Legislature(1993 - 1994)

09/26/1994 04:00 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
  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.                    
                                                                               
  Senator  Drue  Pearce, Co-chair,  Senate  Finance Committee,                 
  convened  the  Joint  Meeting of  House  and  Senate Finance                 
  Committees  and directed that  Senate Bills 382  and 383 and                 
  House Bills  549 and 550 (House versions  of SB 382 and 383)                 
  be  simultaneously  brought  on for  discussion.    She then                 
  advised  that  all   members  of  Senate  Finance   were  in                 
  attendance  and  acknowledged   the  presence  of   Senators                 
  Phillips, Salo, and Leman, as well.                                          
                                                                               
  Representative   Ron   Larson,   Co-chair,   House   Finance                 
  Committee, noted the presence of all House Finance Committee                 
  members  with  the  exception  of  Representatives  MacLean,                 
  Hoffman, Navarre, and  Therriault (all of whom  subsequently                 
  arrived soon after the meeting  began). He also acknowledged                 
  attendance by  Representatives James, Hudson,  Willis, Kott,                 
  Davis, Davies, and Sanders.                                                  
                                                                               
  Senator Pearce advised that the  joint committee would first                 
  take  testimony  from the  administration.   BRUCE  BOTELHO,                 
  Attorney General, Dept.  of Law;  HARRY NOAH,  Commissioner,                 
  Dept. of  Natural Resources;  and SHELBY STASTNY,  Director,                 
  Office of Management and Budget, came before committee.                      
                                                                               
  [Representatives MacLean, Navarre, and Therriault arrived at                 
  this time.]                                                                  
                                                                               
  Commissioner Noah remarked that legislators would be hearing                 
  comments both for and against the proposed settlement of the                 
  mental health trust  litigation.  He stressed  that ultimate                 
  approval of  the settlement  rests with  Judge Mary  Greene.                 
  The  Commissioner  referenced  the  judge's  58-page  order,                 
  laying out  specific concerns, and advised  that legislation                 
  now before committee addresses those concerns.                               
                                                                               
  Attorney   General   Bruce   Botelho   provided   background                 
  information on the mental health issue and observed that the                 
  proposed settlement  was "largely  embodied" in  legislation                 
  passed  during the  Eighteenth  Legislature's First  Special                 
  Session in May of this year.  It includes five elements:                     
                                                                               
                                                                               
       1.   Reconstitution of the land trust (930,000 acres).                  
                                                                               
       2.   Cash component of $200 million.                                    
                                                                               
       3.   Establishment of a trust authority.                                
                                                                               
       4.   Incorporation of certain benefits set forth in                     
            Chapter 66. (Programmatic improvements)                            
                                                                               
       5.   A  modified   budget   process   which   has   the                 
  consequence of                                                               
            isolating legislative evaluation of mental health                  
            programs in the budgetary process.                                 
                                                                               
  The settlement was  presented to  Superior Court Judge  Mary                 
  Greene,  and  preliminary court  approval  was sought.   The                 
  Attorney General  advised that mental  health litigation was                 
  certified as a class action within three months of filing of                 
  the initial case in 1982.  When a settlement is presented in                 
  the context of a class action, the courts follow a four-part                 
  process prior to final approval:                                             
                                                                               
       1.   The first step is preliminary approval.  The court                 
  makes          a  preliminary  determination  concerning the                 
                 fairness of the settlement.                                   
                                                                               
       2.   The next step  is provision of notice to all class                 
            members.                                                           
                                                                               
       3.   The third consists of a fairness hearing.                          
                                                                               
       4.   And the last step is final approval.                               
                                                                               
  In  the present litigation, notice has  been sent to 270,000                 
  households statewide and  1,400 care providers.   Notice has                 
  also been  published  in numerous  newspapers, advising  the                 
  public  of  its  right  to submit  written  comment  on  the                 
  settlement by October 21.   Those comments will go  directly                 
  to Judge Greene.                                                             
                                                                               
  The  process  is  now  working  toward the  third  step--the                 
  fairness hearing.  Judge  Greene has scheduled two  weeks of                 
  hearings.  The  first will be held in Anchorage  the week of                 
  October 21.  The second will continue in Fairbanks beginning                 
  October 31.  Judge Greene has  indicated her intent to issue                 
  a  final ruling  by November  15.   She granted  preliminary                 
  approval to the settlement on July  29.  That represents the                 
  only  time  any  settlement  on   this  topic  has  achieved                 
  preliminary approval.  In issuing  her 58-page decision, she                 
  began her analysis by asking the following questions:                        
                                                                               
       1.   Is the proposed settlement the product of serious,                 
            informed, non-collusive negotiations?                              
                                                                               
                                                                               
       2.   Is the settlement without serious deficiencies?                    
                                                                               
       3.   Is the proposed settlement without preferential                    
            treatment of segments of the class?                                
                                                                               
       4.   Does  the  settlement  fall  within the  range  of                 
  possible                                                                     
            approval?                                                          
                                                                               
  Directing attention to  page 27 of Judge  Greene's decision,                 
  the Attorney General noted that the judge concluded that the                 
  proposal  was the  product of serious  negotiation.   It was                 
  found to be informed (p. 29) and non-collusive (p. 32).                      
                                                                               
  Seven  purported  deficiencies  were  presented by  opposing                 
  counsel.  The  court concluded that the  proposed settlement                 
  does  not  have  serious  deficiencies.   In  responding  to                 
  alleged deficiencies, the judge determined that:                             
                                                                               
       1.   Possible   termination,   by   appeal,   was   not                 
  sufficient to       warrant denial  of preliminary  approval                 
                      (p. 32).                                                 
                                                                               
       2.   The  proposed settlement  is  enforceable.   If  a                 
  subsequent                                                                   
            legislature  changes a material term, the class is                 
            free to reassert  all claims available on  July 29                 
            (p. 33).                                                           
                                                                               
       3.   The terms are not unclear (p. 37).                                 
                                                                               
       4.   Lack  of  a  legal  description  for each  of  the                 
  parcels                                                                      
            is not a problem (p. 38).                                          
                                                                               
       5.   There is no  competent evidence that the  Dept. of                 
  Natural                                                                      
            Resources  was   or  is  unable   to  perform  its                 
            obligations to convey land  to the trust authority                 
            (p. 38)                                                            
                                                                               
       6.   The land management  requirements (HB 201)  cannot                 
  and do         not diminish trust responsibilities  found in                 
                 the federal enabling act (p. 40).                             
                                                                               
       7.   Management by  the Dept.  of Natural  Resources is                 
  not a                                                                        
            serious deficiency (p. 41).                                        
                                                                               
  In evaluating whether the settlement is without preferential                 
  treatment to a  segment of  the class,  the judge  concluded                 
  that there is no improper, preferential treatment.                           
                                                                               
                                                                               
  Judge Greene,  in determining  whether the settlement  falls                 
  within  the  range of  possible  approval, remarked  that in                 
  evaluating  fairness,  the  most  important  element  was  a                 
  comparison  with the  likely  results of  litigation (p.44).                 
  While  litigation  results  are unknown,  it  is  clear that                 
  program  improvements,  the   trust  authority,  and  budget                 
  process advantages could not be obtained through litigation.                 
  It is "entirely possible, if not likely, that there would be                 
  no cash component from continued litigation."  A trial would                 
  be  extremely   expensive,  lengthy,   and  complex.     All                 
  plaintiffs   have   sufficient  information   to  adequately                 
  evaluate the  proposal.   The  judge  said, "Based  on  this                 
  preliminary  examination,  the  court  concludes  that  this                 
  settlement is within the range  of possible final approval."                 
  (pp. 57 & 58)                                                                
                                                                               
  In granting  preliminary approval,  Judge Greene  identified                 
  three areas of concern:                                                      
                                                                               
       1.   The first relates to the land list.                                
                                                                               
            A.   The 116,000 acre Salcha parcel is part of a                   
                 federal military reservation and continues to                 
                 be used as a bombing  range.  The court found                 
                 that if the parties have not found a solution                 
                 by the  time of  final approval  hearing, the                 
                 court  and beneficiaries  will  be forced  to                 
                 examine  the  degree  of  risk posed  by  the                 
                 problem  and the  impact  on the  settlement.                 
                 Failure  to find  a solution  associated with                 
                 Salcha could lead to non-approval.                            
                                                                               
            B.   Miscellaneous problems discovered after the                   
                 legislature adjourned.                                        
                                                                               
       2.   Possible shortfall  in the funding sources for the                 
  $200                                                                         
            million cash component.  The court order noted, in                 
            particular, the $25 million identified as part  of                 
            the DNR land sale contract portfolio.  Concern was                 
            that the shortfall would produce a value of $16 to                 
            $19  million  rather than  $25  million.   If this                 
            issue is not resolved, the court and class members                 
            will have to evaluate the agreement in that light.                 
            The  court  did  not   find  that  the  deficiency                 
            precluded  the  granting of  preliminary approval,                 
            but it may be an  issue for consideration at final                 
            approval (p. 37)                                                   
                                                                               
       3.   Termination of the settlement if  a party files an                 
  appeal.                                                                      
            The benefits of  HB 201 do  not take effect  until                 
            the  case is  dismissed  and all  opportunity  for                 
            appeal  has  ceased  by  December  15,  unless  by                 
                                                                               
                                                                               
            November 30 the Governor has  agreed to extend the                 
            time up to  45 days.   The judge noted that  under                 
            those circumstances and  under Alaska Court Rules,                 
            a party  could wait until December 15  to file the                 
            appeal (court rules allow for the filing of appeal                 
            within  30  days).   Further,  it is  unlikely the                 
            Alaska Supreme Court would rule  within 45 days of                 
            the filing of an appeal.  Judge Greene concluded:                  
                                                                               
                 The  court  agrees   that  the                                
                 effect  of  appeal   on  these                                
                 settlement    provisions    is                                
                 problematic.      In  essence,                                
                 despite   the  investment   of                                
                 hours and significant money by                                
                 everyone   in   the   approval                                
                 process, any party can destroy                                
                 the  settlement  by  filing an                                
                 appeal from a  grant of  final                                
                 approval.   Nevertheless,  the                                
                 court does  not see this  as a                                
                 problem sufficient to  warrant                                
                 denial      of     preliminary                                
                 approval.                                                     
                                                                               
  Mr. Botelho  reiterated that  preliminary approval  has been                 
  granted for the first time in the course of this litigation.                 
  The case is on track toward  final resolution.   The purpose                 
  of the presentation, today, is  to highlight the three areas                 
  the court  found  to be  problematic  and which  will  weigh                 
  heavily in the  judge's determination of  whether or not  to                 
  ultimately grant final approval.                                             
                                                                               
  [Co-chair Pearce noted the presence  of Senators Lincoln and                 
  Little and Representatives Hoffman, Williams, Davidson,  and                 
  Bunde.]                                                                      
                                                                               
  SHELBY STASTNY,  Director, Office of Management  and Budget,                 
  acknowledged that one of the  issues raised by Judge  Greene                 
  relates to sale of the portfolio of contracts from the Dept.                 
  of Natural Resources.  At the time the legislature passed HB
  201, the administration projected that the fair market value                 
  of the  contracts was  approximately $25  million.   Several                 
  things have occurred since that time.    Interest rates have                 
  increased significantly.   That has had a  depressing effect                 
  on the value of the contracts.  Further, the passing of time                 
  has reduced  the principal  value.    The  contracts receive                 
  "between $3.0  and  $4.0 a  month in  principal payments."                   
  There  were  no  provisions  for   use  of  those  principal                 
  payments, so the moneys flowed to the general fund.                          
                                                                               
  On the plus  side of  the financial picture,  there is  more                 
  money  in  the  mental  health  trust  income  account  than                 
  anticipated,  mainly  due  to  increased  oil prices.    Mr.                 
                                                                               
                                                                               
  Stastny  noted  that  when   the  administration  made   its                 
  calculations, and  the  legislature passed  the most  recent                 
  appropriation  bills, the  expectation was  that the  mental                 
  health trust income  account would exist until  June, 1995--                 
  the date used in  measuring the $33 million included  in the                 
  settlement.  When  mental health  legislation passed in  the                 
  first  special  session last  May, and  the bills  went into                 
  effect, the mental  health trust income account  "went away"                 
  as of June 1994.   The administration thus used  the balance                 
  at the end of 1994 in considering what would be available to                 
  fund a portion of the $200  million settlement.  The balance                 
  at that time totaled $47.7 million.                                          
                                                                               
  The  other  estimate   included  in   mental  health   trust                 
  appropriation legislation was mental health income remaining                 
  in  the  general fund  and  accounted  for by  the  Dept. of                 
  Natural Resources.  Earlier  calculations assumed that would                 
  amount to approximately  $11.7 million.  Today the  total is                 
  closer to $13 million.                                                       
                                                                               
  Since  the accounts to  be utilized exceed  the $200 million                 
  cash  settlement  by   $7  to  $10  million,   the  proposed                 
  legislation does not set forth a definitive amount.  It thus                 
  contains  "some  backstop"  measures   to  ensure  that  the                 
  necessary amount is funded.  Remaining  amounts in excess of                 
  the $200 million will lapse to the general fund.                             
                                                                               
