Legislature(1993 - 1994)

09/27/1994 08:40 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                             MINUTES                                           
                     HOUSE FINANCE COMMITTEE                                   
             2ND SPECIAL SESSION - 18TH LEGISLATURE                            
                       SEPTEMBER 27, 1994                                      
                            8:40 A.M.                                          
                                                                               
  TAPE 1, SIDE 1, #000-END                                                     
  TAPE 1, SIDE 2, #000-#375                                                    
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair Ron Larson called the meeting of  the House Finance                 
  Committee  to  order  at  9:45  a.m.  in  the  House Finance                 
  Committee Room, State Capitol Building, Juneau, Alaska.                      
                                                                               
  PRESENT                                                                      
                                                                               
  The following members were present:                                          
                                                                               
       Co-Chair Larson               Co-Chair MacLean                          
       Representative Hanley         Representative Brown                      
       Representative Grussendorf    Representative Hoffman                    
       Representative Martin         Representative Navarre                    
       Representative Parnell        Representative Therriault                 
                                                                               
  (Representative Foster was not present.)                                     
                                                                               
  ALSO PRESENT: Representative Ed  Willis; Representative John                 
  Davies;  Commissioner  Harry  Noah,  Department  of  Natural                 
  Resources; Bruce Phelps, Project Manager, Division  of Land,                 
  Department of Natural Resources; Jim Gottstein, attorney for                 
  the Alaska Mental Health Association; Jeff Jessee, attorney,                 
  Advocacy Services of Alaska;  Tom Koester, Contract Attorney                 
  for  the   Department  of   Law;   Mike  Greany,   Director,                 
  Legislative  Finance   Division;  Fred   Fisher  and   Susan                 
  Sorenson, Fiscal Analysts, Legislative Finance Division.                     
                                                                               
  SUMMARY INFORMATION                                                          
                                                                               
                                                                               
  HB 549         Relating to the mental health land trust, the                 
                 mental health trust  income account, and  the                 
                 mental health land trust litigation, Weiss v.                 
                 State,  4FA-82-2208  Civil, and  amending ch.                 
                 66, SLA 1991, and ch.  5, FSSLA 1994 relating                 
                 to  the   trust,   the   account,   and   the                 
                 litigation; e.d.                                              
                                                                               
                 Bill  reported out  of Committee  with  a "do                 
  pass" recommendation and  zero fiscal note by  Office of the                 
  Governor.                                                                    
                                                                               
                                                                               
  HB 550         Making and  amending appropriations  relating                 
                 to the  mental health trust fund,  the mental                 
                 health trust income  account, and the  mental                 
                 health trust settlement income account; e.d.                  
                                                                               
                 Bill  reported  out of  Committee with  a "do                 
  pass" recommendation.                                                        
                                                                               
                                                                               
  SB 382         Relating to the mental health land trust, the                 
                 mental health trust  income account, and  the                 
                 mental health land trust litigation, Weiss v.                 
                 State,  4FA-82-2208  Civil, and  amending ch.                 
                 66, SLA 1991, and ch.  5, FSSLA 1994 relating                 
                 to  the   trust,   the   account,   and   the                 
                 litigation; e.d.                                              
                                                                               
                 Bill reported  out of  Committee  with a  "do                 
  pass" recommendation and zero fiscal  note by Office of  the                 
  Governor.                                                                    
                                                                               
                                                                               
  SB 383         Making and  amending appropriations  relating                 
                 to the mental  health trust fund,  the mental                 
                 health trust income  account, and the  mental                 
                 health trust settlement income account; e.d.                  
                                                                               
                 Bill  reported out  of Committee  with a  "do                 
  pass" recommendation.                                                        
                                                                               
                                                                               
  HOUSE BILL NO. 549                                                           
                                                                               
       An Act  relating to the  mental health land  trust, the                 
       mental  health trust  income  account, and  the  mental                 
       health   land   trust  litigation,   Weiss   v.  State,                 
       4FA-82-2208 Civil, and  amending ch. 66, SLA  1991, and                 
       ch. 5, FSSLA  1994 relating to the  trust, the account,                 
       and  the  litigation;  and providing  for  an effective                 
       date.                                                                   
                                                                               
  Co-chair  Larson  advised  members  that  the meeting  is  a                 
  continuation  of   the  joint   Senate  and   House  Finance                 
  Committees' meeting held on September 26, 1994.  He asked if                 
  members had any questions.                                                   
                                                                               
