Legislature(1993 - 1994)

05/05/1994 09:15 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    SENATE FINANCE COMMITTEE                                   
                           May 5, 1994                                         
                            9:15 a.m.                                          
  SFC-94, #82, Side 1 (000-end)                                                
  SFC-94, #82, Side 2 (575-end)                                                
  SFC-94, #84, Side 1 (000-086)                                                
  SFC-94, #84, Side 2 (068-123)                                                
  SFC-94, #86, Side 1 (000-121)                                                
  [Note - Malfunction on Tape 84.  No recording on side 1, and                 
  only partial recording on side 2.]                                           
  CALL TO ORDER                                                                
  Co-chair Drue  Pearce convened the  meeting at approximately                 
  9:15 a.m.                                                                    
  All  committee  members  (Co-chairs  Pearce  and  Frank  and                 
  Senators  Jacko, Kelly,  Kerttula, Rieger,  and Sharp)  were                 
  ALSO   ATTENDING:     Representative  Hanley;   Harry  Noah,                 
  Commissioner,  Dept.  of  Natural  Resources;  Nancy  Usera,                 
  Commissioner, Dept. of Administration; Jan Hansen, Director,                 
  Division of Public  Assistance, Dept.  of Health and  Social                 
  Services;  Mike  Ford,  Legal  Counsel, Legislative  Affairs                 
  Agency; Tom Koester,  Legal Counsel,  State of Alaska;  Dave                 
  Skidmore,  aide  to Senator  Frank;  George Dozier,  aide to                 
  Representative  Kott; aides  to committee members  and other                 
  members  of  the  legislature;  and representatives  of  the                 
  SUMMARY INFORMATION                                                          
  SB 372 -  ALCOHOLIC BEVERAGES: LOCAL OPTION & MISC.                          
            Work  draft  "O" was  ADOPTED, and  Senator Pearce                 
            explained  that  it  removes  tax  provisions  and                 
            former  secs.   45,   58,  and   59  relating   to                 
            municipalities  increased  taxation.   The  Senate                 
            Finance   version   now   contains  local   option                 
            provisions only.  CSSB 372  (Fin) was REPORTED OUT                 
            of committee  with a  $1.06 fiscal  note from  the                 
            Office of the  Governor/Division of Elections  and                 
            zero notes  from the  Dept. of  Public Safety  and                 
            Dept. of Revenue.                                                  
  HB 201 -  MENTAL HEALTH TRUST AMENDMENTS                                     
            Lengthy  discussion  was  had   with  Harry  Noah,                 
            Commissioner of Natural Resources and Tom Koester,                 
            legal counsel for the State  of Alaska.  The  bill                 
            was held in committee for additional discussion.                   
  HB 231 -  AGGRAVATING/MITIGATING FACTORS;SEX CRIMES                          
            Brief comments were provided  by George Dozier  of                 
            Representative Kott's  office.  CSHB  231(Fin) was                 
            REPORTED OUT of committee with  a fiscal note from                 
            Dept. of  Corrections showing  no operating  costs                 
            but $500.0 in capital funding  and zero notes from                 
            the Dept. of Law, Dept. of Public Safety, Dept. of                 
            Administration (OPA)  and  (PDA),  and  the  Court                 
  HB 409 -  AFDC DEMO PROJECT AND DECREASE                                     
            SCS  CSHB   409  version  "L"  was   presented  to                 
            committee  and ADOPTED.   Discussion was  had with                 
            Representative Hanley, and a conceptual amendment,                 
            seeking comparison of private sector versus public                 
            workfare  and   a   subsequent   report   to   the                 
            legislature  was proposed  by  Co-chair Frank  and                 
            ADOPTED.  SCS CSHB  409 (Fin) was REPORTED  OUT of                 
            committee.  PLEASE NOTE - This SCS CSHB  409 (Fin)                 
            was  never  finalized.     Problems  developed  in                 
            formulation of the  conceptual amendment, and  the                 
            bill  was   returned  to  committee  5/6/94.    An                 
            alternative SCS  CSHB  409 (Fin)  was adopted  and                 
            reported out on that date.                                         
  CS FOR HOUSE BILL NO. 409(FIN) am(efd fld)                                   
       An Act  relating to  the maximum  amount of  assistance                 
       that may be  granted under the adult  public assistance                 
       program  and  the  program  of  aid  to  families  with                 
       dependent children; proposing  a special  demonstration                 
       project  within  the program  of  aid to  families with                 
       dependent  children  and  directing the  Department  of                 
       Health and  Social Services  to seek  waivers from  the                 
       federal government to implement the project.                            
  Co-chair Pearce directed that CS FOR HOUSE BILL NO. 409(FIN)                 
  am(efd  fld)  be  brought  on  for discussion  and  directed                 
  attention to  a draft  Senate  Finance Committee  Substitute                 
  (8-LS121\L, Lauterbach, 5/2/94).   Co-chair Frank  explained                 
  that the draft increases  the ratable reduction from 1.7  to                 
  2.2.    He then  suggested  that  his staff  speak  to other                 
  changes.  Co-chair Pearce requested that  the sponsor of the                 
  legislation first speak to the demonstration project.                        
  REPRESENTATIVE MARK HANLEY, sponsor of the legislation, came                 
  before  committee.    He explained  that  the  proposed bill                 
  attempts to change  the way  the state administers  Alaska's                 
  welfare program.  He  suggested that the best way  to reduce                 
  welfare costs  is to  get people  off welfare  rolls.   That                 
  approach is consistent in what is happening in other states.                 
  There are three parts to the proposed bill:                                  
       1.   It attempts to remove disincentives to work and                    
            provides incentives instead.                                       
       2.   A workfare program which requires individuals,  if                 
  they           are able, to do  either community service  or                 
                 to work for                                                   
            pay in order to receive benefits.                                  
       3.   A ratable reduction.                                               
  At the present time,  after an individual is on  welfare for                 
  four months and needs to continue to receive benefits, he or                 
  she  is  only allowed  to keep  $50  of anything  made while                 
  working.   The proposed bill  increases that amount  to $200                 
  and  allows  an individual  to  keep one-third  of "anything                 
  after that."    That  removes  a disincentive  to  work  and                 
  provides an  incentive.   It  also  reduces state  costs  by                 
  allowing the state  to keep the two-thirds.  The legislation                 
  also increases the car allowance.   At the present time, the                 
  federal government allows an automobile value of  only up to                 
  $1,500.  That  was increased to  $7,500 in a version  passed                 
  out of Senate HESS.   The bill also eliminates  the 100-hour                 
  rule which limits certain families to  work no more than 100                 
  hours a month.                                                               
  The workfare  program requires  that an  individual do  paid                 
  work for ten hours  a week or unpaid community  service work                 
  for at least twenty-one hours  in order to receive benefits.                 