  Co-chair Frank asked when the decision  was made to sell the                 
  portfolio  to  raise  cash, and  who  brought  the financial                 
  deficiency to the attention  of the court.  Would  the lands                 
  be  more  valuable  if  they  were  retained  by  the state?                 
  Commissioner Noah responded that the possible shortfall  was                 
  brought  to  his attention  by  department  staff.   It  was                 
  brought up again during the first  hearing in Judge Greene's                 
  court.    The  proposed  legislation   attempts  to  satisfy                 
  concerns and deal  with the shortfall.  Speaking  to whether                 
  the lands would be  more valuable in the trust  account, the                 
  Commissioner  acknowledged that,  over  a  longer period  of                 
  time, more  money would  flow to  the trust.   However,  the                 
  administration is attempting  to reach the $200  million for                 
  the cash portion of  the settlement.  Co-chair Frank  voiced                 
  his understanding that it was always  the intent to sell the                 
  portfolio to generate cash for the trust versus providing an                 
  income producing asset.  Commissioner Noah concurred.                        
                                                                               
  [Co-chair Pearce noted  the presence  of Senator Duncan  and                 
  Representatives Finkelstein and Carney.]                                     
                                                                               
  Senator  Kelly  asked  if  Judge  Greene made  reference  to                 
  inflation proofing language at page 3, Section 8, of SB 383.                 
  The Attorney General said that she  made no reference in her                 
  written   decision.     Senator   Kelly   then  voiced   his                 
  recollection that inflation proofing was not part of earlier                 
  passed legislation  and asked  why it was  included at  this                 
                                                                               
                                                                               
  time, when it would stop, and if it could become a "constant                 
  drain."   Commissioner  Noah stated  his  recollection  that                 
  inflation proofing was  incorporated within final amendments                 
  to  the earlier  passed bill.   Senator Rieger  concurred in                 
  comments by the Commissioner but  added his own recollection                 
  that  inflating  proofing  is  a  permissible use  of  trust                 
  income.   Discussion in  May centered  on whether  inflation                 
  proofing would be mandated or  remain permissible.  Language                 
  mandating inflation proofing did not ultimately  become part                 
  of the legislation.  Attorney General Botelho concurred.                     
                                                                               
  Senator Kelly  asked why  the present  legislation seeks  to                 
  increase the $200  million by  inflation proofing and  where                 
  the cutoff point would be.  The Attorney General said he did                 
  not know  the answer.  Commissioner Noah  advised, "I'm  not                 
  sure that we are asking that  this be inflation proofed over                 
  $200 million."  It is not  clear that that is the intent  of                 
  the legislation.  Senator Kelly referenced specific language                 
  within Section  8, subsection  (a).   TOM KOESTER,  Contract                 
  Counsel, Dept. of Law, explained that revenue from the trust                 
  could  be  used by  the  trust  authority for  a  variety of                 
  purposes.  One of  those purposes is to inflation  proof the                 
  principal of the trust fund.   That action is permissive and                 
  not mandatory.   The  proposed bills  change effective  date                 
  provisions to provide  that, upon dismissal by  the Superior                 
  Court, the settlement goes into effect on December 16.  That                 
  takes away the  power of a  party to prevent the  settlement                 
  from  taking effect  by filing  an appeal.    Provisions are                 
  intended  to  guard  the  public  and  ensure  that  if  the                 
  beneficiaries receive  the  benefit of  the settlement,  the                 
  public  receives  those  benefits  as  well.    If,  in  the                 
  alternative, the appellate court reverses the dismissal, and                 
  all  parties  are  back  in  litigation,  the  benefits  are                 
  repealed.  That is when provisions  within Section 8 go into                 
  effect.   Upon  reversal  on appeal,  Section  8 contains  a                 
  contingent effective date  that would take the  $200 million                 
  to go into the mental health trust  fund and place it in the                 
  general fund along with whatever  moneys the trust authority                 
  has added to the fund for inflation proofing.  Senator Kelly                 
  voiced  his  understanding  that  inflation  proofing  would                 
  derive from  the mental health trust account rather than the                 
  general  fund.    Mr.  Koester   and  the  Attorney  General                 
  concurred.  Mr. Koester reiterated that it "comes out of the                 
  income to the trust . .  . ."  It is discretionary  with the                 
  trust authority whether or not to inflation proof.                           
                                                                               
  Representative  Larson noted  that  money  generated by  the                 
  trust will never  be sufficient to  pay the total amount  of                 
  mental  health  needs.   If  a  portion  of  that income  is                 
  diverted  for  inflation  proofing,   that  could  mean   an                 
  additional amount would then be needed from the general fund                 
  to subsidize mental  health programs.   Mr. Koester  advised                 
  that it becomes a discretionary judgment call on the part of                 
  both the trust authority and the legislature.  For the trust                 
                                                                               
                                                                               
  authority, the decision is,  How much, if any, of  the trust                 
  revenue should go to inflation proofing?  The balance of the                 
  income  will  then  go  to  mental  health  programs.    The                 
  legislature will  annually determine how  much money  should                 
  come from the general fund for mental health programs.                       
                                                                               
  Referencing earlier discussion relating to sale of the Dept.                 
  of  Natural  Resources  lands  portfolio,  Senator  Kerttula                 
  voiced his  understanding  that the  settlement  seeks  cash                 
  rather than an  income generating asset.   Commissioner Noah                 
  remarked that the proposed sale  relates to the cash portion                 
  of the settlement.   He  then referenced the  assets of  the                 
  land portfolio that would become part of the trust.  Senator                 
  Kerttula  voiced concern  over  the sale  of  DNR assets  at                 
  discount.   He  noted  the reduced  value  of the  portfolio                 
  because  of  increased interest  rates  and less  demand and                 
  asked at what stage of reduction the department  might elect                 
  not  to sell.   Commissioner  Noah  explained that  the face                 
  value of the  land is $15  million, plus the interest.   The                 
  department envisions  that  that  value  will  be  "somewhat                 
  greater--between and $16 and $19 million."   Every month the                 
  department collects $300.0 to  $500.0.  That is part  of the                 
  decrease.    Senator  Kerttula  sought  assurance  that  the                 
  department would not feel compelled to "sell at $5 million."                 
  Commissioner Noah concurred, saying that the department does                 
  not intend to sell at a loss.                                                
                                                                               
  [Co-chair  Pearce  noted the  presence  of  Senate President                 
  Halford and Representative Brice.]                                           
                                                                               
  Senator Phillips referenced both the anticipated $33 million                 
  balance of  the mental health account and the actual balance                 
  of $47.7 and  asked if the higher amount would  be set forth                 
  in  proposed legislation.  Mr. Stastny responded negatively.                 
  He advised that numbers within the bill would not be changed                 
  because  the  balance is  changing  on  a daily  basis.   He                 
  referenced Sections 4  and 5  of SB 383  and indicated  that                 
  shortfalls in  one account would  be covered by  excesses in                 
  other  accounts.    Whatever  is  left  over from  the  four                 
  accounts will  remain in  the mental  health income  account                 
  until it lapses to the general fund, when the former account                 
  is done away with.                                                           
                                                                               
  Representative Brown inquired  concerning enforceability  of                 
  the  settlement.  She  observed that "all  claims which were                 
  available on July 29  of this year could be  reasserted" and                 
  asked which claims  were available for assertion  as of that                 
  date.   Attorney  General Botelho responded,  "Virtually all                 
  the  claims  that have  been  asserted in  the  class action                 
  itself that have not otherwise been  ruled on adverse to the                 
  plaintiffs in the case."                                                     
                                                                               
  Representative Brown asked if plaintiffs  could go after the                 
  entire million acres  should settlement  be breached by  the                 
                                                                               
                                                                               
  state.  Has any of the acreage been forever removed from the                 
  trust or the possibility of once again becoming entangled in                 
  litigation?  The Attorney General referenced p.  33 of Judge                 
  Greene's decision and noted that it provides that:                           
                                                                               
       If  the legislative change was material, the class                      
       would be entitled  to invoke  the remedy found  in                      
       art. VI, sec. 5:  they would be free to file a new                      
       action asserting all the claims they have today.                        
                                                                               
  The footnote indicates that:                                                 
                                                                               
       The court ensured at oral argument that it was the                      
       state's  intent  that  if  there were  a  material                      
       change, the class would have  all claims they have                      
       today and would be free to assert them.                                 
                                                                               
  A subsequent provision  makes reference to the ability  of a                 
  party or parties to assert all claims existing on July 29.                   
                                                                               
  Representative Brown asked if, as of July 29, plaintiffs had                 
  the right to  go after original  trust lands not within  the                 
  proposed  settlement.   The Attorney General  responded that                 
  he was not in a position to define "what  those claims are."                 
  The point is that  the judge said whatever those  rights are                 
  on  July  29, those  are the  rights  that may  be asserted.                 
  Attorney  General Botelho  acknowledged that there  could be                 
  disagreements over lifting of the lis pendens and whether or                 
  not plaintiffs could assert  claims against those  privately                 
  held lands.  He subsequently suggested that plaintiffs would                 
  probably not be able to "get  a remedy directly against that                 
  land."  They could,  however, assert a claim with  regard to                 
  the underlying question  of reconstitution.  The  issue that                 
  has been the subject of great debate is,  Under the terms of                 
  the Supreme Court decision of 1985, what constitutes a sale?                 
  That issue has not ultimately been resolved in litigation to                 
  date.                                                                        
                                                                               
  Representative Brown voiced need to  hear from attorneys for                 
  plaintiffs and  inquired concerning the state's  response to                 
  amendments proposed  by Mr. Walker  and Mr. Gottstein.   The                 
  Representative  next  asked   that  representatives  of  the                 
  administration  describe what  would happen  upon  appeal or                 
  reversal of settlement approval.                                             
                                                                               
  End:      SFC-94, #92, Side 1                                                
  Begin:    SFC-94, #92, Side 2                                                
                                                                               
  Attorney General Botelho explained that  the operative words                 
  are "reversed on appeal."   Neither the taking of  appeal or                 
  the filing  of a  petition for  certiorari with  the supreme                 
  court would negate the  settlement.  Reversal by  the Alaska                 
  Supreme Court or the U.S. Supreme Court would be required.                   
                                                                               
                                                                               
  Directing  attention  to  the land  list,  Commissioner Noah                 
  acknowledged two issues:                                                     
                                                                               
       1.   The  first  relates  to the  Salcha  parcel.   The                 
  Commissioner                                                                 
            referenced a set of maps (copy dated 9/25/94 is on                 
            file in the original Senate Finance Committee file                 
            for SB 382) in  addendum to HB 201.   He explained                 
            that the list outlines additions and  deletions to                 
            the land list  that was part of the original bill.                 
            In exchanging land  in the  same general area  for                 
            the  Salcha  parcel,    DNR  had to  increase  the                 
            acreage of  the subsurface  parcel  to obtain  the                 
            same  value.    The  original parcel  was  118,436                 
            acres.    The substitute  is  184,599 acres.   The                 
            reason  for  need  for the  increase  is  that the                 
            geology associated with the exchange is different.                 
            The original parcel was "somewhat more favorable."                 
            To obtain  the same subsurface value,  the acreage                 
            was increased.                                                     
                                                                               
       2.   The  second relates  to a  group  of miscellaneous                 
  errors in           the land list.  The settlement  involves                 
                      over  10,000  parcels   "that  we   were                 
                      essentially   changing   around    three                 
                      different times."  The addendum contains                 
                      247  additions  to   the  list  and  168                 
                      deletions.    These  mainly   relate  to                 
                      simple miscoding of parcel numbers and a                 
                      set  of  identified  parcels  that  were                 
                      simply  overlooked.    The  Commissioner                 
                      referenced  an   explanatory  memorandum                 
                      dated September 23, 1994, (copy on file)                 
                      and  an  appended  list  of  parcels  by                 
                      election district (copy  also on  file).                 
                      The Commissioner next  noted need to add                 
                      the following parcel:                                    
                                                                               
                 SM-2225-A,      a     50-acre,                                
                 hydrocarbon-interest-only                                     
                 parcel.                                                       
                                                                               
  Representative  Brown  raised  questions  concerning  mining                 
  claims  or other  leases  scheduled to  become  part of  the                 
  trust.  What  will be the  obligation of  the trust, in  the                 
  future, with respect to administration?  Will the trust have                 
  the flexibility to  change material  terms or conditions  of                 
  those agreements?   Commissioner Noah described  such claims                 
  and leases as "valid, existing rights."  They are dealt with                 
  as such in  the proposed legislation.   Representative Brown                 
  voiced  her understanding  that  opportunities for  contract                 
  changes  could   be  fairly   dealt  with   by  the   trust.                 
  Commissioner Noah said that such issues would be  dealt with                 
  in regulations.                                                              
                                                                               
                                                                               
  [At  this  point  in  the  meeting,  Co-chair  Pearce  noted                 
  teleconference  links to  Anchorage,  Fairbanks, MatSu,  and                 
  Kenai/Soldotna.]                                                             
                                                                               
  Representatives Davies inquired concerning  continued access                 
  and easements across lands that are  schedule to become part                 
  of the  trust.  Do  all presently existing  easements follow                 
  with  those parcels?  The Commissioner again cited the issue                 
  of  valid  existing  rights.   If  an  easement  is a  valid                 
  existing right beforehand, it continues  to be so within the                 
  trust.  The Dept. of Natural Resources  is in the process of                 
  identifying  all  encumbrances  associated   with  different                 
  parcels.  That would then become part of the record.                         
                                                                               
  Co-chair Pearce directed  that the  meeting be recessed  for                 
  approximately  five   minutes  prior   to  proceeding   with                 
  testimony from  Messrs. Walker, Gottstein,  Volland, Jessee,                 
  and Waldo.                                                                   
                                                                               
