Number 075 HB 357 - Remove Liens On Mental Health Land REPRESENTATIVE JEANNETTE JAMES, PRIME SPONSOR, stated she filed HB 357 because at the beginning of the session, there was no indication that the Mental Health Lands issue would be solved and she felt it was very important that the more than 3,000 Moms and Pops be freed from the situation they have been stuck in for years, having the lis pendens on their property. Subsequently, she put the bill on hold because the Department of Natural Resources (DNR) had told her they had a solution. Now, nearly three months later, she is fearful that the presentation made by the department to settle the Mental Health Lands issue may or may not be passed. Therefore, she requested a hearing on HB 357 so it could be passed out, moved to Finance, and join HB 201, which is the substitute presented by the department. REPRESENTATIVE JAMES said while HB 357 only addresses a small portion of the Mental Health Lands litigation, there are more than 3,000 people affected and a solution must be found so they are not held hostage any longer. The committee substitute for HB 201, if passed, will accomplish the same goal as HB 357 but HB 201 has many other things in it which may hold up its progress. She believed that HB 357 will at least address the situation with the Moms and Pops. Number 105 REPRESENTATIVE DAVIES commented Judge Greene's statements in the past suggest this approach will be, in her words, a cruel hoax and would not preclude somebody on behalf of the mental health program from going in and taking one of the third party purchasers to court individually. He did not see how the passage of HB 357 will prevent that circumstance. REPRESENTATIVE JAMES responded the court order resulted because in trying to free the Moms and Pops, there was no identification of those lands sold and no provision made for payment of those lands, except that the settlement would eventually accomplish that. She stated HB 357 is different in that it specifically puts the state of Alaska on record to committing money or additional land to cover the costs of the third party lands. The original court order said that the state would reconstitute the Mental Health Lands Trust, except for lands which were sold, and those lands would be compensated at fair market value. She stressed HB 357 provides that fair market value be paid to the Mental Health Lands Trust for the Moms and Pops. Therefore, the third party purchasers will be held harmless because the state is promising to meet that commitment. Number 160 JIM GOTTSTEIN, REPRESENTATIVE, ALASKA MENTAL HEALTH ASSOCIATION, testified via teleconference and stated passing HB 357 will not have much effect. However, he felt the bill has ideas which can be used to solve specific problems with the third party purchasers. He said the 1978 legislation, which the Supreme Court declared invalid in 1985, did contain a promise to pay for the land taken. The Supreme Court did not even consider that promise to pay worthy of note, since nothing was ever paid regardless that the statute said the state intended to pay, and that statute was declared invalid. MR. GOTTSTEIN stated the Supreme Court has been clear that there are two ways to resolve the Mental Health Lands Trust litigation: 1) a settlement which both sides bring to the court for its consideration and approval if fair; and 2) litigate the issue under the Supreme Court's decision in 1985. Therefore, the legislature cannot just pass a bill and fix it. MR. GOTTSTEIN said the basic structure of HB 357 is to trade out the private third party purchasers as a separate piece. He noted the Mental Health Association has been proposing that idea for some time. He added the work done over the past two and one-half years to identify land, establish values, etc., makes it very easy to take this specific part of the problem and fix it this year. He felt an exchange package can be developed and enacted. That kind of suggestion has been made by the Mental Health Association to the state, but the idea has not been pushed because the Administration and the legislature have expressed a great desire to solve that particular problem. Number 213 MR. GOTTSTEIN stated the Administration has wanted to develop a global settlement solution so there has been no desire to review this particular piece of the pie. He also felt the committee substitute for HB 201 is a step backwards as well. REPRESENTATIVE JAMES said under discussion is approximately 50,000 acres and over 3,000 people who are being held in a trial type situation. She thought there will be a benefit to the state as a whole, to the 3,000 people, and to the Mental Health community if the third party purchasers problem can be eliminated, so the rest of the problem can be solved. MR. GOTTSTEIN agreed. He