  The bill requires that the community service work portion be                 
  contracted out where possible.                                               
  Representative  Hanley acknowledged  that  the program  will                 
  cost money to implement.  It requires additional eligibility                 
  workers  as  well as  people to  monitor  the program.   The                 
  ratable reduction in the original bill was intended to cover                 
  the  cost of the program, but  it was eliminated in the HESS                 
  version.   Representative  Hanley  voiced his  understanding                 
  that the  ratable  reduction was  increased to  2.2% in  the                 
  proposed Senate Finance  draft.  In  response to a  question                 
  from Senator Kerttula, Representative Hanley explained  that                 
  the  ratable  reduction  represents a  "straight  percentage                 
  reduction in the benefits paid to recipients of adult public                 
  assistance and AFDC."                                                        
  DAVE  SKIDMORE,  aide  to Senator  Frank,  next  came before                 
  committee.    He  concurred that  the  proposed  draft would                 
  increase  the ratable reduction  for both AFDC  and APD from                 
  1.7% to  2.2%  The only  other change in  the Senate Finance                 
  draft is that the  reduction would not be repealed  in 1999.                 
  It  would  remain  in  effect  even when  the  demonstration                 
  project is repealed.                                                         
  Mr. Skidmore  next directed  attention to  a Senate  Finance                 
  Committee  fiscal  note for  the  Alaska Work  Program.   He                 
  explained  that  the  Dept. of  Health  and  Social Services                 
  initially submitted a note for the bill  but when provisions                 
  allowing for the  contracting of these services  were added,                 
  the fiscal note increased dramatically.   The Senate Finance                 
  note returns  to original amount  since it is  believed that                 
  costs should remain the same regardless of whether the state                 
  or private sector provides the service.                                      
  Senator Kerttula inquired concerning  liability for injuries                 
  that  might  be sustained  as  a  result of  workfare.   JAN                 
  HANSEN, Director, Division  of Public  Assistance, Dept.  of                 
  Health  and  Social Services,  came  before committee.   She                 
  explained that  part of  the proposal  includes purchase  of                 
  insurance  comparable  to  worker compensation.    Insurance                 
  would thus be covered  by the state  in a manner similar  to                 
  the JOBS program.  That  is included in the fiscal  note for                 
  the  Alaska Work program.  The cost  amounts to a $25 charge                 
  for six-month placement of an individual in workfare.                        
  Senator Kerttula next directed attention to page 4, line 14,                 
  and  inquired  concerning  the  issuing  of contracts  on  a                 
  competitive  basis.     Representative   Hanley  said   that                 
  provisions for  contracting workfare  to the  private sector                 
  were added on the  floor of the House.  In  some areas there                 
  is potentially more than one organization that could  do the                 
  work.  There is thus need  to provide for competitive award.                 
  Further  discussion  followed between  Senator  Kerttula and                 
  Representative  Hanley  regarding   the  qualifications   of                 
  entities  to  be  granted  such  contracts.   Representative                 
  Hanley stressed  that the  organization would  have to  have                 
  experience  to  qualify.   Further  discussion of  the issue                 
  followed with Jan Hansen regarding establishment of criteria                 
  for evaluation of experience.                                                
  Representative Hanley  explained that  while the  department                 
  initially intended to  conduct workfare on its  own, concern                 
  arose in the House that private organizations were available                 
  to provide the  service.   The Fairbanks Native  Association                 
  was cited as an example.                                                     
  Jan Hansen stressed  that the  "contract" referenced in  the                 
  bill relates to administrative services for workfare  rather                 
  than for  the individual  participant in the  program.   The                 
  division of  public assistance  would be the  administrative                 
  entity  if the  program  is not  contracted  to the  private                 
  Discussion followed  between Ms. Hansen and  Co-chair Pearce                 
  concerning  contract arrangements  associated with  the JOBS                 
  Senator  Kerttula  expressed  concern   that  private-sector                 
  contracts  might,  in   the  end,   cost  more  than   state                 
  administration.  He then asked  if the legislation contained                 
  safeguards to ensure that that was not  the end result.  Co-                 
  chair  Pearce  asked if  the House  would  be amenable  to a                 
  conceptual  amendment requiring  that  the department  first                 
  ascertain  whether  private-sector  contract would  be  less                 
  rather  than more expensive.   Representative Hanley advised                 
  that he  would have no  problem with  such a provision.   He                 
  noted, however, that  the original fiscal note  for workfare                 
  was approximately  $300.0, but  the cost  increased to  $1.4                 
  million  after inclusion  of  provisions for  private-sector                 
  services.    The Representative  advised  he was  unsure why                 
  costs  are  expected  to increase  so  dramatically. Senator                 
  Kerttula voiced  support for  a conceptual  amendment.   Co-                 
  chair Frank suggested that the amendment include a report to                 
  the legislature on  both costs and  avoided costs.  The  Co-                 
  chair next voiced the following conceptual amendment:                        
       Provide for private  sector contracting if,  after                      
       having   received   the   bids,   the   department                      
       determines that  the  private sector  could do  it                      
       more effectively and inexpensively than the state.                      
       In determining  that, the department  must analyze                      
       the  avoided  costs  and report  findings  to  the                      
       legislature, annually.                                                  
  Jan Hansen  voiced concern  that assessment  of costs  after                 
  receipt of bids  would be unfair  to contractors who  devote                 
  substantial time and cost to  bid preparation.  Both Senator                 
  Kerttula and Co-chair Pearce suggested that the bid proposal                 
  include information to the effect that the state is  seeking                 
  to  make  the   above-mentioned  evaluation.     Jan  Hansen                 
  commented  that  the state  should perhaps  seek information                 
  rather than a request for bids.                                              
  Responding  to  earlier  statements regarding  the  dramatic                 
  increase  in  the fiscal  note  when allowance  for private-                 
  sector contracting was included, Ms. Hansen explained that a                 
  portion  of  the  cost was  the  department  assessment that                 
  contracting would  cost more.  Another part  of the increase                 
  resulted from  discovery that the cost to the department had                 
  been severely underestimated.   The third piece  of the cost                 
  relates  to  review  of  workfare  in  other  states.    The                 
  department could not find another state that was contracting                 
  out the effort.   All were performing the service  in house.                 
  The department  thus reviewed  the range  of costs in  other                 
  states and based its estimate on those numbers.                              
  Co-chair Frank MOVED for adoption  of a conceptual amendment                 
  to add  language requiring that the department report to the                 
  legislature the  avoided costs  and the  cost of  contracted                 
  provision of these  services under  subsection (b) (page  4,                 
  lines 12 through 21).  No  objection having been raised, the                 
  conceptual amendment was ADOPTED.                                            
  Co-chair  Frank then  MOVED  for adoption  of  SCS CSHB  409                 
  (Finance) work draft "L."  No objection  having been raised,                 
  work draft "L" was  ADOPTED.  Co-chair Frank MOVED  that SCS                 
  CSHB  409  (Finance)  pass  from committee  with  individual                 
  recommendations together with accompanying fiscal notes.  No                 
  objection having  been raised,  SCS CSHB  409 (Finance)  was                 
  *REPORTED OUT of committee with the following fiscal notes:                  
       SFC/ Alaska Workfare                         0                          
       DH&SS, AFDC                                  0                          
       DH&SS, Eligibility Determination             0                          
       DH&SS, PA Administration                   200.1                        
       DH&SS, PA Data Processing                  631.4                        
       DH&SS, Child Care                            0                          
       DH&SS, AFDC                             (3,080.6)                       
       DH&SS, APA                              (  619.2)                       
       DH&SS, PFD                              (  423.2)                       
  Co-chair  Frank  and  Senators Jacko  and  Sharp  signed the                 
  committee report with a "do  pass" recommendation.  Co-chair                 
  Pearce  and  Senators  Rieger  and  Kelly signed  "no  rec."                 