                       RECESS - 4:55 P.M.                                      
                      RECONVENE - 5:08 P.M.                                    
                                                                               
  Upon reconvening the meeting, Co-chair Pearce announced that                 
  the  committee would  hear  from the  above-listed attorneys                 
  prior to  proceeding to  public testimony.   She  encouraged                 
  those  participating via  teleconference  to submit  written                 
  testimony to become  part of  the public record.   She  then                 
  asked that public  testimony be limited to  three minutes in                 
  order to allow all interested parties to speak.                              
                                                                               
  DAVID WALKER,  representing plaintiffs Weiss,  Hilliker, and                 
  others similarly situated, came before committee accompanied                 
  by  JIM  GOTTSTEIN, representing  the  Alaska Mental  Health                 
  Association,  Mary  C.  Nanuwak,  John  Martin,  and  others                 
  similarly  situated.  Mr.  Walker indicated that  he and Mr.                 
  Gottstein were before committee to explain why their clients                 
  continue to oppose the proposed settlement.                                  
                                                                               
  The first issue of concern is enforceability and the ability                 
  of beneficiaries  to reassert original claims in the face of                 
  a breach by  the state.   Mr. Walker suggested that  answers                 
  given by the Attorney General to similar questions raised by                 
  Representative  Brown were  neither  direct nor  responsive.                 
  Claims which  original plaintiffs  now have,  and which  the                 
  court  felt  were important,  are  claims to  original trust                 
  lands  now  held   by  municipalities,   by  the  state   in                 
  legislatively designated areas,  by private third-party (mom                 
  and pop) purchasers, and coal lands.   Those claims are part                 
  of the present  lawsuit.  In discussing  enforceability, the                 
  court said that the fact that plaintiffs can reinstitute the                 
  lawsuit, and litigation  would thus  continue to "hang  over                 
  everybody's  head,"  should  be  a  sufficient  deterrent to                 
  prevent the legislature from breaching  the settlement.  Mr.                 
                                                                               
                                                                               
  Walker stressed that to be  a deterrent, enforceability must                 
  be  applied  against  the  original claims.    There  is  no                 
  deterrent if plaintiffs may only assert against  land on the                 
  "to-be-conveyed  list"  in  the  proposed  settlement.    He                 
  suggested  that   this  deficiency  alone  would   undo  the                 
  settlement.  In  ongoing litigation, the state  is reserving                 
  the right to assert that HB 201 blocks reassertion of all of                 
  the  original  claims.    The  consequence  of  that   is  a                 
  determination by  the  Alaska Supreme  Court  or the  U.  S.                 
  Supreme Court that  this settlement "was  a bum deal."   Mr.                 
  Walker  voiced  his  belief  that  settlement would  not  be                 
  approved  by  the superior  court  because the  standard for                 
  final  approval  is  different  from  that  for  preliminary                 
  approval.  If  such approval is forthcoming,  however, there                 
  is a good chance it will be overturned on appeal.                            
                                                                               
  Mr. Walker  said that the  proposed settlement takes  away a                 
  trust that, properly  managed, has a  good chance to fund  a                 
  mental  health program  for  Alaska  and provide  sufficient                 
  funding  of a core group  of mental health  needs.  To trade                 
  the original  trust  for one  which  cannot do  that  causes                 
  concern  regarding  the  adequacy of  the  settlement.   Mr.                 
  Walker noted  that all parties  recognize that income  to be                 
  produced by the  substitute trust will not  provide adequate                 
  funding.                                                                     
                                                                               
  Mr. Walker said that if his proposed amendments are adopted,                 
  he  would  recommend  the settlement  to  the  mental health                 
  community  and  his clients.   He  then  noted need  for the                 
  following fixes:                                                             
                                                                               
       1.   Land  List.   The  problem  is that  in presenting                 
            information  to the  court, the  state represented                 
            land values to  be approximately $1.1  billion and                 
            cash  to  total $200  million.     When plaintiffs                 
            reviewed  the  land  list  and  applied  the  same                 
            evaluation  procedures as used  by the  state, the                 
            difference between the $1.1 billion representation                 
            and   value   of    individual   parcels    totals                 
            approximately $95 million.                                         
                                                                               
       2.   Formalization of representations made by the state                 
  at                                                                           
            the preliminary  hearing.   Mr.  Walker said  that                 
            these  representations must  be made  part of  the                 
            settlement.   Some of the  necessary changes  will                 
            require legislation while others could be effected                 
            within  the settlement  agreement.  The  thrust of                 
            testimony by Commissioner Noah  at the preliminary                 
            hearing  was that  the substitute  trust  would be                 
            managed   for   the   maximum   benefit   of   the                 
            beneficiaries.   That commitment must be  made for                 
            all  subsequent  administrations  and incorporated                 
            within the settlement.                                             
                                                                               
                                                                               
       3.   Coal  Lands.   Coal lands  that were  part of  the                 
  original       trust should remain  in the trust.   There is                 
                 no justification for removing them.                           
                                                                               
       4.   Survey of trust lands.  Mr. Walker voiced need for                 
            proper survey of lands transferred to the trust in                 
            order to aid  in marketing  and management of  the                 
            lands.                                                             
                                                                               
  Referencing  SB  382, Mr.  Walker  said  that, as  a  former                 
  attorney  with   Legislative  Affairs   and  a   drafter  of                 
  legislative language, he was having difficulty understanding                 
  portions of the  bill and determining what  it accomplishes.                 
  It is troublesome that it is not easy to understand what the                 
  legislation purports to do.                                                  
                                                                               
  Mr. Walker  described  portions  of  HB  201  as  "mean  and                 
  vindictive" and concluded  that there is a chance "that most                 
  of  the  world would  view  them  that way."    The proposed                 
  settlement will thus not provide finality.  While it is true                 
  that the  court, ultimately,  is  the entity  which must  be                 
  satisfied, Mr. Walker said  there would be no settlement  in                 
  the litigation without the original plaintiffs being part of                 
  it.  It is a myth that  there is no widespread opposition to                 
  the  settlement.  He referenced a  group of resolutions from                 
  "deeply involved  organizations and associations"  and noted                 
  that they register  opposition to  the settlement  proposal.                 
  [Materials from the Anchorage Alliance for the Mentally Ill;                 
  Fairbanks  Alliance  for  the  Mentally  Ill; Alaska  Mental                 
  Health Association;  Anchorage Residences  for the  Mentally                 
  Ill,  Inc.;  Kenai  Alliance for  the  Mentally  Ill; Kodiak                 
  Alliance for the  Mentally Ill,  Mental Health Consumers  of                 
  Alaska; and Railbelt  Alliance for the  Mentally Ill are  on                 
  file.]                                                                       
                                                                               
  JIM GOTTSTEIN referenced September  20, 1994, correspondence                 
  (copy  of  file)   and  commenced   to  speak  to   proposed                 
  amendments.  He concurred in earlier comments  by Mr. Walker                 
  that if the amendments are adopted,  he and Mr. Walker would                 
  recommend the settlement  to their clients,  without further                 
  change.  He  reiterated that if the  amendments are adopted,                 
  the state would  indeed have a settlement.  If they are not,                 
  a  settlement  will  not  be   forthcoming  for  some  time.                 
  Elimination of the appeal deadline reflects recognition that                 
  litigation will continue.                                                    
                                                                               
  Mr.  Gottstein said he  had been dealing  with mental health                 
  issues since the  original 1978  legislation, purporting  to                 
  abolish the trust, was  enacted.  This is the  fifth attempt                 
  at  settlement.  While  the state may  be able  to "jam" the                 
  current  proposal through  the court,  until plaintiffs  who                 
  brought the original  suit agree,  what the state  has is  a                 
  settlement negotiated with intervenors in the litigation.                    
                                                                               
                                                                               
  Speaking  to  the issue  of  the  land list,  Mr.  Gottstein                 
  referenced two tabulations.   [Tabulations entitled "Missing                 
  Parcels"     and     "4/21/94     Reconstitution    Proposal                 
  (State/Volland)" are on file.]  He said that the tabulations                 
  would be used  to describe  the "incredibly shrinking  trust                 
  that we've experienced."  Directing attention to the 4/21/94                 
  handout,  Mr.  Gottstein  said   the  state  presented   the                 
  tabulation   at  the   preliminary   hearing  as   "our--the                 
  plaintiffs'--valuation  of   the  settlement."     He   then                 
  referenced a line half way into the tabulation and explained                 
  that  MRTLS  refers   to  "mandatorily  reconstituted  trust                 
  lands."  Under Chapter 66, all agreed that those lands would                 
  become part of the  trust.  There was never  any controversy                 
  over those lands in terms of  category.  Mr. Gottstein noted                 
  that when he reviewed the state's April 28 list, $26 million                 
  worth of parcels  had been removed.  As of  September 8, the                 
  total value  of missing  land is  $86.4 million.   When  the                 
  proposed  addendum to the April  28 list was presented, last                 
  week, it  was discovered  that an  additional $8  million in                 
  land was removed.  Mr. Gottstein  voiced his belief that the                 
  foregoing would be  a problem  for the court  which is  very                 
  concerned that the parties  get the benefit of the  bargain.                 
  He  suggested  that  the legislature  had  been  called into                 
  special session to  solve a  $40 million  problem while  the                 
  administration has basically ignored  a $95 million problem.                 
  Mr. Gottstein added his belief that the problem was actually                 
  larger than $95  million.  All  problems with the land  list                 
  have  not been  evaluated.   Further, the  state "took  some                 
  parcels and  made  them smaller  and  called them  the  same                 
  number."    There is  obviously  not  as much  value  in the                 
  smaller parcels.  The  actual tracking of these values  will                 
  require additional research.   In his concluding  remarks on                 
  the  issue,  Mr. Gottstein  observed  that the  state should                 
  honor the "deal  that was struck  in late April."   Further,                 
  the missing parcels should be added back.                                    
                                                                               
  Mr. Gottstein  next referenced attachments to  the September                 
  20, 1994, correspondence and said he would speak to proposed                 
  amendments  in  order  of  importance.   He  commenced  with                 
  discussion of  provisions allowing  the  trust authority  to                 
  "administer"   the  mental   health  trust   income  account                 
  (amendment B).  The settlement agreement says that the trust                 
  authority has  the right  to spend  that money  free of  any                 
  further  legislative  appropriation.   Mr.  Gottstein  noted                 
  constitutional  questions  concerning that  provision.   The                 
  propose of the proposed  amendment is to make clear  that it                 
  was the  legislature's intent  that the  trust authority  be                 
  permitted to  spend the  money free  of further  legislative                 
  appropriation.  Beneficiaries  have been  told that is  what                 
  the settlement does.  If that is, in fact, the legislature's                 
  intent, the proposed amendment should be adopted.                            
                                                                               
  The  next  amendment (amendment  C)  addresses the  issue of                 
                                                                               
                                                                               
  reassertion of  claims.   (Mr. Gottstein  noted need to  add                 
  Sec.  41  to sections  cited  in  amendment language.)    He                 
  explained that  the amendment  provides for  repeal of  non-                 
  settlement, coercive, punitive measures within HB 201.  Once                 
  the settlement is approved,  there is no need to  "have that                 
  offensive  language in  law .  . .  ."   The amendment  also                 
  removes the state's argument that the original claims cannot                 
  be reasserted.   The idea is that  if the state breaches the                 
  settlement, the issue reverts to where it was before passage                 
  of HB  201 rather  than after.   Current  assertions by  the                 
  state that recourse in  the event of breach extends  only to                 
  what is presently in the trust is not a sufficient deterrent                 
  to legislative breach.                                                       
                                                                               
  The  last  statutory  amendment  relates  to  survey.    Mr.                 
  Gottstein remarked that  claims that the trust  will receive                 
  the same degree of survey and  title the state received from                 
  the  federal government under the enabling act are not true.                 
  Under the mental health enabling act, the federal government                 
  surveys lands prior  to patent and advises  of title status.                 
  Under the proposed  settlement, the  state is exempted  from                 
  survey and  platting requirements  that the trust  authority                 
  will be bound to after it receives the land.  The trust will                 
  be unable to determine what land  it has with any certainty,                 
  nor will it be able to tell  what the encumbrances are.  Mr.                 
  Gottstein stressed need to identify encumbrances.  The state                 
  has not agreed to that.  He then noted that while  the state                 
  steadfastly refused identification, the work  plan the Dept.                 
  of  Natural  Resources  is  pursuing  actually  proposes  to                 
  identify  encumbrances.    The settlement  agreement  should                 
  contain a provision whereby  the state agrees to do  what it                 
  is  already planning  to  do.   Mr.  Gottstein advised  that                 
  amendment language suggests a ten-year  period of survey and                 
  that  the  trust authority  work with  DNR to  determine the                 
  priority of surveys.                                                         
                                                                               
  Mr. Gottstein  next  expressed need  for  amending  language                 
  formalizing   Commissioner   Noah's   statements    at   the                 
  preliminary hearing that the trust would be  managed for the                 
  maximum  benefit  of  the trust  authority  to  achieve fair                 
  market value and that  the trust authority would be  treated                 
  as a client of the Dept. of Natural Resources.                               
                                                                               
  Remaining amendments are  technical in nature and  relate to                 
  reassertion of claims.                                                       
                                                                               
