HOUSE FINANCE COMMITTEE April 30, 1994 10:10 a.m. TAPE HFC 94-146, Side 2, #000 - end. TAPE HFC 94-147, Side 1, #000 - end. TAPE HFC 94-147, Side 2, #000 - end. TAPE HFC 94-148, Side 1, #000 - 547. CALL TO ORDER Co-Chair Larson called the House Finance Committee to order at 10:10 a.m. PRESENT Co-Chair Larson Co-Chair MacLean Representative Grussendorf Vice-Chair Hanley Representative Martin Representative Brown Representative Parnell Representative Foster Representative Therriault Representatives Hoffman and Navarre were not present for the meeting. ALSO PRESENT Bruce Bothelo, Attorney General, Department of Law; Tom Koester, Independent Counsel, Department of Law; Harry Noah, Commissioner, Department of Natural Resources; Jeff Jessee, Advocacy Beneficiaries of Alaska, Anchorage; David Walker, Attorney, Representing Weiss versus State of Alaska, Juneau; Phillip Volland, Attorney, Mental Health Clients-Alcohol Related, Anchorage; Jim Gottstein, Attorney, Alaska Mental Health Association; Loren Jones, Director, Division of Alcoholism and Drug Abuse, Department of Health and Social Services; Deborah Smith, Executive Director, Alaska Mental Health Board; Jay Hogan, Contract, House Finance Committee; Tom Waldo, Attorney, Public Interest Interveners. SUMMARY INFORMATION HB 201 "An Act amending provisions of ch. 66, SLA 1991, that relate to reconstitution of the corpus of the mental health trust, the management of trust assets, and to the manner of enforcement of the obligation to compensate the trust; and providing for an effective date." CSHB 201 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Law; and with four fiscal impact notes by the House Finance Committee, two for the Department of Health and Social Services, one for the Department of Natural Resources, and one for the Department of Administration. HB 371 "An Act making appropriations for operating expenses for certain programs for which the costs are derived from mandated formulas or criteria, and for expenses for certain leases and contracts for state services and operations; and providing for an effective date." CSHB 371 (FIN) was reported out of Committee with a "do pass" recommendation and with five fiscal impact notes, one by the Department of Law; and four by the House Finance Committee. HOUSE BILL NO. 201  "An Act amending provisions of ch. 66, SLA 1991, that relate to reconstitution of the corpus of the mental health trust, the management of trust assets, and to the manner of enforcement of the obligation to compensate the trust; and providing for an effective date." Co-Chair Larson provided members with a proposed Finance Committee Letter of Intent (copy on file). LETTER OF INTENT for Finance Committee Substitute for HB 201 It is the intent of the Legislature to finally resolve the mental health land trust litigation, Weiss v. State, 4FA- 82-2208 Civil, by reconstituting a mental health trust under the Alaska Mental Health Enabling Act, P.L. 84-830, 70 Stat. 709 (1956), as required by the Alaska Supreme Court in State v. Weiss, 706 P.2d 681 (Alaska 1985). At the same time, it is the intent of the Legislature to do that (1) without prejudicing individual Alaskans, Native corporations, and municipalities to whom the state has conveyed land obtained under the Enabling Act, and (2) without removing land obtained under the Enabling Act from legislatively designated areas like parks and wildlife refuges and the control of state agencies to which it has been transferred or assigned. To accomplish these varied and seemingly incompatible goals, the Legislature is exercising a number of the powers given to it by the Enabling Act and the Alaska Constitution. The purpose of this letter of intent is to identify some, but not necessarily all, of those powers, and to explain how the identified powers are being exercised to reconstitute the trust, to remove land from trust status and validate the actions taken with respect to that land, and to compensate the trust for the land removed from trust status. Section 202(e) of the Enabling Act authorizes the Legislature to provide for management and use of the land. It also provides for the land to be "sold, leased, mortgaged, exchanged, or otherwise disposed of ... in order to obtain funds or other property to be invested, expended, or used" by the state for the purposes of the Act. Article VIII, sec. 2 of the Alaska Constitution requires the Legislature "to provide for the utilization, development, and conservation of all natural resources belonging to the state, including land, for the maximum benefit of the people." The Alaska Supreme Court in State v. University, 624 P.2d 807 (Alaska 1981), held that art. VIII, sec. 2 authorizes the Legislature to remove land from trust status if the trust is fairly compensated for the land removed. The Legislature intended to exercise that power in ch. 181 and 182, SLA 1978, but the Alaska Supreme Court held the 1978 legislation invalid in the Weiss decision. In Fairbanks North Star Borough v. State, 753 P.2d 1158 (Alaska 1988), however, the Alaska Supreme Court held that the Legislature may cure an earlier invalid act and validate actions taken under it, and noted that "[c]ourts have uniformly upheld the validity of curative legislation if (1) the Legislature originally had the power to authorize the acts done, and (2) there is no constitutional impairment of vested rights as a result of the act's passage." Under art. VIII, sec. 2 of the Alaska Constitution, there is no question that the Legislature has the power to remove land from the mental health trust, and under the Enabling Act there is no question that the compensation to the trust can be either money (under the authorization to sell) or land (under the authorization to exchange). The current legislation thus ratifies and confirms the 1978 removal from trust status of certain land obtained by the state under the Enabling Act, and compensates the trust with land that will be managed as the Enabling Act requires and money that will first be used for mental health programs as the Enabling Act requires. In returning some land to trust status and providing for its management by the Department of Natural Resources consistently with the requirements of the Enabling Act and, to the extent they are consistent with the Enabling Act, the statutes governing management of other state land, the Legislature is (1) exercising its power under the Enabling Act to provide for the management and utilization of mental health trust land, (2) discharging its obligation under the Enabling Act to provide that the land is administered as "a public trust," and (3) exercising its power under art. VIII, sec. 2 of the Alaska Constitution to provide for the utilization, development, and conservation of state land for the maximum benefit of all Alaskans. The intent of the Legislature in doing so is to ensure that the land is administered as required by the Enabling Act and, to the extent permitted by the Enabling Act, that other public interests in the land are taken into consideration and accommodated. In ratifying and confirming the 1978 removal from trust status of some land obtained by the state under the Enabling Act and validating the actions taken with respect to that land, the Legislature is exercising its powers (1) under the Enabling Act to sell, lease, mortgage, exchange, or otherwise dispose of the land, (2) under art. VIII, sec. 2 of the Alaska Constitution as interpreted by the Alaska Supreme Court in the University case to remove land from trust status, and (3) to enact curative legislation as described by the Alaska Supreme Court in the Fairbanks North Star Borough case. To the extent it was not accomplished by the 1978 legislation and the ratification and confirmation of that legislation, in removing from trust status land obtained by the state under the Enabling Act since 1978, the Legislature is exercising its powers (1) under the Enabling Act to sell, lease, mortgage, exchange, or otherwise dispose of the land, and (2) under art. VIII, sec. 2 of the Alaska Constitution as interpreted by the Alaska Supreme Court in the University case to remove land from trust status. In validating all actions with respect to the land removed from trust status, the Legislature is (1) exercising its power and discharging its responsibility under art. VIII, sec. 2 of the Alaska Constitution to provide for the utilization, development, and conservation of state land for the maximum benefit of all Alaskans, (2) exercising its power under the Enabling Act to provide for the sale, lease, exchange, or other disposal of the land, and (3) discharging its responsibility under the Enabling Act to act in a way that benefits the beneficiaries of the trust by bringing this controversy to an end and making it less likely that continuing the litigation will result in a backlash against the mental health community and make it increasingly difficult for its supporters, including those in the Legislature, to obtain appropriations of unrestricted state revenue to fund the state's mental health program. The Legislature is aware that there has been a significant difference of opinion about the value of the original one million acre mental health land grant. In the Legislature's view, the values used in determining the amount of compensation the trust should receive for land removed from trust status -- values that in large part reflect the mental health plaintiffs' views -- are substantially higher than fair market value (i.e., the price a willing buyer would pay a willing seller), particularly with respect to the subsurface mineral estate. The state since 1978 has spent far more on the state's mental health program than the true fair market value of the land removed from trust status. Nonetheless, to eliminate any question about the fairness of the compensation provided, the Legislature has considered the very high values that the plaintiffs give to the land not returned to the trust. The plaintiffs' value for original mental health trust land not returned