A recent report by Civil Beat highlights a frustrating scenario for Hawaiʻi taxpayers: the state is currently on the hook for a $100,000 bill to cover unpaid rent and damages left behind by the failed Kaʻu Learning Academy, which closed eight years ago.

Because charter schools cannot take on debt directly, they rely on outside nonprofits and foundations to secure facilities. When those third parties fail, the lingering question is always: who is left holding the bag?

The Hawaiʻi State Public Charter School Commission will undoubtedly point to the newly revised Charter Contract 4.1 (which they hastily passed on April 9) as the solution to this problem. On paper, Contract 4.1 is filled with indemnification clauses and “hold harmless” agreements specifically designed to shield the state of Hawaiʻi from the debts, defaults, and liabilities of charter schools and their affiliated nonprofits.

Ideas showcases stories, opinion and analysis about Hawaiʻi, from the state’s sharpest thinkers, to stretch our collective thinking about a problem or an issue. Email news@civilbeat.org to submit an idea or an essay.

Read More

But there are two fatal, multimillion-dollar flaws in the commission’s armor. A liability shield is only as strong as the legal validity of the contract itself, and Contract 4.1 is built on a procedurally tainted foundation and executed through unlawful coercion.

First, the very drafting of this new contract is currently the subject of an active state investigation. The state Office of Information Practices is reviewing an appeal (S APPEAL 26-24) alleging the commission violated the Hawaiʻi Sunshine Law when it established the permitted interaction group tasked with writing the initial framework in July 2025.

By failing to legally define the scope of the group’s authority, the charter commission built its highly touted accountability framework behind closed doors using a procedurally flawed committee.

Compounding this tainted foundation is how the contract was eventually forced upon the sector. Hawaiʻi Revised Statutes §302D-1 explicitly requires a charter contract to be a “bilateral” agreement. This means it must be mutually negotiated, not dictated.

Yet, the commission passed Contract 4.1 as a universal mandate without engaging in the school-by-school negotiations required by law. By forcing independent governing boards to sign a rigid, non-negotiated framework under the implicit threat of non-renewal, the commission has created a textbook “Contract of Adhesion.”

If a contract is built on a procedurally illegal foundation and executed under duress, every protective clause within it can be invalidated by a court. Imagine a future scenario where a charter school’s management organization defaults on a massive facility loan. When the creditors come knocking, the state will attempt to use Contract 4.1 to point the finger back at the school.

The school’s legal defense will be immediate and devastating: The state cannot enforce an indemnification clause from an illegally drafted, unilaterally imposed contract.

Fortunately, there is a systemic solution currently moving through the state Legislature that could prevent these crises altogether.

Senate Resolution 191 and Senate Concurrent Resolution 203 urge the establishment of a Public Charter School Working Group to examine creating a centralized public charter school district or similar service cooperative.

This legislative initiative holds the immense potential to fundamentally restructure how charter schools are overseen and supported in Hawaiʻi.Instead of the charter commission’s current approach (which relies on legally fragile contracts to dodge liability after a school has already failed), a service cooperative would provide proactive structural stability.

By pooling resources and offering centralized support for complex operational and facility needs, SR 191 and SCR 203 offer a pathway to ensure schools succeed, rather than leaving them to sink or swim in isolation.

The $100,000 taxpayer tab for Kaʻu Learning Academy is merely a warning sign. By circumventing open meeting laws and refusing to execute true, bilateral agreements, the commission has not protected the state. Instead, they have shredded the state’s legal defenses.

It is time to abandon punitive, unilateral mandates and embrace the structural reform offered by the Legislature, or else Hawaiʻi taxpayers will be the ones left paying the bill.