  The final item sought is that coal lands originally included                 
  in  the trust  not  be  removed.   There  is no  reason  for                 
  removal.  These lands were trust  lands when the coal leases                 
  were signed.  Plaintiffs are not  asking that lease terms be                 
  changed.   Mr.  Gottstein acknowledged  that the  litigation                 
  challenges  the  validity of  the  leases and  expressed his                 
  belief that active coal mines may be liable  for substantial                 
  back royalties.                                                              
                                                                               
                                                                               
  Mr. Gottstein suggested that the  foregoing requests are not                 
  seeking "that much."  He reiterated that if the requests are                 
  accommodated, a true  settlement will result.   If they  are                 
  not accepted, it will  be some time before anyone  knows the                 
  outcome of the mental health trust issue.                                    
                                                                               
  Representative Larson referenced  the original  100-million-                 
  acre  conveyance of trust land by the federal government and                 
  said  he could  recall  no  Congressional appropriation  for                 
  survey.    He then  asked  if  the original  conveyance  was                 
  surveyed  and at whose  cost.  Mr.  Gottstein explained that                 
  the  mental  health  enabling  act  consists of  a  two-part                 
  process.  Land  is selected and  then conveyed.  Before  the                 
  federal government conveys land, it  surveys it and issues a                 
  patent.   Approximately  750,000 acres  have been  patented.                 
  The remaining 250,000 acres  have been tentatively approved.                 
  The statehood act involves a three part process:  selection,                 
  tentative approval, and  patent.   When land is  tentatively                 
  approved, lines are drawn and  administration of the land is                 
  transferred  to the state.   Survey and  patent then follow.                 
  If the state  chooses to do something with the  land, it can                 
  survey it at state expense and move  forward or wait for the                 
  federal government to  survey and patent the  property.  All                 
  land received  under both  the statehood  and mental  health                 
  trust enabling act will eventually be patented.  The problem                 
  is  that  the  settlement merely  takes  surveyed  lands and                 
  writes descriptions.  That, in  effect, takes surveyed lands                 
  and makes unsurveyed  parcels out of  it.  That is  illegal.                 
  No  one  else  can   do  that.    In  mental   health  trust                 
  legislation, the  state exempted itself from  complying with                 
  surveying and platting  requirements.  This cost  should not                 
  be shifted to the trust authority.                                           
                                                                               
  End,      SFC-94, #92, Side 2                                                
  Begin,    SFC-94, #94, Side 1                                                
                                                                               
  In  response  to  a   question  from  Representative  Larson                 
  relating to language dealing with fair market value of trust                 
  land  as  well  as  best  use  of the  land,  Mr.  Gottstein                 
  explained that it is standard trust language.  He added that                 
  one of the  problems encountered in the  mental health trust                 
  situation is the fact that the state made a determination it                 
  was better, for the  public, to take 370,000 acres  of trust                 
  land and  put  it into  state  parks and  forests,  critical                 
  habitat,  refuges, etc.  than to  hold the  lands  in trust.                 
  When  land  is  taken from  the  trust,  the  trust must  be                 
  compensated.  Management regimes for  trust land often allow                 
  for use  of land.   However,  if the  action has a  negative                 
  fiscal impact  on the trust, the negative fiscal impact must                 
  be compensated for.   Plaintiffs seek to  ensure that, under                 
  the settlement agreement, the trust  will be administered as                 
  a trust.                                                                     
                                                                               
                                                                               
  Co-chair  Frank raised  questions regarding  action  on back                 
  royalties  on  coal lands.    Mr. Gottstein  explained that,                 
  earlier in the year, he filed a motion to certify a class of                 
  defendants--all coal lessees.  One of the claims is that the                 
  leases are  invalid because they were not issued pursuant to                 
  proper trust  management guidelines  in  that royalty  rates                 
  paid for  removal of  coal were  not a  fair market  return.                 
  Back  royalties to achieve fair market  value are thus owed.                 
  Co-chair Frank commented that there does  not appear to be a                 
  practical  solution  to  the  issue  raised  by  the  above-                 
  mentioned motion since third-party private lessees  probably                 
  do  not  have moneys  with  which  to pay  the  alleged back                 
  royalties.   Plaintiffs'  proposed solution of  putting coal                 
  lands back into  the trust at  the same time plaintiffs  are                 
  suing on the  matter is not  palatable.  Mr. Gottstein  said                 
  that if the proposed  amendment for inclusion of  coal lands                 
  is accepted, the  litigation would end.   If not, the  claim                 
  remains.                                                                     
                                                                               
  Mr. Gottstein further  advised that  a similar class  action                 
  was  filed  against municipalities  because they  were "just                 
  given the land."  Under trust  law it is clear that "They'll                 
  come back."  Mr.  Gottstein reiterated that if the  proposed                 
  amendments are accepted, a settlement will  be in place.  If                 
  they  are not,  it will  be  a long  time before  the mental                 
  health issue is resolved.                                                    
                                                                               
  Senator Kerttula asked  which of the proposed  amendments is                 
  the  least  important.    Mr. Gottstein  said  it  would  be                 
  difficult  to  eliminate any  one  and still  say plaintiffs                 
  would be supportive of the settlement.                                       
                                                                               
  Discussion  followed  between   Mr.  Gottstein  and  Senator                 
  Kerttula over settlement agreements achieved up to this time                 
  under  current  administrative  staff,  well-versed  in  the                 
  mental health trust  issue, versus a new  administration and                 
  new staff.                                                                   
                                                                               
  Representative Larson  referenced a succession  of pieces of                 
  legislation  working  toward settlement  and  questioned how                 
  finality  could  be given  to  private third-parties  if the                 
  proposed amendment  would return  the matter  to pre-HB  201                 
  status  should  a breach  occur.   Mr. Gottstein  voiced his                 
  belief that  the court viewed  the prospect  of having  that                 
  very   problem   resurface   as  sufficient   deterrent   to                 
  legislative breach.  Current  settlement provisions relating                 
  to  reassertion  of  claims  do  not provide  the  deterrent                 
  envisioned by the  court.  Representative Larson  stated his                 
  belief that the  continued holding of private  purchasers as                 
  hostages would be "so unbelievable" that the court would not                 
  approve such an  arrangement even if the  legislature agreed                 
  to the  amendment.   Mr. Walker  suggested that  third-party                 
  purchasers  could be removed from the  process entirely.  He                 
  referenced  past  legislation  introduced by  Representative                 
                                                                               
                                                                               
  James to accomplish  that.  All the legislation required was                 
  replacement of  private  third-party  land  with  substitute                 
  land.   There are  thus alternative methods  of dealing with                 
  that problem.                                                                
                                                                               
  Representative   Finkelstein   raised   questions  regarding                 
  security.      Mr.  Walker   voiced  concern   that  without                 
  reconstitution of  the trust  per Chapter  66, the  proposed                 
  settlement  does  not  contain  sufficient  deterrent  to  a                 
  material  breach  of  the settlement.    Repeal  of statutes                 
  creating the trust  authority was cited  as an example of  a                 
  substantive breach.  Claims, should a breach occur under the                 
  settlement, would only apply to  the "to-be-conveyed list of                 
  this trust."  That provides no deterrent at all.  The remedy                 
  is not sufficient.                                                           
                                                                               
  Senator Rieger asked if the trust would have rights equal to                 
  those of private land holders in terms of ability to develop                 
  land and realize  income.    Mr. Gottstein said that  if the                 
  proposed amendments  are adopted,  plaintiffs believe  trust                 
  lands would be managed in closer accord  with privately held                 
  lands.   Zoning  and environmental laws  would apply  to the                 
  trust.    Statutes presently  say  that  the land  is  to be                 
  managed as all other state  land but subject to requirements                 
  of the mental health enabling act.   In granting preliminary                 
  approval, the court  found that  sufficient.  Management  of                 
  trust lands  in accordance  with management  of other  state                 
  lands  takes  into  consideration interests  (environmental,                 
  developmental, land at  less than  fair market value,  etc.)                 
  other than those of the trust.                                               
                                                                               
  Senator Rieger sought a  definition of "public trust."   Mr.                 
  Gottstein acknowledged confusion in this area.  He explained                 
  that the state  originally argued that "public  trust" meant                 
  no different management  than management  of all state  land                 
  under  the  public  trust doctrine--for  the  greater public                 
  good.  That argument was rejected by the supreme court.  The                 
  court  said   that  private  trust  law   principles  apply.                 
  Proposed amendments attempt to get closer to that concept.                   
                                                                               
  Co-chair Frank  asked why an approach such as that contained                 
  within   Representative   James'    legislation   was    not                 
  incorporated  within the  proposed amendments.    Mr. Walker                 
  voiced support for the legislation, saying that it addressed                 
  an issue of great concern to  the legislature.  In proposing                 
  amendments, opposing attorneys  are suggesting the  "minimum                 
  kind of changes" that would  be required prior to acceptance                 
  of the settlement.                                                           
                                                                               
  In  response  to further  questions  from the  Co-chair, Mr.                 
  Walker acknowledged that he could not negotiate a settlement                 
  with  the  legislature.     That  must  be  done   with  the                 
  administration.  Changes within the proposed amendments  are                 
  not  acceptable   to  the  administration.     However,  the                 
                                                                               
                                                                               
  legislature can make amendments to  statutes.  Mr. Gottstein                 
  said he felt it was right for counsel for plaintiffs to come                 
  before committee and,  within the framework of  the proposed                 
  settlement, advise of what  it would take to achieve  a true                 
  settlement.                                                                  
                                                                               
  Speaking  to  the approach  taken  by  Representative James'                 
  bill, Mr.  Gottstein said  that the  administration and  the                 
  legislature abandoned that approach when  HB 201 was passed.                 
  Beneficiaries are being asked to accept a settlement that is                 
  30 cents on the dollar in  exchange for establishment of the                 
  trust   authority   and   trust   authority   control   over                 
  expenditures.     If   beneficiaries  are  to   accept  this                 
  arrangement, provisions therein should be enforceable.                       
                                                                               
  Representative Larson stressed  that the foregoing  comments                 
  and opinions  are those of  the speaker and  not necessarily                 
  agreed to by legislative members.                                            
                                                                               
  Representative Davies asked if DNR management of trust lands                 
  as a public rather than private trust would lead to material                 
  breach of the  settlement.  Mr.  Gottstein said that,  under                 
  the settlement,  the management regime for the trust is left                 
  to the regulatory process or litigation, in terms of what is                 
  permissible.   Plaintiffs'  problem  with DNR  management is                 
  that  it allows  for consideration  of non-trust  interests.                 
  Plaintiffs  are  not  proposing a  change  in  the statutory                 
  regime.   What is being  proposed is that the Commissioner's                 
  statements that  the land should  be managed to  the maximum                 
  benefit  of  the beneficiaries  and  to achieve  fair market                 
  value be incorporated into the  settlement agreement.  Those                 
  statements to  the court  would then  be  binding on  future                 
  administrations.                                                             
                                                                               
  Discussion followed  between Representative  Davies and  Mr.                 
  Gottstein  regarding  management  of the  Washington  school                 
  trust.  Mr.  Gottstein stressed that consideration  of other                 
  interests is  acceptable as long  as those interests  do not                 
  have a negative fiscal impact on the trust.  Negative fiscal                 
  impact must be compensated.                                                  
                                                                               
  Representative James stressed  need for finality.   She then                 
  voiced  her understanding  that problems  associated  with a                 
  future  breach  of  settlement appear  the  same  under both                 
  Chapter 66 and HB 201.  Redress for damages would be through                 
  the  courts.    Mr.  Walker  explained that  the  difference                 
  between Chapter  66 and  the proposed  HB 201  settlement is                 
  that  under  Chapter  66  the trust  corpus  would  be fully                 
  reconstituted.  While allowing substitute  land, the supreme                 
  court required dollar-for-dollar  equivalency with  original                 
  trust land.  The trust  would thus have that property.   The                 
  HB 201  settlement trades  trust value  for other  benefits.                 
  Further,   the  terms   of   Chapter  66   settlement   were                 
  incorporated within the court  judgment and were enforceable                 
                                                                               
                                                                               
  in terms of  that judgment.  There  is a huge difference  in                 
  both the  enforceability and the  value of the  trust corpus                 
  between  Chapter  66  and  the  proposed  settlement.    Mr.                 
  Gottstein  added  that under  Chapter  66 the  mental health                 
  community was not  being asked to "put  a lot of value  on a                 
  constitutionally  dubious  proposition"--trust  authority to                 
  spend trust income without legislative appropriation.                        
                                                                               
  Representative Brown referenced the $94.8 million in missing                 
  parcels and asked  for an explanation.   Mr. Gottstein  said                 
  that when he requested a response  from the Dept. of Natural                 
  Resources, he was told  that the department had one  but was                 
  too busy, "getting  the land  list together, to  give it  to                 
  us."  Counsel  received written response only  last evening.                 
  The response gives  various reasons  for why the  department                 
  unilaterally decided to  "pull things off  the list."   Some                 
  reasons are valid while others are not.  The problem is that                 
  removal  means that the proposed settlement is less than the                 
  court was told.  If something  comes off the list, something                 
  else should go on.   Of approximately 4,000 missing parcels,                 
  17 have been added back.  In less than two weeks'  time, the                 
  trust lost an additional  $7.5 million worth of land  as the                 
  department reviewed and reworked its list.                                   
                                                                               
