Project Jukebox

Digital Branch of the University of Alaska Fairbanks Oral History Program
Tom Koester, Part 1

Tom Koester was interviewed by Bill Schneider on July 28, 2008 at his home in Juneau, Alaska. He was the attorney for the State of Alaska for the Vern Weiss case and discusses his experiences with the mental health trust litigation and settlement, especially related to the State's position, land use conflicts, determination of beneficiaries, and dedicated funds and revenue distribution. He also discusses why he thinks there was no agreement on the settlement during the Cowper administration, and provides his assessment of how the final settlement is working.

Digital Asset Information

Archive #: Oral History 2006-15-10_PT.1

Project: Alaska Mental Health Trust History
Date of Interview: Jul 28, 2008
Narrator(s): Tom Koester
Interviewer(s): Bill Schneider
Transcriber: Carol McCue
Location of Interview:
Funding Partners:
Alaska Humanities Forum, Alaska Mental Health Trust Authority
Alternate Transcripts
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Slideshow
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Sections

Section 1: His childhood and educational background, and first jobs he had when coming to Alaska in the mid-1970s.

Section 2: His parents' work and educational background.

Section 3: Early legal cases he worked on for the State's Attorney General's Office related to natural resources and trying them before the U.S. Supreme Court.

Section 4: The legal issues involved in the Dinkum Sands Case.

Section 5: Becoming involved with the Mental Health Trust lawsuit, and the history of the mental health trust, mental health services in Alaska, and use of the income generated by the trust.

Section 6: The selling of the Mental Health Trust lands and the legislature's transfer of the lands and revenue out of the Mental Health Trust.

Section 7: The 1982 lawsuit led by Vern Weiss and what it meant for the State of Alaska and the mental health trust.

Section 8: Problems with additions of many beneficiaries to the lawsuit, and disputes over using land for income versus other uses.

Section 9: Differences over land valuation and state expenditures on mental health programs and how it was difficult to come to agreement between the State and the plaintiffs for the settlement.

Section 10: The political impetus for settling the mental health trust land issue, and his assessment of the results of the settlement.

Section 11: Decisions about managing and conflicts over use of land.

Section 12: The problem of Alaska Constitution’s prohibition on dedicating funds and how that impacts funding for mental health programs.

Section 13: Some of the major players during the mental health trust lawsuit and settlement period.

Section 14: Representing the State of Alaska under various governors' administrations and trying to resolve the mental health trust lands issue.

Section 15: Assessment of the settlement and success of the Alaska Mental Health Trust Authority for improved attention to mental health needs.

Section 16: Why the mental health trust case was not settled during the Cowper administration.

Section 17: Continuation of discussion about why the mental health trust case was not settled during the Cowper administration.

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Transcript

Section 1: BILL SCHNEIDER: Today is July 28th, 2008. I'm Bill Schneider. I have the pleasure today of doing an interview with Tom Koester. So thank you for taking the time to do this, Tom. TOM KOESTER: You're welcome. BILL SCHNEIDER: And let's start by having you back up and talk about your early childhood, where you grew up, who your parents were.

TOM KOESTER: I was born in Nebraska in 1944 and grew up in San Diego, California, where my dad was a Professor of Education at San Diego State University, and subsequently the Executive Dean at San Diego State. I went to San Diego State as an undergraduate, and then to California Western School of Law and graduated in 1975.

While in law school, I interned between my first and second year and second and third year with the Alaska Public Defender Agency, the first summer in Ketchikan, and the summer of '74 in Fairbanks, which was a pretty fascinating place at that time. The pipeline was in full construction mode and housing was an issue for everyone, and obviously, there was a lot of construction going on in the city itself, but it was a great place and a great way to spend the summer.

The opportunity was pretty fabulous. I played golf ‑‑ or played tennis with Jay Rabinowitz, and played basketball with Bob Boochever, so introduced to justices of the Alaska Supreme Court. And that, in turn, led to an offer from Tom Stewart, the Superior Court judge here in Juneau, and secretary of the Constitutional Convention to be his law clerk for a year.

And so Sue and I decided that we had enjoyed Alaska in the summertime so much, we'd come up and give it a shot for a year. And we just totally fell in love with the place. That, in turn, led to an offer from Av Gross, the Attorney General, to come to work in the Attorney General's Office. It was a marvelous opportunity. Our timing was exquisite. The pipeline opened in 1976, and the state budget went from the hundreds of millions to 4 billion in the space of 12 months.

