Ka Wai Ola - Office of Hawaiian Affairs, Volume 28, Number 2, 1 February 2011 — Letter to the Governor [ARTICLE+ILLUSTRATION]

Letter to the Governor

Leading up to a meeting with Gov. Neil Abercrombie to discuss past due revenues - and the opening of the 20 1 1 Legislature - OHA Chairperson Colette Machado sent this letter to the Governor. In it, she outlines the longstanding history of OHA's right to ceded land revenues, including revenues from the state's past use of ceded lands for airports, hospitals and housing projects, whieh is grounded in the Hawai'i Consti-

tution. In addition, the Hawai'i Supreme Court has consistently stated that the Legislature must enact legislation to resolve the state's constitutional obligation to Native Hawaiians. Here is the full text of the letter. ■

January 5, 2011 The Honorable Neil Abercrombie Governor, State of Hawai'i Executive Chambers, Hawai'i State Capitol Honolulu, Hawai'i 96813 Dear Governor Abercrombie, Aloha Mai. Best wishes for the New Year as you provide leadership and service to the people of Hawai'i! I am writing to humbly ask for your support of 2011 legislation whieh is designed to fulfill the State's obligation to pay the Office of Hawaiian Affairs (OHA), asrequiredby HRS § 10-13.5, forthe State'spastuse of ceded lands for airports, hospitals and puhlie housing. In the 2010 legislative session, in HB 2672 and SB 2519, OHA proposed fiscally responsible legislation where OHA would receive the $200 million past due settlement amount via payments of $30 million per year beginning in 2015. Recognizing the difficult eeonomie times, OHA's proposal was structured to start the $30 million per year payments in 2015, the year that the State's $30 million per year settlement payments to the Department of Hawaiian Home Lands is scheduled to end. Unfortunately, neither bill was reported out of its respective legislative conunittee. Respectfully, OHA believes that the plan outlined in the legislation proposed in 2010 remains the most effective and just resolution of the State of Hawai'i's obligation to OHA and will urge enactment of similar legislation in the 2011 session. At the same time, OHA will remain open to alternate fair legislative proposals. Overview of the "Past Due" Revenues Issue As you know, OHA's right to ceded land revenues arises out of the 1978 amendments to the Hawai'i State constitution. Article XII of the Hawai'i Constitution established OHA and its right to "ineome and proceeds from that pro rata portion" of the ceded lands transferred to the State at admission, excluding Hawaiian Home Lands. In addition, Article XVI obligated the Legislature to enact legislation to transfer said ineome and proceeds to OHA.

In 1980, the Legislature enacted HRS § 10-13.5 that obligated the State to transfer to OHA: "l\\, ■ n I \ n, 'i" , ■ nl nf all fnnrls , I, 'i'i \ , ', I

from the puhlie land trust". However, in the early years after 1980, the State did not transfer all of the revenue derived from the ceded lands, including ceded lands used for airports, hospitals and housing. While the State has made other significant ceded land revenue payments to OHA, it has refused to make payments for ceded lands used for airports, hospitals and housing.

This outstanding debt is commonly referred to as the "past due" amount. In 1987, 2001 and 2006, the Hawai'i Supreme Court held that the State Legislature has a constitutional and fiduciary duty to enact legislation to satisfy OHA's claims to these "past due" monies. In 2008, the Lingle administration and OHA entered into a $200 million settlement agreement to resolve the past due dispute. However, the settlement required legislative approval and the Legislature withheld approval in the 2008, 2009 and 2010 legislative sessions. In June 2010, OHA petitioned the Hawai'i Supreme Court for a writ of mandamus ordering the Legislature to enact legislation in the 2011 session that resolves these past due claims. In August, the Court denied the petition on the grounds that mandamus is an inappropriate remedy because passage of the legislation requires legislative discretion that is not simply ministerial. Detailed Background on the "Past Due" Revenue Dispute and Settlement Proposal In 1983, OHA instituted litigation to eompel the State to transfer the required 20% revenue on all cededlands. In 1987, the Hawai'i Supreme Court mled that OHA's claims were barred by the doctrine of political question because HRS § 10-13.5 did not provide sufficient guidance as to specific types of ceded land "funds" OHA is entitled to. In the aftennath of the 1987 decision, Governor Waihe'e directed Department of State Planning director Nonna Wong to work with OHA and the Legislature to clarify the ceded land revenues OHA is entitled to. In 1990, the Legislature enacted Act 304 that provided specific guidelines on the ceded land revenues that should be transfened to OHA. Based on those guidelines, in 1993, the State agreed to pay OHA $130 million for amounts owed since 1980, with interest. However, OHA and the State were unable to agree on the amounts owed to OHA under the Act 304 guidelines for the State's use of ceded lands for airports, hospitals and housing projects. OHA Lawsuit I In January 1994, James Duffy, Colbert Matsumoto and Leslie Kobayashi sued the State of Hawai'i on behalf of OHA for failure to pay OHA 20% of revenues from the State's use of ceded lands for airports, hospitals and housing projects. In October 1996, Judge Daniel Heely ruled in favor of OHA. Unfortunately, in 2001, the Hawai'i Supreme Court reversed Judge Heely 's decision on the grounds that a 1997 federal law called the "Forgiveness Act" invalidated a 1990 state law that established guidelines on the ceded land revenues that OHA is entitled to. Despite holding in favor of the State, the high court specifically reminded the Legislature of its obligations to OHA pursuant to the State Constitution and Chapter 10: "Given our disposition of this case, and the context of its complexity, we would do a disservice to all parties