felt the idea of HB 357 is good. However, there cannot just be an intent to compensate, there has to be an actual compensation provision to make the bill work. He said all of the pieces to accomplish that are in place but there is a need to determine what that compensation should be and then do it. REPRESENTATIVE JAMES asked if part of HB 357 indicates that the attorney general's office will go to court to dissolve the injunction, which will involve a settlement with the third parties. MR. GOTTSTEIN responded the attorney general's office has tried to get around injunctions on other court rulings many times and has even asked the Alaska Supreme Court to dissolve the injunction or grant another release and has been unsuccessful. He said if an actual compensation package is worked out for the third party purchasers, the lis pendens will be released with respect to those parcels and the preliminary injunction will be canceled. He felt the key is not just an expression of intent to compensate, but there has to be an actual compensation. Number 271 REPRESENTATIVE DAVIES commented in reading Judge Greene's decision, it is obvious that she is very skeptical of any promises made by the legislature to resolve this issue. He asked if the third party purchasers are to be separated out and actually compensated by finding suitable substitute lands, will that type of deal withstand Judge Greene's scrutiny and will she agree to solving the issue in two steps. MR. GOTTSTEIN replied he felt she would. He stated if all of the plaintiffs side agree on this arrangement, this kind of release will fly through the court and can be accomplished very quickly. He felt the Moms and Pops issue is the easiest part of the overall issue to fix because there is not a lot of acreage involved and the land has already been identified. Number 300 REPRESENTATIVE HUDSON asked if most of the parcels being discussed are held by municipalities. REPRESENTATIVE JAMES stated many of the parcels are held by municipalities. She said many of the Moms and Pops in her district have actually purchased the land from the state on a state subdivision, have paid for the land, and have title to it, subject to the lis pendens. She noted there are many who are still paying to the state with the lis pendens and there are some lands which have been transferred to municipalities, subdivided, sold and are mortgaged to banking institutions. She felt the problem needs to be solved for these people who are entirely innocent and cannot be held hostage any longer, either by the plaintiffs or the state of Alaska. Number 339 REPRESENTATIVE HUDSON clarified every parcel has had a value and in some cases, the land has already been paid for. He assumed there has been a total value established for the entire package, a value which has been lost and needs to be made up. MR. GOTTSTEIN said that is correct and added that most of the work, in terms of the value, has already been done. He stated most of the work, in terms of the value of the replacement lands, has also been completed. He felt there are no significant disagreements between the state and the Mental Health Association in regard to the value of the lands. REPRESENTATIVE GREEN said the fiscal note analysis states that although the plaintiffs will most likely challenge the elimination of the encumbrances, adoption of this bill may help advance the state's cause in the overall mental health trust litigation. He noted there have been differences amongst the plaintiffs as well as the other side. He wondered if the other attorneys for the plaintiffs will think HB 357 is a good step as this step may indicate an interruption of the delicate balance which is being worked out between DNR, the plaintiffs, and the Mental Health Trust. Number 385 DAVID WALKER, ATTORNEY FOR SETTLING PLAINTIFFS, testified via teleconference and stated although he cannot speak for all of the plaintiffs or guarantee their reactions, he felt the reaction will be positive because in talking with them, they indicated support for this idea. He said the key issue with these third party purchasers is the fact they are being used as leverage. He stated settling this part of the issue will help. He felt all the plaintiffs will support the idea in HB 357. He stated there is a need to go forward with a discreet (indiscernible) package (inaudible) state lands into the trust in exchange for the private third party purchaser lands. If that is accomplished, then the lis pendens and the injunction will be released in respect to those parcels. He felt the court will approve this idea. Number 420 REPRESENTATIVE PAT CARNEY asked how HB 357 will be accomplished. He assumed there will be a land exchange and if so, asked how that will affect HB 201. MR. WALKER stated this will be a discreet package