In a bold act of legislative positioning, House Finance chairman Marcus Oshiro dished up a complete reorganization of the Department of Business and Economic Development and Tourism, including it in the House version of the state budget. DBEDT now faces a diaspora to other departments. (See http://www.thinktechhawaii.com/reorg.htm for the committee report).

Last Monday, the bill passed third reading, with enough votes to theoretically override a veto should that become necessary. It was then sent to the Senate, where it will be heard by the Ways and Means panel.

In the crisis, the budget bill is the most important bill of the session, and it is historic in many ways. It offers profound criticism of DBEDT's management and strips away 90 percent of DBEDT's attached agencies, funding and power.

NO HEARINGS

Although no hearings were held on the question, Oshiro said he had talked with people who work with the affected agencies. He said some of them "welcomed" the changes and some "felt a sigh of relief and expressed appreciation for getting them away from DBEDT." It might have been complicated for some of them to appear and testify in public.

The budget bill moves three of the five DBEDT divisions, including the one doing economic research, to other departments. It also moves about a dozen of the boards attached to DBEDT. Other bills establish a new Department of Tourism and do away with DBEDT's tourism functions.

The High Tech Development Corporation, the Small Business Regulatory Review Board and the Research and Economic Analysis Division go to the Department of Commerce and Consumer Affairs. The Hawai'i Community Development Authority and the Land Use Commission go to the Department of Land and Natural Resources. The Hawaii Housing Finance and Development Corporation goes back to the Department of Human Services.

The Aloha Tower Corporation and the Foreign Trade Zone go to the Department of Transportation. The film offices go to the State Foundation on Culture and the Arts. Under a separate bill, the Natural Energy Laboratory of Hawai'i Authority goes to the University of Hawai'i.

And their funding goes with them.

ENERGY ISSUE

Oshiro's report found that DBEDT had failed to perform on energy: "DBEDT has been unable to provide a clear plan with specific performance measures and goals. Therefore, the approval of any further funding for the Clean Energy Initiative as currently proposed would be irresponsible." It was also based on money concerns — he said his committee is motivated by a desire to get "the most bang for our buck."

DBEDT Director Ted Liu has had increasingly adverse relationships with legislators, the people who work under him, and also the tech community. He was criticized for soliciting donations to fund a "trade mission" to Asia. And last year, he was the target of an investigation into favoritism regarding the awarding of a contract to manage the Hydrogen Fund. Liu denied wrongdoing, but his popularity has degraded to a new level.

Liu's management has to be a major factor in the reorganization, one that goes well beyond his performance under the Clean Energy Initiative. The reorganization is undoubtedly designed to minimize the risks generated by his management style and the likelihood of similar difficulties going forward.

When Liu learned about the reorganization, he said he was "surprised" by it. He disagreed with the changes and said he expected "big disruptions." Gov. Linda Lingle said the reorganization was "personality-based," "made no sense," was "ridiculous," "silly" and "done in the middle of the night." She said DBEDT is her "most productive department."

DEEP BACKGROUND

It was not always thus. Lingle's original disdain for DBEDT is discussed in Ben Cayetano's book "Ben: A Memoir, from Street Kid to Governor," where on Page 420 he says, "Once during the (1998) campaign, she proposed eliminating (DBEDT). DBEDT, she argued, was in part to blame for the state's economic woes; eliminating it would save hundreds of millions of dollars."

After she was elected governor, one of her first initiatives was to minimize or abolish the DBEDT agencies. She cut their budgets and required them to be "self-sustaining." This made it difficult for them to perform their statutory duties.

When first organized, the High Tech Development Corporation and the Natural Energy Laboratory of Hawai'i Authority were supposed to have autonomy, and they had their own boards and budgets. Their attachment to DBEDT was only "administrative." Liu has nevertheless dominated them. He forced his projects on them, commandeered their staffs, took their funding and micromanaged their CEOs. This made it even more difficult for them.

Liu's high-flying commercial development projects for HCDA and Aloha Tower Corporation led only to controversy. He pushed A&B's project in Kaka'ako, but abandoned other more important life science projects there. Although NELHA was organized as an energy laboratory dedicated to energy and science, Liu favored commercial development, namely deep-sea bottled water. Only through the Herculean efforts of Chief Executive Officer Ron Baird has it returned to science.

Beyond that, stories of staff discontent have been leaking out for years. Those stories have wended their way into the back channels of the Legislature, so it should be no surprise to Liu or Lingle that systemic solutions would surface.

PROS AND CONS

Oshiro was right for more reasons than those articulated in his report. The problem is real, the bill is real, and it has every chance of removing a pocketful of problems in state government.

When Lingle took office as mayor of Maui in the 1990s, she was concerned about the entrenched county department heads. Rather than firing them, she moved them like musical chairs, assigning each to a new department. She prevailed. Now the tables are turned. Another irony.

An Advertiser editorial on March 16 disagreed with Oshiro's criticism of Lingle's energy plan. One reader said that it was "off the mark" and that the administration has produced only rhetoric. In fact, the administration has done little to encourage local energy entrepreneurs. And it has refused to issue Act 221 tax credit comfort letters to energy entrepreneurs, shutting them out because Lingle felt that energy projects are "too expensive." Don't we want them?

STEPS TO FOLLOW

The bill will go to Senate Ways and Means, chaired by Donna Mercado Kim, who conducted both the trade mission and Hydrogen Fund investigations. It is likely to receive a warm reception there.

Of course, it is by no means certain that this reorganization will pass — reorganizing anything in government is difficult. Assuming the reorganization does pass, the governor will undoubtedly want to veto it. Will she able to do that?

Article V of the state Constitution gives the Legislature broad power to organize and reorganize the executive-branch departments. Article III gives the governor a line-item veto for budgetary items in budget bills. But it's not so clear she can use the line-item veto for something that is not a line-item. Whether the governor can veto the reorganization without vetoing the whole budget will depend on how the final bill is written.

BENEFITS GALORE

Although we missed a Constitutional Convention in last year's election, this reorganization is something that could have come out of such a convention. A Con-Con and a constitutional amendment for this reorganization would have taken a year or two and millions we couldn't afford. But this, this is refreshing.

As Marcus Oshiro reported, this reorganization can allow a downsized DBEDT to refocus on energy and technology and "to flourish under new direction more in line with its core goals and functions." Perhaps it can do a better job that way.

Could tech benefit by these changes? Yes, if for no other reason that under the bill, various tech agencies would be out from under a department that has blocked the road.

A return to autonomy is critical. If the director of the attached agency's new department is likewise inclined to micromanage it, the benefit of the move would be defeated. So what's missing is a definition of what it means for an agency to be "administratively attached." That definition should specifically preserve the agency's autonomy.

Oshiro's reorganization appears to be thoughtful and challenging. It would test and strengthen these agencies, and could make them more productive. Sometimes adversity leads us to clarity and reform. This budget crisis has given us a serendipitous opportunity to improve our government. We should make the most of it.