Seventeen million dollars. That’s the hole the Hawaii Department of Education has to fill in its school bus budget.

On Tuesday the Board of Education is expected to hear an official recommendation from the department on how to cover the shortfall.

The options on the table include cutting numerous routes and expanding the distance a student has to live from school to qualify for bus service. But a more comprehensive overhaul was also discussed when the board took up the topic at its April 3 meeting.

Hawaii lawmakers agreed last week to provide $25 million for student transportation services. This is $2 million more than the Senate had initially proposed and well above the $20.3 million that was in the House version of the budget bill. But it’s still far from the $42 million the DOE says it needs to maintain services.

“It’s going to be very difficult to fill in that $17 million gap,” Senate Education Chair Jill Tokuda said last week.

She acknowledged that the budget shortfall is “just too much,” but said the state has to be realistic about its financial situation.

“The writing has been on the wall for some time now that business as usual is not sustainable,” Tokuda said. “I thought last year was the wake-up call but perhaps this is the year that everybody understands that we’re serious. Yes, we have to maintain services — such as getting students to and from schools, especially in rural communities — but these types of contracts without competitive bidding cannot happen.”

Civil Beat has been investigating the skyrocketing contracts in its Taken for a Ride series which has documented the drop-off in bidding among longtime school bus companies. The cost of getting kids to and from school has jumped from $47 million in 2007 to some $75 million this year.

The budget conference committee decision to hold transportation spending to $25 million came a week after House Finance Chair Marcus Oshiro lambasted the department for “irresponsible fear-mongering.” Teachers and school officials have been warning that a substantial cut in the budget would leave thousands of kids without a ride to school and could even result in higher drop-out rates.

Lawmakers have said it is beyond time for the department to get runaway student transportation costs under control. But school officials maintain they need a financial cushion to give them more time to address the issue without severe impacts.

Meanwhile, the state auditor’s office is looking into bus services and said in an April 23 email to Civil Beat that it is “making progress” on its audit of student transportation costs. The office’s working papers are confidential, however, so more details were unavailable.

Switch to Single Statewide Contract?

Education Board Chair Don Horner has shown interest in changing to a single statewide contract for bus service, but the department seems skeptical of this significant change in practice.

The action would likely result in Roberts Hawaii being the only local contractor with the capacity to bid and the rest of the state’s dozen or so school bus companies going out of business, Assistant Superintendent Randy Moore told the board at its April 3 meeting.

He also identified “substantial” costs in terminating existing contracts if the single contract were effective for all routes beginning July 1, 2013.

Horner asked Moore at the time to come back with more information on this possible solution. Neither could be reached for comment Monday.

If Hawaii can save millions of dollars by taking on some additional risk, Tokuda said it’s probably worth it.

“There’s a number of things that need to be acted upon much sooner rather than later,” she said.

The end of relatively small contract sizes could open the door for mainland companies to bid.

The nation’s second-largest school bus company, Chicago-based Durham School Services, has been keeping an eye on the developing situation in Hawaii. But Rick Klaus, vice president of sales, said last week that a single statewide contract would probably not interest Durham unless the state provided facilities.

Durham looked at some bids last fall and met with education officials. Among the suggestions the company made to the state was adjusting the bell schedule, Klaus said.

Some school districts on the mainland operate on a two- or three-bell schedule, he said, which allows buses to take more than one load of children to school.

“This requires many fewer buses,” Klaus said.

Hawaii lawmakers looked this session at adjusting instructional time for students and developing multiple standard bell schedules, but the legislation died.

“That would be one recommendation we would make to the state before we were to jump in too deep because what we wouldn’t want to do is to come with a contract that’s, say, 800 buses today and have it be 500 or 600 a year later,” Klaus said. “So for us, not knowing the thought process that’s going on, that’s a big question for us whether that would be a statewide contract or island by island or whatever may be sought in the future.”

Hawaii Provides the Buses?

The department expects the “greatest savings” to come from providing buses to contractors, Moore said.

This would mean including a statement in the solicitation for bids that says bidders may elect to lease new buses from the department at a fixed price per year for the term of the contract, according to a department memo from Moore to Superintendent Kathryn Matayoshi.

Upon award of the contract, the successful bidder would be required to commit either to leasing the buses from the department or providing its own buses, the memo says. Buses could be leased by the department using tax-exempt financing.

The savings would come from bus contractors needing less capital and by reducing one of the barriers to entry or expansion in the market, the memo says.

The department estimates the annual savings, which would be achieved incrementally until all current contracts had been replaced, at $12 million to $15 million, Moore said.

Messages seeking comment from the Hawaii School Bus Association, which represents some 12 companies, were not returned by deadline.

The board’s Finance and Infrastructure Committee meeting starts at 11:30 a.m. Tuesday at the Queen Liliuokalani Building. The full board will hear the committee’s report at its regular meeting at 1:30 p.m.

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