The cash-strapped state wants to use land, some of it ceded, as partial payment of its $600 million settlement with the Department of Hawaiian Home Lands.
But the Office of Hawaiian Affairs, which gets 20 percent of the revenue generated by ceded lands - former property of Hawaiian monarchy - fears the move would reduce its income.
Moreover, OHA is concerned about the use of a land trust that generates money for native Hawaiians to pay another trust that puts Hawaiians on homestead land.
"You can't use one trust to pay another," said Linda Delaney, OHA's land and natural resources officer.
The settlement, approved in 1995, is for the state's use of lands valued at $1 billion that were never brought into the homelands trust.
Delaney, testifying on behalf of trustee Kina'u Boyd Kamali'i, told the House Finance Committee that OHA has concerns about Senate Bill 2866.
The measure, approved by the committee yesterday, would allow the state to transfer ownership of some state land in Kapolei on Oahu and in Laiopua, Kealakehe, Hawaii to the Hawaiian Home Lands trust.
That would be in lieu of a portion of the $30 million in annual payments to be paid to the trust over the next 20 years.
The transfer of the lands - valued at $25 million - would satisfy a portion of the payment after fiscal year 1998. But because some of the Kealakehe lands are ceded, Delaney fears the state may deprive OHA of revenue from that land even though the parcels currently do not generate revenue for the state.
Furthermore, Delaney believes the action will only make the Hawaiian Homes trust more "land rich and cash poor." Instead, OHA wants to state to make $30 million annual cash payments to the Hawaiian Homes trust.
"The inability of Hawaiian Homes to address its waiting list is directly attributable to a lack of monetary resources," Delaney said.
But Kali Watson, chairman of the Hawaiian Homes Commission, said the agency would consider the land transfer proposal. He said the department has already earmarked the $30 million payment this biennium for homesteads in Kula, Maui, and Kalamaula, Molokai.