  Representative  Brown  desired  clarification regarding  the                 
  "missing  parcels"  as described  by  Mr. Walker  during the                 
  previous evening's  hearing.    Handouts  entitled  "Missing                 
  Parcels"     and     4/21/94     reconstitution     proposal                 
                                                                               
                                                                               
  (State/Volland),  State's  Exhibit  "A",  were  provided  to                 
  members (Attachment 1 and 2).                                                
                                                                               
  Representative  Brown  felt  good  arguments  had  been made                 
  regarding the benefits  of a  survey by the  state prior  to                 
  land conveyance.  She felt surveying to be a prerequisite to                 
  commercial  activity  on  the  land.   Representative  Brown                 
  identified  a  potential  conflict to  be  imposed  upon the                 
  individuals administering the trust as to whether to utilize                 
  resources  to  survey or  apply  resources to  mental health                 
  programs.   She discussed existing  survey technology  which                 
  could be utilized and asked for a response by the Department                 
  of Natural Resources.                                                        
  Members  were  provided a  copy of  a  letter from  David T.                 
  Walker to  Julian Mason II,  dated September 20,  1994 which                 
  included proposed amendments (Attachment 3).                                 
                                                                               
  COMMISSIONER   NOAH,   DEPARTMENT   OF  NATURAL   RESOURCES,                 
  responded  to  Representative  Brown's   question  regarding                 
  discrepancies between the  list of  lands identified in  the                 
  reconstitution proposal.  He stated that the only changes to                 
  the  land list  were those provided  to the  legislature for                 
  modification on September 26, 1994.                                          
                                                                               
  Representative  Therriault  asked  the  percentage of  lands                 
  already surveyed.  Commissioner Noah said approximately 75%.                 
                                                                               
                                                                               
  Representative Larson  said that funding is appropriated for                 
  survey  of land prior  to conveyance to  municipalities.  He                 
  asked  if a  similar process would  be instituted  for trust                 
  lands.    Commissioner  Noah said  possibly.    However, the                 
  individuals who come to lease  the property may also perform                 
  the survey as a part of the  agreement to lease the property                 
  or dispose of the property.   He said the deeds to be  given                 
  to the Trust will be warranted by the state.                                 
                                                                               
  Representative   Davies  asked   if  the   Exhibit  A   list                 
  corresponds to  the list  the legislature  approved in  May.                 
  Commissioner Noah said no.  There  were mistakes made to the                 
  land list in  May resulting in  changes and there have  been                 
  some renegotiations of lands.                                                
                                                                               
  Representative Hanley noted that the  Healy coal leases were                 
  never included by  the Legislature yet were included  on the                 
  Exhibit A  list.   He understood  that Judge  Green was  not                 
  utilizing  the  Exhibit  A  list  in  her  consideration  of                 
  reconstituted  lands.    Commissioner  Noah  said  that  was                 
  correct.  He asked the project manager for the department to                 
  advise members of the status of the lands.                                   
                                                                               
  BRUCE PHELPS, PROJECT MANAGER, DIVISION OF LANDS, DEPARTMENT                 
  OF NATURAL RESOURCES, explained that the settling plaintiffs                 
  identified  several  categories   of  lands  which  included                 
                                                                               
                                                                               
  undisputed mandatory reconstituted trust  land (MRTL); third                 
  party  interest  in  oil  and  gas; municipal  entitlements;                 
  agricultural  tracts  in  good  standing  and  not  in  good                 
  standing;  and  Healy  and Beluga  leases.    The department                 
  identified  each  category  and parcel  in  relationship  to                 
  value.                                                                       
                                                                               
  Mr.  Phelps  said an  evaluation  of the  undisputed MRTL's,                 
  which represent the bulk of the value, indicated that by and                 
  large the  parcels identified  by the  Gottstein law  office                 
  were parcels not conveyable to the Trust.  The parcels could                 
  not  be conveyable in  the way the  legislation was enacted.                 
  For example, some  parcels identified  as conveyable by  the                 
  "Gottstein list" are inside the Chilkat Bald Eagle Preserve,                 
  Haines State Forest and Tanana State  Forest.  He said these                 
  are areas the  state and legislation  had identified as  not                 
  being conveyable to the Trust.                                               
                                                                               
  Mr. Phelps said the  land list was approved April  28, 1994.                 
  He  said  there  are  two  other  primary  categories  which                 
  constitute  the bulk of  the value in  the "Gottstein list".                 
  Mr. Phelps  said they are the  Healy and Beluga leases.   He                 
  said these areas are not included as conveyable parcels.                     
                                                                               