  Senator Kerttula signed "do not pass."                                       
  *PLEASE NOTE -  The SCS  CSHB 409  (Finance) containing  the                 
  conceptual amendment was never produced  due to difficulties                 
  encountered in  attempting to develop  appropriate language.                 
  The  bill  was   returned  to   committee  5/6/94,  and   an                 
  alternative SCS CSHB 409 (Finance)  was reported out at that                 
  HOUSE BILL NO. 445 am                                                        
       Act relating to administrative or court revocation of a                 
       driver's license  resulting from operation  of a  motor                 
       vehicle,   commercial   motor  vehicle,   or  aircraft;                 
       relating  to  chemical testing  of  a person's  breath,                 
       urine, or blood  if the person  is involved in a  motor                 
       vehicle accident  that causes death or serious physical                 
       injury;   relating   to   definitions   applicable   to                 
       commercial  motor  vehicle laws;  relating  to chemical                 
       testing of a  person's breath, urine, or  blood without                 
       the  person's consent;  and relating  to  the use  in a                 
       civil or criminal action of the  refusal of a person to                 
       submit to a chemical test.                                              
  Co-chair Pearce referenced the scheduling of HB 445 and  the                 
  fact  that  provisions  inserted  within  SCS HB  445  (Jud)                 
  convert a  third conviction  for  driving while  intoxicated                 
  into   a   felony   with   a   one-year   prison   sentence.                 
  Approximately 650  individuals, annually, would be caught in                 
  that provision.   The Dept. of Corrections submitted  an $11                 
  million fiscal  note because  the system  cannot accommodate                 
  that number of people.   Co-chair Pearce said that  staff is                 
  working with the  department in an  attempt to "try to  find                 
  some compromise  position  that  still  provides  a  heavier                 
  penalty but  doesn't force  the construction  of  a new  $20                 
  million facility."  It is hoped  that a compromise bill will                 
  be available tomorrow.   The bill will also bring  the legal                 
  limit down to .08.                                                           
  Senator Kelly  subsequently voiced  his understanding  that,                 
  during the interim, the Dept. of Corrections, in conjunction                 
  with the Alaska Railroad, would be discussing  the option of                 
  using  a  funding  mechanism similar  to  that  proposed for                 
  discovery center bonds to  build a facility to be  leased by                 
  the railroad  to the  department, somewhere  along the  rail                 
  line  "toward  the  Fairbanks  area."   That  represents  an                 
  opportunity for  construction of an  additional correctional                 
  facility  without utilizing  general fund moneys.   Co-chair                 
  Pearce inquired concerning  repayment of the bonds,  and Co-                 
  chair Frank suggested  that use of general  obligation bonds                 
  would provide the lowest cost financing.                                     
  SENATE BILL NO. 372                                                          
       Act relating to community local  options for control of                 
       alcoholic  beverages;  relating   to  the  control   of                 
       alcoholic beverages;  relating  to  the  definition  of                 
       `alcoholic  beverage'; and  providing for  an effective                 
  Co-chair Pearce directed that SB  372 be brought back before                 
  committee at this  time.  She noted  that when the  bill was                 
  previously before  members,  it lacked  sufficient votes  to                 
  pass.  She then  directed attention the "O" version  of CSSB
  372 (Finance) and explained that the new draft removes secs.                 
  45, 58, and 59 of the  previous "K" version.  Sec. 58  would                 
  have prohibited a  municipality from levying a  property tax                 
  on alcoholic beverages.   Some  municipalities already  have                 
  such  a  tax.   Sec.  45  would  have  banned ability  of  a                 
  municipality to  apply a sales  tax to alcohol  unless there                 
  was a general  sales tax.   Sec. 59 contained the  increased                 
  tax on alcoholic beverages.   Local option provisions remain                 
  the same as  does the  definition of "alcoholic  beverages."                 
  The title was changed to remove the word "taxation."                         
  Co-chair Frank MOVED for adoption of CSSB 372 (Finance), "O"                 
  version.   No objection having  been raised, the "O" version                 
  of  CSSB   372  (Finance)  was  ADOPTED.    In  response  to                 
  statements by Co-chair Frank, Co-chair Pearce concurred that                 
  the newly adopted draft  now contains only the  local option                 
  changes requested by the department.                                         
  Senator Sharp directed attention to page 30, lines 10 and 11                 
  and  raised questions  concerning  opt-out provisions.   Co-                 
  chair  Pearce directed that  CSSB 372  (Finance) be  held in                 
  committee pending the arrival of the legal drafter to  speak                 
  to Senator Sharp's concerns.                                                 
  CS FOR HOUSE BILL NO. 231(FIN)                                               
       An Act relating to when previous conduct constituting a                 
       sexual offense may be used as an  aggravating factor at                 
  Co-chair Pearce directed that CSHB  231 (Finance) be brought                 
  on for discussion.  She noted that the bill was reported out                 
  of committee on May 1, 1994, and returned from Rules because                 
  it  picked  up  a  $500.0  fiscal  note from  the  Dept.  of                 
  Corrections.  The department contends that the $500.0 fiscal                 
  note would apply  with or without mitigating  language.  She                 
  acknowledged discussion of inserting mitigating factors back                 
  into the bill  but questioned whether  they would fit  under                 
  the title.                                                                   
  GEORGE  DOZIER,  aide to  Representative  Kott, came  before                 
  committee.    He explained  that  the  sentencing commission                 
  initially embraced both  aggravating and mitigating portions                 
  of the bill.   Mr. Dozier  advised that Representative  Kott                 
  would not be  in favor of reinserting  the mitigating factor                 
  at this point since there was considerable opposition in the                 
  House and time is now a concern.                                             
  In response to  questions from Senator Kerttula,  Mr. Dozier                 
  explained  that as  now structured,  previous  sexual crimes                 
  constitute  an aggravating factor.  However,  there is a gap                 
  in coverage when an individual is being sentenced for sexual                 
  abuse of a  minor and has  a previous conviction for  sexual                 
  assault of an adult.   The proposed bill amends  current law                 
  to  require  that  previous  sexual  crimes,  regardless  of                 
  whether  they  were perpetrated  against adults  or children                 
  constitute aggravating  factors for  purposes of  sentencing                 
  for sexual crimes.                                                           
  Senator  Kelly  MOVED  that  CSHB  231 (Finance)  pass  from                 
  committee  with individual  recommendations.   No  objection                 
  having  been raised, CSHB 231  (Finance) was REPORTED OUT of                 
  committee with a  fiscal note from the  Dept. of Corrections                 
  showing zero operating costs and  a capital cost of  $500.0.                 
  Previous zero  fiscal notes  from the  Alaska Court  System,                 
  Dept.  of   Law,  Dept.  of  Public  Safety,  and  Dept.  of                 
  Administration (one for  the Public Defender Agency  and one                 
  for  the  Office of  Public  Advocacy) also  accompanied the                 
  bill.  Co-chairs  Pearce and  Frank  and Senators  Kelly and                 
  Sharp  signed  the   committee  report  with  a   "do  pass"                 
  recommendation.  Senators Jacko and  Rieger signed "no rec."                 
