SB3336

SECTION 1. The legislature finds that in Act 226, Session Laws of Hawaii 2022, (Act 226), it found the following:

"[I]t must set right and fulfill its trust responsibilities to native Hawaiians, consistent with governmental action across America to address injustices against Indigenous Peoples. It is incumbent upon the legislature to enact legislation that upholds its trust responsibilities and duty of care to native Hawaiians to:

(1) Account for all ceded lands in the public lands trust inventory;

(2) Account for all income and proceeds derived from the public land trust; and

(3) Transfer the full twenty per cent pro rata share of income and proceeds from the public land trust annually to the office of Hawaiian affairs (OHA) for the betterment of the conditions of native Hawaiians.

The genesis and source of the State's public land trust responsibility to native Hawaiians are the historical events that led to the illegal overthrow of the Kingdom of Hawaii; the transfer of approximately 1,800,000 acres of crown, government, and public lands to the United States under the 1898 Joint Resolution of Annexation without the consent of and without compensation to the native Hawaiian people or their sovereign government; the admission of Hawaii as a state of the Union in 1959, with the explicit trust responsibility and requirement in section 5(f) of the 1959 Admission Act that one of the five purposes of the public land trust is that the income and proceeds from the public land trust are to be used 'for the betterment of the conditions of native Hawaiians'; and the 1978 Constitutional Convention's recognition that native Hawaiians are one of the beneficiaries of the public land trust and the creation of OHA to manage and administer the specific allocation of 'all income and proceeds from that pro rata portion of the [public land] trust . . . for native Hawaiians' (Article XII, section 6, of the Hawaii State Constitution). The United States and the courts have consistently affirmed the trust nature of the government and crown lands, including large tracts of ceded lands used for military or other purposes under federal control.

In 1959, as a condition of its admission into the Union, the State of Hawaii agreed to hold certain lands granted to the State by the United States in a public trust for five purposes delineated in section 5(f) of the Admission Act, which provides in relevant part:

The lands granted to the State of Hawaii by subsection (b) of this section and public lands retained by the United States under subsections (c) and (d) and later conveyed to the State under subsection (e), together with the proceeds from the sale or other disposition of any such lands and the income therefrom, shall be held by said State as a public trust [(1)] for the support of the public schools and other public educational institutions, [(2)] for the betterment of the conditions of native Hawaiians, as defined in the Hawaiian Homes Commission Act, 1920, as amended, [(3)] for the development of farm and home ownership on as widespread a basis as possible [(4)] for the making of public improvements, and [(5)] for the provision of lands for public use. Such lands, proceeds, and income shall be managed and disposed of for one or more of the foregoing purposes in such manner as the constitution and laws of said State may provide, and their use for any other object shall constitute a breach of trust for which suit may be brought by the United States.

(Emphasis added.)

In 1978, the people of Hawaii affirmed the State's trust obligation to native Hawaiians by ratifying constitutional amendments from the Constitutional Convention, including article XII, sections 4, 5, and 6, of the Hawaii State Constitution, which established OHA and charged it with managing income and proceeds from the public land trust for the benefit of native Hawaiians. Article XVI, section 7, of the Hawaii State Constitution required the State to enact legislation to comply with its trust obligations. Thus, in 1979, legislation, codified as chapter 10, Hawaii Revised Statutes, set forth the purposes of OHA and described the duties of its trustees.

In September 1981, an initial land inventory by the department of land and natural resources listed approximately 1,271,652 acres, falling woefully short of its duty to provide a complete inventory of the public land trust lands. Additionally, the state land information management system does not include all lands held by all state entities.

Act 273, Session Laws of Hawaii 1980, enacted section 10‑13.5, Hawaii Revised Statutes, to implement OHA's pro rata share and required that OHA receive '[t]wenty per cent of all funds derived from the public land trust[.]' This legislative directive addressing the constitutional mandate has led to a series of lawsuits and legislative enactments concerning OHA's constitutional pro rata share of the public land trust. The State and OHA have labored to resolve the political question of the statutory pro rata share of income and proceeds derived from the public land trust, and payment to OHA.

