UPDATED 5/17/2012 at 11:45 a.m.

A Hawaii Supreme Court decision requiring the state to fund the Department of Hawaiian Home Lands will do little to help the struggling agency in the short term.

And the department’s budget woes likely will get worse because money from a previous court settlement involving the state’s misuse of Hawaiian lands is running out.

In a sharply worded opinion last week, the Supreme Court said the state had “failed, by any reasonable measure, under the undisputed facts, to provide sufficient funding to DHHL,” in violation of the state constitution.

UPDATED The court decision doesn’t specify how much money the state must provide to DHHL.

It has been thrown back to Circuit Court for further proceedings, and a trial if necessary, Attorney General David Louie told Civil Beat this week.1

The case was brought by the Native Hawaiian Legal Corp. on behalf of six Native Hawaiian clients from the Big Island. The agency oversees 200,000 acres of land granted from the federal government for residential, agricultural and pastoral plots to Native Hawaiians. It has a waiting list of about 25,000 people and the legal firm says Native Hawaiians are dying while on the waiting list.

The lawsuit challenged the state for failing to provide enough money to DHHL to carry out its mandate. While the Supreme Court agreed that the budget provided by the Legislature was inadequate, it didn’t say how much that budget should be.

Louie says the high court ruling only has implications for DHHL’s operating expenses. According to state documents, that amounted to $185 million in fiscal year 2012. The court ruled that it was impossible to determine whether development costs for homestead plots was sufficient or not.1

Robin Danner, president of the Council for Native Hawaiian Advancement, disputes this. She says the Supreme Court ruling leaves open the question of development costs and how much state money should go toward that.

The ruling “doesn’t deny that it should be done. The court didn’t say no one has to address the development costs of homesteads,” she said.

The state has argued that the cost is prohibitive. Developing all the homestead lots could cost tens of millions of dollars, state officials have said.

But Danner says that capital expenditures would buoy the state’s economy.

“Every dollar invested means dollars to create jobs, to create infrastructure, to lay pipes, to lay lines,” she said. “It creates an economic ripple and economic impact all the way to the grocery store. I think that is the part that gets missed. We’re not a problem, we’re a solution.”

Louie says it’s too early to estimate how much money Gov. Neil Abercrombie might seek for DHHL in next year’s budget.

“The amount of funding for administrative and operating expenses of DHHL for any given fiscal year is to be proposed by the Administration and appropriated by the Legislature,” Louie wrote by email. “The sufficiency of any particular appropriation for administrative and/or operating expenses is subject to court review.”

While potential state support for the department hangs in the balance, DHHL is facing even worse budget troubles in a couple of years.

For the past 18 years, DHHL has relied on $30 million a year from a court settlement, part of a $600 million settlement for claims against the state for misusing Hawaiian home lands. The state had been mishandling the acreage in violation of the 1920b federal law entrusting the lands to the state on behalf of the Hawaiian people.

That money runs out at the end of 2014.

Meanwhile, the list of applicants on the waiting list has quadrupled since 1978 when the constitution was amended to specify that the state must provide DHHL with sufficient funding. The list increased from 5,800 to more than 25,000 applicants as of the end of 2010, and traces back to the 1970s.

Former Gov. Linda Lingle stripped state general fund revenue from the department to save the state money. The agency now gets its money from leasing out its lands to commercial development.

But, thanks to the Supreme Court ruling, DHHL could get state money again in the new budget proposal.

“The Department, along with its new director, Jobie Masagatani, plans to work closely with Gov. Abercrombie’s administration, the Hawaiian Homes Commission and the state Legislature to determine adequate funding levels for administration of the department going forward,” Crystal Kua, a spokesperson for DHHL, said by email.

While Louie said that the state was obligated to fund the operational expense of the department, based on the court ruling, he didn’t say by how much. In past decades, state funds for the department have been a fraction of what is required to support its expenses and approximately 120 employees. General fund expenditures prior to Lingle ranged from $2 million to $7 million annually, according to Danner.

And without an increase in funding or new budget strategy, it’s unlikely that DHHL’s controversial history of leasing out lands for commercial development in order to support the department will change. Approximately 30 percent of DHHL’s 200,000 acres, which were set aside by the federal government in 1920 to benefit Native Hawaiians, have been leased out to companies that include Office Max, Home Depot and Wells Fargo Bank.

Danner said it’s disturbing that the state would spend money on a court case “to attempt to deny that DHHL is their state agency and should be funded.”

“I mean, just from a common sense perspective, it’s criminal,” she said.

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