Legislature(1993 - 1994)
09/27/1994 08:40 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.