State offices underreport revenue from land trusts, OHA claims

The Office of Hawaiian Affairs says state agencies have been vastly under­reporting to the Legislature the amount of revenue they are generating from the state’s public land trust and that OHA’s share of that revenue should be more than double what it’s currently receiving.

Currently, OHA receives $15.1 million annually in revenue generated from the land trust that is to be used for the benefit of Native Hawaiians, which makes up about one-third of its core operating budget. Agency officials said they should instead be receiving at least $35 million during a brief­ing Thursday in front of the Senate Water and Land Committee and Senate Ways and Means Committee.

Sen. Kai Kahele, who chairs the Water and Land Committee, said he will likely seek a state audit of the reporting system when the Legislature convenes in January.

The land trust is composed primarily of crown and government lands that were ceded to the United States following the 1893 overthrow of the kingdom of Hawaii, which the U.S. Congress has recognized as illegal. Control of the lands, which include about 1.4 million acres, was subsequently transferred to Hawaii when it became a state, and the 1959 Admission Act requires that the lands be used for several public purposes, among them “the betterment of conditions of native Hawaiians.”

The Hawaii Constitution was amended in 1978 to stipulate that a share of the revenue from the land trust be transferred to OHA for specifically that purpose. In 1980 the Legislature specified this amount should be 20 percent.

However, Native Hawaiians and state officials have been sparring over how to interpret and calculate this 20 percent ever since. In 2006 the Legislature agreed to a specific dollar figure of $15.1 million, as an interim amount that must be transferred to OHA annually. At the time, that amount appeared to proximate about 20 percent of revenue from the public land trust.

However, OHA says that recent financial reviews that it commissioned of the land trust, as well as the state’s own accounting, show that the state has been generating significantly more revenue from ceded lands than it’s been reporting and that the $15.1 million falls far short of the 20 percent of total revenues that Native Hawaiians are entitled to.

State agencies reported only $177 million in total revenues for fiscal year 2016, for example. But an independent accounting firm hired by OHA found this figure was instead $425 million.

Of that total, OHA argues that it is entitled to about $35 million when various agreements with the state about what should and should not be factored into OHA’s share are taken into account.

Thursday’s hearing included testimony from multiple state agencies on how they have been reporting their revenue from public trust lands. Department heads said that at times they haven’t always known what lands under their control are ceded lands and which are not, while there remain unsettled questions about what types of revenues should comprise OHA’s share.

“What I’ve seen today and what we’ve seen from some of the answers is really an honor system of reporting and categorizing and collecting various receipts from different agencies,” said Kahele near the close of the hearing. “It causes OHA to second- guess if those 20 percent receipts are accurate. It forces them to spend money on internal audits and time-consuming efforts to verify those amounts. And I think even when those audits come in, they are still unsure if those numbers are being reported 100 percent with accuracy.”

At the same time, Kahele said OHA needs to be more accountable for how it manages funds to benefit its Native Hawaiian beneficiaries.

OHA unsuccessfully introduced bills in the Legislature in 2016 and 2018 that would increase its share of public land trust revenues. Sterling Wong, OHA’s public relations officer, said that during this upcoming legislative session, the agency will introduce a bill to address reporting deficiencies.

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