RELATING TO HAWAIIAN AFFAIRS.

SB3307

THE SENATE

S.B. NO.

3307

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to hawaiian affairs
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
�
In Act 226, Session Laws of Hawaii 2022 (Act
226), which in part established the public lands trust working group, the
legislature stated in relevant part:

����
"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:

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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
.)

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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.

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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.

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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.

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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.

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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."

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In 2022, the legislature found 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 earlier.

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Act 226
was enacted to:

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(1)
�
Increase the office
of Hawaiian affairs' interim annual share of the income and proceeds of the
public land trust beginning in fiscal year 2022-2023 from $15,100,000 to
$21,500,000;

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(2)
�
Appropriate
$64,000,000 to the office of Hawaiian affairs; and

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(3)
�
Establish a public
land trust working group (working group) to determine the pro rata share of
income and proceeds from the public land trust due annually to the office of
Hawaiian affairs after June 30, 2022.

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The legislature finds 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 will be a geographic
information system that is intended for 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 or county agency must submit
comprehensive lists of its land and encumbrance inventories.

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The legislature further finds that the
working group established under Act 226 was assigned to:

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

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

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(3)
�
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.

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In December 2023, the working group
submitted to all state agencies that hold title to, maintain management control
over, or otherwise use ceded lands, a written request to provide information,
data, documents, and maps to ensure that those agencies have completely and
accurately identified and reported to the department of land and natural
resources:
�
(1) all ceded land parcels
for the purpose of an inventory; and (2) all income and proceeds collected or
received from the public land trust.

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The working group has been informed
that the last financial review by an outside independent accounting firm of the
pro rata share was the fiscal year 2015-2016 financial review initiated by the
office of Hawaiian affairs.
�
At the 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 been
no new financial review since the 2015-2016 financial review.
�
The 2016 financial review cost $145,404.

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The legislature notes that Act 178,
Session Laws of Hawaii 2006 (Act 178), requires the department of land and
natural resources, with the cooperation of the department of budget and finance
and any other state department or agency that uses or manages public lands, to
provide an accounting of all receipts from lands described in section 5(f) of
the Admission Act for the prior fiscal year.
�

The working group has been informed that state agencies' self-reported
information for the purposes of these reports is not audited or reviewed for
accuracy by the department of land and natural resources.

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The working group has been informed
that work began on the process to procure a consultant for the information
system after the enactment of Act 54 and that 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 by an outside independent
consultant.
�
The final amount for the
creation of the information system and training was $340,382.

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As part of the implementation of the
information system, all state and county agencies that hold title to land are
required to submit their entire land inventory, regardless of the public land
trust status, regardless of whether there are any encumbrances on the land, and
regardless of whether revenue is being generated on the land.
�
All state and county agencies are
additionally required to submit encumbrances that they have issued over
state-owned and county-owned land, regardless of whether they hold title to
that land or not and regardless of whether they were revenue generating.
�
This includes all encumbrances, including
leases, permits, right‑of‑entries, and easements.
�
The goal was to have all encumbrances issued
over state-owned and county-owned land represented in the information system.

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As with the reporting to the
department of land and natural resources on public land trust revenues, the
information system is also based on self-reporting by state agencies and the
counties.
�
There are some disclaimers
about the information.
�
The department of
land and natural resources has encouraged all state and county departments to
regularly update data in the system.
�

Updates, however, are also based on self-reported information.
�
The legislature believes that independent
third‑party professionals need to evaluate this practice.

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The working group has been informed
that when a parcel consists of both ceded and nonceded lands, the state
agencies use a "rule of thumb" to determine whether a parcel is ceded
or not.
�
When more than fifty per cent of
a parcel is ceded land, it is categorized as ceded.
�
The working group has been unable to
determine whether this is detrimental to the calculation of the office of
Hawaiian affairs' pro rata share.
�
The
legislature believes that independent third-party professionals need to
evaluate this practice.

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The working group has been informed
that there are many parcels without tax map key numbers in the information
system and therefore may not be included in the system.
�
This is particularly so for submerged lands,
which are generally considered public land trust lands.
�
The legislature believes that independent
third-party professionals need to evaluate how to include these parcels so that
the information system contains the complete and accurate inventory.

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The working group has been informed
that the lands under federal jurisdiction are not included in the information
system and that the counties do not report any of the revenue from the public
land trust to the department of land and natural resources for the purposes of
the annual accounting required pursuant to Act 178 (Act 178 report).

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

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The working group has conducted
research and has determined that the services of one or more third-party
independent consultants with the necessary financial, accounting, and land
inventory expertise will be appropriate to address the concerns that have been
raised regarding the thoroughness and accuracy of the information system, to
ensure that the working group completes its objectives under Act 226.

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Accordingly, the purpose of this Act
is to
:

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(1)
�
Amend the membership and responsibilities of the public land trust working
group established pursuant to Act 226, Session Laws of Hawaii 2022;

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(2)
�
Require the public land trust working group to submit four reports to the legislature,
as follows:

���������
(A)
�
By August 1, 2027, a first interim report
regarding the Act 178 financial reporting and accounting;

���������
(B)
�
By December 1, 2027, a second interim report
regarding the public land trust inventory;

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(C)
�
By June 1, 2028, a third interim report that
includes a preliminary draft of findings and recommendations regarding Act 178
financial reporting and accounting and the public land trust inventory; and

���������
(D)
�
By October 1, 2028, a final report that
includes proposed legislation; and

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(3)
�
Authorize
the office of Hawaiian affairs to provide administrative support to the working
group in coordination with a third-party consultant.

