SB 67 - MENTAL HEALTH TRUST AMENDMENTS An Act amending provisions of ch. 66, SLA 1991, that relate to reconstitution of the corpus of the mental health trust and to the manner of enforcement of the obligation to compensate the trust; and providing for an effective date. Vice-Chairman Jacko directed that CSSB 67 (Fin) be brought on for discussion. BRUCE BOTELHO, Attorney General, Dept. of Law; and HARRY NOAH, Commissioner, Dept. of Natural Resources, came before committee. Commissioner Noah directed attention to the land list (copy appended to these minutes as Attachment A) associated with reconstruction of the mental health trust. The Attorney General provided a recap of the current proposal under consideration by parties to the litigation. He referenced a handout (copy appended as Attachment B) and noted specifically the schedule of events on page 3. Changes embodied within SB 67 are intended to bring closure to the mental health controversy through either resolution or settlement. Settlement involves agreement of all parties to the litigation. Resolution (a legislative fix) presupposes that not all parties will agree. SB 67 reconstitutes the trust via three basic components: 1. Restoration, to the extent possible, of original mental health lands to the trust. 2. Substitution of additional lands to the trust to make up the difference between the original 1 million acre trust and lands that are restored. 3. Cash payment reflecting the fair market value of lands that have been sold. If fewer than all parties agree to the settlement, the bill would provide cash, substitute lands, and restoration. The state retains the ability to set off, as the Supreme Court in the Weiss decision directed was possible, the $1.3 billion the legislature has appropriated for mental health programs since 1978. That means the state would continue to litigate the question of whether the state has fully satisfied the obligation of reconstituting the trust. Further, everything done with regard to Ch. 48 and Ch. 66 would vanish, and the state would no longer set aside 6% of its general fund receipts for mental health programs. If all parties agree, the cash, substitute lands, and restoration of original mental health trust lands become part of the bargain as well as benefits derived from the trust authority embodied in Ch. 66. That authority allows the mental health community to make recommendations that are "for the most part binding on the Governor and the legislature with respect to earnings." Additional program improvements are embodied in Ch. 66, and a trust fund, administered by the authority, would be established. If SB 67 is enacted, the state expects to "walk away from the mental health controversy now and forever." Commissioner Noah directed attention to page 4 of the second handout (Attachment B) and noted assumptions used in reconstruction of the mental health lands trust. He then directed attention to the first handout (Attachment A) and explained that land is listed by district. He cautioned that the handout was rapidly compiled and directed attention to associated maps and noted inaccuracies such as designation of land within the Pt. MacKenzie agricultural area as original mental health trust land when the intent is for the subsurface estate only to return to the trust. The surface estate falls within the "sold" lands category. Commission Noah voiced his anticipation that, as part of ongoing negotiations, the land list may be reduced to accommodate concerns the department was not aware of when the list was compiled. Commissioner Noah next recited assumptions used in reconstruction of the mental health lands trust as set forth on page 4 of the second handout (Attachment B). He stressed that the $1.3 billion set-off has not been used in the present proposal. In discussions of value, the $1.3 billion would be available to the court to deduct from claims that the trust has not been adequately compensated. Directing attention to page 5 of Attachment B, Commissioner Noah explained that of the original 1 million acre trust, 466,180 acres will return while 530,865 acres are not available for return. In addition, approximately 98,398 acres of subsurface only land are available for return. Mental health lawyers initially identified 525,000 acres they felt were suitable as potential substitute lands. DNR review and public comments pared the list to 356,884 acres. An additional 127,037 acres of subsurface only values have also been identified that could be returned to the trust through substitute lands. The final tally evidences total estate lands of 826,364 acres, consisting of 446,180 acr/es of original land and 360,184 acres of replacement land. Split estate lands total 225,435 acres, comprised of 98,398 acres of original lands and 127,037 acres of replacement land. Commissioner Noah next directed attention to large maps of original lands that would and would not return to trust as well as proposed substitute lands. Subsurface estate lands are distinguished as either mineral and/or hydrocarbon lands. Hydrocarbon only lands are associated with the original mental health trust. Discussion followed between Commissioner Noah and Senator Jacko regarding subsurface rights. The Commissioner explained that the subsurface owner would have to secure approval from the surface owner to come on to the lands and disturb them. Senator Rieger requested detailed information on legislatively designated areas. He then directed attention to the initial handout (Attachment A) and inquired concerning the status of Telephone Hill in Juneau, Commissioner Noah explained that the City and Borough of Juneau has spent considerable sums securing the site for a new state office building. Municipalities all had concerns regarding certain parcels. Consideration was given to instances where municipalities had expended considerable sums "over and above just having vacant land . . . ." The Commissioner then highlighted the subport area in Juneau which he described as under utilized because the water front property is only used for storage. Since there is great potential for higher use of this valuable property, it was designated for inclusion within the trust. In response to a question from Senator Sharp concerning state lands in the area of Circle Hot Springs, Commissioner Noah explained that land listed on Attachment A reflects more controversial parcels. Great amounts of land are not listed. Commissioner Noah next spoke to the status of negotiations. He attested to discussions in "tremendous detail," over the past six to seven weeks, in an attempt to reach a basic agreement everyone could support. He then voiced his belief that "We're pretty close on the land list," if we could agree on the money. If the current situation unravels, it will be because of the amount of money requested or control over mental health budgets. Commissioner Noah acknowledged that he was less optimistic a true settlement could be reached because of the number of individuals and groups involved in the issue. Senator Rieger inquired concerning the type of budgetary control sought by the mental health community. Commissioner Noah explained that the trust authority would like to have control over both the trust fund and general fund dollars for mental health. The authority would like to tell the legislature how the money should be spent. If the Governor or legislature deviates from that plan, a finding would have to be rendered detailing why another course was taken. Senator Rieger asked if the authority also wants control of land management. Commissioner Noah responded affirmatively. Senator Kelly asked if the trust authority is well established. Attorney General Bruce Botelho explained that it does not exist at the present time. It is embodied within Ch. 66 which has not yet become effective due to lack of approval of the underlying settlement. SB 67 would set up the three-member board. Board membership is dictated by professional qualifications and recommendations from constituents in the mental health community. In function it would be similar to the permanent fund board. Commissioner Noah described the state approach which calls for DNR to act as the "hands and feet" for the group in terms of land management. The board would ultimately make the decisions. Moneys would be invested with the permanent fund corporation. Commissioner Noah observed that while there are advantages to establishment of the trust authority, the mental health enabling act did not require development of such an authority. Co-chair Frank directed that the meeting be briefly recessed prior to proceeding with remaining agenda items. RECESS - 9:35 A.M. RECONVENE - 9:50 A.M.