  Senator  Kerttula was  temporarily  away from  the committee                 
  table and did not sign the report.                                           
  CS FOR SENATE BILL NO. 372(FIN)                                              
       An Act relating to community  local options for control                 
       of  alcoholic beverages;  relating  to  the control  of                 
       alcoholic beverages;  relating  to  the  definition  of                 
       `alcoholic beverage'; relating to purchase  and sale of                 
       alcoholic   beverages;   relating  to   alcohol  server                 
       education courses; and providing for an effective date.                 
  Co-chair Pearce  directed that attention  revert to  earlier                 
  adopted  CSSB  372  (Finance).    Senator  Sharp  reiterated                 
  concern regarding language  at page 30, lines 8  through 11,                 
  and asked if it would allow a community of 25 people or more                 
  located 50 miles outside of the City of  Fairbanks to hold a                 
  local  option  election, even  though  the community  may be                 
  located within the Fairbanks North Star Borough.                             
  End:    SFC-94, #82, Side 1                                                  
  Begin:  SFC-94, #82, Side 2                                                  
  MIKE FORD,  Legal Services, Legislative Affairs Agency, came                 
  before committee.   He  referenced bill  language and  noted                 
  that   "established   village"   means   an   unincorporated                 
  community.   Discussion focused on  the designation "unified                 
  municipality."  Co-chair Frank voiced his understanding that                 
  Anchorage,  Juneau,   and  Sitka   are   the  only   unified                 
  municipalities within Alaska.  Senator Rieger voiced concern                 
  that, as presently drafted, the language could inadvertently                 
  be construed to allow 25 houses clustered "just  outside the                 
  Fairbanks city limits  but within the Fairbanks  Borough" to                 
  hold a local  option election because  the group is  located                 
  more  than  50 miles  outside  the  boundary limits  of  the                 
  nearest   unified  municipality  which  is  Anchorage.    He                 
  suggested  that  language speak  to  a  unified municipality                 
  "adjacent" to the organized  borough in question.  Mr.  Ford                 
  said that his reading  of bill language would not  apply the                 
  interpretation suggested  by Senator  Rieger.   The bill  is                 
  intended  to  focus  on  unincorporated  communities  in  an                 
  organized  borough prior  to  meeting  other bill  criteria.                 
  Senator Rieger  raised questions  concerning application  of                 
  the bill  to communities  within the  MatSu Borough  and the                 
  Kenai Peninsula  Borough.   Senator Sharp  expressed concern                 
  that the bill does not say that the unified municipality has                 
  to be within the  organized borough.  Co-chair Pearce  asked                 
  if  members  wished  legal  services  to  draft  alternative                 
  language.  Senator Rieger observed that communities in close                 
  proximity to a  unified municipality are often  difficult to                 
  identify.    Housing  flows  from  one section  to  another.                 
  Elsewhere in the state, however, communities are more easily                 
  defined.  He cautioned that, as drafted, the bill provides a                 
  window for strained application.   Co-chair Pearce suggested                 
  that, in the interest of time,  the bill pass from committee                 
  with  the  understanding   that  Mr.  Ford  would   work  on                 
  clarification language that could be offered on the floor of                 
  the  Senate.    Senator  Kerttula  asked if  the  Co-chair's                 
  proposal  would   be   predicated   upon   Senator   Sharp's                 
  satisfaction  with  the  new  language.    Co-chair   Pearce                 
  answered affirmatively.  Mr. Ford also concurred.                            
  Co-chair Frank MOVED for passage of CSSB  372 (Finance) with                 
  the understanding that amending  language would be  prepared                 
  for possible application in  second reading on the floor  of                 
  the  Senate.   No  objection having  been  raised, CSSB  372                 
  (Finance)  was  REPORTED  OUT of  committee  with  the noted                 
  caveat.   Co-chairs Pearce and Frank  and Senators Kelly and                 
  Rieger  signed  the  committee  report   with  a  "do  pass"                 
  recommendation.    Senators Kerttula  signed "do  not pass."                 
  Senator Sharp signed "do pass if  amend."  Senator Jacko was                 
  absent  from the  meeting and did  not sign.   The  bill was                 
  accompanied by a  $1.06 fiscal note  from the Office of  the                 
  Governor/Elections and zero  notes from the Dept.  of Public                 
  Safety and Dept. of Revenue/ABC Board.                                       
  CS FOR HOUSE BILL NO. 201(FIN) am                                            
       An Act relating to the mental health land trust and the                 
       mental health  land trust  litigation, Weiss  v. State,                 
       4FA-82-2208  Civil, and  amending  and repealing  other                 
       laws relating to  mental health institutions, programs,                 
       and services that are affected by ch. 66, SLA 1991; and                 
       providing for an effective date                                         
  Co-chair Pearce directed that CSHB 201 (Fin)am be brought on                 
  for discussion.  She noted the  presence of David Walker and                 
  teleconference participation by Mr. Gottstein.                               
  The  Co-chair  asked  that   the  Commissioner  of   Natural                 
  Resources and  Mr. Tom  Koester first  speak to  differences                 
  between  CSHB  201 (Fin)am  and CSSB  67 (2d  Fin)--the bill                 
  reported  out  of   committee  last   year.    HARRY   NOAH,                 
  Commissioner,  Dept.  of   Natural  Resources,  came  before                 
  committee with TOM KOESTER, contract  attorney for the Dept.                 
  of Law in the Weiss mental health litigation.                                
  Mr.   Koester   directed   attention   to   May   3,   1994,                 
  correspondence (copy on file in  the original Senate Finance                 
  Committee file for HB 201)  to Representative Ron Larson and                 
  explained that it provides a section-by-section breakdown of                 
  CSHB  201  (Finance).   Mr.  Koester  acknowledged  that the                 
  letter does not address technical  House floor amendments to                 
  the bill.                                                                    
  The  basic   difference  between  CSHB  201   (Finance)  and                 
  legislation passed last year relates to the second component                 
  of  the  legislation.    The  mental  health  bill  has  two                 
       1.   The reconstitution component                                       
       2.   The incentive component                                            
  The reconstitution component:                                                
       1.   Reconstitutes the mental health  trust as required                 
  by the         Alaska Supreme Court.                                         
       2.   Removes certain original  mental health land  from                 
  trust          status  and  confirms   actions  taken   with                 
                 respect to those lands (conveyances to third-                 
                 party     purchasers,     conveyances      to                 
                 municipalities,  and  inclusion  of  original                 
                 mental  health  land  in parks  and  wildlife                 
       3.   Compensates the trust for lands removed from trust                 
  status         by:                                                           
            A.   Providing additional state land.                              
            B.   Identifying and claiming as a set-off against                 
                 monetary  liability  to  the trust  the  $1.3                 
                 billion  in  state   mental  health   funding                 
                 between 1978 and 1994.                                        
            C.   A $100 million a year allocation to a special                 
                 account in the general fund for appropriation                 
                 by   the   legislature   for  mental   health                 
                 programs.  That continues only as long as the                 
                 state has conceivable liability  remaining to                 
                 the trust.   Once the annual $100  million is                 
                 credited   against   the   liability  for   a                 
                 sufficient  time  period  to   discharge  the                 
                 liability, the authorization terminates.                      