to the trust is between $900 million and $1.4 billion, roughly twice the value placed on that land by the Department of Natural Resources ("DNR"). The DNR value for the land is $656 million, of which $473 million is the value of the surface estate, $173 million is the value of the mineral estate not including oil and gas, and $10 million is the plaintiffs' oil and gas value. The value of the state land designated as mental health trust land to replace land not returned to the trust is, by both the plaintiffs' and the state's calculations, more than $200 million. As a result, even using the plaintiffs' values, the state's maximum monetary liability to the trust for land not returned to trust status cannot exceed $1.2 billion ($1.4 billion, the plaintiffs' highest value for the land not returned, minus the $200 million for the replacement land), which is $100 million less than the $1.3 billion set-off for past mental health expenditures authorized by the Alaska Supreme Court. And, even if the $1.3 billion set-off is not taken into account, the state's monetary liability to the trust for the land not returned to trust status will be satisfied by virtue of the $100 million per year allocation of funds to the trust to be expended on mental health programs as required by the Enabling Act. By any measure, in other words, the trust is being more than fairly compensated for the land not returned to it. Finally, under the Enabling Act, the Legislature has the responsibility to determine both the programmatic aspects of the mental health program of Alaska and the level of funding to pay for it. Under art. VII, secs. 4 and 5 of the Alaska Constitution, the Legislature has the responsibility to "provide for the promotion and protection of public health" and to "provide for public welfare," again calling for decisions regarding both the program and its funding. Since statehood, the Legislature has discharged both its Enabling Act and constitutional responsibilities by establishing and maintaining a mental health program and funding it at levels that, as both the Enabling Act and the Alaska Constitution permit, substantially exceeded both the revenues from mental health land, as the Alaska Supreme Court noted in the Weiss decision, and the absolute legal minimum required by the Alaska Constitution. In the words of the Enabling Act, however, all of these expenditures comprise the "necessary expenses of the mental health program of Alaska." Based on a review of actual amounts expended, moreover, the Legislature has determined that state expenditures for the state's mental health program have totalled more than $1.3 billion from fiscal year 1979 through fiscal year 1994. In making this determination, the Legislature is mindful that Congress in the Enabling Act vested responsibility for both the substantive provisions of Alaska's mental health program and the decisions as to amounts to be spent in the Alaska Legislature. As stated in Sen. Rep. No. 2053, 84th Cong., 2d Sess. (May 25, 1956), reprinted in 1956 U.S. Co Cong. & Admin. News 3637 ("Senate Report"), the Senate struck all of the detailed program provisions in the bill that passed the House of Representatives, "leaving it up to the people of Alaska to enact their own mental-health program." The people's power to enact such a program -- i.e., to legislate on the subject -- is vested in the Legislature under art. II, sec. 1 of the Alaska Constitution. The Enabling Act, moreover, divested the federal government of both fiscal and functional responsibility for the mental health program in Alaska, and provided in the words of the Senate Report for Alaska to "assume full responsibility for enactment of commitment, hospitalization, and care procedures, and gradually assume responsibility for all costs" of the program. Under art. IX, sec. 13 of the Alaska Constitution, no money may be withdrawn from the state treasury except in accordance with legislative appropriations. In terms of revenues from the land grant, the Senate Report noted that "[a]mounts not needed for the mental health program can be used for other public purposes as the Legislature may determine." And the managers in the House of Representatives accepted a Senate amendment "which broadens the use of the revenues for use of the Alaska mental-health program rather than [only] for the hospitalization and care of the mentally ill in Alaska." Conference Report No. 2735, 84th Cong., 2d Sess. (July 17, 1956), reprinted in 1956 U.S. Code Cong. & Admin. News 3659. In light of Congress' intent that the Alaska Legislature take the lead role in determining the mental health program of Alaska, and the Alaska Constitution's vesting of spending authority in the Legislature, it is only appropriate that the Legislature determine the amount spent in the past on the state's mental health program. As noted, from fiscal year 1979 through fiscal year 1994, that amount totals more than $1.3 billion. The Legislature respectfully requests that any court reviewing the Legislature's