A fair and just settlement for unpaid ceded lands revenues

After protracted negotiations, the state and the Office of Hawaiian Affairs reached a settlement on the back pay owed to OHA from the revenues generated from the "ceded lands." What is the underlying basis for this payment, and why have these negotiations proved to be so difficult?

When Hawaii was annexed by the United States in 1898, about 1.8 million acres of land (more than 43 percent of the 4.1 million acres on Hawaii's main islands) were "ceded" by the Republic of Hawaii to the United States. These lands had been classified as "Crown Lands" (which supported the monarchy) and the "Government Lands" (which supported the government as a whole) during the Kingdom Period. When the kingdom was overthrown in 1893, the republic combined these two groups of lands as "Public Lands," and this merger continued during the Territorial Period (1898-1959). In 1993, the U.S. Congress apologized for U.S. participation in the overthrow, characterized the U.S. military and diplomatic role in the overthrow as "illegal" and a violation of "international law" and said that the lands were transferred "without the consent of or compensation to the Native Hawaiian people of Hawaii or their sovereign government."

It was recognized almost immediately after annexation that these "ceded lands" should not be merged with the other public lands of the United States and, because of their special history and meaning, that they should not be freely disposed of. The U.S. attorney general wrote in 1899 that the 1898 Annexation Resolution had created a "special trust" for the benefit of Hawaii's people.

In 1959, the federal government transferred about 1.4 million acres of the "ceded lands" to the new state of Hawaii, to be held in trust, with the revenue generated from these lands to be used for five named purposes, including "for the benefit of the conditions of native Hawaiians." During the next two decades, however, the state failed to allocate any of the revenue specifically for this purpose, devoting almost all of it to public education. To address this failure, the delegates to the 1978 Constitutional Convention proposed (and the voters adopted) amendments creating OHA and requiring the state Legislature to allocate a pro rata share of the revenues from the "ceded lands" to OHA to be used explicitly for the betterment of native Hawaiians.

The 1980 Legislature determined that the appropriate pro rata share for OHA should be 20 percent. This compromise figure was adopted because the "betterment of the conditions of native Hawaiians" was one of five purposes listed in the 1959 Admission Act and also perhaps because persons of Hawaiian ancestry constituted about 20 percent of the population of the state.

Difficulties arose almost immediately, however, about how to define "revenues" and which lands should be viewed as within the "ceded lands." After a lawsuit was filed by OHA in the 1980s, the Waihee administration negotiated an agreement dividing revenues into two categories -- "sovereign revenues" coming from activities unique to a government, such as collecting taxes and tuition at the university; and "proprietary revenues" coming from activities that any landowner could engage in, such as leases to farmers or operating airports or other profitable enterprises. It was agreed that OHA would receive 20 percent of the proprietary revenues, but none of the sovereign revenues, and the state then paid almost $135 million to OHA for revenues it had received in the 1980s but had not shared with OHA.

Disputes continued regarding the allocation of revenues between these two categories, focusing, for instance, on the duty-free sales from stores in Waikiki, because the customers receive their purchases when they depart at the airport, which is partially on "ceded lands."

The Hawaii Supreme Court refused to address the merits of this dispute, characterizing it as a "political question" that should be resolved by the Legislature, but the court stated clearly in 2001 (and again in 2006) that "the state's obligation to native Hawaiians is firmly established in our constitution" and "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."

The current settlement -- a combination of selected lands and money -- is designed to provide OHA with the funds it should have been receiving from the revenue stream generated by the "ceded lands" since this dispute arose. It is a fair settlement, reached in good faith through arms-length negotiations between the relevant state officials and OHA's trustees. It will enable OHA to maintain its existing programs and develop new ones to promote the well being of native Hawaiians, the Hawaiian language and Hawaiian culture.

This is an important interim settlement and an important step toward the ultimate resolution of the festering claims of the native Hawaiians, which could occur once the Akaka Bill is enacted, and negotiations begin between the native Hawaiian governing entity, on the one hand, and the state and federal governments, on the other.