Copyright © 1996-2004 The Law Offices of James B. Gottstein and The Law Offices of David T. Walker . All Rights Reserved
In 1956, Congress granted the then Territory of Alaska the right to select one million acres of the best available land in Alaska for a trust to be used "first for the necessary expenses of [Alaska's] mental health program." The State of Alaska accepted this upon Statehood. While the best land for producing income for the mental health program was selected, the State never treated it like a trust. Then, in 1978, due to pressure to make this land available for private development and recreational purposes, the State purported to abolish the Mental Health Trust. In 1982, Vern Weiss (represented by David Walker from 1986) under the sponsorship of the Alaska Mental Health Association (represented by Jim Gottstein from 1984) sued to correct the situation. In 1985, the Alaska Supreme Court held that the legislation abolishing the Trust was illegal and ordered the Trust to be reconstituted. However, based upon an unauthorized agreement by then counsel for Mr. Weiss to allow the State to deduct what it spent on the mental health program (the "set-off), the Supreme Court gave the following "guidance:"
Those general grant lands which were once mental health lands will return to their former trust status. In the event exchanges have been made, those properties which can be traced to an exchange involving mental health lands will also be included in the trust. To the extent that former mental health lands have been sold since the date of the conveyance the trust must be reimbursed for the fair market value at the time of sale. In calculating the total amount owed, the trial court should grant a set-off for mental health expenditures made by the state during the same period. In the event that expenditures exceeded the value of lands sold, the state need not furnish cash as part of the reconstitution. The goal is to restore the trust to its position just prior to the conveyance effected by the redesignation legislation.
The State interpreted this to mean that every dollar it spends on the mental health program "buys" a dollars worth of the Trust's land. Specifically, the State has placed over 300,000 acres of Mental Health Trust Land in State Parks and similar designations and the State says this is "sold" under the above language and it doesn't owe anything because it has funded Alaska's mental health program. The plaintiffs vigorously disputed this interpretation as not supported by any case law.
In any event, the State and the plaintiffs entered into a settlement in 1987, wherein the State was allowed to keep Mental Health Trust Lands in exchange for annual "rent" payments of 8% of the value of Mental Health Trust Lands. The value was to be determined under procedures approved by the Interim Mental Health Trust Commission. In the meantime, the State agreed to pay 5% of the State's general fund revenues into the Trust to be used "first for the necessary expenses of the mental health program." This settlement also created the Alaska Mental Health Board, which was charged with determining the needs of the mental health program and make recommendations about funding the mental health program from the Trust. This settlement was known as the "Chapter 48" Settlement because it was embodied in Chapter 48 of the 1987 Session Laws of Alaska.
In 1989 after two and one half years of work, the Trust Commission's approved procedures resulted in a valuation of $2.243 Billion, a figure the Trust Commission felt was conservative. However, in 1990, the State announced it would not accept that figure, primarily because it was felt that a $160 million annual obligation to the mental health program, expected to increase, while general State revenues were expected to decline was more than it could afford. Instead, the State passed legislation, without consulting the plaintiffs, that made permanent a payment of 6% of the State's general fund revenues.
We strongly urged the beneficiaries, to seriously consider the 6% offer because we felt that if the State was going to fund the Mental Health Trust out of its general fund rather than revenues from the land, that 6% of its total budget was about the most that we could possibly expect the State to spend regardless of the technical obligation to spend more under Chapter 48. However, the Mentally Retarded and Mentally Defective (Developmentally Disabled) group strongly opposed it as did the Alaska Alliance for the Mentally Ill. The 6% offer was therefore never presented to the court for consideration as a settlement. At this point, at our urging, the trial court issued a preliminary injunction preventing the State from making threatened transfers of Mental Health Trust Land without court approval.
Chapter 66 of the 1991 Session Laws of Alaska was the second settlement attempt. In that agreement, the State agreed to reconstitute the Mental Health Land Trust with as much of the original Trust Land as could be agreed upon and replace the other land with land as comparable as possible and of equal value, including its income producing potential. The State also agreed to payments expected to be in the $1 Billion range to the Mental Health Trust Income Account. The Chronic Alcoholics with Psychosis group never agreed to that settlement and the Developmentally Disabled group switched from supporting the settlement to opposing in the middle of the trial court's consideration. The Chapter 66 Settlement created a firestorm of political opposition -- both from development and environmental interests, neither of which wanted so much land committed to the benefit of the mental health program. By the end of 1993, the Hickel administration backed out of that settlement.
The Hickel Administration then proceeded to sponsor legislation (HB 201) that purported to "ratify" the conversion of Mental Health Trust Land to general grant land ruled invalid by the Alaska Supreme Court in 1985. To "pay" for all the land it took, HB 201 said that the State had spent $1.3 Billion on the mental health program and this "bought" $1.3 Billion worth of land. HB 201 also said that "because of the criticism and hostility directed against" the Trust's beneficiaries, "failure to resolve" the litigation "will make it increasingly difficult for the beneficiaries . . . to obtain appropriations . . . to fund the mental health program." In the face of this threatened legislation, the Chronic Alcoholic with Psychosis and the Developmentally Defective groups agreed to a settlement wherein
1. The State would pay $200 million;
2. Approximately one million acres of land (much of it mineral and oil and gas interests only) would go into the Trust. However, only land that no one objected to going into the Trust made it into the Trust.
3. A newly created Alaska Mental Health Trust Authority would have the right to spend the Trust's income "without and free of legislative appropriation" and make recommendations to the Legislature and Governor regarding what expenditures should be made on Alaska's Integrated Comprehensive Mental Health Program.
4. The Alaska Mental Health Board, the Advisory Board on Alcohol and Drug Abuse, the Governor's Council on Disabilities and Special Education, and the Alaska Commission on Aging (Four Boards) are to perform certain functions and fulfill certain duties on behalf of their respective beneficiary groups, including making budget recommendations to the Trust.
Estimates of the value of the settlement ranged from $750 million to $1.3 billion, including the $200 million. Because we believed a minimum acceptable settlement was at least $2 billion and because of technical defects, our clients opposed the HB 201 Settlement. However, the settlement was approved by the Alaska Supreme court on appeal in Weiss v. State. We filed a Petition for Certiorari asking the United States Supreme Court to review this decision, but it declined to do so in November 1997. In the end, while we believe a better result was achievable, the beneficiaries ended up with a Trust valued somewhere between $750 million and $1.3 billion and a (so far) independent Trust Authority. This is in contrast with the Trust having been totally abolished when the the case was started in 1982.
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