www.oha.org/kwo | kwo@OHA.org NATIVE HAWAIIAN » NEWS | FEATURES | EVENTS

Gov. Neil Abercrombie

Choirperson Colette Maehaelo

involved if we did not acknowledge that the State's obligation to native Hawaiians is finnly established in our constitution. How the State satisfies that constitutional obligation requires policv decisions that are primarilv within the authoritv and expertise of the legislative branch. As such. it is incumbent upon the legislature to enact legislation that gives effect to the right of native Hawaiians to benefit from the ceded lands trust." OHA Lawsuit II In 2003, OHA sued the State for breach of its fiduciary duties by failing to disclose to OHA that it was negotiating the Forgiveness Act to the detriment of OHA. In 2006, the Hawai'i Supreme Court in the OHA II decision acknowledged the validity of the elaim but then dismissed the elaim on the grounds that the statute of limitations had expired in 1999. However, the Court also held that OHA is entitled to revenue from the State's use of ceded lands at the Honolulu International Airport. The OHA II decision also held that the Legislature has a fiduciary duty to enact legislation to resolve OHA's past due claims and the judiciary will step in to enforce any such breach of fiduciary duties: "[A]s in OHA I, given our disposition of these cases and the context of their complexity, "we would do a disservice to all parties involved if we did not acknowledge" the State's continuing trust obligations to native Hawaiians. 96 Haw. at401, 31 P.3d at914. We have repeatedlv stated that the legislative branch is vested with the authoritv to determine how the State satisfies its constitutional trust obligations. However. we have also consistenth recoenized that the mdiciaiy isvestedwith the resvonsibilitv to ensure that trustees. whether puhlie orprivate. upholā their fiduciaiy duti.es." $200 million settlement From December 2004 to January 2008, OHA and the Lingle administration engaged in negotiations on the airport/hospital/housing past due claims. On January 17, 2008, OHA and the State entered into a written settlement agreement that would allocate $200 million to OHA to resolve the past due claims, and a

going forward allocation of at least $15.1 million annually. Consistent with Article XVI of the Hawai'i Constitution, the settlement was conditioned upon implementing legislation. The House and Speaker Say agreed to implement legislation with amendments in HB 266 that were acceptable to OHA and the administration. However,theSenateandPresident Hanabusa opposed the HB 266, and in March 2008 deferred the bill. In response, on March 27, 2008, Attorney General Bennett who supported the bill testified: "As the Legislature itself has recognized, and as is undeniable, the Legislature has always been free to exercise what is the Legislature 's constitutional responsibility to resolve this issue. Indeed, the proposition that after thirty years of controversy, with all the material linaneial facts being matters of public record, the Senate was simply unable to resolve this issue in one session (when it resolves the budget every single year) is just unfathomable." In the 2009 session, OHA returned with proposed legislation that attempted to obtain approval of the $200 million past due settlement but expressly omitted the going forward portion of the settlement. However, SB 995 failed to get out of the conference committee during the 2009 legislative session. At that time, conferees attempted to include, but could not agree on language that would provide for a global resolution of the State's public land trust obhgation to OHA. As mentioned above, in January 2010, OHA proposed legislation where OHA would receive the $200 million past due settlement amount via payments of $30 million per year beginning from 2015. This legislation failed to pass. Writ of Mandamus On March 22, 2010, OHA wrote to the 2009 SB 995 conferees and the Senate President Hanabusa and House Speaker Say wherein OHA stated: "If the Legislature fails to adopt the terms of SB 2519 or HB 2672 or any other fair and constitutionally appropriate legislation during the 2010 legislative session, OHA will ask the judiciary to enforce the Legislature's breach