actions with respect to resolving the mental health land trust litigation, Weiss v. State, 4FA-82-2208 Civil, give appropriate consideratio to these principles underlying the Legislature's actions. TOM KOESTER, OUTSIDE COUNSEL, DEPARTMENT OF LAW explained that the purpose of the draft letter of intent is to set out the constitutional and federally created statutory powers, given to the legislature, that HB 201 employs, in regards to seeking the state's obligation under the federal law and the Supreme Court's Weiss decision to reconstitute the Mental Health Lands Trust. Mr. Koester summarized the contents of the draft letter of intent. He emphasized the need for the legislature to understand the legal analysis used to concluded that HB 201 satisfies the state's obligation. He stressed that the legislature is properly exercising powers given by the United States Enabling Act and the Alaska State Constitution. Mr. Koester noted that a technical amendment is needed on page 20, line 7 to change "board" to "department." He added that the status of two land parcels on the land list were inadvertently reversed. The status of parcels 3171 and 3166 will be reversed by addendum. He explained that one of the parcels contains the Herring Cove hatchery. The second parcel is vacant. The intent is for the vacant parcel to go into the trust. In response to a question by Representative Brown, Mr. Koester calculated that if all parties cooperate and an expedited schedule is adopted by the court then resolution could take place prior to December 15, 1994. He stressed that litigation by any party would prevent the final determination from occurring prior to December 15, 1994. The incentive package will not take place if the December 15, 1994 deadline is not met. Mr. Koester emphasized that reconstitution, under HB 201, addresses third party purchasers. He clarified that the incentive package only affects the mental health community. He stressed that the incentive package is not required by federal law. The incentive package is designed to encourage early dismissal of the case. He observed that in the state's view the reconstituted trust will resolve third party purchases. He accentuated that the state intends to move to dismiss the case and dissolve the preliminary injunction in order to relieve the third party purchasers. Representative Brown maintained that the December 15, 1994 deadline does not provide sufficient time for Supreme Court review regarding the power of appropriation. Mr. Koester stressed that the legal questions surrounding the power of appropriation have nothing to do with efforts to reconstitute the Trust. He emphasized that plaintiffs have requested the power of appropriation in return for early dismissal. He acknowledged that there are legal questions regarding the state's ability to give the plaintiffs the power of appropriation, in regards to the Trust. He noted that the state will defend the plaintiffs power of appropriation, if there is an early dismissal. He emphasized the state's belief that a good faith defense can be made. He conceded that early dismissal will result in legal uncertainty, in regards to the plaintiffs power of appropriation of the Trust. He noted that the state cannot guarantee the court will sustain their power of appropriation. Representative Brown asked why the Trust is only preserved in perpetuity if the incentive provisions take effect. Mr. Koester explained that the state does not see any reason to include the incentive package if there is no early dismissal. He stressed that the state must meet its obligation under federal law. He noted that federal law states that "lands granted to the state and the income of the proceeds from any dispositions shall be administered as a public trust and proceeds shall first be used to meet the necessary expenses of the mental health program of Alaska." He summarized that if mental health lands are sold, federal law states that the proceeds must first be spent on mental health programs. He stressed that HB 201 satisfies the state's obligation under federal law. If plaintiffs agree to an early dismissal the state has agreed to preserve proceeds from the sale of mental health lands, to yield mental health permanent fund earnings to be spent on mental health programs. He maintained that both options are available to the legislature under federal law. He underscored that, in the case of an early dismissal, it is in the public's interest to create the permanent fund that will earn money which can be spent on mental health programs in the future. He concluded that if there is no early dismissal the state should fulfill the obligations of federal law. Representative Brown summarized that the legislation, absent the incentive package, fully discharges the state's responsibility as trustee and will be upheld by the court. Mr. Koester agreed with Representative Brown's synopsis. Mr. Koester argued that the incentive package deadline is not coercive. He reiterated that it is not part of the state's