie and John Waihee III to the first ever virtual annual meeting of the Tax Foundation of Hawaii. During the Zoom meeting, we had a free-flowing discussion of topics, sometimes tightly connected with taxation and public finance, and sometimes loosely connected. Many of the twists and turns in the discussion were driven by audience questions. One of the central themes of the discussion was the COVID-19 pandemic and the economic fallout from it. The governors zeroed in on two principal drivers of our government’s response, namely structural capability and leadership. Structural capability reflects the ability of government to respond to new things. Gov. Abercrombie mentioned that during his term in office he was worried about the State’s information technology infrastructure and tried to implement significant changes to it. Changes did happen, but vestiges of older technologies stubbornly remained – such as the two fax machines that the Department of Health’s contact tracing program has relied on to receive reports of new and suspected cases. Structural capability also reflects the ability of people in it to respond with creative, out-of-the-box thinking, such as the COVID-19 testing effort in the Interstate H‑3 Harano Tunnels spearheaded by Deputy Director of Transportation Ed Sniffen. Leadership, loosely defined as the ability to motivate people to do what you want when they might not be willing to do it without the motivation, is an ability (or lack thereof) often cited in describing a government’s response. Gov. Waihee identified three essential aspects of leadership. First, there must be no corruption. If the public thinks you as a leader are doing something wrong, they will have less motivation to follow you. Second, there needs to be openness, and third, there needs to be clear communication to the constituency of what and why. The electorate doesn’t like to be told to shut up and do what they’re told. They need to have some sense of not only the desired behavior but also the reasons behind it before they are able to buy in. The openness aspect seemed to be lacking at least in our government’s initial response to the crisis. When the emergency proclamations giving us the stay-at-home orders and quarantining came down from the fifth floor of the Capitol, the Governor suspended in its entirety the state’s chapter of mandating public access to government records, and suspended a large part of the state’s open meetings laws. The Governor walked back the suspensions a little at the beginning of May, but it seems that the tone and direction of the executive branch already had been set. Not even the Legislative Auditor was able to obtain cooperation with its information gathering efforts at the Department of Health or the Department of Education. When it is that tough for a government agency to get answers, woe be to the press and the public who are trying to find essential information. When government is challenged in structural capability or leadership, Gov. Abercrombie suggested that a possible solution is to fill in the gap with a public-private partnership, such as is being tried with the Aloha Stadium grounds. Of course, safeguards need to be in place to be sure that the interests of the public are protected, but many situations present opportunities for win-win situations. Our thanks once again go out to former Govs. Abercrombie and Waihee for such a thought-provoking discussion! |
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