of its constitutional obligation "to enact legislation that gives effect to the right of native Hawaiians to benefit from the ceded lands trust." There was no response to the letter. On June 2, 2010, OHA filed a petition for writ of mandamus with the Hawai'i Supreme Court seeking a decision ordering the Legislature to enact legislation addressing the past due claims in the 201 1 session. OHA's primary argument was: "The basis for the petition is that the Legislature has violated its eonstitutional obligation under Article XVI, § 7 of the Hawaii State Constitution, its statutory obligation under HRS § 10-3(1) and its fiduciary duties owed to native Hawaiians as trustee of the public land trust by failing to enact legislation clarifying the amount of past due funds derived from the State public land trust that should be transferred to OHA." On July 28, 2010, the State filed its response to the petition but did not address the merits of OHA's breach of fiduciary duty elaim and instead raised procedural defenses such as mandamus is not appropriate because the requested legislation is not ministerial and the request is barred by sovereign immunity and the applicable statute of limitations. On August 18, 2010, the Hawai'i Supreme Court entered its order denying the petition solely on the grounds that mandamus is not an appropriate remedy because the requested legislation is not ministerial. However, the order did not comment on the merits of OHA's elaim, and the order does not bar a lawsuit to enforce the claims asserted in the petition. OHA's recent Petition for Writ of Mandamus was filed because the trustees believed they had a fiduciary responsibility to seek to enforce OHA' s rights on behalf of its beneficiaries; in addition, the petition was filed against the legislators in their official eapaeity because the relief sought by the petition required that all legislators be parties in their official capacity. A judgment against legislators in their official capacity is only a judgment against the office - in this case State - and not legislators personally. 2011 Legislative Session Looking ahead to the 201 1 legisla-

tive session, OHA trustees, its Chief Executive Officer, staff and attorneys will onee again attempt to work with the Legislature in the 2011 session to enact legislation to implement the $200 million settlement. Governor Abercrombie, I earnestly ask for the support of your administration to work in partnership with OHA for legislation whieh will adopt a plan to pay OHA the "past due" revenues on ceded lands used for airports, hospitals and housing in fulfillment of the State's constitutional, statutory and fiduciary obligation. These funds are critical to enable OHA to serve our beneficiaries. We ean reflect, for example upon the findings in Poe v. Kamehameha. 470 F.3d 827, n.4 (2005), the Ninth Circuit Court of Appeals, en banc, whieh described the Native Hawaiian situation as follows: "Disparities abound outside of the educational context as well. Today among the major ethnic groups in Hawaii, Native Hawaiians have the highest rates of unemployment, Ka Huakai at 84, and poverty, i.d. at 86-87, and the lowest mean family ineome, i.d. at 85-86. They live in the poorest geographic areas and are underrepresented in managerial and professional occupations. Id. at 8. Native Hawaiians suffer from greater heahh risks than other ethnic groups on the islands, with the lowest life expectancy and highest mortality rates from cancer, heart disease, and diabetes. Id. at 93. Although Native Hawaiians account for approximately 20% of the state's population, they account for more than half of all teenage pregnancies, i.d. at 203, and more than 44% of child abuse and neglect cases in the state, i.d. at 206. Native Hawaiians are more likely to be arrested for violent crimes than any other ethnic group in the state. Id. at 76-77." See also the 2006 Native Hawaiian Data Book available on OHA's website (www.oha.org) whieh further documents the needs of the Native Hawaiian community. I truly believe that OHA's proposal for $30 million payments per year starting in 2015 is fair. The Legislature ean similarly enact legislation paying OHA $30 million per year until the $200 million amount is satisfied; provided that in lieu

of cash payments, the State may, with OHA's approval, substitute land having the fair market value of such cash payments, as mutually agreed upon by the State and OHA. Although cash payments would start in 2015, the State could convey to OHA land mutually agreed upon by the appropriate State agency and OHA beginning July 1, 2011. This legislation is modeled after the 1995 Act 14 settlement with the Department of Hawaiian Home Lands whieh provided that: "The State, while not admitting to the validity of any claims hereby resolves and satisfies all controversies and claims encompassed by this Act by (1) establishment of the Hawaiian home lands trust fund and the requirement that the State make twenty annual deposits of $30,000,000". I am also attaching a copy of the Report On Publi.c Land Tmst "ineoiiie And Proceeds " Due OHA that has been on the OHA website since early February 2010 and was attached to the March 22, 2010 letter to the Legislature for your infonnation. I look forward to discussing this matter with you on Friday, January 14,2011. Please do not hesitate to eall my office at (808) 594-1941 if you have any questions. Me Ke Aloha Nui Loa, Colette Y. Machado Chairperson, Office of Hawaiian Affairs Attachment e: OHA Board of Trustees Clyde W. Nāmu'o, OHA CEO William Meheula Robert G. Klein Lieutenant Governor Brian Schatz Members of the Legislature