Gap in funding questioned

While the Hawaii Supreme Court already has dinged the state for failing to provide sufficient funding to operate the Department of Hawaiian Home Lands, the debate now turns to what constitutes sufficient funding.

Is it $25 million, for instance, over the current two-year budget cycle, as DHHL argues?

Or is it an amount far lower than that, as the state administration maintains?

Arguments on what constitutes adequate funding highlighted a court hearing Wednesday on a motion brought by Native Hawaiians who have sued the state over the funding question.

They also have sued DHHL, saying it has failed to aggressively seek sufficient amounts, as mandated by the Hawaii Constitution, from the state administration over the years.

The gap between what the agency has requested and what the Legislature appropriated has been huge for at least the past couple of decades, with lawmakers approving far less than what was sought.

In the current budget cycle, for instance, the Legislature appropriated only $9.6 million to cover DHHL operating costs, rather than the $25 million sought by the department.

If DHHL and the Hawaiian Homes Commission had been performing their duty to protect the assets of the trust established for the agency’s beneficiaries, they would have sued the state long ago because of the shortfalls, Native Hawaiian Legal Corp. attorney David Kimo Frankel, who represents the plaintiffs, told Circuit Judge Jeannette Castagnetti.

Instead, the department has been using trust money to make up the difference, he added.

"They’re supposed to be guard dogs of trust assets," Frankel told the court. "But they’re acting like lapdogs of the state. They’ve been ripped off by the state for years but have failed to do anything about it."

The hearing focused on the plaintiffs’ request that Castagnetti issue a summary judgment saying the state violated its constitutional duty because of the funding shortfall and that the Hawaiian Homes Commission breached its trust duties by not doing everything in its power, including filing a lawsuit, to seek adequate funds.

The state Attorney General’s Office opposed the request, and the judge told the parties she would rule later.

The lawsuit by six Native Hawaiians from Hawaii island was filed in 2007 and alleged that the state failed to meet its constitutional obligation to provide enough money for DHHL to carry out its mission of getting beneficiaries onto homestead lots in a timely fashion.

After a lower court determined that the issues raised by the plaintiffs were political questions that must be decided by the Legislature, they appealed, and the Intermediate Court of Appeals ruled in their favor. The state then appealed that ruling to the Hawaii Supreme Court, which in 2012 issued what is known as the Nelson decision (for the lead plaintiff, Richard Nelson III).

That decision limited the litigation to the adequacy of the administrative funding, saying other issues, such as whether enough money has been appropriated to develop homestead lots, are political questions that must be decided by lawmakers.

Girard Lau, a deputy attorney general representing the state, told Castagnetti that the Nelson decision linked the administrative funding question to a 1978 baseline of $1.3 million to $1.6 million annually and that subsequent amounts would be adjusted for inflation.

That baseline was established when delegates at a constitutional convention met to frame a proposed amendment on funding DHHL operations, according to Lau.

"The framers were very concerned about how much this was going to cost," he said.

The amendment was approved by voters.

Using the original baseline, the amount today would be about $5 million to $6 million, Lau said.

But Melvyn Miyagi, a private attorney hired by DHHL to represent the agency in this case, disputed the state’s position, saying that nowhere in the Nelson decision does it say what Lau argued.

Even the $9.6 million appropriated by the Legislature was insufficient, Miyagi added, citing the dramatic growth in the department’s workload, including the number of beneficiaries waiting for homesteads.

"We need more money, pure and simple," he said.

Miyagi also disagreed with the state’s position that repair and maintenance costs should be excluded from what constitutes operating expenses.

"That’s just nonsense to me," he told the court.

In addition, Miyagi argued that there was no evidence to show DHHL was negligent in failing to file a lawsuit against the state over the funding question.

While the plaintiffs didn’t specify what would be an adequate amount to cover DHHL’s operating costs, they noted that using trust assets to pay for those expenses violates the state Constitution, which requires the Legislature to appropriate sufficient funding.

Diverting trust money to pay for administrative costs only worsens the problem of getting beneficiaries onto homestead lots on a timely basis, according to the plaintiffs.

Frankel criticized the state for using "hocus-pocus" accounting to argue that money appropriated by the Legislature and money coming from DHHL trust or special funds met the constitutional requirement.

But Lau noted that none of the money came from the leasing of trust lands. He agreed that lease revenue cannot be used for operating costs.

If the court were to grant what the plaintiffs are seeking, Lau added, that would violate what the framers of the constitutional amendment intended and would "wreak havoc on our state budget."

The judge did not indicate when she would make her decision.

CORRECTION: The first name of Girard Lau, a deputy attorney general and the state’s solicitor general, was misspelled in a front-page story Thursday about a funding dispute involving the Department of Hawaiian Home Lands.