And Av was a great Attorney General. He pretty much gave us free rein in the Attorney General's Office, and he was sort of Merlin to Jay Hammond's Arthur. And couldn't have asked for a better supportive boss or more fun, kind of trying to guide the state through those first days of heady money. So it was pretty exciting.

Section 2: BILL SCHNEIDER: Tell us about your parents. Were they involved in legal areas? You said your dad was an educator.

TOM KOESTER: He was an educator. My mom was ‑‑ was a teacher. They were both teachers in Nebraska when they met.

Then my dad went in the Army during the Second World War, and I was a war baby, born in 1944. He was a captain. When he got out, the GI Bill sent him to University of Minnesota, where he got his doctorate in educational psychology.

In 1950, we moved to San Diego and he began teaching at San Diego State. My mom was a stay‑at‑home mom. And they really liked San Diego. And my dad really liked working at San Diego State, and eventually became the executive dean prior to his death in 1974.

Section 3: BILL SCHNEIDER: So you came up here to Alaska and got involved with the Attorney General's Office? TOM KOESTER: Right. First experience was with the Public Defender Agency in Ketchikan, Alaska, where Bill Counsel, who is married to Fran Ulmer, Chancellor of UAA, was the public defender.

And that was a very exciting experience for Sue and me. It was so totally different from Southern California to be in Ketchikan where the wilderness is literally out your back door. And then in 1974 we went to Fairbanks, spent the summer in Fairbanks where I interned with the Public Defender Agency there. And subsequently clerked for Judge Tom Stewart here in Juneau for a year, and then went to work in the Attorney General's Office.

Spent 18 months or so in what was called the Government Affairs Section dealing with elections and retirement and benefits and state municipal relations, and then moved to the natural resources section. And about a year and a half after that became a supervisor of the natural resources section. So pretty terrific opportunity. I felt like I had the best attorney's job in Alaska, supervising the natural resources section for the Alaska Attorney General.

BILL SCHNEIDER: And what were some of the issues you got involved with? TOM KOESTER: It pretty much ran the gamut. The ‑‑ one of the first cases dealt with the distribution of federal oil and gas mineral revenues from the Kenai National Moose Range.

And that case went to the United States Supreme Court. I argued it in the United States Supreme Court in 1981, so I had been a practicing attorney for five years, and argued my first case in the U.S. Supreme Court. Was fortunate to prevail 6 to 3 in that case, which made me feel really good.

Then subsequently, there was a major boundary dispute between the state and the federal government on the North Slope called the Dinkum Sands Case, that was the euphemism. And that was my case. That one I was not as fortunate when we argued in the U.S. Supreme Court, we lost that one 6 to 3. So ‑‑ but I'm 1 and 1 in the U.S. Supreme Court, which I guess is better than some.

BILL SCHNEIDER: That's pretty unusual to try a case in the Supreme Court, to have it go so far. TOM KOESTER: Yes, it is. It is very unusual. And I feel I was very fortunate then. Right place, right time. You know, it –

BILL SCHNEIDER: And what were the issues involved in the Kenai Moose Range? TOM KOESTER: Well, there were two statutes competing in terms of how the revenues were to be distributed. One of the statutes provided that Alaska would get 90 percent of the revenues, and the Federal Treasury would get 10 percent.

The other statute provided that the U.S. Fish & Wildlife Service would get 75 percent, and the Kenai Borough would get 25 percent. And in 1964, that law was passed providing for the 75/25 distribution.

But the government continued to distribute the oil and gas revenues on the 90/10 basis for 11 years. Then in 1975, some smart federal employee said, hey, there's this other law that will give us more of the money.

And so the United States announced unilaterally that it was going to change the revenue distribution, and Alaska took exception, and the Federal District Court and the Ninth Circuit Court of Appeals and the U.S. Supreme Court all agreed that the 90/10 split was the appropriate split; that Congress had not intended to divest Alaska of its share, 90 percent share in that 1964 law.

Section 4: BILL SCHNEIDER: And then how about the Dinkum Sands? TOM KOESTER: There were a number of issues in the Dinkum Sands case, whether Harrison Bay was an actual bay, whether a formation known as Dinkum Sands was or was not an island, and whether Alaska's boundary should be measured from a line connecting a series of islands or it should be measured instead from the coast ‑‑ the coastline and from the shoreline of each individual island.

