Legislature(1993 - 1994)
03/12/1993 08:00 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
Number 234
MR. STILES explained that Section 10 of HB 201 establishes
the interface between HB 201 and Chapter 66. He suggested
adding similar language to SB 67, the companion senate bill
to HB 201. With that he concluded his analysis of the bill.
Number 256
REPRESENTATIVE GREEN asked Mr. Stiles whether he supported
HB 201 generally, or only the proposed amendments.
MR. STILES responded that he was very much in support of
HB 201, and noted he had worked with the coalition that
included the public interest interveners, the oil
interveners, and the non-settling plaintiffs and development
interests. All parties, he said, had input in the
development of the bill in order to make it as "bulletproof"
as possible.
Number 288
REPRESENTATIVE JAMES remarked that the mental health lands
issue has been frustrating for everyone, and it seemed that
there were two real points being pushed, which cannot seem
to come together. The first of these, she said, is whether
or not the state breached its obligations in the first
place, denying some people in the process. The other
question, she explained, was how to best proceed. She noted
the state seems to be on one side and all the plaintiffs and
interveners on the other side. She suggested the plaintiffs
and interveners get on the side of the state in order to get
on with reaching a solution.
Number 300
MR. STILES agreed it was in the interest of the state to do
that, but commented that a team cannot be built unless
everyone wants to get on it and play. He had not found that
to be the case with the Attorney General. He said the
coalition would welcome the opportunity to sit down and talk
with the Attorney General.
REPRESENTATIVE JAMES made an analogy of the situation as
being like a tug of war. She asked Mr. Stiles to comment on
whether he agreed that some people go to one side in order
to create an even playing field.
MR. STILES asked whether she was suggesting that some
members of the coalition, "unholy alliance" as he referred
to them, go over to the attorney general's side.
REPRESENTATIVE JAMES suggested that when that happens, the
focus of the fight would change.
Number 349
VICE CHAIRMAN HUDSON commented that everyone wanted
something out of the issue, including coal. He referred to
Chapter 66 and its intention to free up lands so that
development and investment could proceed. He asked Mr.
Stiles what he was being prevented from doing that led him
to become involved in the mental health lands issue.
MR. STILES replied that coal is more market driven than any
other resource in the state, in that customers look strongly
at the ability to get access to the land. The industry is
based on long-term contracts, he said. The practical
reality of Chapter 66, he said, is that the Alaska coal
industry cannot sell its coal because of the perception
created in the marketplace of a land freeze. In that
respect, the industry is held hostage by the litigation. He
said the industry is much like the moms and pops. The
industry had entered into good faith agreements with the
state and could not go forward because of the freeze
perception, he added.
MR. STILES explained that the coal interests in general end
up in exactly the same place under Chapter 66, under HB 201,
and SB 67, or under a strict reconstitution. Under any set
of circumstances, he said, the coal company would have a new
landlord, and neither the companies nor their potential
customers have any idea who that landlord will be.
Number 408
VICE CHAIRMAN HUDSON questioned why it would not be possible
to resolve three-quarters of the problem, which would free
up the moms and pops. He noted the courts were calling for
a total settlement or no settlement, which could be Mr.
Cole's justification for saying that he had concerns with
the way the courts had behaved. He noted eventually, coal
and other mineral investment interests would have to deal
with the mental health people. He questioned why that could
not happen now, and leave the last question, the land swap,
to be determined later in the courts. He also questioned
why the court would not agree to those steps.
Number 430
MR. STILES explained that challenges had been raised to a
piece-meal solution. He said HB 201 removes that problem
with the substitute lands. Chapter 66 allows the trust to
select lands now with more known about the lands than was
known in 1956, at the time of the original lands' trust.
Much of the original land is no longer available, which
creates problems of valuation, he said. What HB 201 does,
he said, is to take away those problems. It would identify
remaining lands, return it to the trust subject to existing
encumbrances, and let the parties proceed with a solution as
early as the fall of 1993.
Number 462
REPRESENTATIVE GREEN stated one of the concerns he would
have if he were a potential investor in Alaska minerals was
that the solution might not come to fruition and the
investment might be lost. He suggested a ripple effect
would continue until the whole matter was resolved.
MR. STILES noted in the recent Supreme Court denial of a
petition to grant relief to the moms and pops, the court
essentially said it would be a cruel hoax to do that because
the plaintiffs in the settlement agreement retain their
right to reassert the claim at a future date.
Number 490
CHAIRMAN WILLIAMS thanked Mr. Stiles for his testimony, and
introduced the next witness, Mr. Jeff Jessee.
Number 503
JEFF JESSEE, ATTORNEY FOR ADVOCACY SERVICES OF ALASKA,
testified on behalf of his clients, the non-settling
plaintiffs to the settlement agreement. He wished the
Attorney General had stayed at the committee meeting to hear
the testimony of the other parties, in order for him to
better understand the viewpoints of others. Mr. Jessee
commented that it seemed clear that the Attorney General did
not agree with what the courts had said regarding the
state's trust responsibility and breach of that
responsibility.
MR. JESSEE stressed the parties were not just alleging a
breach of trust, but the Alaska Supreme Court had declared
the breach to be a fact. He suggested the Attorney
General's refusal to recognize that there was a trust, and
there was a breach, and there needs to be an agreement, was
a fundamental problem in getting everyone on one side to
reach an agreement.
Number 530
MR. JESSEE disagreed with Representative James' comments
that the parties needed to get on the side of the Attorney
General. He called Mr. Cole's position an untenable one for
the executive branch to continue to take. Regarding the
relief to the moms and pops, Mr. Jessee called it no relief
at all. Addressing HB 201 and the concept of an income
stream, Mr. Jessee said he disagreed with the Attorney
General, and said he believed the land was certainly
intended to produce a stream of income to support the mental
health programs. Instead of using it for that purpose, he
continued, the state had used the revenues for its own
purposes.
MR. JESSEE felt the concept of ongoing financial support for
mental health programs was appropriate. Regarding the six
percent revenue stream, he remarked that now the onus was on
the plaintiffs to justify the six percent when he said, that
had not been their idea in the first place. In 1991, he
noted, the legislature and the executive branch pushed the
idea of the six percent as an idea of a fair settlement. He
commented now that the plaintiffs were trying to make that
concept work, they are being seen as greedy. He pointed out
the suggestion that the problem be "cashed out" which would
require taking money and putting it into a corpus account.
The percentage approach, he said, is different from that, in
that it did not require a sum of money to be taken off the
table and put into a bank account. Rather, he said, it
would be used to supplant state general fund revenues.
Number 575
MR. JESSEE explained that the revenue stream approach had
been reached to allow the state to benefit the
beneficiaries, by giving them some influence over how mental
health monies are spent. He suggested the beneficiaries
might do a better job at that than the legislature does. He
mentioned that he had spent time with the Mental Health
Board determining their budget and emphasized that their
focus had been getting the most in mental health services
for their investment.
MR. JESSEE suggested the failure to reach a solution in the
mental health lands issue stemmed from the state's reneging
whenever an agreement had been reached. He said it happened
in Chapter 48 and was happening with Chapter 66. He
referred to letters from settling plaintiffs in the
committee members' packets, as well as a page out of the
settlement agreement. He suggested that agreement clearly
shows that intent of the agreement. He expressed
dissatisfaction with the cycle of litigation, and with the
blame being placed on the settling plaintiffs. Regarding
the state's claims that original trust lands did not contain
oil and gas, Mr. Jessee displayed a long list of lands which
he said have significant oil and gas potential. The list
was compiled, he said, by consultants hired by the settling
plaintiffs.
Number 626
MR. JESSEE suggested when HB 201 is heard in the House
Finance Committee the revenue percentage could be looked at,
as well as appropriations and the scope of programs. He
believed HB 201 was an appropriate direction to go, and
hoped the Attorney General and the Governor would realize
they need to get on the side of the coalition.
Number 648
REPRESENTATIVE JAMES clarified her previous comments and
said her goal was for the parties to come to some common
agreement stemming from negotiations. Regarding Mr.
Jessee's statement that the beneficiaries' goal was to have
input in the mental health budgeting process, she asked him
to clarify who the parties are specifically.
MR. JESSEE explained that he had referred to the
beneficiaries and their representatives.
REPRESENTATIVE JAMES asked how that group would work
differently than the current Mental Health Trust Board.
MR. JESSEE explained that the board does not make decisions;
rather, it makes recommendations which, he said, the
legislature and the executive branch routinely ignore with
no rationale or justification as to why their view is so
different from the board's recommendations.
REPRESENTATIVE JAMES said it was her understanding that the
funds that would be in the mental health trust would be
appropriated for mental health expenditures by the
legislature.
MR. JESSEE confirmed this.
REPRESENTATIVE JAMES then asked if there was more money in
the trust than needed for mental health expenditures, the
legislature could take money out and appropriate it
somewhere else.
MR. JAMES confirmed this, also.
REPRESENTATIVE JAMES asked Mr. Jessee to comment on the
scenario where, if the beneficiaries were making up a budget
that represented the way they thought the money should be
spent, but there was not enough money, they would then come
back to the legislature to ask for another appropriation.
MR. JAMES answered that if they asked for more funding, it
would come from general funds and the legislature would be
in no way obligated under the trust to appropriate.
REPRESENTATIVE JAMES asked why the process could not be
shortened to put the beneficiaries in that position. In
other words, she asked if the mental health board could not
be exchanged for the mental health beneficiaries.
MR. JAMES explained that this was essentially what Chapter
66 and HB 201 would do.
TAPE 93-29, SIDE A
Number 000
MR. JESSEE added the manner of compensation was the subject
of disagreement in the mental health lands issue.
REPRESENTATIVE JAMES noted her concern is that the court
order exists from 1985 that tells the parties what they must
do. Even if 100% of all the people involved agreed on the
way to solve the issue, she asked whether, if the solution
does not meet the demands of that court issue, the court
would approve it.
Number 035
MR. JESSEE clarified what the Supreme Court decision meant.
He said the decision was a directive to the lower court
that, barring a settlement, this was how the lower court
should proceed to resolve the issue. Chapter 66, he said,
does not strictly comply with what the Supreme Court said.
The court did not say, he explained, that the parties should
go find some other lands and substitute those into the
trust. The court, he said, required the original lands to
be put back into the trust. None of the settlements will
track exactly what the Supreme Court has said, he added.
The court has to approve the settlement, but not on the
basis of it meeting the letter of the Supreme Court's
decision as to how the trust would be reconstituted in the
absence of a settlement.
VICE CHAIRMAN HUDSON asked Mr. Jessee to comment on the
amendments proposed by Mr. Stiles. The first, he said, was
to remove section 3 of HB 201, and the other would insert,
on page 2, line 31, a new statement, "not withstanding the
pledge of the lands secured in the state would continue to
conduct all activities that are authorized by law."
MR. JESSEE addressed the amendment that would delete Section
3. He said this was a good idea that became too hard to
make work. In an effort to try to make the trust more self-
sufficient in the long run, with anticipated declines in
state revenues, the idea was to take the fairly minimal
income from the lands the trust would get back, and put them
in what would amount to a permanent fund. He said building
up such a fund over 20 or 30 years, then when the state did
not have general fund dollars, the trust would be more self-
sufficient. The reason that would not work, he said, was
because the Attorney General said it violated the dedicated
fund and the enabling act. The solution, Mr. Jessee
explained, was to get rid of the idea, and instead, the
minimal income from the land would be added to the income
account and spent every year as has been done in the past.
VICE CHAIRMAN HUDSON asked Mr. Jessee whether he agreed that
Section 3 does not need to be in HB 201.
MR. JESSEE agreed that, unfortunately, that was his
position. As to the other amendment proposed by Mr. Stiles,
Mr. Jessee commented that it was always understood those
lands would continue to be managed, and the amendment just
makes that clear.
Number 092
CHAIRMAN WILLIAMS said that in the interest of time, and in
order for all witnesses to be heard, the committee would
hear from the next witness.
Number 109
DAVID WALKER, ATTORNEY FOR THE WEISS PLAINTIFFS, testified
as lead counsel for the remaining settling plaintiffs in
the action. He referred to HB 201's predecessor, introduced
in the 17th Alaska Legislature, and noted he had had
reservations related to the issue of enforceability and the
security that would be required for promises made under that
bill. He pointed to a letter in member's packets explaining
those concerns.
MR. WALKER commented that in using the approach of
introducing HB 201, it was proper to consider and debate the
expenses of the mental health program, separate from the
issue of enforceability. In order for any scenario to be
considered, he said, by the remaining settling plaintiffs,
it must be enforceable. If there is an obligation to pay,
rather than a transfer of assets, he said that must be
secured. He noted the Attorney General had stated he was
opposed to guaranteeing by statute the six percent revenue
stream. Mr. Walker called this "baloney" and said the issue
had become a mess because the state breached the statute,
and statute cannot guarantee the payment of six percent in
perpetuity.
Number 142
MR. WALKER said in the past, the Department of Law had said
the six percent could not be guaranteed by statute. The
only way, he suggested, to guarantee the payment and thereby
obviate the need for security and answer questions of
enforceability, would be to have a constitutional amendment.
A promise, rather than a transfer of assets, he explained,
has to be enforceable and properly secured. Because HB 201
constitutes an unenforceable promise, he said the settling
plaintiffs will not support HB 201.
Number 184
REPRESENTATIVE DAVIES asked Mr. Walker to restate his reason
for his feeling that the security that HB 201 attempts to
offer is inadequate.
MR. WALKER explained that the problem has to do with the
amount of the security as well as with constraints put upon
the security. For example, he said if there was a
suggestion that LDAs should serve as security, then it has
to be clear that those lands are able to be foreclosed upon.
Once foreclosed upon, it needs to be clear they can be
developed, he added. Regarding the amounts of security, Mr.
Walker said he did not think the state could take LDAs away
from the trust, or the lands given to municipalities or to
the "moms and pops" and then say "we're not going to let you
have those back, we're going to give you a cash income
stream for it," and as security let them have some kind of
hold on the LDAs.
MR. WALKER compared that to going to the bank and borrowing
$100,000 with $50,000 as security. He said that in effect,
the LDAs would be put up as security for themselves.
Number 216
REPRESENTATIVE JAMES commented that she did not see the LDAs
as good security. She suggested the plaintiffs be given the
LDAs now with full fee-simple title and then enter into an
agreement where the state would rent those lands and if the
state stopped paying rent the plaintiffs would take back
control of the lands. She asked Mr. Walker to comment on
that scenario.
Number 230
MR. WALKER replied that the question of the use of the
Legislatively Designate Lands was proper for debate. He
explained that it was clear those lands were originally
mental health trust lands and were taken away from the
trust. He mentioned that Senator Robin Taylor had said to
him, "You will take those back if we give them to you."
Number 240
MR. WALKER said there had been so many attempted solutions
to the mental health lands problem, and he mentioned one of
those, Chapter 48. Under Chapter 48, he said, there was an
idea that the LDAs would continue to retain that designation
and be used in a rental arrangement. The difficulty in
reaching a solution, he said, has to do with the fact that
there was a large amount of valuable mental health trust
land that was taken, and the people who got it want to keep
it, while nobody wants to pay for it.
Number 250
REPRESENTATIVE JAMES presented a follow-up question,
regarding the potential time in court if the parties
proceeded with the course they are on.
MR. WALKER could not predict that at the time, but said by
the end of the 1993 legislative session, they would be
closer to being able to do that. He foresaw, because of the
difficulty of the situation, that under any solution
proposed, there would be litigation.
VICE CHAIRMAN HUDSON asked Mr. Walker to confirm a summary
of his statements: First, the plaintiffs would not be
satisfied with either three or six percent because it was
not backed up with assets for security.
MR. WALKER agreed that any percentage would not be
acceptable because of the questions of security and
enforceability.
Number 293
VICE CHAIRMAN HUDSON asked whether it was correct that if
the state failed to carry through on its obligation of a
certain percentage, the plaintiffs could go to the courts
and begin to take the LDAs. Because they were prior mental
health trust lands, he said, they would be excluded from the
underground resource issue.
Number 300
MR. WALKER did not believe HB 201 made it clear that the
lands could be foreclosed upon in the ordinary way
foreclosures are made, or if foreclosed upon, there would be
no legislative designation on the lands, or that the trust
could develop the lands the way any private landholder
would.
Number 312
VICE CHAIRMAN HUDSON commented that in his view, the
intention of HB 201 was to give a guarantee to the people
from whom the assets had been taken. He also asked if, in
its present form, HB 201 does not do anything that Chapter
66 did not do, then why not let the courts go ahead and
decide the issue.
MR. WALKER advised that was what should be done.
Number 323
REPRESENTATIVE GREEN expressed personal concern about
letting the court decide what is best for the state. He
asked Mr. Walker what would be the problem if the only way
there could be enforceability was to go to the people for a
constitutional amendment.
Number 337
MR. WALKER's response was that Representative Green was
"preaching to the choir."
Number 340
ANNOUNCEMENTS
CHAIRMAN WILLIAMS announced the committee would take up HB
201 again, probably on Friday, March 19, 1993. He said at
that time additional amendments would be prepared for the
committee's consideration.
ADJOURNMENT
There being no further business to come before the House
Resources Committee, Chairman Williams adjourned the meeting
at 9:55 a.m.
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