obligation. He observed that the Department of Law is not in a position to call the legislature in to ratify terms of an agreement. He noted that the Department of Law has not been able to fully implement previous laws passed by the legislature, in regards to mental health lands, due to objections from one or more involved parties. He stressed that the state is holding out additional benefits in order to entice plaintiffs to agree to an early dismissal. He maintained that the incentive package is fair to the state and its constituent citizens as well as to mental health plaintiffs. In response to a question by Representative Brown, Mr. Koester stated that the land list will be final with the addition of an addendum regarding parcels 3171 and 3166. He noted that precise legal descriptions are not included. Parcels are referenced by parcel number and by reference to other documents. He noted that the legislation allows adjustment for precise legal descriptions. Representative Brown questioned if surface owners have been notified that subsurface rights are being transferred. HARRY NOAH, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES observed that surface owners of property with subsurface rights being transferred have not been identified or notified. Commissioner Noah discussed the notification of surface owners. He observed that compensation for disturbances to the property of surface owners would require approval by the owner. Any disagreements would be adjudicated by the Commissioner of the Department of Natural Resources. Representative Brown expressed concern with the lease and management of subsurface rights by the Trust. Commissioner Noah emphasized that many of the subsurface lands were original mental health trust lands. TOM WALDO, ATTORNEY, PUBLIC INTEREST INTERVENERS testified in support of HB 201. He represents a coalition of five environmental groups who opposed the Chapter 66 settlement. He discussed the group's opposition to Chapter 66. He commented that there was no public notice regarding substitute land going into the Trust under Chapter 66. Mr. Waldo discussed the proposed settlement under HB 201. He stressed that the Department of Natural Resources responded to concerns regarding land going into the trust and management of trust land. He observed that, with the exception of two subsurface rights, there are no state forest, parks or other legislatively designated areas entering the trust. He noted that HB 201 requires the Department of Natural Resources to comply with other state laws governing management of state lands, to the extent consistent with the Mental Health Enabling Act. He emphasized that the lands can be managed through the public planning process to protect the multiple purpose uses of the state public lands. In response to a question by Representative Brown, Mr. Waldo discussed management under the federal public trust requirement. He concluded that Congress did not wish the state to ignore the interest of other Alaskans in managing trust land. He acknowledged that case law is not well defined. (Tape Change, HFC 94-147, Side 1) DAVID WALKER, ATTORNEY, MENTAL HEALTH PLAINTIFF alleged that the legislation is designed to restrict the abilities of the beneficiaries. He maintained that the letter of intent makes assertions that have no basis in fact. Co-Chair Larson noted that members were provided with AMENDMENT 4 (copy on file). PHILLIP VOLLAND, ATTORNEY, MENTAL HEALTH PLAINTIFFS explained that Amendment 4 contains technical changes to Chapter 66. Mr. Volland spoke in opposition to the adoption of the draft letter of intent. He disputed findings outlined in the letter. Mr. Volland spoke in support of HB 201. He indicated that his clients wish to receive the incentive package. Representative Brown referred to a proposed amendment to HB 371 providing that: "The net income by the mental health trust fund is appropriated to the mental health trust income account for uses authorized in AS 37.14.041. Mr. Volland observed that the amendment was not requested by plaintiffs. He noted that the amendment may cure a potential legal defect in regards to the power of appropriation. Mr. Volland acknowledged that the December 15, 1994 deadline for resolution would be tight. He stated that plaintiffs attempted to insert a longer time period. He emphasized that the court must have a hearing and issue a ruling on the underlying issue, prior to December 15, 1994, and appeals must be finalized. He stressed that the case must immediately come before the court to initiate proceedings. He interpreted the legislation to incorporate the resolution of appeals. He understood that if no appeals had been taken by a certain period of time than provisions would immediately go into effect. If an appeal has been taken then the appeal must be resolved prior to the December 15, 1994 deadline. Representative Brown questioned if language in the legislation would allow appeals to have taken place. Mr. Volland noted that there is no way the court can prevent