And finally, there was an issue whether Alaska was entitled under the Equal Footing Doctrine to the ownership of the lands underlying navigable waters in the Arctic National Wildlife Refuge and in the National Petroleum Reserve Alaska. And we prevailed on the issue whether Harrison Bay was a juridical bay, the United States prevailed on the boundary issue, and on the Arctic National Wildlife Refuge and Petroleum Reserve.

Section 5: BILL SCHNEIDER: Okay. Well, this is going good. So what ‑‑ what brought you to the Mental Health Trust? TOM KOESTER: Well, it was a ‑‑ it involved land, which is a natural resource, and so it was under the juris ‑‑ in the Attorney General's Office, it was under the jurisdiction of the natural resources section.

And the Attorney General, when the complaint came in, came down to my office and said, I'd like you to handle this case. And I said, okay. So it was just something that at that time I think the Attorney General was Will Condon, and Will said, I trust you to handle this case and I'd like you to do it. So it became my case.

BILL SCHNEIDER: Can you explain to us some of the issues from the different standpoints? TOM KOESTER: Well, the basic issue is that ‑‑ that the federal government frequently would grant ‑‑ make land grants to states in the ‑‑ in what are called the public land states; basically those west of the Mississippi.

The typical grant was for school purposes, educational purposes. And these lands would be granted to the states in trust, meaning that the states could dispose of them, but had to keep the proceeds in a fund that would earn money to be directed to a particular purpose, for education is the ‑‑ is the typical purpose. There are school land trusts in Washington and Utah and Wyoming and New Mexico and Montana.

The federal government did the same thing with respect to schools in the territory of Alaska ‑‑ and this was pre‑statehood ‑‑ for schools and for the university, and they enacted the Alaska Mental Health Enabling Act. Prior to statehood, under federal law, the territory had no authority to deal with mental health issues. It was all dealt with as a federal government responsibility.

And the residents of the territory were unhappy with that situation because it was simply not very responsive to the mental health needs of the people in the territory of Alaska. The federal system was really draconian. The United States Attorney would bring an action alleging that there was an insane person at large. There would be a trial.

And if the person was found insane, they would be shipped off to Morningside Hospital in Portland, Oregon. If the person was found not insane, then the case was over and the person would go back into the community. There was no counseling, no treatment facilities, no ‑‑ nothing in Alaska to deal with the problems of the mentally ill.

The 1956 Act changed that, and basically gave to the territorial government the power to establish a mental health program in Alaska to deal with the mental health needs of the people here. To fund the program, like the school land grants in the Lower 48, Congress authorized Alaska to select a million acres of land, with the incoming proceeds from that land to be used for mental health purposes.

Now, there's one significant difference between the school lands trusts in the Lower 48 and in Alaska and the university trust here. Those grants provided that revenues could only be used for school or university purposes. The Mental Health Trust Enabling Act in 1956 said the income and proceeds shall first be used for mental health purposes.

The legislative history showed that Congress had no idea what it would cost, nor did they have any idea how much revenue would be generated, and so what they wanted to do ‑‑ what they tried to do and what the language of the statute did was gave the territory the power to generate revenues from these lands if there were not enough to fund the mental health program, the anticipation was the territorial legislature would come up with additional funds to fund the programs.

If there were huge revenues, the anticipation was the territory would use what it felt was appropriate for mental health purposes, and then the balance could be used for other things. And this is a major distinction between the Mental Health Trust and the school trust in that the federal legislation did not require all income from the mental health lands to be used for mental health purposes. When ‑‑ BILL SCHNEIDER: That's written into the legislation? TOM KOESTER: It's written into the legislation. Yes.

Section 6: And in addition, Congress didn't know whether the ‑‑ the territory could generate revenue while holding onto the lands. And so basically, what Congress did, unlike in the school trust and the university trust lands, there was no requirement that the legislature retain the titles to the lands. It could sell them.

And unlike the school trust, if ‑‑ for instance, if university lands are sold, the money goes into a trust fund very similar to the Permanent Fund. You cannot spend the money that's generated, you invest it and you earn money, and you can spend the money that you earn.

In the Mental Health Trust Enabling Act, Congress provided that if the territory were to sell the lands, it did not have to keep the proceeds in perpetuity in a permanent fund. It could spend those directly. At statehood, Congress confirmed this mental health land grant from the territory to the state, transferring it, so that the state now had these lands.