  Senator Rieger referenced settlement language requiring that                 
  the principal be retained.  Since the original  enabling act                 
  does not make  such a provision, the requirement  appears to                 
  be a  major change  strengthening the  corpus of the  mental                 
  health trust.  Mr. Gottstein noted  that review of all other                 
  states indicates that the corpus is  preserved.  Even if the                 
  enabling act permits the trustee to invade the corpus  under                 
  appropriate circumstances,  the only proper  time that could                 
  be  done is  in  the  best interest  of  the  trust and  the                 
  beneficiaries.    The  supreme court  decision  speaks  to a                 
  setoff  for  land  that has  been  sold.    That suggests  a                 
  reduction in corpus.   One of the questions  embodied within                 
  the litigation is, What lands would be considered sold?  Had                 
  that  language  not  existed, and  had  administrations  not                 
  seized upon it  as a means  of destroying the trust  through                 
  the setoff, the mental health issue would have been resolved                 
  much earlier.                                                                
                                                                               
  Senator Rieger  referenced enabling act language, recited by                 
  Judge Greene, that uses  the words "expended or used  by the                 
  territory  of  Alaska."   He  then  suggested  that language                 
  implies that  the  corpus  could be  used.    Mr.  Gottstein                 
  acknowledged that the language has been interpreted that way                 
  by the administration.  Earlier  decisions indicate that the                 
  trust must be  managed solely  in the best  interest of  the                 
  beneficiaries.  The question is, "If it's possible to invade                 
  the corpus, was that  undertaken for a proper motive?"   The                 
  record does not  indicated that  the corpus  was invaded  to                 
  benefit Alaskans who need mental health services.                            
                                                                               
                                                                               
  Referencing the list of missing  parcels, Senator Salo asked                 
  if  the  value  of  each  is  an agreed-upon  figure.    Mr.                 
  Gottstein acknowledged that  the state  does not agree  with                 
  the  values.    The  administration  would  have  to  agree,                 
  however, that  all those  parcels were  subsumed within  the                 
  list  "that went  in  to  what the  court  was  told we  had                 
  valued."  The question  is not so much one of  value as much                 
  as whether or not these parcels "were supposed to be  in the                 
  deal."                                                                       
                                                                               
  PHILLIP  VOLLAND,  representing  a  group  of  plaintiffs in                 
  support of the settlement, and  JEFF JESSEE, senior attorney                 
  with  Advocacy  Services   of  Alaska,  representing   named                 
  beneficiaries and the developmentally disabled, came  before                 
  committee.  Both attorneys advised  that they had negotiated                 
  and signed the proposed settlement with  the administration.                 
                                                                               
                                                                               
  Mr. Volland voiced disagreement with Mr. Gottstein's and Mr.                 
  Walker's  assessments of  the settlement and  suggested that                 
  they made misrepresentations  of the fairness and  accuracy.                 
  He  said he  would not speak  to technicalities,  since they                 
  have been well argued over the past  two years.  He stressed                 
  that the bills now before committee represent follow-through                 
  on the commitment made last session.   The legislation fixes                 
  mistakes made  when formulating  the HB  201 settlement  and                 
  resolves problems identified  by the  court.  Assertions  of                 
  need  for  greater enforceability,  more  land added  to the                 
  list, written assurances of what the  state said it will do,                 
  etc. reflect the recurring theme  of "tremendous mistrust of                 
  the  state"  that is  the  basis  for those  who  oppose the                 
  settlement.  That mistrust  alleges that the state will  not                 
  keep its  commitments.  In  stepping forward on  the pending                 
  legislation, the legislature is demonstrating its commitment                 
  to solve  the mental health  problem.   That should  silence                 
  those who criticize the motivation of the legislature.                       
                                                                               
  End:      SFC-94, #94, Side 1                                                
  Begin:    SFC-94, #94, Side 2                                                
                                                                               
  Mr. Volland  stressed need  to keep  in mind  what has  been                 
  happening in the courts.  The  notice and comment period has                 
  begun.  Notice of the impending settlement was mailed to all                 
  post office  boxes statewide.   Of those  who have  replied,                 
  response  is overwhelmingly  consistent  in  support of  the                 
  settlement.  Responses are consistent in one theme--a desire                 
  to conclude the litigation.   The settlement is deemed fair,                 
  and  need  is  expressed  to  stop endless  bickering  about                 
  details,   refinements,   solutions,  and   legal  theories.                 
  Passage of the proposed legislation responds to that kind of                 
  feeling   among   both   the   public   and   beneficiaries.                 
  Legislative action will  not only keep  the promise made  to                 
  the  public,  but  it  will  also  demonstrate  the  state's                 
  willingness  and commitment to keep its own promises when it                 
                                                                               
                                                                               
  "makes  a particular deal."   Mr. Volland urged that members                 
  not  lose sight  of the  goal of  the three-day  legislative                 
  session.  The objective is  to review concerns expressed  by                 
  Judge Greene and  address them in a  simple, straightforward                 
  way.  A disservice will be  done if the legislature attempts                 
  to "tinker"  with the  delicate balance  of the  settlement.                 
  Mr. Volland urged favorable passage  of pending legislation.                 
                                                                               
                                                                               
  Mr. Jessee stressed that there is nothing about the proposed                 
  settlement  that   changes  the  relationship   between  the                 
  legislature,  as  trustees,  and the  beneficiaries  of  the                 
  trust.  It merely closes a chapter in that relationship that                 
  has led  to litigation and  adversarial positions.   It will                 
  begin  a  new relationship  and a  new  future leading  to a                 
  spirit  of  cooperation   wherein  beneficiaries  can   work                 
  together   with  the   legislature,   trustees,  the   trust                 
  authority, the administration,  and the people of  Alaska to                 
  "get something positive out of this trust . . . ."                           
                                                                               
  Mr. Jessee described Judge Greene's  decision as a reliable,                 
  objective view of the  litigation, proposed settlement,  and                 
  suggested  amendments.    She is  the  closest  thing  to an                 
  objective attorney--able  to assess  the litigation  and its                 
  risks  and  the  settlement   and  its  risks  and   make  a                 
  fundamental decision as to whether the settlement is  in the                 
  interest of the beneficiaries.                                               
                                                                               
  When the settlement  was first negotiated and  placed before                 
  beneficiaries,  beneficiaries  were  not  pushed  to take  a                 
  position.   Mr. Jessee said he urged his clients to wait and                 
  listen to what  Judge Greene had to say.  She has spoken and                 
  has made  specific concerns  that could  lead to  failure to                 
  achieve final approval very clear.                                           
                                                                               
  Mr. Jessee concurred in comments by  Mr. Volland that one of                 
  the ongoing problems  is the sense that  the administration,                 
  legislature, and state cannot be  trusted.  He then stressed                 
  that  this  is  the  first  time  he had  been  involved  in                 
  negotiations, both before  and after a settlement,  where he                 
  feels  the  state  has  not  only  stepped up  to  keep  its                 
  commitments but  has gone  "the extra  mile."   Commissioner                 
  Noah has worked  incredibly hard to  keep the settlement  on                 
  track and resolve problems as they arise.  The atmosphere at                 
  both the Dept. of Natural Resources and  Dept. of Law is one                 
  of cooperation.   The intent  is for both sides  to "get the                 
  benefit  of  their   bargain."    That  is   of  benefit  to                 
  beneficiaries  in  commencing the  settlement  on the  right                 
  foot.  Much  remains to  be done in  appointment of a  trust                 
  authority, commencement of the  regulatory process with  the                 
  Dept.   of  Natural   Resources,   development  of   program                 
  regulations, implementation of significant  changes to major                 
  mental health planning boards and commissions, establishment                 
  of new budgeting mechanisms, etc.                                            
                                                                               
                                                                               
  Mr.   Jessee  stressed  the   importance  of  the  immediate                 
  effective date in  proposed legislation.  When  Judge Greene                 
  grants final approval, implementation of the settlement will                 
  commence immediately.  Judge Greene has pointed out inherent                 
  risks in  the settlement.  It is not  perfect.  But, much of                 
  what has been said about imperfections relates to items with                 
  which Judge  Greene has either dealt or  will deal.  As soon                 
  as November 15, the  state may be in the  process of finally                 
  implementing  a settlement.  While  appeal may be taken, the                 
  issue  will be  moving forward.   That  is one  of the  most                 
  positive elements of the pending  legislation.  Judge Greene                 
  has validated the  fairness and adequacy of  the settlement.                 
  Mr.  Jessee  urged  positive response  to  the  bills before                 
  committee.                                                                   
                                                                               
  Senator  Kerttula  referenced  earlier   comments  regarding                 
  draftsmanship of the  current bills  and asked if  statutory                 
  changes embodied in SB 382 are logical and make sense.  Both                 
  Mr. Volland and Mr. Jessee responded affirmatively.                          
                                                                               
  Representative Brown  inquired about  enforceability of  the                 
  settlement.   Mr.  Volland replied  that  enforceability  is                 
  based on deterrence.  The thought of continued litigation is                 
  something that future legislatures will shy  away from.  The                 
  court recognized that.  It said that the claims and defenses                 
  that exist when the  case is dismissed can be  reasserted at                 
  the time of breach.  The settlement agreement specifies that                 
  the  sole  remedy is  the filing  of  a new  action claiming                 
  whatever remedies  are appropriate under  the circumstances.                 
  Upon a breach  of the settlement,  beneficiaries can file  a                 
  complaint and seek an appropriate remedy, including a remedy                 
  against original  trust land  if that  is appropriate.   The                 
  state,  likewise,  will assert  all  of its  defenses.   The                 
  lawyers then go to battle over the strengths  and weaknesses                 
  of their particular claims.  Deterrence  is based on "a fear                 
  of two parties  going to  war again."   It is  a mistake  to                 
  focus on a particular remedy or particular breach since they                 
  can  only be assessed  in light  of circumstances  that will                 
  exist at the  time they occur,  if they occur  at all.   For                 
  certain  breaches,  it  might  not   be  an  appropriate  or                 
  effective remedy to assert a  claim against land.  Receiving                 
  the benefit of the  bargain makes the deal enforceable.   If                 
  that benefit is not forthcoming in the future, the situation                 
  for the parties reverts  to where it was before  the bargain                 
  was made.                                                                    
                                                                               
  Mr. Jessee said  he views  enforceability in this  situation                 
  differently than a  commercial venture  where an  injunction                 
  may be  obtained against a  party, preventing breach  of the                 
  agreement.  There  is no way a  court would be able  to hold                 
  the  legislature  in contempt  and  put members  in  jail if                 
  legislation  constituting  a  breach  of  the  agreement  is                 
  considered.  The arrangement  is different when governmental                 
                                                                               
                                                                               
  bodies are involved.  Mr. Jessee stressed that the threat of                 
  "starting  this  lawsuit up  again  is a  pretty significant                 
  deterrent."   It does  no good to  argue enforceability when                 
  the matter is one for the judge to ultimately decide.  Judge                 
  Greene  determined  that  the settlement  is  a  "reasonably                 
  enforceable deal."   She  recognizes there  are risks.   All                 
  parties understand that and have  so informed their clients.                 
  Mr.   Jessee   voiced   his    belief   that,   with    that                 
  acknowledgement,  the majority of  the clients  will support                 
  the settlement.                                                              
                                                                               
  Senator Little  asked what  type of  result is  anticipated,                 
  since  the  original plaintiffs  are  dissatisfied with  the                 
  settlement.  Mr.  Volland voiced  his anticipation that  the                 
  court  will grant  final  approval, that  there  will be  an                 
  appeal, and that the  appeal will not be successful.   Final                 
  approval will  involve more  detailed analysis  and findings                 
  than preliminary approval.  He  stressed that Judge Greene's                 
  decision  clearly  meets  the legal  standard  necessary  to                 
  sustain her finding on any level of appeal.                                  
                                                                               
  Senator Little  next asked  if  Mr. Volland  and Mr.  Jessee                 
  agree with any of the proposals set  forth by Mr. Walker and                 
  Mr. Gottstein.   Mr. Volland  acknowledged that elements  of                 
  the proposals enhance the  settlement.  He cited  surveys of                 
  lands conveyed to trust and legislative appropriation of $15                 
  million to do so as  an example and said he was in  favor of                 
  that  effort.   However,  he noted  his   commitment  to the                 
  legislature when he stood by "the deal last May" and said he                 
  would not come  back to the  legislature and ask for  more.                  
  Good faith with  the legislature rests  in adhering to  what                 
  was determined to be fair and not asking for more.                           
                                                                               
  Co-chair  Frank  asked what  the situation  would be  if the                 
  court fails to  grant final approval.   Mr. Volland said  it                 
  was  highly  unlikely that  would  occur.    The reason  for                 
  preliminary  approval  is  to  pinpoint  problems  and  give                 
  parties  an  opportunity   to  address  them  so   that  the                 
  likelihood of final approval  is much more secure.   That is                 
  exactly what is happening in this instance.  Final  approval                 
  is thus a reasonable assumption.  Mr. Volland suggested that                 
  the  court  would  not  have   gone  through  a  process  of                 
  considerable   expense   (statewide  notification   and  the                 
  scheduling of two to  three weeks of hearings) if  the court                 
  did not believe the settlement should and could be approved,                 
  providing  that   certain  problems  are   corrected.    The                 
  legislature  is  addressing  those  items  in  this  special                 
  session.                                                                     
                                                                               
  Representative Therriault inquired concerning  the different                 
  level of scrutiny  or proof associated with  final approval.                 
  Mr.  Volland explained  that different  legal standards  are                 
  applied to preliminary  approval and final approval.   These                 
  standards relate to what the court  needs to do and findings                 
                                                                               
