Hawaii DOE Faces Roadblocks, Delays In Spending $2 Billion For School Facilities

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Sen. Lorraine Inouye was confident Hilo High School would have a new parking garage for its gymnasium by the end of 2024. The school, which is over 100 years old, already lacked sufficient on-campus parking, Inouye said, and having a garage was essential in case the gym needed to serve as an emergency shelter during a tsunami or fire. 

An architect had begun drawing up plans for the garage before Inouye learned around November that the Department of Education aimed to lapse the $7.4 million allocated for the project — along with over $450 million intended to improve facilities at other schools statewide.

“It’s kind of a crazy situation,” Inouye said.

DOE has over $2 billion in unspent capital improvement program funds at school facilities, but it remains unclear how — or when — the buildup of money will result in campus improvements.

DOE has roughly $880 million obligated in contracts for ongoing projects and another $1.2 billion that will lapse by 2026, according to the department’s website. 

DOE leaders have proposed that the Legislature allow $465 million to lapse, but the department has until June to spend the money. Some lawmakers have argued that unfinished school projects should take priority in the new year. 

“Before you embark on new projects, you’ve got to take care of the old projects,” Sen. Donna Mercado Kim told DOE leadership at a recent Senate briefing. 

On Oahu, Farrington High School is losing out on over $57 million that would have gone toward the construction of a new gym, music building and other campus facilities. The lack of resources for schools, like Farrington, that serve low-income communities only increases families’ distrust of public schools and encourages flight from the public education system, said Rep. Ernesto “Sonny” Ganaden, who represents the Kalihi district. 

“For many of us who represent Title I schools, the CIP list isn’t pork barrel, it’s not pet projects,” Ganaden said. “These are necessary updates to infrastructure.”

While CIP funding for schools has increased in recent years, DOE’s spending has been unable to keep pace. The Covid-19 pandemic only worsened matters, introducing additional delays in the permitting and construction process for school projects. 

At this time, the department has approximately 180 projects under construction and an unspent $130 million in planned projects that it was unable to start over the past three years.

Increasing Funds, Declining Expenditures 

While senators recently criticized DOE’s limited oversight and communication when it comes to handling CIP projects, legislative appropriations may have also contributed to the department’s buildup of funds over time. 

Since 2016, the DOE’s CIP appropriations have steadily increased, with the department receiving nearly $1 billion in the 2021 to 2023 fiscal years. 

Many legislators want to fund attention-grabbing CIP projects, such as new gymnasiums or auditoriums, for schools in their districts, said Cheri Nakamura, director of the He’e Coalition. But, she said, as appropriations for new CIP projects accumulate, it can make it more difficult for DOE to manage projects that are ongoing.  

With approximately 20% of Hawaii schools over a century old, the state needs to better prioritize facility projects, especially when some campuses are in need of immediate repairs to broken bathroom faucets or leaking roofs, Nakamura added.

Legislators also need to balance their own priorities with the DOE’s capacity for construction and project management, added Rep. Amy Perruso. Currently, DOE’s office of facilities and operations has just over 70 job vacancies.

“We do need to make sure that we have the capacity and (the projects) are truly what the school leadership needs and wants, and legislators are not supplanting DOE work with our own projects,” Perruso said. 

As CIP appropriations rose over the past several years, the department’s spending fell. Up until 2018, the department typically spent 70% or more of its appropriated CIP funds. But in the following years, the department spent less and less of its CIP budget, until it spent less than 1% of its appropriations in the 2023 fiscal year. 

Several factors have contributed to the recent spending slowdown, said deputy superintendent Curt Otaguro. In particular, the Covid-19 pandemic created supply chain shortages and delays in the permitting process, he said, adding it could take a year and a half to receive a permit for a school CIP project.

DOE faced another roadblock in spending CIP funds earlier this year when legislators denied the department’s request for nearly $150 million in project completion funds. While these funds help to cover unexpected costs that may arise in the construction process, the Legislature appropriated no money in the 2023-25 biennium budget.   

House finance chair Kyle Yamashita said in an emailed statement that the decision stemmed from legislators’ concerns that the department had too many inefficiencies and improper project planning when it came to building school facilities. DOE’s CIP budget already far surpassed the funding allocated to other departments, he said. 

“The denial of the funding aligns the DOE with other Departments in executing its capital improvement projects in a prudent and consistent manner,” Yamashita said. 

Potential Solutions 

Not all state departments have faced the same challenges with spending their CIP funds in recent years. 

During the pandemic, the University of Hawaii went “gangbusters on construction,” said Jan Gouveia, vice president for administration. With the exception of two projects, the university plans to encumber the entirety of its CIP budget totaling over $300 million, Gouveia said.

“We don’t lapse money,” Gouveia said, although she acknowledged the university has seen a decline in its CIP appropriations in recent years. 

Gouveia attributes the university’s success to the reorganization of its facilities and procurement offices in 2016. Before the reorganization, Gouveia added, there was no way to easily track the status of ongoing CIP projects and appropriated funding. 

DOE now faces similar considerations around its possible reorganization. 

In last month’s Senate briefing, Otaguro said no one in the department is responsible for overseeing CIP projects from beginning to end. Senators pointed to DOE’s lack of central organization as contributing to the department’s struggles to spend its CIP funds. 

At the briefing, Ways and Means Chair Donovan Dela Cruz said senators may introduce legislation in the coming weeks proposing changes to DOE’s office of facilities and operations. 

But some officials are more hopeful about the department’s ability to improve.

Over the past few months, DOE has worked on a comprehensive review of its facilities and real estate assets, said Board of Education Chair Warren Haruki. From this review, the department can revise its processes of encumbering and spending its CIP funds as necessary, Haruki added. 

“It’s going to take a long period of time to reap the benefits of this,” Haruki said. 

Chad Farias, executive director of the School Facilities Authority, believes his agency can also help to expedite the spending of CIP funds and the completion of school projects in the coming years. 

SFA was created in 2020 with the intention of overseeing schools’ CIP projects. Right now, Farias said, SFA primarily handles construction projects for charter schools and public preschools. But as the agency expands, it intends to take responsibility for all CIP funds allocated for public schools within the next two years, Farias said. 

He said he plans to revise the process of selecting vendors for CIP projects, using a prequalified construction method that could reduce the time for awarding bids by up to 80%. DOE already uses this process for smaller projects, Farias added, but he’s hopeful that SFA could scale up this approach and apply it to more CIP projects. 

These changes will take time, Farias said. But he believes Hawaii schools have the ability to spend all of the CIP funds they receive from the Legislature.

“I’m not afraid of failing,” Farias said. “I’m only afraid of not getting the opportunity to try.” 

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