  Mr.  Phelps  said  another  category,  included  third party                 
  purchasers-oil and gas  areas.  He  said the state made  the                 
  decision to convey the hydrocarbon interest in very specific                 
  areas of the state (i.e: Cook Inlet Basin, Kenai and Susitna                 
  lowland  areas).   Of  the  approximately 2,000  third party                 
  purchaser parcels throughout the state;  1,200 to 1,300 have                 
  no value according  to plaintiffs.   In the instances  where                 
  there is value according to the  plaintiffs, and where it is                 
  appropriate to provide the  hydrocarbon interest, Mr. Phelps                 
  indicated that many of the parcels  that Mr. Gottstein would                 
  recommend as conveyable had been conveyed under the April 28                 
  list.                                                                        
                                                                               
  Mr.  Phelps  said in  the  parcels  in the  Cook  Inlet area                 
  identified  as  appropriate  for  conveyance  but  were  not                 
  conveyed for a specific reason.  He said the hydrocarbon and                 
  mineral estate interest  is no  longer in state  title.   He                 
  said the interest went to the Cook Inlet Region under a deed                 
  of  trust.    The  state  conveyed  other  land  immediately                 
  adjacent to those areas of  non-conveyable mineral estate to                 
  compensate the Trust  if there was any discrepancy  or issue                 
  regarding the value.                                                         
                                                                               
  Mr. Phelps  said  the  municipal  entitlements  are  parcels                 
  scattered throughout the  state.  He  said according to  the                 
  plaintiffs, they have  value of $3.00  to $500.  Mr.  Phelps                 
  said it would not be appropriate to convey that much acreage                 
  for  such  a  little  advantage.    Specifically  the  state                 
  identified only the mineral estate to be conveyable  in very                 
  specific  areas   where  the   state  concurred   there  was                 
                                                                               
                                                                               
  substantial mineral value (i.e: Ketchikan, Juneau, Fairbanks                 
  areas).   In  this particular instance, Mr. Phelps  said the                 
  state did convey the mineral estate of the parcels but in no                 
  other instances.                                                             
                                                                               
  Representative Davies asked if encumbrances for right-of-way                 
  stay  as  a condition  of the  transfer  when the  lands get                 
  conveyed to the Trust.  Mr. Phelps said yes.                                 
                                                                               
  Representative  Brown  asked if  ten  years is  adequate for                 
  survey completion.   Commissioner Noah  responded that  with                 
  adequate funding being provided  by the legislature, surveys                 
  would likely be  performed on an  "as needed" basis and  ten                 
  years may not be a realistic timeframe.  From the standpoint                 
  of the dismissal  of the lawsuit, Commissioner  Noah was not                 
  clear what the state would gain  by "stepping forward on the                 
  survey".                                                                     
                                                                               
  JIM GOTTSTEIN,  ATTORNEY FOR THE MENTAL  HEALTH ASSOCIATION,                 
  explained that Exhibit  A showed that one  of the categories                 
  was  Healy  and  Beluga  coal leases  and  Healy  and Beluga                 
  unleased  areas.    Mr.  Gottstein  said  the  second  group                 
  represented areas  which they  believed at  the  time to  be                 
  unleased in the  Healy and  Beluga areas and  which did  not                 
  have any coal leases.  He said both the leased and  unleased                 
  areas were  included in  Exhibit A  but not  on the  "spread                 
  sheet" identified as  Attachment 1. Only the  unleased areas                 
  were included.                                                               
                                                                               
  Mr. Gottstein said there is  a discrepancy between what  the                 
  state's  list  and  what the  settling  plaintiffs  may have                 
  believed to  be included.   Mt.  Gottstein said  he and  Mr.                 
  Walker had received  the state's  response to their  inquiry                 
  regarding this discrepancy as late  as Sunday, September 25.                 
  They  had  not  yet  been  able  to  adequately  review  the                 
  information.                                                                 
                                                                               
  Mr. Gottstein said the court was presented with Exhibit A as                 
  "the  agreement"  and there  are  parcels missing  from that                 
  list.                                                                        
                                                                               
