The state Department of Hawaiian Home Lands plans to ask Hawaii lawmakers for more time to spend a historic $600 million appropriated by the Legislature in 2022 with a three-year use deadline.

The move, unanimously approved Tuesday by the Hawaiian Homes Commission despite some concerns, follows the appointment of new DHHL Director Ikaika Anderson in December by recently elected Gov. Josh Green.

DHHL’s request for an extension of unspecified length via an already drafted bill also comes in the wake of a written plan the agency sent to lawmakers Dec. 6 to use the entire $600 million within three years largely to develop 2,727 homestead lots for beneficiaries of DHHL, which has a waitlist of roughly 28,700 applicants seeking homesteads.

Lehua Kinilau-Cano, a DHHL government relations manager, advised commissioners that a surprise problem was discovered with DHHL spending too much money quickly.

Kinilau-Cano said during Tuesday’s meeting that if DHHL encumbers, or contracts to spend, more than $172 million and spends more than $50 million in the fiscal year ending June 30, this could cause the state to have to pay back $412 million in federal coronavirus relief funding.

Such DHHL spending, according to Kinilau-Cano, could push the state out of compliance with a requirement to spend enough money on education in relation to other state spending under the federal American Rescue Plan Act.

To avoid violating the provision, DHHL would have to spend less then planned in the current fiscal year ending June 30 and next fiscal year, leaving DHHL with a “likely difficult” prospect to spend what’s left of the $600 million in the third fiscal year, which ends June 30, 2025, Kinilau-Cano explained to commissioners.

Some commissioners were surprised by the revelation given that the federal spending condition has long been known to lawmakers and all state agencies.

Commissioner Dennis Neves asked how it is that DHHL all of a sudden is responsible for maintaining the ratio between education and other state spending.

“I’m not sure if I’m totally sold on this yet,” he said while the extension recommended by DHHL staff was being discussed.

Randy Awo, another commissioner, also expressed initial confusion and reluctance over an extension request.

“Somehow (DHHL) is now responsible for limiting how much we can actually expend, which I don’t clearly understand,” he said during the meeting.

Anderson, a former Honolulu City Council chair, described the recommended extension as a “responsible action” to let lawmakers know that the commission, which oversees DHHL, would support an extension if the Legislature grants one.

“I’m not at all saying that we cannot, or that we will not, encumber the funds within the existing timeline,” he told fellow commissioners. “I can commit to us all working diligently to meet the existing timeline that we have to encumber the funds. And as I stated in front of the Senate last week, it’s our every intent to be able to do that. But, that being said, realize the time constraints upon the commission, the department and our hardworking staff. If the Legislature will give us an extension … I just believe it would be the responsible action of this commission to accept it.”

At a budgetary briefing last week to the Senate’s Ways and Means Committee and Hawaiian Affairs Committee, Anderson was repeatedly pressed by Sen. Jarrett Keohokalole (D, Kaneohe-Kailua) as to whether DHHL needed an extension.

Anderson would only say that he was not asking for an extension at the moment, and he noted that the commission would have to decide such a thing.

Anderson is scheduled to return Thursday to continue the budgetary briefing before the two committees after some members of the committees criticized Anderson for not being prepared and for requesting homestead development project funding of $62.7 million for the fiscal year ending June 30, 2024, and $139.6 million in the following fiscal year on top of the $600 million appropriated in 2022.

DHHL’s plan to spend the $600 million was produced under the agency’s prior administration, led by William Aila Jr., and approved in September by the commission.

The plan calls for producing 2,727 homestead lots and 177 rental apartments using $540 million, which also includes acquiring some land. Another $60 million would provide other beneficiary aid that could include help with down payments to buy a home and rental assistance.

Green and Anderson have previously indicated that they might want to deviate from the approved plan, which could require the commission to approve an amended plan if changes fall outside of considerable leeway provided for under the existing plan.

Under the Hawaiian homestead program, created in 1921 by federal law and administered by the state since 1959, DHHL beneficiaries must be at least 50% Hawaiian and can receive 99-year land leases for $1 a year but pay for or build their own houses.

The agency has about 10,000 lot lessees but has struggled for over 60 years under state control to do more, in part because of relatively little past funding and expensive infrastructure costs to develop its land, which is often outside urban areas.

DHHL and the Legislature have long been criticized for neglecting beneficiaries, including many who have spent decades on the waitlist and more than 2,000 who have died while on the list.

Cora Schnackenberg, a DHHL beneficiary from Molokai, told the commission Tuesday that she is concerned that an extension will lead to homestead development being pushed back.

“Time is very at the essence here,” she said.

Homelani Schaedel, a beneficiary from Kapolei, criticized lawmakers for putting a three-year deadline for DHHL to encumber all $600 million or have it return to the state’s general fund, but she also questioned the value of an extension.

“We all know what the goal is here,” she said. “We need to get this work done, and we need to get it done now.”