                                                                               
  the  court  needs  to make.    Final  approval  is not  more                 
  detailed.  The more important factor  is that because of the                 
  complexities of this case, the  court devoted far more  time                 
  and scrutiny to  the settlement than  would normally be  the                 
  case under  preliminary approval.   Preliminary  approval is                 
  rarely a week-long  adversarial hearing with ten  or fifteen                 
  witnesses.   The court  has heard and  is aware  of what the                 
  substantial  arguments against  the settlement  are.   Using                 
  value as an  example, Mr. Volland noted that  Judge Greene's                 
  decision  sheds  important  light on  those  arguments.   It                 
  indicates that values are educated guesses with no assurance                 
  of money.  Mr. Volland acknowledged that while the court has                 
  already closely  reviewed  the  settlement,  it  will  again                 
  conduct review to ensure that issues outlined in the earlier                 
  decision were addressed and allow  time for parties to brief                 
  and argue the issues since they are complex.  The difference                 
  in  the  standard  between preliminary  and  final  approval                 
  should not be something  that alters what the court  does or                 
  the final outcome.                                                           
                                                                               
  Co-chair Frank asked  if the court had  adequately addressed                 
  and rejected the amendments  offered by opposing  attorneys.                 
  Mr.  Volland  responded affirmatively.     Using  the survey                 
  issue as an example, he advised of testimony and argument on                 
  that  matter  at   the  preliminary  hearing.     The  court                 
  understands the issue and found that the proposed settlement                 
  was  fair  without  survey requirements.    The  court heard                 
  arguments  concerning  enforceability  and  found  that  the                 
  agreement is enforceable.   The  court heard suggestions  of                 
  possible    unconstitutionality    associated    with    the                 
  appropriation process, but suggested  to plaintiffs' counsel                 
  that the arrangement is something clients and  beneficiaries                 
  would want as part of the deal.  The question is not a legal                 
  issue that has been briefed or claimed because all attorneys                 
  for plaintiffs want trust authority  ability to allocate the                 
  net income through a  process of grants and contracts.   For                 
  the  most  part,  the  court   has  addressed  the  proposed                 
  amendments  in one way or another.   They were part of Judge                 
  Greene's  consideration in  ruling  that the  settlement was                 
  fair.                                                                        
                                                                               
  In response to  an additional  question from Co-chair  Frank                 
  regarding the issue of value, Mr. Volland said the court was                 
  well  aware that  the coal  leases were  not a  part of  the                 
  settlement and  discussed that  value issue  in the  overall                 
  assessment of fairness.                                                      
                                                                               
  Representative Brown voiced her understanding that the court                 
  considered the value to be $1.3 billion, including the  $200                 
  million in cash.   She then inquired concerning the  missing                 
  parcels and the apparent discrepancy  in value.  Mr. Volland                 
  acknowledged that the issue of the "new missing parcels" was                 
  not  raised before the court at the July hearing.  The court                 
  had  the  land  list  before  it.   He  explained  that  the                 
                                                                               
                                                                               
  tabulation dated 4/21/94 (distributed by  Mr. Walker and Mr.                 
  Gottstein) contains a  preliminary estimate of the  value of                 
  the settlement.  It does not provide a comprehensive list of                 
  what was supposed to be there.  The court looked at value in                 
  terms  of  all  the  different  yardsticks presented.    Mr.                 
  Volland noted estimated  values ranging  from $2 billion  to                 
  $500  million.    The  judge  determined that  "however  you                 
  measure it, it's still fair."  Mr. Volland voiced his belief                 
  that if the  issue is  raised at final  approval, the  court                 
  will treat it as a value  discussion and will again conclude                 
  that the settlement is fair.   Continuing evidence will show                 
  that  some  of   the  values  are  "very,   very  optimistic                 
  assessments of values to the land, that probably won't  hold                 
  up."                                                                         
                                                                               
  Mr. Jessee advised of  an earlier list of parcels  that were                 
  omitted or alleged  to be  omitted.  He  said that  settling                 
  attorneys  sat  down  with the  department  and  developed a                 
  parcel-by-parcel explanation.   Mr. Jessee said he  was very                 
  comfortable taking  that  explanation  to  his  clients  and                 
  showing what happened to every parcel.  This same process is                 
  beginning for "this other list that we've gotten in the last                 
  couple of weeks."  Of the 4,000 parcels, over 2,000 are oil-                 
  and-gas-only  estates in  parcels  that  have an  identified                 
  value of zero  for oil and  gas.  That  does not affect  the                 
  value and  was not part of  the deal.   Mr. Jessee expressed                 
  his confidence that  item-by-item review would allow  him to                 
  explain to both his  clients and the court what  happened to                 
  the parcels.  He expressed  further confidence that when the                 
  court  looks  at  the  overall  value  and fairness  of  the                 
  settlement, Judge Greene will conclude  that the value given                 
  for what was given up is fair and reasonable.                                
                                                                               
  Representative   Davies   asked   if  the   parcel-by-parcel                 
  explanation also lists encumbrances.   Mr. Jessee responded,                 
  "No, not at this time."                                                      
                                                                               
  Co-chair Pearce called for additional  questions.  None were                 
  forthcoming.  She then directed that the meeting be recessed                 
  for approximately five  minutes prior  to taking public  and                 
  teleconference testimony.                                                    
                                                                               
                       RECESS - 7:00 P.M.                                      
                      RECONVENE - 7:07 P.M.                                    
                                                                               
  Upon reconvening the meeting, Co-chair Pearce announced that                 
  the MatSu teleconference site had dropped off the line.  She                 
  then requested that teleconference testimony proceed.                        
                                                                               
  FAIRBANKS                                                                    
                                                                               
  JEANNETTE  GRASTO,  President,  Fairbanks  Alliance for  the                 
  Mentally Ill,  advised that Mr.  Walker was correct  when he                 
  indicated that  many of  the beneficiaries do  not feel  the                 
                                                                               
                                                                               
  current settlement is adequate or  enforceable.  She advised                 
  of  contact  with  the  Kodiak  Alliance,   Kenai  Alliance,                 
  Anchorage Alliance, Railbelt  Alliance, Barrow Alliance, and                 
  a family advocate  group in  Juneau. Conversations with  the                 
  presidents  of  these groups  evidences  that many  are very                 
  disappointed with the settlement.   Amendments sought by Mr.                 
  Gottstein and Mr. Walker are  "minimally acceptable but very                 
  essential to make  this deal fair."   Ms. Grasto voiced  her                 
  belief  that it  is  difficult for  the  state to  act  as a                 
  trustee for the  mentally ill and  continue to look out  for                 
  the interests  of the state as  a whole.  If  the amendments                 
  sought by Mr. Walker and Mr. Gottstein are not adopted, many                 
  want to  ask the court  to completely remove the  state as a                 
  trustee.  Ms. Grasto  voiced her hope that the  legislature,                 
  acting in special  session as trustee for  the mental health                 
  community, will do  what is best  for beneficiaries and  not                 
  act on behalf  of the state as a whole.  She acknowledged it                 
  would be difficult  for members to separate  those functions                 
  but  stressed that, as trustees,  legislators have a duty to                 
  attempt to focus  on what  is best for  beneficiaries.   She                 
  urged adoption of amendments presented by Mr. Walker and Mr.                 
  Gottstein.                                                                   
                                                                               
                                                                               
  JOY ALBEN, a member  of both the Fairbanks Alliance  for the                 
  Mentally  Ill  and  the Fairbanks  Community  Mental  Health                 
  Board, next testified.   She said  that the groups to  which                 
  she belongs represent  the "invisible people"--the class  of                 
  plaintiffs that were  originally named in the  mental health                 
  lands trust.    As family  and advocates  for the  seriously                 
  mentally   ill   and    chronically   mentally   ill,    the                 
  aforementioned groups represent the unwashed, the  unwanted,                 
  the misunderstood, the feared, and the odd-acting folks that                 
  have been discriminated against since the beginning of time.                 
  A vast  number of  those people  continue to  be treated  as                 
  lepers.  There are  no poster children  in this group.   The                 
  above-noted  organizations are the  voice for the voiceless,                 
  the timid, and the lost souls that are mentally ill.                         
                                                                               
  The  original mental  health lands trust  was an  attempt to                 
  rectify the  injustices done  in territorial  days when  the                 
  mentally ill were  sent to Morningside, and  many were never                 
  to be seen by their families again.                                          
                                                                               
  Ms. Alben next quoted from a  letter to the editor published                 
  in  the Anchorage Daily News  on Monday, September 19, 1994,                 
  and entitled "Trust Lands Offer a Cruel Joke:"                               
                                                                               
       The  one  million  acres  offered   by  our  state                      
       legislature  in  the  mental  health  lands  trust                      
       settlement proposal is  not land of like  value as                      
       the courts have  determined it should be.   [That]                      
       this lesser, or non-productive land selection,  is                      
       required  to  be  managed   by  a  new,  exclusive                      
                                                                               
                                                                               
       bureaucracy  within  the  Department   of  Natural                      
       Resource assures a worthless return and represents                      
       an obvious conflict  of interest.  With  regard to                      
       the $200 million offered in cash, after  inflation                      
       proofing, the best we  can hope for is $6  million                      
       to  fund current services that currently cost $150                      
       million.    This legislative  proposal is  a cruel                      
       joke.   It  does  not achieve  the  intent of  the                      
       original   trust   or  provide   adequate  funding                      
       independent of state involvement.                                       
                                                                               
  Ms.  Alben  said  that  dissolution  of  the  trust  by  the                 
  legislature  in  1978 was  a black  mark  in the  history of                 
  Alaska.  She urged  that members remember that the  original                 
  million acres  consisted of  one million  acres of  the most                 
  valuable land in  the State  of Alaska,  outside of  Prudhoe                 
  Bay.                                                                         
                                                                               
  Speaking to concerns regarding the  status of private third-                 
  party purchasers of mental health lands, Ms. Alben said that                 
  the mentally ill are not holding  them hostage.  It was  the                 
  illegal  dissolution  of the  trust  by the  legislature and                 
  subsequent actions of the  state that did so.   She urgently                 
  requested that the proposed settlement be amended to include                 
  provisions that are acceptable to all plaintiffs.                            
                                                                               
  SYBIL SKELTON  next testified,  advising that  she has  been                 
  mentally  ill  since 1963.    She  attested to  a  number of                 
  "puzzling episodes" and advised of  her special feelings for                 
  the mentally ill.  Ms. Skelton explained that her efforts on                 
  behalf of the mentally  ill have been as an  advocate rather                 
  than a client.   She said she  has been critical  of lacking                 
  programs and  suggested that  the greatest  beneficiaries of                 
  mental health programs are staff rather  than those who need                 
  services.  She said health insurance programs should include                 
  a program specifically for the mentally ill.                                 
                                                                               
  [At this  point, the  teleconference link  to Fairbanks  was                 
  disrupted, and testimony from the Anchorage site commenced.]                 
                                                                               
  ANCHORAGE                                                                    
                                                                               
  JIM   PARSONS,   Vice   President,   Alaska  Mental   Health                 
  Association,  advised  that  he  has  been a  mental  health                 
  professional  in  Alaska for  42  years.    He concurred  in                 
  commendations for  the efforts of  Commissioner Noah, saying                 
  that the Commissioner  has been equally informative  to "his                 
  interim committee  of which I am a member, who are to advise                 
  him."    Mr. Parson  voiced  further commendation  for Judge                 
  Greene, who he said had  demonstrated an evenhanded approach                 
  and fairness in her deliberations.                                           
                                                                               
  Mr.  Parsons noted  that  while Mr.  Jessee approves  of the                 
  current  settlement  proposal,  he   also  approved  of  the                 
                                                                               
                                                                               
  previous, failed settlement  attempt.   Mr. Parsons said  he                 
  found  it  puzzling  that  attorneys  who represent  "ninety                 
  percent of the beneficiaries" feel that the trust settlement                 
  is not  just unless the Gottstein and  Walker amendments are                 
  approved while the two attorneys who represent less than ten                 
  percent of the clients do.                                                   
                                                                               
  Mr. Parsons  questioned why  valuable coal  lands that  were                 
  part  of the original trust should be removed, "just because                 
  private interests are  involved."   He suggested that  trust                 
  income  is more  important,  as a  public  interest, to  the                 
  state.   It is  reprehensible to substitute  lands of lesser                 
  value for lands with the best income potential.  Mr. Parsons                 
  voiced concurrence with  comments by the first  two speakers                 
  from Fairbanks.                                                              
                                                                               
  Co-chair    Pearce    called   for    questions   concerning                 
  teleconference testimony.  None were forthcoming.                            
                                                                               
  JUNEAU                                                                       
                                                                               
  JOHN  MALONE, President,  Alaska Alliance  for  the Mentally                 
  Ill, and  PATRICK MURPHY,  member, Juneau  Alliance for  the                 
  Mentally  Ill,  next  came  before  committee.   Mr.  Malone                 
  explained that  Mr. Murphy  conducted an  evaluation of  the                 
  proposed settlement  on behalf  of the  Alaska Alliance  and                 
  that   findings   set   forth   in   September   19,   1994,                 
  correspondence (copy on  file) reflect  the position of  the                 
  statewide alliance.   Mr. Malone  noted he had  been closely                 
  involved in the mental  health issue through most of  all of                 
  the  proposed settlements.  He said he is now faced with the                 
  dilemma  of  two bodies  of  plaintiffs' attorneys  that are                 
  vigorously divided.   Reliance must  be placed on  something                 
  and someone.  For the majority  of the issues, that reliance                 
  rests  with  Judge Greene.   She  has  spoken both  well and                 
  clearly in her  58-page decision.  Mr. Malone  observed that                 
  issues  of  equity, fairness,  and  sufficient value  in the                 
  lands are for  the judge to determine.   He said he  is more                 
  concerned   by   future   public  policy   associated   with                 
  "delivering an  integrated and  comprehensive mental  health                 
  program."  While the  state has a comprehensive program,  it                 
  is certainly not  integrated.  The unspoken  focus contained                 
  within legislation (SB  65) commenced  several years ago  by                 
  Senator  Duncan  started  the  process  of  reestablishment,                 
  reorganization, the trust authority concept,  etc.  That, as                 
  well as statutory changes within the current settlement, are                 
  the largest steps taken, since statehood, toward integration                 
  of the mental health program as a public health issue.                       
                                                                               
