Ka Wai Ola - Office of Hawaiian Affairs, Volume 25, Number 8, 1 August 2008 — FISCAL IRRESPONSIBILITY [ARTICLE+ILLUSTRATION]

FISCAL IRRESPONSIBILITY

Rūwena Akana TrustEE, At-largE

£ k no'aikakou... Hereisanupdate / \ on OHA's recent spending: OHA OWNED BUSINESSES On lan. 17, 2008, the BOT approved a realignment of the OHA budget appropriating $4,567,511 from OHA's Fiscal Reserve Fund to be distributed over three years to the Hi'ilei Aloha LLC for the operation of its subsidiaries Hi'ipaka LLC and Hi'ipoi LLC. The operating budget for all three businesses for the Iuly 1, 2007, to lune 30, 2008, fiscal year was $2,276,882, of whieh we have already spent $614,809.70 as of March 31, 2008. MASSIVE GRANTS The OHA budget was realigned again at our board meeting on lune 5 to aeeommodate the huge Board Initiative grants, whieh were also approved at the same meeting. The grants include: (1) $1 million to Kanu o Ka Aina Learning 'Ohana; (2) $750,000 to the Lana'i Cultural Center; (3) $500,000 to Kaumakapili Church; (4) $500,000 to the Malama Learning Center; (5) $150,000 to Hawaii Maoli; (6) $300,000 to Na Maka Walu; (7) $300,000 to Papahana Kuaola; and (8) $150,000 to La'i'opua 2020. The grand total for all of these grants is $3,650,000! Hawaii Maoli is a permanent fixture in our budget as they are contracted by OHA to collect Kau Inoa registrations. However, there is no accounting for all of the funds that are being spent through this organization, especially monies given to grantees that do not have a 501(c)(3) nonprofit tax status. How mueh more money is Hawaii Maoli getting through fees or charge-backs from these organizations? The Trustees have no idea.

LONG-TERM DHHL LOAN On lune 5, the Board authorized the Administrator to enter into an agreement with the Department of Hawaiian Home Lands to cover their debt service on a loan of $35 million to $41 million for a period of 30 years starting on Iuly 1, 2008, with an amount not to exceed $3 million annually. DHHL is a government agency under the Governor's budget. The state has long neglected its obligations to house Hawaiians and it should, therefore, be the state's responsibility to guarantee the DHHL loans - not OHA. It is the only fair thing to do since the state receives 80 percent of ceded land revenues while OHA has to survive on only 20 percent of those revenues. As advocates for Hawaiians, OHA should be holding the state accountable instead of funding their shortfalls. Trustee Mossman asked whether the timing for this proposal had anything to do with the Sovereign Councils of the Hawaiian Homelands Assembly's (SCHHA) recent opposition to OHA's negotiated settlement hill at the state Legislature. Trustee Heen assured the Trustees that there was no "quid pro quo." However, I agree with Trustee Mossman that the timing is awfully suspicious. Not to mention the fact that Haunani Apoliona is running for re-election this year. Make no mistake; I am NOT against giving grant money away. However, in order to stay within our budget, we must cut costs elsewhere. At present, our budget is approximately $41 million. Add to that all of the recent budget realignments and the budget will probably elimh to well over $50 million a year. This is a ridiculous figure. Besides all this, OHA is too top heavy with "special assistants" who are getting contracts to work on "special projects" that are taking up a great deal of our inflated budget. The scariest thing of all is that OHA Chairperson Haunani Apoliona is supporting the increase in spending all the way through 2012. In other words, these realigned budgets are being approved using money that we have yet to receive. With the economy in the "drink," our people

struggling with high gas prices and unahle to drive to work or losing their homes and being forced to live under freeway overpasses and beaches, OHA continues to spend money like "drunken sailors." The question is why? At present, we are already $5 million overspent in our current budget. Wouldn't our people understand if we explained how important it is to tighten our belts at this time? We should be leading by example. Making a lot of nonprofits happy now by offering them a lot of money into 2012 and then taking that money away after the November elections because we are not able to meet these commitments is cruel, irresponsible, and a terrible way to get votes.

EXPENSIVE ATTORNEY'S FEES

One of OHA's attorneys for our failed ceded lands negotiated settlement with the state and the OHA v. State II case was paid a total of $414,533.84 in attorney's fees. A second attorney was paid a total of $423,840.16. As you may recall, the ceded lands negotiated settlement was shot down by the state Senate and OHA lost the OHA v. State II case. OHA's Washington, D.C., law firm that was hired to lobby for the passage of the Akaka Bill was paid more than $2 million (that we know of; a request for a monthly billing statement would be mueh more accurate - these numbers are conservative). A special consultant for the Akaka Bill was paid an additional total of up to $450,000. That is a total of up to $2,450,000 (conservatively) that has been paid to lobbyists who have not been able to deliver the votes. Make no mistake, I support the passage of the Akaka Bill, but I have also suggested many times that we hire people who are able to deliver. OHA INVESTMENT PORTFOLIO DROPS The Native Hawaiian Trust Fund portfolio has lost 10 percent of its value (approximately $39 million) in these tough eeonomie times, and probably more at the time of this printing. National consumer and prognostic indicators say that investors should have at least 20 percent of their investments in cash that ean be liquidated and moved quickly. Unfortunately OHA

currently has less than 10 percent or $25 million of its portfolio in cash. According to a lune report from one of our money managers, global equity markets fell by more than 8 percent, with U.S. and European equity markets returning -8.4 percent and -11.7 percent respectively. As of Iuly 9, 2008, the estimated preliminary return for their share of OHA's portfolio in the month of lune was -4.95 percent eompared to benchmark performance of -4.48 percent. They also stated that the growth outlook for the U.S. economy remains weak, as increased unemployment, a weak dollar and further pressure on the finaneial markets contribute to expectations of higher inflation over the next year, with expectations beyond that more restrained. Given all of this bad news, it is now more important than ever to bring our spending under control.

TRUSTEE HEEN'S MEMORY

On another note, I was surprised to read OHA Trustee Walter Heen's lune 13 letter to the Star-BuIIetin where he wrote, "I do not recall Akana ever dissenting from any of the terms (of the ceded lands negotiated settlement) that were brought before the board, including the waiver provision that she now loudly decries." Heen was present at all of the executive session meetings where I expressed concerns regarding the waiver provision. Further, all of the OHA Trustees, along with the Administrator, received a letter from me, in advance, whieh explained why I could not support the settlement hill and that I would be submitting testimony to the Legislature in opposition to the bill. I hope that Heen will make sure that OHA has lined up its "ducks" next time for the 2009 legislative session since he is now part of the negotiating team. Further, I question why OHA's negotiating team is still negotiating with the Governor's office when she has publicly stated that she will not reconsider her proposal - a proposal that our beneficiaries have overwhelmingly rejected. Why not just work with the Legislature? For more information on important Hawaiian issues, eheek out Trustee Akana 's website at www.rowenaakana.org. ^

LEO 'ELELE ■ TRUSTEE MESSAGES —