an unnamed class member from appealing an issue. Mr. Volland clarified that if there are any appeals pending after December 15, 1994, the settlement portion of the legislation would not be effective. JIM GOTTSTEIN, ATTORNEY, ALASKA MENTAL HEALTH ASSOCIATION suggested that if the state agrees that an appeal can be taken, than page 20, lines 25 and 26 should be amended to read, "all appeals have been concluded." He interpreted the current language to prevent a Supreme Court ruling in regards to the endowment compensation and appropriation issue. He asserted that the December 15, 1994 deadline is virtually impossible. Mr. Gottstein noted that questions remain regarding how to notice beneficiaries of the Trust. He suggested that the deadline be extended to allow legislative review at the start of the next legislative session. He emphasized that the legislature could extend the deadline if the case is proceeding. DEBORAH SMITH, EXECUTIVE DIRECTOR, MENTAL HEALTH BOARD discussed Amendment 4. She explained that the amendment contains minor corrections to Chapter 66 to clarify the relationship between the four beneficiary boards and the Mental Health Trust Authority. The Older Alaskans' Commission would be given the responsibility to plan for Alzheimer and mentally ill patients. It clarifies that the Alcohol Board plans for chronic alcoholics with psychosis. It also reduces the Mental Health Board from 24 to a maximum of 16. Co-Chair Larson ascertained that there were no objections from individuals representing concerned parties. In response to a question by Representative Hanley, Ms. Smith discussed section 46. She noted that section 46 contains transitional provisions to provide continuity. Sections 47 and 48 pertain to the adoption of the incentive package. Representative Martin expressed concern with the reduction of the Alaska Mental Health Board. Ms. Smith clarified that the Mental Health Board requested the reduction from 24 to 16 members. Mr. Koester expressed concern that the sections referenced in Amendment 4 are accurate. LOREN JONES, DIRECTOR, ALCOHOLISM AND DRUG ABUSE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES discussed the Department of Health and Social Services' fiscal note. He noted that Chapter 66 changed the duties and responsibility of the Advisory Board on Alcoholism and Drug Abuse. The size of the Board was increased and the Board was authorized to hire its own staff separate from the Division. Funding authorized for these changes was taken out by the Office of Budget and Management when it became evident that Chapter 66 would not be the settlement vehicle. He noted that if HB 201 becomes effective then that portion of Chapter 66 which gives the Advisory Board authority to hire staff and be separate from the Division takes effect. The fiscal note supports the implementation of that portion of Chapter 66. Discussion pursued regarding staff and member composition of the four beneficiary boards. (Tape Change, HFC 94-147, Side 2) Mr. Jones stressed that Chapter 66 allows the Alcoholism and Drug Abuse Board to give advise to the legislature, governor and state agencies. He noted that the legislature felt that the Board should be separate from the executive branch. He stressed that the fiscal note would implement current law. Representative Hanley stressed that the law has not been implemented. He suggested that the fiscal note for FY 95 should reflect that settlement would not take place until December 15, 1994. Mr. Jones observed that funds cannot be spent until a settlement takes place. He noted that the fiscal note reflects the full base cost. He maintained that staff would not be hired until the law is effected. Co-Chair MacLean suggested that the FY 95 fiscal note be zero. Representative Brown expressed concern with the number of advisory boards. Mr. Jones observed that the legislature created four boards with the adoption of Chapter 66. He noted that there are four beneficiary groups supported by four agencies; the Older Alaskans Commission, Division of Mental Health, Governor's Council on Disabilities and Special Education, and the Division of Alcoholism and Drug Abuse. He emphasized that the Alcoholism and Drug Abuse Board is the only board currently without staff. Representative Martin suggested that the boards be consolidated. Co-Chair MacLean MOVED to reduce the Department of Health and Social Services' fiscal note for the Division of Alcoholism and Drug Abuse, FY 95 to zero. There being NO OBJECTION, it was so ordered. Commissioner Noah discussed the Department of Natural Resources' fiscal note. He noted that an additional $450.0 thousand general fund dollars were added for FY 95. He explained that the $450.0 thousand dollars were originally part of the Department's capital projects request. The request was removed from the capital budget since the settlement status is unknown. Representative Hanley pointed out that the capital request was for $450.0 thousand mental health trust income account dollars. Co-Chair MacLean