Act 178, Session Laws of Hawaii 2006, affirmed the State's trust obligation to native Hawaiians by requiring that the department of land and natural resources provide an annual accounting of revenue-generating public trust lands and the amounts derived from those lands to the legislature. The measure also set a fixed amount of $15,100,000 from the pro rata share of the public land trust income and proceeds due to OHA for the betterment of the conditions of native Hawaiians until further action is taken by the legislature for this purpose.

Act 15, Session Laws of Hawaii 2012, (Act 15) was enacted to address past-due amounts, which accumulated during the period between November 7, 1978, up to and including June 30, 2012, of income and proceeds from the public land trust owed to OHA by implementing an agreement between the State and OHA for the State to convey certain lands in Kakaako, Oahu, to OHA valued at approximately $200,000,000. Act 15 did not, however, address the State's constitutional obligations relating to OHA's twenty per cent pro rata share of the income and proceeds from the public land trust generated after June 30, 2012. Notably, a 2015-2016 financial review initiated by OHA found that the minimum amount of total gross receipts from sources that OHA has historically claimed was approximately $394,322,163 in the fiscal year 2015-2016. Twenty per cent of this gross amount is approximately $78,900,000.

The legislature finds that to uphold its constitutional trust obligation and duty to native Hawaiians, it must enact another legislative measure in light of the information, data, and facts provided to the legislature by state agencies since the enactment of Act 178, Session Laws of Hawaii 2006, more than a decade ago."

The legislature recognizes that Act 54, Session Laws of Hawaii 2011, (Act 54) mandates the establishment of a comprehensive information system to inventory and maintain information about the lands of the public land trust as described in section 5(f) of the Admission Act and article XII, section 4 of the state constitution. The department of land and natural resources worked with a consultant to develop a public land trust information system (information system) to satisfy the requirements of Act 54. The information system is a GIS-based system that aims to be a complete inventory of all state-owned and county-owned lands, as well as a complete inventory of encumbrances issued by state and county agencies over these lands. To meet these goals, each state and county agency must submit comprehensive lists of their land and encumbrance inventories.

The legislature further recognizes that the public land trust working group (working group) was established pursuant to Act 226 to account for all ceded lands in the public land trust inventory; account for all income and proceeds from the public land trust; and subsequently determine the twenty per cent pro rata share of income and proceeds from the public land trust due annually to the office of Hawaiian affairs for the betterment of the conditions of Native Hawaiians.

In December 2023, the working group requested in writing to all state agencies that hold title to, maintain management control of, or otherwise use ceded lands, to provide information, data, documents, and maps to ensure that the agency completely and accurately identified and reported to the department of land and natural resources all ceded land parcels for the purpose of an inventory and all income and proceeds collected or received from the public land trust.

The last financial review by an outside independent accounting firm of the pro rata share of income and proceeds from the public land trust due annually to the office of Hawaiian affairs was the fiscal year 2015-2016 financial review initiated by the office of Hawaiian affairs. At that time, the financial review identified total gross receipts from historically claimed public land trust revenue sources in the minimum amount of approximately $394,322,163 in the fiscal year 2015-2016. Twenty per cent of this gross amount is approximately $78,900,000. The working group found that there has not been a new financial review since fiscal year 2015-2016. The fiscal year 2015-2016 financial review cost $145,404.

Current annual reporting by state agencies to the department of land and natural resources is self-reported and is not audited nor reviewed for accuracy by the department of land and natural resources. This annual reporting is for the purpose of the preparation of the annual accounting of all receipts from lands described in section 5(f) of the Admission Act, pursuant to Act 178, Session Laws of Hawaii 2006 (Act 178 report).

The work began on the process to procure a consultant for the information system after the enactment of Act 54; the development of the information system began in 2012; and the information system was launched in October 2018. Act 54 appropriated up to $360,000 from a land conservation fund for the work performed by an outside independent consultant. The final amount for creation of the information system and training was $340,382.