  Senator  Kelly  asked  if  the  proposed  bill  extinguishes                 
  liability.  Mr.  Koester responded, "Yes, it does."  Further                 
  responding to questions from committee members,  Mr. Koester                 
  said that  the $100  million is  intended to  ensure that  a                 
  mechanism is in place to satisfy  any state liability to the                 
  mental health trust, no  matter how large it is.   Liability                 
  will  be an  amount certain,  and it  will not  go into  the                 
  future.  The above  provision, in effect, takes  the current                 
  6% allocation of the unrestricted general fund that flows to                 
  the mental health  trust income  account and terminates  it.                 
  The  current 6% arrangement is  ad infinitum.  The proposals                 
  contained in CSHB 201 (Finance) terminate that  arrangement,                 
  limit the authorization to $100 million a year, and allow it                 
  to  extend  only as  long as  the  state's liability  is not                 
  satisfied.   Mr. Koester expressed his view that the state's                 
  liability has  already been  satisfied, and "this  provision                 
  will  never  come into  play."   Inclusion of  the provision                 
  makes clear to  the court  that the state  is determined  to                 
  satisfy its  liability no  matter how  long it  takes.   The                 
  legislation, therefore, contains a mechanism to do that.  It                 
  provides a failsafe to  ensure that there is a  mechanism to                 
  take care of the state's liability.                                          
  Senator   Kelly  referenced  $165   million  and   asked  if                 
  appropriation of that amount  would satisfy all liabilities.                 
  Commissioner Noah explained  that the  $165 is  part of  the                 
  incentive program, the second  component of the legislation.                 
  He explained that payment would conclude the issue in that a                 
  settlement  would be reached, and  the money would only come                 
  into effect when the court has dismissed the case.                           
  Senator   Kelly   raised   questions  regarding   continuing                 
  liability.  Mr. Koester explained that the approach taken by                 
  the  state  rests  in  its  belief that  the  reconstitution                 
  portion  of  the bill  will  eventually allow  the  state to                 
  persuade the court  to dismiss the  case.  Judge Greene  has                 
  said that the state cannot unilaterally settle the case, but                 
  it can obtain  a final  judgment that it  has satisfied  its                 
  obligations.  The state  believes the reconstitution portion                 
  does  that.   The  state  has,  in effect,  armed  itself to                 
  litigate  the  case to  conclusion  should agreement  not be                 
  reached.  It has  also included the second component  of the                 
  bill--an incentive to the mental  health community in return                 
  for  an  early  dismissal  and  conclusion of  the  case  by                 
  December 15, 1994.                                                           
  If the mental  health community looks  at provisions of  the                 
  bill and determines  that it is not  in particular agreement                 
  with the state  on reconstitution,  but it finds  sufficient                 
  impetus to incentive provisions:                                             
       1.   A total of $200 million up front.                                  
       2.   Creation of  a mental health  trust authority that                 
            oversee the  state's mental  health program,  make                 
            recommendations with respect to general funding of                 
            mental health programs,  and expend  discretionary                 
            funds on pieces of the state mental health program                 
            it believes are the most important.                                
       3.   Numerous improvements to  the state mental  health                 
  to agree to dismissal of the lawsuit, the case will be over.                 
  The $200  million is  not part  of the  compensation to  the                 
  trust.   Reconstitution provisions  of the  bill accommodate                 
  that.  The  $200 million is  part of the incentive  package.                 
  Mr. Koester voiced his understanding that most of the mental                 
  health community believes the $200 million, establishment of                 
  the mental health authority, and other  program improvements                 
  represent a fair resolution of the  case and will be working                 
  toward that end.                                                             
  Senator Kelly again raised questions concerning the earlier-                 
  mentioned  $165 million figure.   Mr.  Koester advised  of a                 
  $200 million appropriation bill consisting of $45 million in                 
  currently  available  funding  from  a  variety  of  sources                 
  (Commissioner Noah  interjected:   "two mental  health trust                 
  accounts") and $155 million (rather  than $165 million) from                 
  the permanent fund earnings reserve.                                         
  The  two-pronged approach in SB  67 is still being followed.                 
  The difference is in the incentive  portion.  The work draft                 
  for SB 67 included a  $225 million staggered approach  under                 
  which $15 million  a year would  be considered a  guaranteed                 
  income stream to the trust.  CSHB 201 (Finance) provides for                 
  a $200 million up-front  appropriation in a lump sum.   That                 
  appropriation would flow to a  mental health trust permanent                 
  fund,  the principal of which would  not be spent.  The fund                 
  would be invested with net income, after inflation proofing,                 
  to  be  used  by  the  trust  authority  for  mental  health                 
  programs.  The difference is that the House bill:                            
       1.   Creates a trust authority.                                         
       2.   Provides a monetary corpus of $200 million for the                 
            mental health permanent fund trust.                                
       3.   Authorizes  expenditure  of  the earnings  of  net                 
            of the trust.                                                      
       4.   Provides for management of the $200 million by the                 
            Alaska Permanent Fund Corporation.                                 
  Senator Rieger inquired concerning use of  the net income of                 
  the  $200 million  and  inflation proofing.   He  voiced his                 
  understanding of a reading  of bill language to be  that the                 
  mental health trust  authority would enjoy  full use of  net                 
  income from the  $200 million, but inflation  proofing would                 
  derive from a draw from the permanent fund earnings reserve.                 
  Mr. Koester responded, "Nothing that's in the permanent fund                 
  earnings reserve  will be used to inflation proof the mental                 
  health trust fund."  The mental  health trust fund would not                 
  be part  of  the permanent  fund.   It would  be a  separate                 
  account.  He concurred  that the entire net income  from the                 
  trust fund  would  flow  to  the  trust  authority,  but  he                 
  directed attention to page 15, line  14, and noted that once                 
  the income accrues to the authority, one of the purposes for                 
  which it may be used is  offsetting the effect of inflation.                 
  In response to  a further question  from Senator Kelly,  Mr.                 
  Koester acknowledged that inflation proofing  of the fund is                 
  permissible rather than mandated.   He explained that it was                 
  not mandated since the trust authority  requires flexibility                 
  in use of the earnings for current or  future beneficiaries.                 
  The  strong sense of the mental health community, which will                 
  be influencing and speaking through  membership on the trust                 
  authority, is that  the corpus should be  inflation proofed.                 
  The trust authority has statutory responsibility to do that.                 
  Senator Kelly expressed  concern that  without a mandate  to                 
  inflation proof, demands for trust funding will be such that                 
  inflation proofing  will fall by  the wayside.   Mr. Koester                 
  noted that bill  provisions were negotiated with  members of                 
  the mental health community  who are in support of  the bill                 
  and will  testify to  that effect.   Senator Kelly  stressed                 
  that  they  are not  aware  of  the pressures  that  will be                 
  exerted  upon  the  authority to  spend  trust  fund income.                 