  Mr. Gottstein believed  the state unilaterally decided  that                 
  even  though  they  were on  the  list  of  parcels for  the                 
  hydrocarbon estate  to transfer  to the  Trust, because  the                 
  parcels had zero  value they were withdrawn.   Mr. Gottstein                 
  viewed many  parcels as  having oil  and gas potential  even                 
  though the  oil and  gas models  utilized by  the department                 
  indicated no value.   He  understood that those  hydrocarbon                 
  estates were suppose to go into the Trust on the chance that                 
  economic oil and gas discoveries would be made.                              
                                                                               
  There was  discussion regarding  the two  handouts depicting                 
  categories of land and value in relationship to each parties                 
  understanding of the land which is included.                                 
                                                                               
                                                                               
  Representative Hanley  acknowledged  that  not  all  parties                 
  agree with  the  land package  and its  value, however,  the                 
  issue is to address the  concerns of Judge Green and  not to                 
  renegotiate  the value  of the  overall package.   He stated                 
  that Judge Green is  ultimately going to determine if  it is                 
  the best settlement for the clients.                                         
                                                                               
  JEFF  JESSEE,   PLAINTIFF   ATTORNEY,  said   there   is   a                 
  misrepresentation  that he and Mr.  Volland made a deal with                 
  the state   and "fell asleep and the state  has slipped away                 
  almost $100 million dollars of  parcels and we can't  figure                 
  out this has  happened to us".   He said  this is not  true.                 
  Mr.  Jessee  discussed in  detail  his involvement  with the                 
  state in identifying lands  for the reconstitution  proposal                 
  and the evolution of the list represented as "Exhibit A".                    
                                                                               
  Mr.  Jessee  said   he  has  laboriously  worked   with  the                 
  Department of Natural Resources to  identify and examine the                 
  lands which were and were not  included and the reasons why.                 
  He  said  he  has  not  yet  found  an  instance  where  the                 
  department appears to have deliberately lied or misconstrued                 
  the facts in an attempt to "get  something off the list that                 
  was a part of the deal".  Mr. Jessee could not  identify one                 
  instance in which  they feel the  state has reneged in  even                 
  the smallest degree in meeting the criteria for  the parcels                 
  which were to be in the Trust.                                               
                                                                               
  Mr. Jessee said there is a lot of dispute over valuation and                 
  that Judge Green realizes that the values are "guesses".  He                 
  said there would be considerable testimony at final approval                 
  hearing regarding the estimated values.                                      
                                                                               
  (Tape change, Tape 1, Side 2, #000)                                          
                                                                               
  Mr.   Jessee  said  it  is  difficult  for  some  people  to                 
  prioritize what they "want  out of the deal".   For example,                 
  Mr. Jessee said  he and Mr.  Volland had to prioritize  when                 
  considering  whether  they  would  be  willing to  take  $15                 
  million for surveys off the $200 million for the  endowment.                 
  He did not think that most land owners with substantial cash                 
  would consider the  best use of  the funds to be  upfronting                 
  surveys.    He  said surveys  are  a  normal  cost of  doing                 
  business as you develop land and so it will be for the Trust                 
  Authority.  Mr. Jessee  said they are not opposed  to having                 
  survey money  as it  would certainly  be a  benefit for  the                 
  Trust,  however,  he did  not  feel  it rendered  the  Trust                 
  unusable or undevelopable.                                                   
                                                                               
  Representative  Martin  MOVED  to  report   HB  549  out  of                 
  Committee with individual recommendations.                                   
                                                                               
  Representative Brown distributed a proposed letter of intent                 
  (Attachment  4).  The letter of intent would address whether                 
                                                                               
                                                                               
  the  Trust Authority  can spend  the income  from  the Trust                 
  without legislative appropriation.  She said  that provision                 
  was a part of the settlement agreement.  Mr. Walker and  Mr.                 
  Gottstein had recommended  that this statement be  placed in                 
  statute    to    indicate    the    legislature's    intent.                 
  Representative  Brown felt the legislature's intent could be                 
  demonstrated through a letter of intent without amending the                 
  statute.  Representative Brown felt unresolved issues remain                 
  for  individuals  effected by  the  Trust.    She felt  this                 
  emphasis of the legislature's intent would be a good gesture                 
  by the legislature.                                                          
                                                                               
  No objections having been raised to  the motion to report HB
  549  out  of  Committee, it  was  so ordered.    HB  549 was                 
  reported out of  Committee with  a "do pass"  recommendation                 
  and zero fiscal note by the Office of the Governor.                          
                                                                               