MOVED to change the funding source for $450.0 thousand dollars from the general fund to the Mental Health Trust Income Account. There being NO OBJECTION, it was so ordered. Ms. Smith reviewed the Department of Administration's fiscal note. She observed that Chapter 66 also effected the duties and responsibilities of the Older Alaskans Commission. She reiterated that funding authorized to implement Chapter 66 was taken out by the Office of Budget and Management when it became evident that Chapter 66 would not be the settlement vehicle. Co-Chair MacLean MOVED to delete funding requested in the Department of Administration's fiscal note for FY 95. Ms. Smith emphasized that responsibilities will begin after December 15, 1994 if settlement takes place. Ms. Smith suggested that the fiscal note be reduced by half. Co-Chair MacLean MOVED to AMEND the motion to reduce the FY 95 funding request in the Department of Administration's fiscal note from $91.9 thousand dollars to $45.9 thousand dollars. There being NO OBJECTION, it was so ordered. Ms. Smith discussed the Department of Health and Social Services' fiscal note, Alaska Mental Health Board. She stated that the fiscal note will fund the Board's travel. She advised that the fiscal note could be reduced to reflect a six month period and smaller board composition. She suggested that the fiscal note be reduced to $5.2 thousand dollars for FY 95. Co-Chair Larson MOVED to reduce the Department of Health and Social Services' fiscal note request for the Alaska Mental Health Board to $5.2 thousand dollars in travel for FY 95. There being NO OBJECTION, it was so ordered. Representative Hanley observed that the fiscal note request for the Division of Alcohol and Drug Abuse should also reflect a half year funding. Ms. Smith agreed that the Alcohol Board will have responsibilities after December 15, 1994. Co-Chair MacLean MOVED to increase funding for the Department of Health and Social Services' fiscal note for the Division of Alcoholism and Drug Abuse, FY 95 to $150.0 thousand mental health trust income account dollars. There being NO OBJECTION, it was so ordered. Representative Brown restated concerns regarding the tight time line for settlement. She counseled that the legislature give discretionary authority to the state to extend the deadline for a time certain if deliberations are close. Discussion pursued regarding the ability to reach the December 15, 1994 deadline. Commissioner Noah assured Representative Brown that the state will expedite the municipal reselection process. HB 201 was HELD in Committee for further discussion. HOUSE BILL NO. 371 "An Act making appropriations for operating expenses for certain programs for which the costs are derived from mandated formulas or criteria, and for expenses for certain leases and contracts for state services and operations; and providing for an effective date." Co-Chair Larson provided members with two proposed committee substitutes (copies on file). He explained that work draft from the Earnings Reserve Account and establish a special account in the Permanent Fund to provide for the endowment. Work Draft #8-GH2026\E would use a series of appropriations from the Mental Health Trust Income Account, Department of Natural Resources, Mental Health Trust Income Account, Department of Natural Resources land sale contract portfolio, Alaska Science and Technology Endowment, Constitutional Budget Reserve Fund or Earnings Reserve Account. JAY HOGAN, CONTRACT STAFF, HOUSE FINANCE COMMITTEE explained that the Mental Health Trust Income Account balance will be $32.2 million dollars at the end of FY 95. He added that current law allows that any balance from the 6 percent general fund appropriation to the Mental Health Trust Income Account can be reappropriated back to the General Fund at the end of the fiscal year. He noted that money in the Department of Natural Resources, Mental Health Trust Income Account are derived from mental health trust land income. He suggested that the General Fund Mental Health Trust Income Account and the Department of Natural Resources, Mental Health Trust Income Account be appropriated in their entirety to lay aside all question that funding from these accounts were used for the Mental Health Trust. Co-Chair Larson counseled that the Committee adopt work draft Mental Health Trust Income Account - $32.2 million dollars, Department of Natural Resources, Mental Health Trust Income Account - $11,957.1 million dollars, Earnings Reserve Account -$155,842.9 million dollars. Co-Chair MacLean MOVED to AMEND work draft #8-GH2026\E to include the following funding sources: Mental Health Trust Income Account - $32.2 million dollars, Department of Natural Resources, Mental Health Trust Income Account - $11,957.1 million dollars, Earnings Reserve Account - $155,842.9 million dollars; delete funding from the Constitutional Budget Reserve Fund contained on page 2, lines 21 - 23; and incorporate a title change to reflect the amended funding sources. There being NO