Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committees on Hawaiian Affairs and Transportation, Military Affairs and Government Operations, to which was referred S.C.R. No. 113 entitled:

beg leave to report as follows:

The purpose of this measure is to request that that the Auditor conduct an audit of the Departments of Accounting and General Services; Business, Economic Development, and Tourism; Education; Health; Land and Natural Resources; Transportation (Airports and Harbors Divisions); the University of Hawaii; and any other agency that has ceded land leases under its jurisdiction, regarding their methodologies in verifying the amounts of ceded land revenues, with particular emphasis on the reliability and consistency of such methodologies with generally accepted accounting principles.

Testimony in support of the measure was received from the Office of Hawaiian Affairs. The Attorney General, the Department of Accounting and General Services, the Department of Land and Natural Resources, the Department of Transportation, and the University of Hawaii submitted comments.

Your Committees find that on September 21, 2001, the Hawaii Supreme Court overturned a decision made by former circuit court judge Daniel Heely that stated that the Office of Hawaiian Affairs was entitled to a portion of revenues derived under Act 304, Session Laws of Hawaii 1990. In its decision, the Hawaii Supreme Court essentially invalidated Act 304, Session Laws of Hawaii 1990, due to a provision that stated that if any provision of Act 304 was found in violation of federal law, then the entire act would be invalid. Since the Hawaii Supreme Court found that a portion of the Act violated federal law, Act 304, Session Laws of Hawaii 1990, was subsequently invalidated.

Although the Hawaii Supreme Court did strike down Act 304, it held that the fundamental obligation of the State to native Hawaiians under the Admission Act had not been diminished.

Your Committees find that in light of this responsibility, the State still has an obligation to accurately account for revenues derived from the public land trust so that until such time that the Legislature is able to legislate a final resolution to the matter of the Office of Hawaiian Affairs', and by extension, the native Hawaiian people's, share of public land trust revenues, the State will be able to accurately determine how much is owed.

Consequently, the methodologies used by the various state departments in verifying the amounts of revenue from ceded lands under their respective jurisdictions should be reliable and consistent with generally accepted accounting principles.

As affirmed by the records of votes of the members of your Committees on Hawaiian Affairs and Transportation, Military Affairs and Government Operations that are attached to this report, your Committees concur with the intent and purpose of S.C.R. No. 113 and recommend that it be referred to the Committee on Ways and Means.