The state Department of Hawaiian Home Lands appears set to receive extra time to use $600 million appropriated by the Legislature in 2022.

Members of the state House of Representatives and Senate unanimously voted Tuesday to endorse two similar yet competing bills that would extend a deadline to encumber, or contract to spend, all the funding to June 30, 2026.

If either bill becomes an effective law with the new proposed deadline, DHHL would receive four years to use the money mainly to develop homesteads for beneficiaries on the agency’s embarrassingly long waitlist before any unencumbered balance lapses back to the state general fund, instead of three years intended by lawmakers in 2022.

However, because of faulty language in the historic 2022 appropriation that conflicted with a Hawaii constitutional provision, the original appropriation was technically only valid for two years. This prompted the Legislature to take up bills this year to fix the mistake before the effective June 30 lapse date.

Initially, Senate Bill 3109 and House Bill 2420 proposed to extend the lapse date to June 30, 2025, to give practical effect to the original intent by the Legislature in 2022. But changes to both bills made by the House Finance Committee added another year even though DHHL didn’t request it.

The House Finance Committee also added another provision to both bills that has drawn some criticism, and concern that it might be faulty.

This amendment in the current drafts of both bills would create a special fund to receive any unencumbered balance of the $600 million on June 30. Then any money in the special fund would lapse to the general fund on June 30, 2026, if not encumbered by then.

It’s not publicly clear why the special fund was proposed or what benefit it would provide.

Rep. Kyle Yamashita (D, Pukalani-Makawao-Ulupalakua), who recommended the special fund as Finance Committee Chair, said in a statement Wednesday that the special fund is “a practical approach to ensure strategic utilization of the $600 million appropriated by the Legislature to address the beneficiary waitlist, while eliminating concerns regarding unencumbered funds lapsing back to the general fund. As we make major investments in native Hawaiian housing, the House advocates for the funds to be expeditiously and responsibly expended. “

The special fund provision has been questioned by the nonprofit Tax Foundation of Hawaii and the state Department of Budget and Finance.

“We are questioning why the special fund is being created,” Jade McMillen, a representative of the foundation, said during a March 12 hearing on HB 2420 held by the Senate Committee on Hawaiian Affairs, which advanced the bill with the special fund language.

The foundation in written testimony also said, “If it ain’t broke, why are we fixing it?”

Luis Salaveria, Budget and Finance director, said in written testimony that the department as a matter of general policy doesn’t support creating any special fund that isn’t intended to be financially self-sustaining or for uses that can be carried out under the general fund appropriation process, among other reasons.

The state Department of the Attorney General raised a concern in written testimony that the proposed special fund in both bills would be established under the 1920 Hawaiian Homes Commission Act. This is problematic, the department said, because amending the act requires congressional approval or an exception from the U.S. Secretary of the Interior, and neither of those things are conceivably possible before the June 30 lapse is triggered.

DHHL did not seek the special fund, but has supported all drafts of both bills, and expressed no concern when the special fund issue was raised at a March 12 Senate Hawaiian Affairs committee hearing.

“It’s a very, very special fund for a very special purpose, which is to help reduce our waiting list,” Kali Watson, DHHL director, told committee members.

About 28,700 applicants are on the waitlist, including many who have been on it for decades.

DHHL’s main purpose is to provide beneficiaries with 99-year land leases costing $1 a year, and lessees have to pay for their own house. But only about 10,000 homesteads have been developed in the roughly 100-year history of the program transferred from the federal government to the state in 1959, largely because of historically little funding and large landholdings that have very high infrastructure development costs.

The agency plans to develop about 3,000 homesteads with the $600 million appropriation, and has said recently that it is on pace to encumber the full amount by June 30 but sought the original three-year use window to June 30, 2025, “just in case.”

DHHL also is pursuing $628 million from federal agencies so it can roughly double the number of homestead projects for beneficiaries to around 6,000 over the next several years.

Sending either SB 3109 or HB 2420 to Gov. Josh Green for possible approval will be up to House and Senate negotiators to agree on a final version for one of the bills, each of which has a defective effective date to force a negotiated final draft.