OBJECTION, it was so ordered. (Tape Change, HFC 94-148, Side 1) Representative Parnell MOVED to ADOPT work draft #8-GH2026\E as amended. Representative Brown provided members with AMENDMENT 1 (copy on file). Amendment 1 states that: "The net income by the mental health trust fund is appropriated to the mental health trust income account for uses authorized in AS 37.14.041. She argued that the amendment would strengthen the state's legal case. Mr. Koester agreed that Amendment 1 would strengthen the legal case. Representative Brown MOVED to ADOPT AMENDMENT 1. There being NO OBJECTION, it was so ordered. Representative Brown provided members with AMENDMENT 2 (copy on file). Amendment 2 states: "If, on or before November 30, 1994, the Governor determines that it is in the best interest of the beneficiaries of the mental health trust and the state that the December 15, 1993 deadline be extended, the Governor at that time may extend the December 15, 1994 deadline for not more than forty-five days." Representative Brown explained that the amendment would allow the Governor to assure that the settlement not expire if the deadline is not met, but action is proceeding. She clarified that Amendment 2 would be inserted on page 2. BRUCE BOTHELO, ATTORNEY GENERAL, DEPARTMENT OF LAW advised that the possibility of an extension would virtually assure that the deadline is extended. Mr. Volland spoke in support of Amendment 2. He accentuated that it is possible that the deadline cannot be reached through no fault of any of the involved parties. Representative Brown MOVED to ADOPT AMENDMENT 2. Representative Therriault OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Brown, Grussendorf, MacLean OPPOSED: Foster, Hanley, Martin, Parnell, Therriault, Larson Representatives Hoffman and Navarre were absent from the vote. The MOTION FAILED (3-6). Co-Chair Larson MOVED to ADOPT a title change to HB 371 as amended to reflect the change in appropriation. There being NO OBJECTION, it was so ordered. Co-Chair MacLean MOVED to report CSHB 371 (FIN) out of Committee with individual recommendations. CSHB 371 (FIN) was reported out of Committee with a "do pass" recommendation and with five fiscal impact notes, one by the Department of Law; and four by the House Finance Committee. HOUSE BILL NO. 201 "An Act amending provisions of ch. 66, SLA 1991, that relate to reconstitution of the corpus of the mental health trust, the management of trust assets, and to the manner of enforcement of the obligation to compensate the trust; and providing for an effective date." Mr. Koester concluded that Amendment 4 was properly drafted to accurately reflect the intent. Representative Martin WITHDREW his motion to move CSHB 201 (FIN) from Committee (pending from 4/29/94). Representative Brown MOVED to ADOPT AMENDMENT 4. Representative Martin OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Parnell, Brown, Foster, Grussendorf, Hanley, Hoffman, MacLean, Larson OPPOSED: Martin, Therriault Representatives Hoffman and Navarre were absent from the vote. The MOTION PASSED (8-2). Representative Hanley MOVED to ADOPT a technical amendment on page 20, line 7 to change "board" to "department." There being NO OBJECTION, it was so ordered. Representative Martin MOVED to report CSHB 201 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Brown referred to an amendment suggested by Mr. Koester to address the ambiguity regarding appeal language. Representative Brown provided members with AMENDMENT 5 (copy on file). Mr. Koester explained that Amendment 5 would amend language on page 20, lines 26 and 31 to add "or any appeals taken have been finally resolved and the order dismissing Weiss versus State, 4EA-82-2208 Civil, having been affirmed on appeal." He asserted that the amendment would improve the bill and address concerns expressed by Mr. Volland. Representative Martin WITHDREW his motion to move the bill from Committee. There being NO OBJECTION, it was so ordered. Representative Brown MOVED to ADOPT AMENDMENT 5. Representative Parnell clarified that the case is finally and conclusively concluded on appeal. If an order has been affirmed but remanded for consideration and the deadline passes the incentive provision would not take place. There being NO OBJECTION, AMENDMENT 5 was adopted. Representative Martin MOVED to report CSHB 201 (FIN) out of Committee with individual recommendations. Representative Brown OBJECTED for purpose of discussion. She emphasized that a provision should be made to protect the beneficiaries of the Trust in the event that the process gets bogged down. Co-Chair MacLean MOVED to report CSHB 201 (FIN) out of Committee with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 201 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Law; and with four fiscal impact note by the House Finance Committee, two for the Department of Health and Social Services, one for the Department of Natural Resources, and one for the Department of Administration. ADJOURNMENT The meeting adjourned at 1:15 p.m.