The implementation of the information system informed all state and county agencies that hold title to land that they must submit their entire land inventory, regardless of the public land trust status, whether there are any encumbrances on the land, and whether revenue is being generated on the land. The goal is to have all state-owned and county-owned land represented in the information system. All state and county agencies must submit encumbrances that they have issued over State-owned and county-owned land, regardless if they hold title to that land. This includes all encumbrances, including but not limited to leases, permits, right-of-entries, and easements, regardless of whether they generate revenue, issued over state-owned and county-owned land represented in the information system.

As to the reporting of public land trust revenues to the department of land and natural resources, the information system relies on self-reporting by state and counties agencies. The department of land and natural resources has encouraged all state departments and counties to regularly update data in the system, but independent third-party professionals are needed to evaluate this practice.

State agencies use a "rule of thumb" to determine whether a parcel is ceded. When the parcel is more than fifty per cent ceded land, it is categorized as ceded. The working group cannot determine whether this disadvantages the calculation of the office of Hawaiian affairs' pro rata share, therefore independent third-party professionals are needed to evaluate this practice.

There are many parcels without tax map key numbers in the information system, including submerged lands, which are generally considered public trust lands. Independent third-party professionals are needed to evaluate how to include parcels without tax map key numbers in the information system so that the information system contains a complete and accurate inventory.

Lands under federal jurisdiction are not included in the information system and the counties do not report any of the revenue from the public land trust to the department of land and natural resources for its annual Act 178 report.

To the knowledge of the working group, there has been no third-party independent audit, review, or evaluation of the completeness and accuracy of the information system; current reporting by agencies for the purpose of the preparing the annual Act 178 report; nor any analysis or comparison of the data in the information system with the data in the Act 178 report.

The working group has determined that the services of a third-party independent consultant with the necessary financial, accounting, and land inventory expertise is appropriate to address the concerns that have been raised regarding the completeness and accuracy of the information system, so that the working group can complete its objectives under Act 226.

Based on the amounts expended for the office of Hawaiian affairs' 2016 financial review and the creation and launch of the information system, which was $495,786, the working group has estimated that approximately $500,000 is needed for the retention of third-party independent professionals.

Accordingly, the purpose of this Act is to appropriate funds to the office of Hawaiian affairs for the retention of third party professionals with the necessary financial, accounting, and land inventory expertise to evaluate and address the completeness and accuracy of the public land trust information system, so that the public land trust working group can complete its objectives pursuant to Act 226, Session Laws of 2022.

SECTION 2. In accordance with section 9 of article VII of the Hawaii State Constitution and sections 37-91 and 37-93, Hawaii Revised Statutes, the legislature has determined that the appropriations contained in Act 164, Regular Session of 2023, and this Act will cause the state general fund expenditure ceiling for fiscal year 2024-2025 to be exceeded by $ or per cent. This current declaration takes into account general fund appropriations authorized for fiscal year 2024-2025 in Act 164, Regular Session of 2023, and this Act only. The reasons for exceeding the general fund expenditure ceiling are that:

(1) The appropriation made in this Act is necessary to serve the public interest; and

(2) The appropriation made in this Act meets the needs addressed by this Act.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $500,000 or so much thereof as may be necessary for fiscal year 2024-2025 for the retention of third-party independent professionals with the necessary financial, accounting, and land inventory expertise to evaluate and address the completeness and accuracy of the public land trust information system, so that the public land trust working group can complete its objectives pursuant to Act 226, Session Laws of 2022, including the hiring of necessary staff and purchase of equipment and professional services. Purchases made with funds appropriated by this Act shall be exempt from chapter 103D, Hawaii Revised Statutes.

The sum appropriated shall be expended by the office of Hawaiian affairs for the purposes of this Act.

SECTION 4. This Act shall take effect on July 1, 2024.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	3336
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII