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
HOUSE RESOURCES STANDING COMMITTEE
Friday, March 12, 1993
8:00 a.m.
MEMBERS PRESENT
Representative Bill Williams, Chairman
Representative Bill Hudson, Vice Chairman
Representative Con Bunde
Representative John Davies
Representative Joe Green
Representative Jeannette James
Representative David Finkelstein
MEMBERS ABSENT
Representative Pat Carney
Representative Eldon Mulder
COMMITTEE CALENDAR
Briefing by Water and Wastewater Works Advisory Board
HB 201: "An Act amending provisions of ch. 66, SLA 1991,
that relate to reconstitution of the corpus of the
mental health trust, the management of trust
assets, and to the manner of enforcement of the
obligation to compensate the trust; and providing
for an effective date."
HEARD AND HELD IN COMMITTEE FOR FURTHER
CONSIDERATION
WITNESS REGISTER
Ernie Mueller
Water and Wastewater Works Advisory Board
155 S. Seward
Juneau, Alaska 99801
Phone: 780-6888
Position Statement: Presented briefing on advisory board
John Hargesheimer
Water and Wastewater Works Advisory Board
P.O. Box 10134
Fairbanks, Alaska 99710
Phone: 452-1414
Position Statement: Presented briefing on advisory board
James Berg
Water and Wastewater Advisory Board
18765 May Ct. Circle
Eagle River, Alaska 99577
Phone: 696-4494
Position Statement: Presented briefing on advisory board
Charles Cole
Attorney General
Department of Law
P.O. Box 11030
Juneau, Alaska 99811-0300
Phone: 465-3600
Position Statement: Presented state's position on HB 201
Bob Stiles, President
Alaska Coal Association
12227 W. 9th St. #201
Anchorage, Alaska 99501
Phone: 276-6868
Position Statement: Testified in support of HB 201
Jeff Jessee
Advocacy Services of Alaska
615 E. 82nd
Anchorage, Alaska 99518
Phone: 344-1002
Position Statement: Testified in support of HB 201
David Walker
417 Harris
Juneau, Alaska 99801
Phone: 586-3537
Position Statement: Testified in opposition to HB 201
PREVIOUS ACTION
BILL: HB 201
SHORT TITLE: MENTAL HEALTH TRUST AMENDMENTS
BILL VERSION:
SPONSOR(S): RESOURCES
TITLE: "An Act amending provisions of ch. 66, SLA 1991, that
relate to reconstitution of the corpus of the mental health
trust, the management of trust assets, and to the manner of
enforcement of the obligation to compensate the trust; and
providing for an effective date."
JRN-DATE JRN-PG ACTION
03/05/93 552 (H) READ THE FIRST TIME/REFERRAL(S)
03/05/93 552 (H) RESOURCES, JUDICIARY, FINANCE
03/12/93 (H) RES AT 08:00 AM CAPITOL 124
ACTION NARRATIVE
TAPE 93-28, SIDE A
Number 000
The House Resources Committee was called to order by
Chairman Bill Williams at 8:12 a.m. Members present at the
call to order were Representatives Williams, Hudson, Bunde,
Davies, and Green. Members absent were Representatives
Carney, Finkelstein, James and Mulder.
CHAIRMAN BILL WILLIAMS announced the agenda for the meeting
would begin with the Water and Wastewater Works Advisory
Board's presentation until 8:30, followed by testimony on
House Bill 201.
Number 032
ERNIE MUELLER, WATER AND WASTEWATER WORKS ADVISORY BOARD
MEMBER, introduced two other members of the board who joined
him at the witness table, John Hargesheimer and Jim Berg.
Mr. Mueller described the composition and goals of the nine-
member advisory board, which he said, was responsible for
advising the Department of Environmental Conservation (DEC)
on regulations and standards on water and wastewater
throughout the state. He noted state, local and federal
spending on water and wastewater in Alaska over the last ten
years totalled about one and a half billion dollars.
MR. MUELLER said the state had provided $628 million in that
period, with another $300 million provided by the federal
government. He discussed facilities' funding in Alaska, and
said the board feels that if facilities are not properly
operated and maintained, the investment will be lost. He
said training of operators was an important goal, but noted
little money has been spent for training. Rural communities
in particular are affected by the lack of training
resources, he explained. This situation has been addressed
with the Remote Maintenance Worker program, which sends
trained individuals to those communities to help keep water
and wastewater systems operating.
MR. MUELLER noted basic public health issues are at stake in
the operation of the facilities, and the federal government
is not spending what it should to keep the facilities
operating up to standards.
Number 149
REPRESENTATIVE JOE GREEN referred to the level of state
funding as shown in the chart handed out by the board
members. He asked what caused the wide fluctuation in state
spending.
MR. MUELLER responded that the fluctuation reflected the
amount of state money available for capital, and the
commitment of the state for these facilities.
Number 173
REPRESENTATIVE GREEN asked Mr. Mueller what level of funding
was expected for FY 94 and FY 95.
MR. MUELLER replied that the answer to that was more up to
the legislature itself than the board.
REPRESENTATIVE GREEN asked Mr. Mueller to address the
question of training for proper maintenance of water and
wastewater systems in rural areas.
MR. MUELLER replied that adequate training and adequate pay
were critical. He referred again to the remote training
system and said that it is effective in delivering needed
training to rural areas.
JOHN HARGESHEIMER, MEMBER OF THE WATER AND WASTEWATER WORKS
ADVISORY BOARD, commented that the remote program spreads
the cost of one individual among the sites that benefit from
the program.
JAMES BERG, MEMBER OF THE WATER AND WASTEWATER WORKS
ADVISORY BOARD, noted that proper training reduces the risk
of a system failure, which can be as costly as one million
dollars per incident.
REPRESENTATIVE GREEN referred to the risk of medical
problems associated with improper wastewater systems.
Number 236
MR. HARGESHEIMER agreed that medical problems, such as
dysentery and hepatitis, were a risk. He commented that
more money was needed for training, but instead funding has
been cut. He suggested grants for privatization of
facilities could be a tool to eliminate future state
expenditures. If budget cuts continued, he noted, the state
could see many more system failures and medical problems.
Number 253
MR. MUELLER added a number of sanitation issues exist, but
the priority is proper human waste disposal and proper
drinking water protection. Once those aspects of operation
are fully addressed, he said, other sanitation issues could
be dealt with.
MR. BERG mentioned the DEC staff had targeted several areas
for additional remote maintenance workers, including Kodiak
Island and villages in the Bethel area. Expansion into
those areas would depend upon funding, he added.
Number 269
REPRESENTATIVE JOHN DAVIES asked how many remote maintenance
workers there are.
MR. MUELLER answered that there were six, and the total
budget for that program was under $800,000.
Number 284
VICE CHAIRMAN HUDSON referred to the state operating budget,
and specifically HB 65, which Representative Hudson said
would convert state services to user-fee programs. He said
that approach was essential if the state was to continue to
provide oversight and professional assistance. He asked Mr.
Mueller if he was aware of what had been done in the budget
process for FY 94.
MR. MUELLER replied that Janice Adair of the DEC had given
the wastewater board a briefing, and he agreed that a
program where industry helped pay for regulation would be a
fair way to deliver services.
CHAIRMAN WILLIAMS thanked the members of the Water and
Wastewater Works Advisory Board for their presentation. He
noted Representative Finkelstein had joined the meeting at
8:25 a.m., and also announced that the remainder of the
meeting would be held by teleconference with sites in
Anchorage, Fairbanks and Mat-Su. The next item on the
agenda would be HB 201.
HB 201: MENTAL HEALTH TRUST AMENDMENTS
CHAIRMAN WILLIAMS explained that HB 201 was introduced by
the House Resources committee after two overview hearings on
the issue and committee discussion, followed by the
appointment of a subcommittee. That subcommittee, he said,
had recommended introduction of the bill. He announced that
since the committee already had heard the background of the
issue, the testimony at this meeting should focus
specifically on the legislation itself.
Number 375
CHARLES COLE, ATTORNEY GENERAL, ALASKA DEPARTMENT OF LAW,
presented the state's opinion on HB 201. In his preliminary
statement, he referred to the settlement agreement entered
into between the counsel for the Weiss plaintiffs and those
similarly situated, the attorney for the Alaska Mental
Health Association, Mr. Walker and Mr. Gottstein. Also
signatory to that agreement was Jeff Jessee, attorney for
the intervening plaintiffs.
MR. COLE read from the settlement agreement, then restated
it in non-legal terms. He referred to an injunction
precluding the state from issuing deeds to the so-called
"moms and pops," the innocent third parties whose lands were
tied up because of the pending land exchange. The state, he
said, was concerned about that situation and wanted to
afford relief to those people. He said those people had
dealt with the state in good faith and had paid money. By
virtue of the Superior Court in Fairbanks, he explained, the
state could not perform, and so sought to afford relief by,
in effect, pledging the full faith and credit of the state
to protect the plaintiffs.
MR. COLE said if such relief was not granted, the parties
would have 60 days to try to reach a solution that gives
appropriate relief to the moms and pops. The agreement
further provided that "in the event the parties are unable
to arrive at such an agreement, either party may terminate
the settlement agreement," Mr. Cole explained. An
application for relief for the moms and pops was made to the
Superior Court in Fairbanks, he said, and the motion was
denied on the grounds that the propriety of granting it was
directly related to the validity of Chapter 66.
Number 437
MR. COLE said that in a further effort to grant relief, the
state petitioned the Alaska Supreme Court, asking it to
review the order of the Superior Court denying the relief to
the moms and pops sought by the motion. In this part of the
petition the state asked the Supreme Court to help explain
the scope of the set-off which it granted to the state in
the original Weiss decision. On March 11, 1993, Mr. Cole
said, the Supreme Court, without comment, denied the
petition. The state, he said, was now considering what
action, if any, it should take in light of the rejection by
the Supreme Court in denial for relief from the Superior
Court. Relief to the innocent third parties was one of the
administration's major objectives in formulation of Chapter
66, Mr. Cole added.
Number 480
MR. COLE said the administration's view has been that the
breach by the state of its obligations under the Mental
Health Enabling Act should be resolved on the basis of the
merits of that claim, and the Weiss litigation should not be
used as a vehicle to permanently obtain a mental health
appropriation. So long as the mental health payments are
guaranteed by statute at six percent of unrestricted general
revenues, he said it would be difficult to achieve a
settlement which, in his view, satisfactorily resolves the
issues surrounding the Weiss claim. If litigation or
statute exists which says six percent, he said, there would
not be great incentive to wrap up the issues.
MR. COLE, citing an additional problem, referred to
settlements the state had reached with British Petroleum and
Phillips, which resulted in $680 million dollars in revenue.
He noted under the formula of encumbering six percent of
revenues, it could be that six percent of that settlement
could go to the mental health budget, which he commented,
would constitute a windfall.
Number 525
REPRESENTATIVE GREEN asked Mr. Cole to clarify what would
happen if settlements are reached which include revenues to
the state. Specifically, he asked whether additional
windfalls would be dedicated to mental health.
MR. COLE explained that the six percent figure presently
generates $130 to $140 million dollars a year, when there
are no large tax settlements entered in. Under those
settlements, money properly should go into the general fund,
and then the six percent figure would apply to them. If
that is the legislature's intent, he said, "that's all well
and good."
Number 546
REPRESENTATIVE GREEN mentioned the six percent figure in the
house bill may still be negotiable.
MR. COLE understood that, and said he had been obliquely
referring to the three percent figure in HB 201. He said
that from the position of the Weiss claimants, three percent
is less satisfactory than six percent.
CHAIRMAN WILLIAMS noted Representative James had joined the
meeting at 8:15 a.m.
REPRESENTATIVE JOHN DAVIES referred to the comments on the
percentage of unrestricted general fund revenues, and asked
whether it was Mr. Cole's view that any permanent
appropriation as a percentage of the general fund would be
inappropriate because it does not meet the merits of the
original settlement.
Number 565
MR. COLE answered that it does not isolate the merits of the
Weiss claims and what should be paid to settle them, from a
perpetual appropriation to mental health.
REPRESENTATIVE DAVIES asked why it would be inappropriate to
substitute such a method for that portion of land that was
not reconstituted. He noted the land itself, under the
original congressional intent, was intended for a permanent
income stream.
MR. COLE did not believe the intent of the original enabling
act was to provide a permanent fixed stream. Rather, he
felt the intent was to make available lands from which
income could be generated to support in whole or in part,
depending on the legislature's desires, the mental health
programs. Regarding the first part of Representative
Davies' question, Mr. Cole said nothing would be wrong with
that so long as the total dollars paid, made good the
state's obligations under the enabling act. This, he said,
is key to the damages sustained by the trust for the state's
breach.
Number 602
REPRESENTATIVE JEANNETTE JAMES returned to the question of
the $680 million received by the state in settlements with
oil companies. She noted the legislature disagrees with the
administration's position that the money should go into the
general fund, and believes instead that the revenue should
go into the budget reserve account. If that is the case,
she asked the attorney general whether it was then correct
that the settlement money would not figure into the six
percent revenue stream for mental health programs.
MR. COLE replied in the affirmative.
VICE CHAIRMAN HUDSON summarized the situation of the mental
health lands issue by saying that the state erred in taking
the mental health lands that were set aside for the trust;
they erred in disposing of the lands; they erred in
encumbering; and they erred in designating many of those
lands into special use purposes. Those lands that are left,
he said, can go back into reconstituting the trust.
MR. COLE preferred to say he had no comment with respect to
whether the state had indeed breached all those obligations.
He agreed, however, that those are the claims of the
plaintiffs.
VICE CHAIRMAN HUDSON commented that to correct the
situation, Chapter 66 was passed, which said the state would
return the unencumbered lands to the trust and let the
mental health trust select other lands. He said it was to
the state's credit to release the moms and pops. When
looking at the current status of the situation, Vice
Chairman Hudson said the Resources subcommittee considered
viewpoints that said the reconstitution would likely take
years, with every party trying to position themselves to get
the most out of it.
VICE CHAIRMAN HUDSON said the subcommittee looked at a
variety of alternatives, including the possibility of a
lease-back mechanism. He said the committee was stymied as
to how to resolve the issue, and the three percent revenue
stream figure in HB 201 was an alternative to six percent,
and it gave some consideration for the millions of dollars
that the state had already paid into the trust. He asked
Mr. Cole to comment on the current court impasse in trying
to develop the reconstitution, and whether that solution
could be expected to result in a satisfactory solution.
Number 674
MR. COLE commented that he had been personally disappointed
in the way the settlement agreement had functioned,
particularly with respect to the land selection by the
claimants. He also expressed disappointment in the
inability to receive adjudication in the issues by the
courts.
TAPE 93-28, SIDE B
Number 000
MR. COLE announced that he had to leave the meeting for
another appointment, and noted Tom Koester, an attorney on
contract with the Department of Law working on the mental
health lands issue, would be available for further
questions, if needed.
BOB STILES, PRESIDENT OF THE ALASKA COAL ASSOCIATION,
explained that he manages properties in the Beluga Coal
Fields, all of which are situated on original mental health
trust lands. He noted that he is not an attorney, and would
analyze HB 201 from a businessman's perspective.
Number 043
MR. STILES said it was important to recognize the concept of
HB 201, as an attempt to fix the major sticking points on
Chapter 66. He commented that the whole land exchange
process was the biggest problem with Chapter 66,
particularly as it relates to replacement lands. He said HB
201 removes that aspect. He also noted HB 201 contains
"technical fixes" for Chapter 66. He explained these
changes section by section.
MR. STILES referred to Section 1 of HB 201, and explained
that this section, as well as Section 9, addresses the
jurisdiction of the case, adjusting it first to the Superior
Court. Section 2, he said, is identical to Chapter 66
except for paragraph four, where the language is
strengthened with regard to land asset management by the
Department of Natural Resources (DNR). This parallels
paragraph five, he said, which establishes the Alaska
Permanent Fund as the manager of the cash assets.
MR. STILES addressed Section 3 of HB 201, and offered an
amendment to submit to the committee that would remove
Section 3. The problem with that section, he said, was that
it allocates the income from the land to the Trust Fund,
which he said was seen as a violation of the enabling act,
which said the income from the land had to go to the trust
income account. This is the way it was structured in
Chapter 66, he said.
MR. STILES explained that Section 4 repeals the substitute
land exchange portion of Chapter 66, and replaces it with an
allocation instead of an appropriation of a percentage of
the unrestricted general revenues to the trust income
account. Section 5, he said, establishes security for the
state's carrying through of the allocation of the income.
He again stressed that it was an allocation of income and
not an appropriation. Effectively, he said, the section
establishes rent on those lands that do not go back to the
trust.
MR. STILES said Chapter 66 reconstituted the land corpus of
the trust from original trust lands that are not in
Legislatively Designated Areas (LDAs), that are not
municipal lands, and are not "moms and pops" lands. It
only, he explained, puts back unencumbered original trust
lands and encumbered lands with the encumbrances listed.
Number 175
MR. STILES referred to an amendment to Section 5 that was
included in committee members' packets. That amendment, he
said, lifts some restrictions on the state's functioning on
LDAs. It says, he explained, that the state could continue
to allow and permit those activities that are permitted by
law, so there would be no restriction on the use of the LDAs
because they are held as security for the trust.
MR. STILES noted the way Section 5 of HB 201 was originally
written, it was conceivable that the state could not put a
park bench in LDAs. More importantly from an industry
perspective, he explained, was that the Wishbone Hill mine
is inside of an LDA. This raised questions about the
ability of the project to go forward, but the amendment
should resolve that, he said.
MR. STILES turned to Section 6, which he said reconstitutes
the land corpus of the trust. The way the section is
written in HB 201, he said, it is only a recognition of the
existence of the mental health trust lands. That situation
was unacceptable to the plaintiffs, he said, in that they
are interested in having a patent to the lands. He
recommended amendments to Section 6, and said he hoped to
have them prepared and to the committee in the following
week.
MR. STILES addressed Section 7, which he said eliminates the
repeal of Section 38.05.800. The reason for that, he said,
was that the preceding section was, in fact, Section
38.05.800. In Chapter 66, he said, that section was
repealed, and in HB 201, the repeal is being reversed.
Section 8, he said, repeals all of the land portion of
Chapter 66. Sections 54 through 57 of Chapter 66, he said,
all spoke to the reconstitution of the land corpus of the
trust, and Section 9 is jurisdictional, as explained under
his comments on Section 1.
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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