exchanging these lands for other lands and the third party purchaser portion will be eliminated from HB 201. Number 437 CHAIRMAN WILLIAMS thought the courts had said they will not accept a piecemeal solution. MR. WALKER responded the court's greatest concerns about this issue were not only the concerns regarding the rights of the private third party purchasers but also a deep concern over the rights of the trust. With HB 357, those concerns will be taken care of because it will not complicate things for the court and it will clearly be something that the parties can come forward and say the trust is not being harmed, because even though the trust is releasing lands which are claimed by private third party purchasers, they are getting other lands in exchange. He felt the court will not insist on a full resolution of all issues at once. REPRESENTATIVE CARNEY clarified it is the Administration's position that if a definite settlement on Chapter 66 is not reached, all of that law is null and void, resulting in no Mental Health Trust authority in existence. MR. WALKER said that is correct. REPRESENTATIVE CARNEY asked if this land exchange is made and that falls through, how will HB 357 work. MR. WALKER responded if there is a failure ultimately and there is no Mental Health Trust authority, this property will be put in the Mental Health Trust Corpus. Therefore, there still will be a trust. There will be arguments about how that trust will be managed and what constitutes proper stewardship of it. There will be an inclusion of this land into the body of the Corpus of that trust and in exchange for release of the claims against the private third party purchasers. MR. GOTTSTEIN added if there is a trust, a trustee is needed although there may not be an exact trust authority. One of the issues in the litigation is what the obligation of the state is in terms of acting like a trustee. He said the key point is that it is possible to carve this portion out, replace these encumbered lands with unencumbered lands in the trust and then however those lands get resolved in the case will apply to these new lands. REPRESENTATIVE DAVIES felt there is some question whether or not the courts will accept HB 357, but having read Judge Greene's opinions several times, he said there is a reasonable chance the court will allow HB 357 to go forward, as it only involves 10 percent of the disputed lands and will have a concrete exchange included, if amended. He thought if a partial settlement is presented, which both sides agree to, the third party purchasers could be taken off the hook. He suggested that Representative James bring back a committee substitute which includes a specific land exchange. CHAIRMAN WILLIAMS stated in the interest of time, since HB 357 has to go to the House Judiciary and Finance Committees, perhaps the bill could be amended in one of those committees. Number 536 REPRESENTATIVE JAMES said she is willing to amend the bill in one of those committees, if the bill can be moved out of this committee. JERRY GALLAGHER, LEGISLATIVE LIAISON, DEPARTMENT OF NATURAL RESOURCES, reminded committee members that HB 201 solves the broad range of problems. The department has no objection to HB 357 moving on, but believes the legislature's effort should be geared toward the entire problem because it is a large problem. He said the issue of a lands list is very complicated and the department has promised the House Finance Committee they will have a list of proposed substitute lands by next Monday. That list will be beyond what is necessary for the Moms and Pops exchange. REPRESENTATIVE DAVIES said Mr. Gottstein has indicated that a noncontroversial package can be put together and a settlement be reached, which is consistent with the discussions he has had with a number of people interested in the litigation. He added that the problem with the 400,000 acres that the state is proposing is there are some controversial lands included but it may be easy to get up to 200,000 acres. He felt if that is true, 50,000 acres can be found and an agreement can be reached. MR. GALLAGHER stated everyone has sympathy for the Moms and Pops because they are in a very difficult situation. He cannot answer the question of whether or not it will be easy to accomplish HB 357. He said his concern is that taking the easy lands and allocating them to this one group, the residual issues might become that much more difficult to solve. REPRESENTATIVE JAMES agreed that an effort needs to be made to solve the entire issue. She said her intent in moving HB 357 forward is to not close out an option--if the big issue is not resolved, HB 357 is an option to get through the legislature this year. She felt the Moms and Pops have been held hostage and there has been no real intense desire on the