  Mr. Murphy  stressed that  the proposal  now awaiting  final                 
  approval is  the fourth  attempt at  settlement.   He voiced                 
  doubt that there would  be a fifth, if the  present proposal                 
  is  not finalized.  He explained  that he carefully reviewed                 
  the  settlement, and he acknowledged that it is not perfect.                 
                                                                               
                                                                               
  Mr. Murphy concurred  in comments by Mr. Jessee and stressed                 
  that Judge Greene's decision is extremely well written.  The                 
  judge has  pointed out  what needs  to be  done to  complete                 
  settlement.    If that  is  accomplished, in  all likelihood                 
  final  approval will  be granted.   This represents  the one                 
  opportunity "to get done something  that will never get done                 
  if  we don't do it here . . . ."  Most of the parties are on                 
  board.                                                                       
                                                                               
  Speaking  to  claims  that  Mr.  Gottstein  and  Mr.  Walker                 
  represent ninety  percent of the  beneficiaries, Mr.  Murphy                 
  said that those claims are inaccurate.   He informed members                 
  that  the Juneau  Alliance for the  Mentally Ill  operates a                 
  program that serves approximately 100  consumers.  There was                 
  no  program  nine years  ago.   The  alliance now  has seven                 
  buildings in which the mentally ill are housed.                              
                                                                               
  End:      SFC-94, #94, Side 2                                                
  Begin:    SFC-94, #95, Side 1                                                
                                                                               
  Mr. Murphy voiced support for the settlement  but added that                 
  that is not  to say "there isn't tremendous fear  here."  It                 
  is almost  impossible for  consumers and  family members  to                 
  know whether the  settlement is good  or not.  Much  concern                 
  relates  to  the  disagreement  between  the two  groups  of                 
  attorneys  and an  overriding distrust  of the  legislature.                 
  Mr.  Murphy advised  that if  everyone  moves ahead  in good                 
  faith with an  honest intention to make the settlement work,                 
  it  will work.   This is the  last opportunity  to make that                 
  happen.  The  settlement is a  good one.   Mr. Murphy  urged                 
  support.   He acknowledged  that while  the Juneau  Alliance                 
  would also  like to have  the things embodied  in amendments                 
  proposed by Mr. Gottstein and Mr.  Walker, a deal is a deal.                 
  There is no time for renegotiation at this point.                            
                                                                               
  Mr. Murphy requested that the legislature make the necessary                 
  corrections  noted  by  Judge  Greene,  and he  pledged  his                 
  support to the  settlement.  He  voiced his belief that  the                 
  only  ones likely to  utilize the  December 15  deadline are                 
  those opposed  to the settlement.  He  voiced further belief                 
  that if the  legislature acts on pending  legislation, Judge                 
  Greene will approve the settlement,  and a subsequent appeal                 
  will fail.   The parties  will then have  a settlement  that                 
  will end mental health trust litigation.                                     
                                                                               
  FAIRBANKS                                                                    
                                                                               
  Co-chair  Pearce   advised  of  additional   testimony  from                 
  Fairbanks.                                                                   
                                                                               
  SUE SHERIF, representing her late father who would have been                 
  a  beneficiary  of  mental  health  litigation,  noted  that                 
  legislative dissolution  of the  mental health  trust was  a                 
  serious breach of  a public trust.  The  current legislature                 
                                                                               
                                                                               
  has an opportunity  to take significant  action to undo  the                 
  damage  done  in 1978  and  which  led to  protracted  legal                 
  actions and  negotiations.   The legislature  should restore                 
  the  trust   and  its   obligation  to   its  mentally   ill                 
  constituents by  amending the current settlement  to protect                 
  against future breaches  and to include  clearly identified,                 
  meaningful,  income-producing  lands  like  the coal  lands.                 
  This is the time to admit a state obligation to the mentally                 
  ill.    The  class  of  beneficiaries  may  seem  small  and                 
  otherwise preoccupied.  However,  mental illness, as defined                 
  by the court  in this case, has far reaching effects.  It is                 
  not exclusive to one area of the  state, one sort of family,                 
  or  one  particular  economic group.    It  is  in the  best                 
  interest of all, including the legislature, to "put teeth in                 
  the  settlement  by  amending  it  strongly to  reflect  the                 
  changes   offered   by   the   original  plaintiffs'   legal                 
  representatives."                                                            
                                                                               
  Ms. Sherif urged that members remember that the suit was not                 
  brought to damage "moms and  pops" or stifle development but                 
  simply  to  hold the  legislature  accountable for  what the                 
  courts have deemed was an improper act.                                      
                                                                               
  Co-chair   Pearce  called   for   questions.     None   were                 
  forthcoming.  She  then advised that  Mr. Al Aaron was  next                 
  scheduled to speak.   The Fairbanks teleconference moderator                 
  advised that Mr. Aaron had decided not to testify.   The Co-                 
  chair  asked  if additional  individuals  wished  to testify                 
  locally or via teleconference.   No additional testimony was                 
  presented.     Co-chair  Pearce   advised  that  Tom  Waldo,                 
  representing  public  interest intervenors,  was  present to                 
  answer  questions, if  members  wished to  raise  them.   No                 
  questions were addressed to Mr. Waldo.                                       
                                                                               
  BRUCE BOTELHO,  Attorney General,  Dept. of  Law; and  HARRY                 
  NOAH, Commissioner, Dept. of  Natural Resources, again  came                 
  before   committee.      Representative   Brown   referenced                 
  amendments presented by Mr. Walker  and Mr. Gottstein, asked                 
  for  the  administration's  views  on  the  amendments,  and                 
  questioned  whether  the  situation  would  provide  greater                 
  security if a true settlement,  including everyone, could be                 
  reached.  Commissioner Noah stressed that the purpose of the                 
  special session  and proposed  legislation is  to deal  with                 
  Judge Greene's concerns.  The judge  has stated that she can                 
  dismiss the  case without  all the parties  agreeing to  the                 
  settlement.  That is the current situation.                                  
                                                                               
  Legislation  now  before committee  deals  with the  judge's                 
  concerns.  The proposal  by Mr. Walker and Mr.  Gottstein is                 
  not what would be  considered a settlement proposal in  that                 
  it  is not specific  enough.   It is  much like  Chapter 66.                 
  Chapter  66  was  "a   process  to  settle  versus   a  true                 
  settlement."                                                                 
                                                                               
                                                                               
  Speaking to the value list, Commissioner Noah said that when                 
  parties went before Judge Greene, the  value of the list was                 
  $175 million.   In subsequent  correspondence to the  Senate                 
  President and the Speaker of the House, the value was listed                 
  at $75 million.   The number "tends to be going all over the                 
  place,  relative   to   these   specific   values."      The                 
  administration  has  attempted   to  address  each  of   Mr.                 
  Gottstein's concerns on the land list, and would  gladly sit                 
  down with him at  any time and "go through  those once again                 
  to try to explain  those to him."  The  Commissioner advised                 
  that  there  is a  difference  in  the way  the  parties are                 
  counting things and adding things up.  That partly has to do                 
  with "what's going on with the land list."                                   
                                                                               
  Addressing the issue  of the  coal lands, Commissioner  Noah                 
  noted  that they  have been  paid for  as part  of  the $200                 
  million in cash.   In terms of the value  of the settlement,                 
  one could add  the $1 million  in annual royalties from  the                 
  Usibelli coal lands.   That would simply be adding  value to                 
  the trust when the judge has not asked for additional value.                 
  That is not an issue at this time.  The judge has determined                 
  that  the  proposed  settlement  is   within  the  realm  of                 
  fairness, in terms of her approval.   While coal lands could                 
  be added, it is not clear what would be gained by "adding it                 
  to this list right now."                                                     
                                                                               
  Commissioner Noah explained that the administration does not                 
  disagree  with the contention that  surveys need to be done.                 
  He stressed that 75  percent of the lands have  already been                 
  surveyed.    Survey of  remaining  lands would  be extremely                 
  expensive.   The estimate  of approximately  $15 million  is                 
  accurate.  If the legislature is  willing to include the $15                 
  million, it would gladly be accepted by the department.  The                 
  Commissioner said that he was not  sure that inclusion would                 
  improve the chances of the judge dismissing the case at this                 
  point.   He added,  "I'm not sure  what your money  would be                 
  buying you."  As properties become available for disposal or                 
  a deal is  made on them, they will then have to be surveyed.                 
  But, that will  be part of  the interaction between DNR  and                 
  the trust  manager, on a parcel-by-parcel basis.   The lands                 
  could be  surveyed now and  never touched for  thirty years.                 
  The time and value of money is thus in question here.                        
                                                                               
  In his  closing remarks, Commissioner  Noah said  it is  not                 
  clear that proposals  offered by Mr. Gottstein are  going to                 
  "improve the deal as outlined by the judge."                                 
                                                                               
  ATTORNEY GENERAL  BOTELHO  noted  that  the  original  trust                 
  provided that moneys would be first applied to mental health                 
  programs, although not exclusively.   There was a breach  of                 
  the trust, and the supreme  court ultimately determined that                 
  the trust was to be reconstituted,  insofar as possible, but                 
  made no specific directive that any specific parcel  of land                 
  had to go back to the trust.  To the extent that there was a                 
                                                                               
                                                                               
  shortfall, the court said there had  to be a substitute fair                 
  market value.  The court also said the state was entitled to                 
  a  setoff.   The  directive  was  to the  superior  court to                 
  supervise reconstitution of  the trust.   That is  basically                 
  the function  that Judge  Greene has  served.   She has,  on                 
  several occasions, been presented with  issues to decide and                 
  has issued decisions.   One of  those decisions is that  not                 
  all parties--not even a majority--have to agree in order for                 
  her to grant  either preliminary or  final approval.  It  is                 
  somewhat ironic that  when she rendered that decision it was                 
  within the context of the state  being allied with those who                 
  are opposing the settlement.                                                 
                                                                               
  Since  the  decision  by  the   Alaska  Supreme  Court,  the                 
  legislature has tried, each year, to  solve the problem.  It                 
  is important to note  that this is not simply  a negotiation                 
  between  plaintiffs  and  the  state.     It  is  multiparty                 
  litigation.  It has required tradeoffs with all participants                 
  to attempt to  reach settlement.   Virtually every  proposal                 
  brought forward  by Mr.  Gottstein and  Mr. Walker,  at this                 
  time,  involves  issues they  specifically presented  to the                 
  court as a  basis for denial  of preliminary approval.   The                 
  court rejected each of those, with an explanation.                           
                                                                               
  Speaking to the  issue of coal  lands, the Attorney  General                 
  reiterated remarks by Commissioner Noah indicating that they                 
  were negotiated and paid for.   Trust principal and need for                 
  survey were discussed  with the court  at length.  Terms  in                 
  the settlement were  not lightly arrived  at.  Every one  of                 
  the  issues was heavily  debated, discussed,  disputed, etc.                 
  That was what allowed "us to reach the final  construction."                 
  The settlement was  presented to Judge Greene.  It was up to                 
  her to  make the first cut, and she  will make the final cut                 
  on  whether  this  is a  fair  settlement  with  a class  of                 
  plaintiffs  in the  case.   She  has  made that  preliminary                 
  determination and told us what it will take to "get the rest                 
  of the  way."   That is  what we  are dealing  with at  this                 
  point.  He added:                                                            
                                                                               
       For  us,   at  this  point,  to   accommodate  the                      
       additional   request  (in   part   it  is   giving                      
       additional consideration) is  less troubling to me                      
       than the fact that  it fails to take  into account                      
       that this is a multiparty settlement that has been                      
       reached with great  care.  And, what  is happening                      
       is an attempt to really add on more to a deal and,                      
       in essence, skew  the deal with other  parties who                      
       are not right now testifying in front of you about                      
       the deal that  they negotiated and what  they gave                      
       up to get what is in there.                                             
                                                                               
  The Attorney General  said that for  those reasons he  would                 
  not  recommend  that  any  of  the  proposed  amendments  be                 
  accepted  by  the  legislature.     He  cautioned  that  the                 
                                                                               
                                                                               
  amendments  are  not  "settlement  proposals"  made  to  the                 
  legislature.     Opposing  attorneys   have  not  said  that                 
  inclusion of  amendments would constitute a  settlement they                 
  would sign.  They have said, "If  you buy off on this," they                 
  will "recommend"  a settlement to their clients.  That means                 
  that:                                                                        
                                                                               
       You cannot  walk out of  here, even if  you accept                      
       every  one of their  recommendations, with a deal.                      
       The only commitment made is  to recommend, then, a                      
       settlement with the state.                                              
                                                                               
  Representative Brown voiced her understanding that the issue                 
  of  the  missing  parcels was  not  part  of  Judge Greene's                 
  considerations.    She then  asked if  that  is viewed  as a                 
  significant issue  and voiced  lack of  understanding as  to                 
  what  has   become  of  parcels  causing   the  discrepancy.                 
  Commissioner Noah responded:                                                 
                                                                               
       I do  not view  these as  missing parcels  like we                      
       forgot about them or something.   They were simply                      
       not part of the negotiation.  The Healy and Beluga                      
       leases  were part of  the negotiation, and clearly                      
       it was thought out by us.  I think  there are some                      
       ag[ricultural]  parcels in  here,  also.   I  mean                      
       these are all  things that were considered  by us,                      
       as far as I'm concerned, in the negotiations.                           
                                                                               
  He stressed that, as the Judge said, "You give a little, and                 
  you get a little."   Everybody gave and everybody  got some.                 
  The Commissioner explained that  negotiations, over a period                 
  of time,  produced a list--a  settlement--that Mr. Gottstein                 
  and Mr.  Walker did  not sign  on to.   But,  settlement was                 
  achieved with a whole group of  other people.  These parcels                 
  are  not missing as far as  the administration is concerned.                 
  The deal is  the April 28,  1994, land list the  legislature                 
  approved when  it passed  HB 201,  as amended by  provisions                 
  within SB 382  and the September  23, 1994, addendum to  the                 
  April  28  list.   Commissioner  Noah acknowledged  that Mr.                 
  Gottstein had pointed out approximately 17 parcels that were                 
  overlooked and have now been included in the addendum.  When                 
  raising issues regarding  leases and other things,  however,                 
  those  parcels  were  not forgotten.    There  was never  an                 
  agreement to "put  them in."   The amendments sought by  Mr.                 
  Gottstein constitute "renegotiating the deal."                               
                                                                               
  Representative  Brown asked  if  the  situation had  changed                 
  since  the  judge  considered  the  settlement  and  granted                 
  preliminary approval.  Commissioner Noah  answered, "only in                 
  that   we're   making   these  corrections,   here."     The                 
  Representative acknowledged that corrections were being made                 
  but  referenced  assertions  by opposing  attorneys  that  a                 
  significant  amount   of  value  has   been  removed   since                 
  preliminary  approval.    Commissioner Noah  said  that  the                 
                                                                               
                                                                               
  administration cannot remove  property from  the list.   The                 
  "list is something  that the legislature  put in as part  of                 
  the bill."  The reason the administration had to come to the                 
  legislature for the  Salcha exchange was to  "get permission                 
  to exchange those  lands."  The  situation is not such  that                 
  the administration  can take  out parcels  and replace  them                 
  with others.   Modifications contained within the  September                 
  23 addendum  are part of  the technical  corrections to  the                 
  land list.  Attorney General  Botelho suggested that perhaps                 
  the question  is, "What  are these  missing parcels  missing                 
  from?"     Commissioner   Noah   acknowledged  a   lack   of                 
  understanding  as to how  they were derived.   He reiterated                 
  that  Mr.  Gottstein's amendments  represent  an attempt  to                 
  "renegotiate the deal."                                                      
                                                                               
  Senator   Little   asked    if   representatives   of    the                 
  administration concur with settling attorneys that an appeal                 
  of the  settlement would  be denied  by the  courts, if  the                 
  legislature passes  the pending  bills.   The response  was,                 
  "Emphatically so!  Yes."                                                     
                                                                               
  Senator  Kelly expressed  his hope that  the court  does not                 
  think that  "everybody in the  legislature buys off  on this                 
  settlement,  either."   He  said he  had  problems with  the                 
  settlement and was only voting for it because, after working                 
  on the issue  for many  years, it represents  and option  to                 
  provide finality to the process.   He attested to the number                 
  of   Governors,   Commissioners,   Attorneys  General,   and                 
  legislators that  have attempted  to deal  with the  problem                 
  over  a   substantial  number   of  years.     The   Senator                 
  acknowledged  that  the  settlement  is  not  perfect.    He                 
  expressed particular  concern over  the power  of the  trust                 
  authority and lack  of public  accountability.  He  stressed                 
  that   he   would,   nevertheless,   support  the   proposed                 
  legislation because  it presents  opportunity for  finality,                 
  and it is time  to move on to  other issues.    The Attorney                 
  General   acknowledged   the   potential   for   conclusion,                 
  reiterating that preliminary approval  has never before been                 
  granted to a settlement proposal.                                            
                                                                               
  Co-chair Frank asked  that the administration  again explain                 
  need for revision  of the deadline contained  within HB 201.                 
  Commissioner Noah  told members  that the administration  is                 
  proposing  that  the  December  15  date remain  in  effect.                 
  Changes provide that  once Judge Greene makes  her decision,                 
  the deal goes  into effect and  remains in effect until  the                 
  supreme court overturns her decision.   If the supreme court                 
  reverses the decision, the $200 million would, at that time,                 
  return to the general fund, and the trust authority would be                 
  dissolved. Co-chair  Frank asked  how that  differs from  HB
  201.   Commissioner  Noah advised  that earlier  legislation                 
  said that by  December 15  or the forty-five-day  extension,                 
  the case had to be dismissed with no appeals taken.  That is                 
  the  difference.    The administration  assumes  that  those                 
                                                                               
                                                                               
  opposed to settlement will appeal.                                           
                                                                               
  Co-chair  Frank inquired  concerning  what necessitated  the                 
  above-noted  change.    Commissioner  Noah  said  that   the                 
  administration was  initially hopeful that the  matter could                 
  get to the  point where everyone  would settle.  He  advised                 
  that  he  was not  now  sure  that point  could  be reached.                 
  Further,  the  administration  knows more  now  than  it did                 
  before in terms of how the judge would lay out her schedule.                 
  A  schedule  that calls  for  her  to make  her  decision by                 
  November 15  has "tied  our hands  more than  we thought  it                 
  might."    Attorney  General Botelho  added  that  since the                 
  settlement becomes effective upon  dismissal, private third-                 
  party land holders  would be free  at an earlier date  under                 
  the change.  Under HB 201,  their property would continue to                 
  be encumbered until all appeals had been exhausted.                          
                                                                               
  Responding to  an additional question  from Co-chair  Frank,                 
  concerning  the  length  of  time  involved in  appeal,  Mr.                 
  Botelho noted the 30-day period  within which appeal must be                 
  made.  He acknowledged that  the maximum window would  "rest                 
  with any who chose to take the  appeal."  He then voiced his                 
  belief   that   the   Alaska   Supreme   Court  would   move                 
  expeditiously and  suggested a  three to  six-month process.                 
  He further noted  opportunity for  a party  to petition  the                 
  U.S. Supreme Court.   A process  of several months would  be                 
  involved in the  court's decision  as to whether  or not  it                 
  wants  to hear  the  case.     Mr.  Botelho  advised of  his                 
  judgment that it  is highly unlikely the  U.S. Supreme Court                 
  would take the case.  Attorneys for  plaintiffs opposing the                 
  settlement have also gone on record saying that it is highly                 
  unlikely it would be taken.                                                  
                                                                               
  Senator  Rieger  asked if  passage  of amendments  contained                 
  within SB  382 and 383  would result in  need to  reword any                 
  part of the settlement agreement.   After brief consultation                 
  with Mr. Koester, the Attorney General responded, "We do not                 
  believe that will be necessary."                                             
                                                                               
  Senator  Rieger  referenced   language  in  the   settlement                 
  agreement requiring parties  to use  best efforts to  obtain                 
  passage of legislation, if  it is needed.  He  then asked if                 
  the  wording  represents  the  prevailing  standard  and  if                 
  anything  within  the  agreement  binds  the legislature  to                 
  passage of legislation.   Attorney General Botelho answered:                 
  "There is not.  The best  efforts are those, Madam Chairman,                 
  that are being applied today."                                               
                                                                               
  Representative Martin asked  if the  administration had  the                 
  opportunity to tell the judge that if settlement is refused,                 
  some provisions, such as the  $200 million cash payment, may                 
  never be reestablished.  The  Attorney General observed that                 
  Judge Greene is "thoroughly familiar with how House Bill 201                 
  works."   She  is  also  very  sensitized  to  the  existing                 
                                                                               
                                                                               
  political environment.   Most, if not all, parties share the                 
  view expressed by  Mr. Murphy when  he commented that it  is                 
  unlikely there would be a fifth settlement.                                  
                                                                               
                                                                               
  Representative Parnell  inquired concerning the  standard of                 
  appeal that  might be  used by  the supreme  court on  Judge                 
  Greene's  decision.   Attorney  Botelho  responded,  "It  is                 
  basically  a   clearly   erroneous  standard."     He   than                 
  acknowledged  that  two  standards would  be  applied.   The                 
  supreme  court   will  sit  on   issues  of  law   and  will                 
  independently review those  issues as  to what the  enabling                 
  act means, to the extent that it  is directly applied.  As a                 
  question of law, there  is no particular deference given  as                 
  to factual issues.  The valuation issue, as an example, will                 
  be  one  that  great  deference,  in terms  of  the  clearly                 
  erroneous standard, would be applied.                                        
                                                                               
  Representative Parnell next asked if appealing parties could                 
  move for injunction to stop the settlement process, and what                 
  standard of review  might be  used in that  situation.   The                 
  Attorney General advised that an appealing party would first                 
  ask the superior court for a stay of the dismissal.  He then                 
  voiced his belief that if  dismissal is granted, there would                 
  be no  stay.   The next remedy  is to  petition the  supreme                 
  court for  a stay.  Mr.  Botelho voiced his  belief that the                 
  likelihood of a stay  is very low.   The standard itself  is                 
  "an  injunctive  standard"--irreparable  injury  to a  party                 
  caused by the  other and  no other adequate  remedy at  law.                 
  The remedy at law  is for the court to  ultimately determine                 
  that the reconstitution is invalid.                                          
                                                                               
  Senator  Rieger asked  if there  is a  remedy for  contracts                 
  entered by the trust authority that  are clearly a violation                 
  of fiduciary responsibility.   The Attorney General  advised                 
  that any beneficiary  who believes  the trust authority  has                 
  violated its responsibility will have recourse in the courts                 
  to challenge trust authority actions.                                        
                                                                               
  Representative Therriault acknowledged  Judge Greene's  role                 
  as the impartial attorney making a decision on behalf of the                 
  beneficiaries and asked if she is the original judge to whom                 
  the Alaska Supreme Court remanded the case for consideration                 
  and reconstitution of the trust.  The Attorney  General said                 
  that she was not  the original judge.  She  initially became                 
  involved in 1986.   Representative Therriault then  asked if                 
  anyone else, who is  not committed to one party  of another,                 
  is  as  well  versed  as  she  is  in  the  legal  arguments                 
  surrounding  the  case.    The  Attorney  General  responded                 
  negatively.                                                                  
                                                                               
  Representative   Larson   referenced  a   newspaper  article                 
  relating to the  cost of  the current special  session.   He                 
  then referenced past  information provided  by the Dept.  of                 
                                                                               
                                                                               
  Law  concerning  the  cumulative   cost  of  mental   health                 
  litigation and asked  that figures be updated.   He stressed                 
  the importance of public awareness that although the special                 
  session costs money, in  the long run it will  probably save                 
  money that can both  be used for mental health  purposes and                 
  remain  in  the  general  fund.   Attorney  General  Botelho                 
  advised that,  as of  September 13,  expenditures for  legal                 
  costs total  $8,581,878.93.  The  summary shows  a total  of                 
  $3,064,380.63, to date, for this fiscal year alone.                          
                                                                               
  Co-chair  Frank  noted  that  a  reading of  Judge  Greene's                 
  decision does not  deal at length  with the issue of  value.                 
  He then  voiced concern  that the  judge might  subsequently                 
  determine  that  value  is a  questionable  area.   Attorney                 
  General Botelho directed  attention to  pages 50 through  56                 
  and Appendix A--an analysis of the various positions.                        
                                                                               
  Representative Martin asked  if final approval is an  all or                 
  nothing matter.  Could the judge approve 90 or 80 percent of                 
  the  settlement package?  Attorney General Botelho explained                 
  that the judge has made clear that it is not the role of the                 
  court to negotiate  or participate in  the negotiation of  a                 
  settlement.  What  she may do,  and has done in  preliminary                 
  approval,  is make  certain suggestions  about how  concerns                 
  could  be  addressed.   The court  will take  the settlement                 
  package  presented   to  it  and  apply   appropriate  legal                 
  standards--the fairness test.   It is either up or down.  In                 
  either  case,  the   parties  expect   a  written   decision                 
  explaining the reasoning for  either approving or  rejecting                 
  the  settlement.    In  late  December  of 1993,  the  judge                 
  provided extensive memoranda explaining why she rejected the                 
  Chapter 66 settlement.                                                       
                                                                               
  Co-chair Pearce  called for  further questions.   None  were                 
  forthcoming.  She then voiced her intent to recess the joint                 
  meeting to the  call of the  chairs of the individual  House                 
  and Senate Finance Committees and  announced that the Senate                 
  Finance  Committee meeting  would  convene in  approximately                 
  five minutes to "decide what our time frame is going to be."                 
  Representative Larson polled House Finance Committee members                 
  on  their preference  for  a meeting  time.   House  Finance                 
  members elected to meet at 8:30 a.m., Tuesday, September 27,                 
  1994.                                                                        
                                                                               
  RECESS                                                                       
                                                                               
  The Joint  House and  Senate Finance  Committee meeting  was                 
  recessed at approximately 8:10 p.m.                                          
                                                                               

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