  Senator  Rieger  suggested  it  would  not be  difficult  to                 
  rewrite bill language to make the "real income" rather  than                 
  "net income" available to the trust authority each year.  He                 
  concurred with  Senator Kelly concerning pressure  that will                 
  be brought to bear on authority members to spend rather than                 
  inflation proof  the trust and  suggested that it  should be                 
  "set up right . . . at the start."                                           
  In  response  to a  question  from Senator  Kelly concerning                 
  establishment of the trust authority, Mr. Koester  explained                 
  that  the  concept arose  in 1991,  the  most recent  of the                 
  failed settlement attempts.   It was  included in Ch. 66  of                 
  the 1991  session laws.   That  law has  never taken  effect                 
  because, per the  effective date  clause, it  does not  take                 
  effect until the case is dismissed.  The trust authority was                 
  addressed at that time and has since  taken hold in both the                 
  mental  health community  and  elsewhere as  an  appropriate                 
  "umbrella-kind" of organization.                                             
  Senator  Kelly  asked if  already-enacted  other legislation                 
  would  take  effect  upon  settlement  or be  overridden  by                 
  legislation in the instant bill.   Is additional legislation                 
  needed?  Mr. Koester explained that the proposed bill amends                 
  earlier legislation.  Both bills  become effective when CSHB
  201 (Finance)am takes effect.  Many of the provisions of the                 
  House bill relate directly to provisions of ch. 66 from 1991                 
  session laws.                                                                
  Senator Kelly questioned whether establishment of the  trust                 
  authority  would,   in  effect,   establish  "another   huge                 
  bureaucracy."    He then  asked  if provisions  restrict the                 
  types of purposes trust moneys could  be expended upon.  Mr.                 
  Koester  said  that there  are  no explicit  provisions that                 
  limit  authority  ability   to  hire   staff.    There   are                 
  substantial provisions  that require  the authority  to take                 
  actions in light of obligations  to the beneficiaries of the                 
  mental health trust.  In response to  similar concerns again                 
  expressed by Senator  Kelly, Mr.  Koester stressed that  the                 
  mental health community would receive  the benefit of grants                 
  and  contracts  authorized  by the  trust  authority.   That                 
  community will not  allow all  of its moneys  to be used  to                 
  fund a bureaucracy.  Unlike many state agencies  where there                 
  is  no direct link  between the population  being served and                 
  agency expenditure of  its dollars, there  is a very  direct                 
  link  between  the  mental health  community  and  the trust                 
  authority.   Funding is  to go  to programs  to benefit  the                 
  mental health community.  Senator Kelly argued that less and                 
  less would flow into programs as the bureaucracy expands.                    
  Senator Sharp voiced his understanding that the $200 million                 
  would not be transferred until reconstitution of trust lands                 
  and extinguishment of  state liabilities have  occurred, and                 
  all  parties have signed on  to the agreement.  Commissioner                 
  Noah  said  that  it  would  not  be paid  until  the  judge                 
  dismisses the case.  Senator Sharp asked if the $100 million                 
  would  be  "sunset" at  the same  time  the $200  million is                 
  transferred.   Commissioner  Noah  advised that  the 900,000                 
  acres is  part of reconstituting  the trust, whether  or not                 
  the incentive package is exercised.   It is the central part                 
  of the  bill.  Senator  Sharp then voiced  his understanding                 
  that  the 900,000 acres could be reconstituted and "the $100                 
  million still guaranteed."   Commissioner Noah said  that if                 
  the incentive package  is not exercised, and  the judge does                 
  not dismiss  the case,   the  state will  claim that  it has                 
  reconstituted the trust with 900,000  acres plus "the offset                 
  of the  $1.3 billion."   The  $100 million  would simply  be                 
  there if the  judge, for whatever reason,  found "that there                 
  was some additional value that had to be paid to the trust."                 
  If the  incentive package is  accepted, the land  remains in                 
  place,  the  trust authority  is  established, and  the $200                 
  million is placed in the trust.  Because the judge would, at                 
  that point,   dismiss the  case, the $100  million would  no                 
  longer come into play.                                                       
  Senator Sharp sought  assurance that  with the proposed  and                 
  earlier legislation in place and effective, plaintiffs could                 
  not "double back" and file new cases.  Mr. Koester responded                 
  Again referencing  concerns earlier voiced by Senator Kelly,                 
  Mr.  Koester noted  Dept. of  Law discussion  of making  the                 
  authority budget subject to the executive budget act so that                 
  it would have to come before the legislature each year.  The                 
  reason it is not  is that the mental health community--those                 
  who will be receiving the  benefit of grants and contracts--                 
  are worried that  the state might  use the executive  budget                 
  act to  thwart ability of the trust  authority to work.  The                 
  mental health community is convinced it will have sufficient                 
  control and tools available to influence the trust authority                 
  to  ensure  that  the  feared  bureaucracy will  not  occur.                 
  Structure of the trust authority as proposed in the bill was                 
  the  subject of discussion and negotiations with plaintiffs.                 
  It   was   an  important   consideration  in   the  "fragile                 
  construction of this bill."                                                  
  Senator Kelly asked if the authority would be subject to the                 
  Alaska  Procurement Procedures  Act,  conflict of  interest,                 
  law, etc.  Mr.  Koester said the authority would  be subject                 
  to  conflict  of  interest law  but  not  the Administrative                 
  Procedures  Act.  Senator  Kelly voiced dismay  over lack of                 
  controls.  Co-chair  Frank concurred, saying that  he wished                 
  to  explore the relationship  between expenditure  of moneys                 
  and the legislative process.  He  voiced his belief that the                 
  legislature  would  not  back away  from  its  commitment to                 
  mental  health.     He   raised  questions,   however,  over                 
  establishment of  a trust  authority with a  flow of  income                 
  while the legislature  continues to  appropriate moneys  for                 
  mental  health   needs.    There  are  legitimate  questions                 
  concerning that relationship.                                                
  Co-chair Frank  next referenced  the original  Congressional                 
  grant  of  a  million  acres for  mental  health  needs  and                 
  questioned whether  the  state  could  transfer  its  public                 
  responsibility to the  trust authority.   Commissioner  Noah                 
  explained that the University trust was  used as a model for                 
  the proposed trust.                                                          
  Senator Rieger directed attention to  the bottom of page  9,                 
  top of page  10, and  page 12,  lines 14 and  15, and  noted                 
  requirements   for   how   the   legislature   crafts    its                 
  appropriation  measures.   He  then inquired  concerning the                 
  constitutionality of  provisions such  as the one  requiring                 
  that  the  appropriation  for  the  mental health  trust  be                 
  contained  in  a   separate  measure   as  well  as   report                 
  requirements.   He asked  who would  prepare the report  and                 
  commented  that  the  requirements  appear  to  bind  future                 
  legislatures.    Mr.  Koester reiterated  that  much  of the                 
  proposed bill  is predicated  upon ch.  66 from  1991.   The                 
  appropriation process in the current House bill differs from                 
  that  in ch. 66  in that there  is less  mental health trust                 
  community influence, under the instant bill, with respect to                 
  the  bulk  of mental  health  trust  funding.   That  is the                 
  portion of mental  health trust funding that comes  from the                 
  state general  fund.   All the  proposed bill requires  with                 
  respect to general fund funding of mental health programs is                 
  that  trust authority  recommendations be  considered and  a                 
  report  issue indicating  why  actual appropriations  by the                 
  legislature differ  from those  recommendation.   That gives                 
  the mental  health community  a  sense that  recommendations                 
  will be considered and looked  at directly and specifically.                 
  Mr.  Koester stressed that the  primary purpose of the bill,                 
  from the state's perspective, is to "give us what we believe                 
  to be the best legal chance to get the case dismissed and to                 
  go  forward."   Other provisions are  incentives, negotiated                 
  with the  mental health community, which many have said will                 
  allow them to see their  way clear to dismissal of  the case                 
  by the end of this year.                                                     
  In response to  inquiry from  Co-chair Frank concerning  the                 
  number   of   attorneys  representing   the   mental  health                 
  community,   Mr.   Koester   advised   of   four   attorneys                 
  representing  various  groups.   At  least two  others whose                 
  clients  are beneficiaries  of the trust  have not  moved to                 
  intervene but have participated in negotiations along with a                 
  "very large group  of mental  health constituents that  have                 
  been actively involved in looking at the package."  Co-chair                 
  Frank  asked  if all  six  attorney  had signed  off  on the                 
  proposed bill.  Commissioner Noah responded negatively.                      
  Responding  to   further  questions  from   Co-chair  Frank,                 
  Commissioner  Noah  explained  that  the  1991  approach  to                 
  settlement  also  contained  an  incentive  package.    That                 
  package is modified in  the proposed bill.  Instead  of $225                 
  million over a fifteen-year period, the $200 million for the                 
  trust would be provided in one lump-sum payment.                             
  Co-chair  Frank  voiced  his   understanding  that  if   all                 
  attorneys do not  sign off on  the proposed bill, the  court                 
  will  be  left  to  decide whether  the  bill,  without  the                 
  incentives,  meets  requirements  earlier  laid  out  by the                 
  court.  He then asked why incentives were included.                          
  Senator Kerttula asked who would manage reconstituted mental                 
  health trust  lands under earlier legislation.  Commissioner                 
  Noah  advised that SB 67 contained  the same land management                 
  provisions  as CSHB 201 (Finance)am.  In both instances, the                 
  lands would be managed by the Dept. of Natural Resources.                    
  Speaking to  Co-chair Frank's  question  regarding need  for                 
  incentives, Mr. Koester  explained that they encourage  both                 
  consent and early dismissal  of the lawsuit.  The  state is,                 
  in effect, paying for an early resolution of the lawsuit.                    
  Senator  Kerttula   asked   if   municipalities   would   be                 
  responsible for returning some land under the proposed bill.                 
  Commissioner  Noah  noted  three   specific  municipalities:                 
  MatSu, Kenai,  and Anchorage.   Senator  Kerttula asked  why                 
  those  who  benefitted  from  the  land  do  not  bear  some                 
  liability.  Commission Noah responded that the land list has                 
  been the subject of "tremendous  negotiation between a whole                 
  group of parties."                                                           
  Senator  Kerttula  spoke  to  the  value  of  mental  health                 
  community management of  lands in  terms of the  competitive                 
  nature  of  state   resources.    He  voiced   concern  over                 
  management  of mental  health trust  lands by  the Dept.  of                 
  Natural  Resources  and  asked if  the  mental  health trust                 
  authority would be involved.  The Senator suggested that the                 
  proposed  bill  allows  for money  management  by  the trust                 
  authority but  not resource  management.  Commissioner  Noah                 
  noted   that  regulations  for   land  management  would  be                 
  developed  in concurrence  between  the  department and  the                 
  trust authority.                                                             
  End, SFC-94, #82, Side 2                                                     
  [Tape malfunction at  this point in  the meeting.  Tape  #84                 
  was loaded onto the recorder but failed to record on side 1.                 
  The  following minutes  reflect  transcription of  shorthand                 
  Mr. Koester concurred that management of mental health trust                 
  lands would be  an interactive procedure with members of the                 
  mental  health trust  authority.    Development  would  come                 
  through regulation.  Senator Kerttula advised that he wished                 
  to see more statutory involvement.  Senator Kelly said  that                 
  he was not interested in  legislative involvement but voiced                 
  need for  public involvement and  oversight.  He  then asked                 
  who  initially  brought the  mental  health lawsuit  and who                 
  would  comprise  the  mental health  trust  authority.   Mr.                 
  Koester explained that the authority would be a state agency                 
  with  members appointed by the  governor.  The mental health                 
  community  will have  input, and  prequalifications will  be                 
  established.  Senator Kelly asked if the mental health board                 
  would be abolished when the  trust authority is established.                 
  Mr.  Koester  answered negatively.    He explained  that the                 
  mental  health  lawsuit  was brought  by  the  mental health                 
  association.  It is not a  state agency.  Other groups  that                 
  felt they should also be covered  joined in the suit.  Judge                 
  Greene has ruled that at least four groups should benefit:                   
       1.   The mentally ill                                                   
       2.   The mentally retarded                                              
       3.   The developmentally disabled                                       
       4.   Chronic alcoholics and senile elderly individuals                  
  The trust  authority would have umbrella  responsibility for                 
  all four groups.   Each of the four individual  boards would                 
  make recommendations to the authority.  At the present time,                 
  that  function is  performed in  part by  the  mental health                 
  board.    The  approach  taken  by  the  proposed  bill,  in                 
  conjunction with Ch. 66,  is a better approach.   The mental                 
  health board would continue to cover the mentally ill.                       
  Senator Kelly inquired regarding the number of mental health                 
  board employees.   Mr. Koester advised  of three and a  half                 
  positions.  He  further directed  attention to fiscal  notes                 
  accompanying the proposed bill and noted that they relate to                 
  coverage for other, above-listed groups.   He explained that                 
  the Older  Alaskan's Commission would  assume responsibility                 
  for  senile  elderly.   The fiscal  note  from the  Dept. of                 
  Administration  would  fund  one full  time  employee.   The                 
  Governor's Council on the Disabled has a staff of three.                     
  [End of  shorthand  transcription of  unrecorded portion  of                 
  Start, SFC-94, #84, Side 2                                                   
  Mr.  Koester  reiterated that  the  proposal under  CSHB 210                 
  (Finance)am is a comprehensive  state mental health  program                 
  that has two funding sources:                                                
       1.   The general fund                                                   
       2.   Mental health trust income                                         
  Funding will involve legislative review and appropriation of                 
  general  fund expenditures  and trust  authority  review and                 
  expenditure  of trust income  for funding of  all aspects of                 
  the state mental  health program.   Expenditures for  boards                 
  and the trust authority  itself will be part of  the state's                 
  comprehensive mental health program.                                         
  Co-chair  Frank  inquired concerning  how  the  two fundings                 
  would fit together.   Commissioner  Noah suggested that  the                 
  specifics of how they would fit would evolve over time.  The                 
  earnings from the  trust account ($6 million  was mentioned)                 
  will be a "portion of the money that you're spending now . .                 
  .  on  mental  health  programs."   Mr.  Koester  concurred,                 
  advising that  it involves projecting out into the future in                 
  a system that  has never been  tried before.  He  reiterated                 
  that the model used for the  trust authority is that of  the                 
  University of Alaska.  The University receives revenues from                 
  its  land  trust and  expends  those  proceeds  in a  manner                 
  reported  to  the  legislature.    The annual  report  lists                 
  various contracts and grants made  with land trust revenues.                 
  Those moneys are not appropriated  by the legislature.   Co-                 
  chair Frank advised that that approach was being changed  in                 
  legislation that has already passed the Senate and is on its                 
  way to the House.  Mr. Koester said that once the  system is                 
  operational, the legislature  will be  aware, each year,  of                 
  what  the  trust   authority  did  in  the   previous  year.                 
  Contracts or grants that expend over more than one year will                 
  also  be  noted.     The  trust  authority  will  be  making                 
  recommendations  for  the overall  package  of funding.   In                 
  those   recommendations,   the   authority    will   provide                 
  information  concerning how  it used its  part and  how that                 
  will fit  with what the authority hopes the legislature will                 
  do.   The  legislature  will be  taking  into account  other                 
  public needs for general funds and may  or may not do as the                 
  trust  authority   requests.    Co-chair  Frank  voiced  his                 
  understanding  that expenditure of  earnings from the mental                 
  health permanent  fund account  would not  come through  the                 
  legislative budget process.   Mr. Koester concurred  that it                 
  would  not.  Co-chair  Frank noted that  the authority would                 
  thus  have  appropriation power  over  income from  the $200                 
  million trust  account.   Mr. Koester  concurred.   Co-chair                 
  Frank  then asked  if  that would  be  constitutional.   Mr.                 
  Koester  acknowledged,  "There are  certainly constitutional                 
  questions raised  about that."   Co-chair  Frank voiced  his                 
  recollection  that  "No  money  can   be  spent  without  an                 
  appropriation by  the legislature."   Mr.  Koester concurred                 
  that a number of constitutional  issues have been raised and                 
  addressed in a number of  opinions by the attorney  general.                 
  He  then referenced  examples such as  AIDEA and  AHFC which                 
  have the  power to  use interest  earned  on revolving  loan                 
  funds   for  expenditure   without   appropriation  by   the                 
  legislature.  Attorney general opinions have acknowledged  a                 
  constitutional question raised by that practice, but because                 
  it is something  that has been done  in the past, it  can be                 
  defended.  Constitutional questions have  been made known to                 
  plaintiffs.   They  nonetheless  feel  that  provisions  for                 
  authority  expenditure  of  earnings  are  important.    Mr.                 
  Koester  stressed  that the  only  means by  which  the $200                 
  million will  flow to  the trust  account  is if  plaintiffs                 
  agree to dismiss  the lawsuit.  Commissioner  Noah explained                 
  that by passage of CSHB 201  (Finance)am, the legislature is                 
  essentially laying out an  offer of settlement.  It  will be                 
  up to the mental health community  whether or not it accepts                 
  that offer.                                                                  
  Co-chair  Frank   voiced  his  understanding   that  if  the                 
  settlement is not accepted, the final decision will have  to                 
  be made by the courts per SB 67.  Commissioner Noah stressed                 
  that CSHB 201  (Finance)am exactly defines the  terms of the                 
  settlement.    It  gives  the  case  the  greatest  possible                 
  certainty for dismissal.  The Commissioner  further stressed                 
  that  many others  (land  owners  and resource  developers),                 
  aside from the mental  health community, are at risk  in the                 
  issue.  In  the absence of  the proposed bill, the  argument                 
  will be one of value.                                                        
  [Defective tape.  Recording  on SFC-94, #84, Side 2  stopped                 
  at this point and would not restart.]                                        
  Start, SFC-94, #86, Side 1                                                   
  Senator  Rieger  expressed  concern over  "turning  over the                 
  appropriation control  which was  not part  of the  original                 
  setup of the  trust."  He further asked  what the end result                 
  of the issue  would be.   If the lawsuit  is dismissed as  a                 
  result  of   passage  of  the  proposed   legislation,  does                 
  settlement  then consist  of a  statute that  is subject  to                 
  amendment in the  future or will  settlement entail a  court                 
  order similar to  the Cleary settlement?   Commissioner Noah                 
  said that  because the  mental health trust  issue has  been                 
  very  difficult  for the  state  for  many  years,  once  an                 
  agreement is reached, if modification is to occur, consensus                 
  must  be sought with  various groups involved.   Mr. Koester                 
  explained  that   because  agreement   from  all   attorneys                 
  representing all mental health groups has not been achieved,                 
  there has  been no  negotiation of  a settlement  agreement.                 
  The state has talked with all  plaintiffs' lawyers about the                 
  possibility  of settlement in order to  have an agreement to                 
  present to the judge.   The state has expressed  its concern                 
  over  "getting   locked  into  something  like   the  Cleary                 
  settlement  which cannot  be  fixed."   The  state does  not                 
  believe that is necessary.  Once  this case is put to  rest,                 
  there  will be  absolutely no interest  on anyone's  part to                 
  reopen the issue and thus open the  door to an argument that                 
  somehow the  state is violating  the mental health  trust by                 
  doing  something  that  would  lead  to a  reinstitution  of                 
  litigation.   The state  is going  to cure  what the  Alaska                 
  Supreme Court said was a breach of the trust in 1985.   This                 
  bill does that.  The state is not interested in getting into                 
  a situation where there will be perpetual court oversight of                 
  everything  the state does  in the  future.   Senator Rieger                 
  voiced  concurrence  in  that approach  and  suggested  that                 
  perhaps  the  legislation  should  state  "something  to the                 
  effect that the original trust  obligation remains, but that                 
  this  is  just a  statute  that is  like any  other  law; it                 
  doesn't  override  or otherwise  change  the  original trust                 
  obligation."    There  would  thus  be flexibility  for  the                 
  future.   Senator  Rieger attested  to the  rigid  effect of                 
  court orders and voiced a  preference for avoiding that end.                 
  Senator   Kelly  advised   that  his  reading   of  enabling                 
  legislation relating to  the mental  health trust  authority                 
  indicates   the   authority   is  covered   by   the  Alaska                 
  Administrative  Procedures  Act.    He  then asked  if  that                 
  provision would be "amended out" in  the proposed bill.  Mr.                 
  Koester initially responded affirmatively,  but subsequently                 
  corrected his comments  to advise of one  exemption from the                 
  Act.  He  further advised  that authority regulations  would                 
  have to be adopted under  the Administrative Procedures Act.                 
  He said he  would further research  the issue and provide  a                 
  more definitive answer.                                                      
  Senator  Rieger  voiced  his intent  to  offer  an amendment                 
  requiring a higher  priority for inflation proofing  so that                 
  only  real income is utilized  for annual expenditure by the                 
  trust authority.                                                             
  Co-chair  Pearce  noted need  to  attend the  pending Senate                 
  floor session and advised that the meeting would be recessed                 
  at  this   time  and  reconvened   later  in  the   day  for                 
  consideration of appropriations for labor agreements as well                 
  as legislation relating to pension investments.                              
  The meeting was recessed, subject to recall by the chair, at                 
  approximately 11:20 a.m.                                                     

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