part of the plaintiffs or the state to get the Moms and Pops out before the entire issue is resolved. She stressed the release could have been done three years ago if the intent was really to do that. She noted that the agreement is probably going to involve land more valuable than what the third party purchasers' land is worth but it is a price which must be paid to get these people free. She is willing to let HB 357 sit in the House Finance Committee and push HB 201 on, but if she sees at the last minute that HB 201 is not going to pass, she wants HB 357 to pass, to ensure these people are taken care of. Number 658 MR. WALKER emphasized the plaintiffs are in support of solving the problem and assisting in this exchange but in reading HB 357, there are many statements contained in the bill which he opposes. He does not feel HB 357 sets the tone required to accomplish the settlement of this part of the issue. He said the plaintiffs are continuing to work on the resolution of the entire issue. REPRESENTATIVE GREEN expressed continued concern about HB 357 jeopardizing the resolving of the entire Mental Health Lands issue. TAPE #94-47, SIDE A Number 000 REPRESENTATIVE HUDSON felt the final solution on HB 357 will rest with the final committee of consideration. He said whether or not HB 357 will be able to ride on its own merits or whether or not it will upset the ultimate state's negotiations on the total package is beyond this committee. REPRESENTATIVE HUDSON made a MOTION to MOVE HB 357 with accompanying zero fiscal notes and a letter of transmittal indicating that the bill needs amending, out of committee with INDIVIDUAL RECOMMENDATIONS. REPRESENTATIVE FINKELSTEIN said the bill, as written, does not meet the legislature's obligation to the Mental Health Trust and felt HB 357 will be another empty promise. Therefore, he cannot support the bill. REPRESENTATIVE DAVIES wondered if the motion to move and the attached recommendation for amendment could be made more specific. He would feel more comfortable if there were some reference in the needs amending statement which refers to the issue of needing specific language for the land exchange. He felt if HB 357 does not contain a land exchange provision, it will be an empty promise and he could not support it either. He would agree to pass HB 357 out of committee if a recommendation be made that in the transit to the next committee that kind of CS be brought forward. CHAIRMAN WILLIAMS said the sponsor wants the bill to move and will amend it. Number 054 REPRESENTATIVE GREEN expressed concern about the zero fiscal note analysis stating "most likely will challenge" and "funds are available in existing mental health lands budget." He wondered if there actually will be a zero fiscal note. MR. GALLAGHER responded the fiscal note in committee members folders is from the Department of Law which he cannot speak to. He said DNR is preparing a zero fiscal note, because there is funding in effect currently for the Chapter 66 settlement, which includes the conveyance of land. HB 357 will not require additional funding. REPRESENTATIVE GREEN felt if HB 357 is going to cost money, the committee should know that. REPRESENTATIVE HUDSON said the reason he cannot offer a specific amendment is because he does not know what it should be. He felt HB 357 is a fall back position which will have to be weighed in the overall scheme of things as it moves on to House Finance where it will join HB 201. He stated when HB 357 gets to that point, the necessary specific amendments will be attached or it will never pass on the floor. He stressed he would never vote for HB 357 in its current form. REPRESENTATIVE DAVIES stated there needs to be a recognition that the land exchange is a fundamental problem with the bill as it is currently drafted. REPRESENTATIVE JAMES said she will be happy to put down on record that the recommendation of the committee is that instead of a promise to exchange, the language in the bill will actually require a land exchange. REPRESENTATIVE HUDSON said the letter of transmittal will state that the bill is transferred with a notation that it requires amending in the language concerning the land exchange provision. CHAIRMAN WILLIAMS asked if there were any objections to the motion. Hearing none, the MOTION PASSED. CHAIRMAN WILLIAMS asked what the committee's wishes are in regard to the confirmation hearings for the ten Governor's appointees which have been referred to the committee. REPRESENTATIVE DAVIES asked if all of the resumes could be submitted to committee members for review before the next committee meeting. ANNOUNCEMENTS CHAIRMAN WILLIAMS announced the committee will meet Friday, April 8 at 8:15 a.m. to hear SCR 13 and SCR 16. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 10:00 a.m.