It may not yet be time to retire Hawaii’s “Rusty Scalpel” competition.

A pair of good-government organizations have bestowed the ignominious annual award in recent years to the worst piece of legislation at the state Capitol produced using the “gut and replace” tactic that dodges democratic lawmaking principles rooted in Hawaii’s Constitution.

The Hawaii Supreme Court laid down a precedent-setting November ruling that invalidated a 2018 law stemming from a gut-and-replace maneuver, designating certain aspects of the practice as unconstitutional.

Yet at least two examples of bills that could easily be considered an affront to the court’s decision popped up recently at the Legislature.

One measure, House Bill 510, had two public hearings and three readings last year in the House when the bill had to do with providing a vehicle registration fee tax credit for certain low-income taxpayers. House members unanimously approved the bill over a year ago.

But now, HB 510, which automatically carried over to this year’s legislative session in the second year of the Legislature’s biennium, is something very different.

At a hearing held April 7 by the Senate Ways and Means Committee, the bill was converted to only extend and make permanent Hawaii’s earned income tax credit. On Tuesday, the full Senate voted 25-0 to approve the bill.

Sandy Ma, executive director of Common Cause Hawaii, which challenged the 2018 law with the League of Women Voters of Honolulu, called HB 510 “problematic” in the context of whether it meets the court’s new standard for being germane to versions that received public input and lawmaker consideration last year.

“This is still taxes, but it’s two completely different taxes,” she said.

The other bill that Common Cause is aware of as a possible example of reconstructed legislation that could be struck down in court if challenged is Senate Bill 775.

This measure, also introduced last year, proposed to raise Hawaii’s transient accommodations tax rate, and as such was passed last year by two Senate committees and a 25-0 vote in the full Senate.

On April 1, the House Committee on Labor and Tourism, along with the House Finance Committee, announced that a public hearing had been scheduled on a proposed new draft of the bill.

The current draft no longer includes a rate increase, but instead aims to create and fund a commission that would help manage local natural resources.

This commission, as proposed in the bill, would receive $30 million in TAT revenue to distribute to nonprofits as well as local government agencies to benefit parks, beaches, marine habitat and other local natural resources.

Ma said she’s not as concerned about this bill being potentially unconstitutional because it seems like it could meet the court’s germaneness standard.

“It seems like it’s pushing the boundaries, but it’s doing different things with the TAT,” she said.

Generally, Ma doesn’t believe that lawmakers, who took an oath to uphold the state Constitution, are disregarding that oath or flouting the law.

“I don’t think our legislators are saying, ‘Here’s our Supreme Court decision and we’re not going to abide by it,’ ” she said. “But … boundaries are tested.”

Brian Black, executive director of The Civil Beat Law Center for the Public Interest that represented Common Cause and its co-plaintiff in the 2018 case, said his impression is that lawmakers have dialed back the quantity and egregiousness of gut-and-replace actions this year compared with past years.

“I think the Legislature has been working to be more careful about these issues,” he said.

Overhauled bills

Gutting and replacing bill contents has long been bemoaned — sometimes as an unpleasant but necessary emergency tool, and sometimes as a flat-out underhanded bad practice.

For instance, lawmakers treated themselves to a 150% pension benefit increase by amending a bill having to do with the state Employees’ Retirement System a day before the end of the legislative session in 1975. The bill was condemned by some legislators yet passed by a close margin.

In 2014, lawmakers overhauled a bill several days before the end of the session so that it would refinance debt on the Hawaii Convention Center as part of a mechanism to use TAT revenue to pay for a conservation easement protecting land at Turtle Bay Resort from development.

That plan was arranged by then-Sen. David Ige, who is now governor, and Rep. Sylvia Luke, who is currently running for lieutenant governor and said at the time that it is “our duty to bend sometimes those rules to accommodate extraordinary situations, and this is one such situation.”

Common Cause and the League of Women Voters debuted their Rusty Scalpel award in 2014 to recognize the year’s most-altered bill whose original content was no longer recognizable because of “surgical techniques.”

They gave the inaugural dishonor to the Turtle Bay easement measure, which began as a bill to spend $3 million of TAT revenue annually on protecting natural resources through a special fund guided by two agencies.

“Regardless of the final proposal’s merits, there was no compelling reason not to extend the session and hold public hearings on this important amended bill,” the two organizations said in their award announcement. “It disrespects Hawaii’s Constitution when a legislative committee adopts bill amendments with no rational connection to the subject of the bill referred to that committee.”

Other award winners include a 2019 bill that authorized $350 million to redevelop Aloha Stadium lands after starting out as a piece of environmental legislation, and a bill last year that simply aimed to abolish the Hawaii Office of Aerospace Development but ended up doing a whole host of other things that included eliminating dedicated TAT allocations to counties and the Hawaii Tourism Authority.

The 2018 Rusty Scalpel winner spurred the legal challenge, and represented a pretty dramatic example of gut-and-replace on a fairly innocuous bill that originally required the state Department of Public Safety to produce performance reports and ended up requiring the state to consider designing new public schools so they can serve as hurricane shelters.

Plaintiffs lost in state Circuit Court, but appealed and won in Hawaii’s high court three years after filing their complaint.

Since then, there’s been some misconception that the gut-and-replace practice has been outlawed, and varying views on what exactly runs afoul of the new standard.

Colleen Hanabusa, a lawyer and former Hawaii Senate president who represented the Legislature in the 2018 legal case, recently told members of a board guiding the city’s rail project that there’s no prohibition on the practice.

“It’s not unconstitutional,” she said at a March 25 Honolulu Authority for Rapid Transit board meeting she chairs. “They (lawmakers) can do it, and it really does come down to whether somebody is going to challenge it.”

Legal challenges

Potential future legal challenges to gut-and-replace legislation likely would be easier because ancillary issues were decided in the 2018 case. However, Black said a very high standard exists to prove that a piece of legislation is unconstitutional under the new germaneness standard.

“There’s an extremely high bar for cases that challenge the constitutionality of legislation,” he said. “It can’t be a close call.”

Hawaii’s Constitution simply says that no bill shall become law unless it passes three readings in each house on separate days.

The Hawaii Supreme Court ruled in its 3-2 decision that this reading requirement begins anew “after a non-germane amendment changes the purpose of a bill so that it is no longer related to the original bill as introduced.”

Additionally, the ruling, which applies prospectively but not retroactively, states: “In sum, the constitutional history of the three readings requirement indicates that the framers intended the rule to provide notice of a bill’s contents, facilitate informed debate, prevent hasty legislation, and provide the public with notice and an opportunity to comment on proposed legislation. In order to effectuate this intent, a bill must retain some common attributes between readings. Thus, we are convinced that in order to satisfy the three readings requirement, a bill at each subsequent reading must bear some resemblance to the previous versions read beyond merely having the same title and number.”

Sen. Donovan Dela Cruz, Ways and Means Committee chairman, contends that shifting HB 510 from providing one kind of tax credit to another doesn’t violate the germaneness standard because the same section of Hawaii Revised Statutes deals with both tax credits.

“It’s germane to the section,” he said. “It’s the same section.”

House Speaker Scott Saiki had a different take on the bill.

“At first blush, it does not meet the standard,” he said. “It’s replacing the content with an entirely new tax credit.”

On Thursday, the House indicated that it disagrees with the Senate’s version of HB 510, thus positioning the bill for possible conference committee negotiations.

Also on Thursday, the Senate disagreed with the House version of SB 775 that now deals with a natural resources commission.

It’s possible that lawmakers could address issues over constitutionality in bills that have gone through a gut-and-replace procedure by holding additional readings, possibly in a special session. Or such bills could die, or receive a veto from Gov. Ige.

If any become law, Ma said directors of her organization and the League of Women Voters could consider preparing a 2022 Rusty Scalpel award or maybe even another lawsuit.

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Staff writer Dan Nakaso contributed to this report.