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SECTION
2
.
�
Act
226
, Session Laws of Hawaii
2022
, is amended by amending section
3
to read as follows:

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"
SECTION 3.
�
(a)
�
There is established a working group to:

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

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

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(3)
�
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.

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(b)
�

The working group shall be
[
comprised
]
composed
of
[
six

members,
three of whom
three shall be
]
the
following:

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(1)
�
Two members
appointed by the governor
[
and three of whom shall be
]
;

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(2)
�
Four members
appointed by the office of Hawaiian affairs board
of trustees
[
.
]
;

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(3)
�
Two members of the senate appointed by the president of the senate;

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(4)
�
Two members of the house of representatives appointed by the speaker of the
house of representatives; and

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(5)
�
One non-governmental community member selected by the members appointed
pursuant to paragraphs (1) through (4).

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The members appointed pursuant to paragraphs
(1) through (4) shall elect a chairperson from among themselves.

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(c)
�

The working group, with the cooperation of any department or agency that
uses, manages, or receives income, proceeds, or any other funds derived from
the public land trust, shall prepare and submit a report of its findings and
recommendations, including any proposed legislation and the amount it
determines for the annual amount of the twenty per cent pro rata share of
income and proceeds from the public land trust, to the legislature.

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(d)
�

The working group shall oversee and be responsible for the completion of
the following tasks, which shall be carried out with the support of independent
third-party professionals retained to fulfill the objectives of the working
group:

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(1)
�
Regarding the public land trust inventory:

���������
(A)
�
Document the current data collection and
reporting processes;

���������
(B)
�
Assess the accuracy, completeness, and reliability
of land parcels in the public land trust information system;

���������
(C)
�
Determine whether the public land trust
information system complies with and fulfills the purposes of Act 54, Session
Laws of Hawaii 2011;

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(D)
�
Identify issues and gaps in reporting on public
land trust inventory and encumbrances across federal, state, and county
agencies;

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(E)
�
Assess the accuracy of the reporting of parcel
trust status; and

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(F)
�
Recommend improvements to reporting
consistency, land inventory accuracy, encumbrance reporting, and assignments of
tax map key numbers to all parcels; and

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(2)
�
Regarding section 5 of Act 178, Session Laws of Hawaii 2006, financial
reporting and accounting:

���������
(A)
�
Document the current processes as to how the
data is being collected and reported;

���������
(B)
�
Validate the accuracy, completeness, and
reliability of the reporting of revenue data derived from the public land
trust;

���������
(C)
�
Identify issues and gaps in reporting revenues
across state agencies;

���������
(D)
�
Assess the accuracy of the reporting of parcel
trust status; and

���������
(E)
�
Recommend improvements to financial tracking
and reporting consistency for all parcels.

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(e)
�
In
addition to the report required under subsection (c), the working group shall
submit to the legislature:

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(1)
�
No later than August 1, 2027, a first interim report with findings from the
preliminary financial reporting and accounting related to Act 178, Session Laws
of Hawaii 2006, required pursuant to subsection (d)(2);

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(2)
�
No later than December 1, 2027, a second interim report with findings from
the preliminary public land trust inventory required pursuant to subsection
(d)(1);

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(3)
�
No later than June 1, 2028, a
third
interim report that includes
a preliminary draft of findings and recommendations regarding Act 178 financial
reporting and accounting and the public land trust inventory; and

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(4)
�
No later than October 1, 2028, a final report that includes proposed
legislation based on the findings and considerations of the third interim
report submitted pursuant to paragraph (3).

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[
(d)
]
(f)
�
The office of Hawaiian affairs shall provide
any necessary administrative support, including preparation of the [
report
]

reports
required by [
subsection (c),
]
this Act,
to the
working group[
.
]
in coordination with a third-party consultant
.
"

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SECTION
3
.
�
No later than fifteen days after the effective date of this Act:

����
(1)
�
The governor shall select one of the
three members of the working group initially appointed by the governor pursuant
to Act 226, Session Laws of Hawaii 2022,
to be removed from the working group; and

����
(2)
�
The president of the senate and speaker of the house of representatives
shall appoint one member each to the working group established by Act 226,
Session Laws of Hawaii 2022, as amended by this Act.

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SECTION 4.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

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SECTION 5.
�
This Act shall take effect upon its approval
.

INTRODUCED BY:

_____________________________

Report Title:

Public
Land Trust Working Group; OHA; Public Land Trust; Inventory; Financial
Reporting and Accounting; Reports

Description:

Amends
the
membership and responsibilities of the Public Land Trust Working Group established
under Act 226, SLH 2022.
�
Requires the
Working Group to submit four reports to the Legislature:
�
by 8/1/2027, a first interim report regarding
Act 178, SLH 2006, financial reporting and accounting; by 12/1/2027, a second
interim report regarding the public land trust inventory; by 6/1/2028, a third
interim report that includes a preliminary draft of findings and
recommendations regarding Act 178 financial reporting and accounting and the
public land trust inventory; and by 10/1/2028, a final report that includes proposed
legislation.
�
Authorizes the Office of
Hawaiian Affairs to provide administrative support to the Working Group in
coordination with a third-party consultant.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.