  TOM KOESTER, CONTRACT  ATTORNEY FOR  THE DEPARTMENT OF  LAW,                 
  responded  to questions regarding the  letter of intent.  He                 
  noted that Mental Health Trust Settlement Income Account (AS                 
  37.14.036(a)) is the account into which the  earnings of the                 
  Trust, which may  be spent, are to be placed.  He said it is                 
  not  the Mental  Health Trust  Fund, the principal  of which                 
  must be  kept without  expenditure.   Mr. Koester  said they                 
  view the letter  of intent as  reflecting the intent of  the                 
  legislature in the bill and is what the statute provides.                    
  Representative Brown MOVED  to adopt  the letter of  intent.                 
  Responding  to  a  question  by Representative  Hanley,  Mr.                 
  Koester summarized  the specifics of the statutes referenced                 
  in the letter of intent.                                                     
                                                                               
  Representative Navarre said  he had  no objection but  noted                 
  the   questionable   constitutionality    of   the    issue.                 
  Representative Larson interpreted the letter of intent as an                 
  expression to the court of the legislature's intent.                         
                                                                               
  Representative   Grussendorf   and   Representative   Martin                 
  OBJECTED.                                                                    
                                                                               
  A roll call vote was taken on the motion to adopt the letter                 
  of intent.                                                                   
                                                                               
       IN FAVOR: Navarre, Brown, Larson, MacLean                               
       OPPOSED:    Parnell,  Therriault, Grussendorf,  Hanley,                 
  Hoffman                                                                      
                 Martin                                                        
                                                                               
  The motion  FAILED (4-6).   (Representative  Foster was  not                 
  present.)                                                                    
                                                                               
                                                                               
  HOUSE BILL NO. 550                                                           
                                                                               
                                                                               
       "An Act  making and amending appropriations relating to                 
       the mental health  trust fund, the mental  health trust                 
       income account, and the  mental health trust settlement                 
       income account; and providing for an effective date."                   
                                                                               
  Representative  Navarre  MOVED  to  report  HB  550  out  of                 
  committee with individual recommendations.                                   
                                                                               
  Mr. Koester discussed the potential shortfall it money to be                 
  realized  from  the  sale  of   the  Department  of  Natural                 
  Resources' land sale contract portfolio.   He said there are                 
  additional  amounts available  in the  revenues from  mental                 
  health trust  land which have been deposited  in the general                 
  fund  and  additional revenues  in  the "old"  mental health                 
  trust income account.  Mr.  Koester acknowledged that should                 
  the bill become  effective, it is  not possible to know  for                 
  certain the  amounts available  from these  funding sources.                 
  Mr. Koester said HB 550 is designed to  ensure that the full                 
  $200 million is available on the effective date.                             
                                                                               
  No objections having been raised, HB 550 was reported out of                 
  Committee with a "do pass" recommendation.                                   
                                                                               
  RECESS                                                                       
                                                                               
  Co-Chair Larson  recessed  the  meeting  at 9:45  a.m.    He                 
  reconvened the meeting at 12:02 p.m.                                         
                                                                               
  (All members were present at this time except Representative                 
  Hoffman.)                                                                    
                                                                               
                                                                               
  SENATE BILL NO. 382                                                          
                                                                               
       "An Act relating  to the mental health land  trust, the                 
       mental health  trust  income account,  and  the  mental                 
       health   land  trust   litigation,   Weiss  v.   State,                 
       4FA-82-2208 Civil, and  amending ch. 66, SLA  1991, and                 
       ch. 5,  FSSLA 1994 relating to the  trust, the account,                 
       and  the  litigation; and  providing  for an  effective                 
       date."                                                                  
                                                                               
  Representative  Martin  MOVED  to  report   SB  382  out  of                 
  Committee  with individual  recommendations.   No objections                 
  having been  raised, SB  382 was  reported out of  committee                 
  with a "do pass" recommendation and  zero fiscal note by the                 
  Office of the Governor.                                                      
                                                                               
                                                                               
  SENATE BILL NO. 383                                                          
                                                                               
       "An Act making and  amending appropriations relating to                 
                                                                               
                                                                               
       the mental health  trust fund, the mental  health trust                 
       income account, and the mental health  trust settlement                 
       income account; and providing for an effective date."                   
                                                                               
  Representative  Martin  MOVED  to  report   SB  383  out  of                 
  Committee  with individual  recommendations.   No objections                 
  having been raised,  SB 383  was reported  out of  committee                 
  with a "do pass" recommendation.                                             
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 12:06 p.m.                                          
                                                                               

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