Because the Mental Health Trust Enabling Act was in 1956, the Statehood Act came in 1959, which authorized the selection of 104 million acres of lands. The territory had already begun selecting mental health lands, so in effect, they were the first lands. And as you might imagine, the territory had no idea whether statehood was coming or not, so it was picking the best lands it possibly could.

A lot of lands surrounding communities, a lot of lands that had mineral potential, a lot of forested lands with good timber, with the idea that it was going to make some money off these lands. So they are ‑‑ they are good quality, they were good, quality land selections.

As anyone who's lived in Alaska for any period of time knows there are huge conflicts over land use, whether a particular tract should be logged or mined or sold or granted for homesteads or put in a park or made part of a wildlife refuge. And so there are huge competing interests.

While there ‑‑ the problem with the Mental Health Trust Lands was the mandate was to generate money from them, which pretty much restricts your ability to make it available for a homestead at low cost or less than market value. You have to generate fair market value. Makes it difficult, if not impossible, to put into a park or a wildlife refuge because you're not generating money from it.

And the consequence was that because these lands were valuable for a variety of purposes, because many of them were close to communities that wanted to expand, the number of conflicts grew to the point where the legislature said, you know,

it would really help us if we could move out of the land development business, if we did not have this mandate to generate money from these lands, and instead could simply manage them as our constitution requires for the highest and best use of the land, the best public purpose of the land.

So what the legislature did in 1978 was it, in effect, said we're going to take all these lands out of the Mental Health Trust and we're going to take the lands out of the school trust and the university trust, as well. In return, we're going to dedicate a percentage of revenues from all state lands to these programs.

I think the mental health enabled ‑‑ the mental health provision was for 1 and a half percent of public land revenues, would be dedicated ‑‑ put in a trust fund and administered for mental health purposes under the terms of the grant.

The problem was the legislature never put any money in the trust fund. And the people in the mental health community concluded that really, this is nothing but theft; that here this trust had been set up with these lands designed to raise money to go for mental health programs, and the legislature simply took them and said we're going to do whatever we want with these lands by administering them for their highest and best use.

Section 7: That led ‑‑ in turn led to the lawsuit in 1982 by members of the mental health community, Vern Weiss, to, in effect, reconstitute the land trust, to get the land back.

Well, the problem was the state only had about a third of that million acres left. It had conveyed a bunch to municipalities, it had made it available for private ownership, it had put it in parks, wildlife refuges. It ‑‑ it simply couldn't happen. The Superior Court basically ordered the state to reconstitute the trust.

The Supreme Court said, well, we want the trust reconstituted, but because the Mental Health Enabling Act did not require that a trust fund be established, a permanent fund, but enabled the state to, if it were to sell lands, to use the money that it had obtained by selling the lands to pay for programs, the state is entitled to a setoff against whatever liability it might have in terms of reconstituting the trust, is entitled to a setoff for the money it has spent on mental health programs.

So there are two ways to reconstitute a trust. One would be to put land back in, another would be to determine the fair market value of the land and come up with a pot of money to pay for the land that was ‑‑ that was taken.

With this provision for the setoff that the Alaska Supreme Court authorized, all of the state's expenditures for mental health would have counted against whatever monetary liability the state had to the trust. I'm not sure I'm ‑‑ BILL SCHNEIDER: All of the state's expenditures for mental health?

TOM KOESTER: Would have counted as a credit against the debt the state had to the trust. That, I think, really upset the people in the mental health community because unlike the school trusts where if they were to reconstitute the school trust, there would be some land and a large pool of money that could never be spent but could be used to generate income, like the Permanent Fund does, the Alaska Permanent Fund.

Here what the courts said the State could do was simply establish the debt to the Mental Health Trust, and then credit against that debt all of the money that it had spent on mental health programs from the date of statehood.

It raised a host of issues, of course. What's a mental health expenditure? Who knows. Maybe only the direct payments to mental healthcare providers, psychiatrists, caregivers. Maybe the administrative expenses of the program would count.

Maybe putting a stoplight in where there's a school because it makes people feel better and feel that their kids are safer. It ‑‑ it raised this entire gamut of issues, how do you determine what these expenditures are.

Section 8: So the legislature established the Interim Mental Health Trust Commission. George Rogers was the chair, who you've interviewed for this project. And it tried to go about the task of determining the value of the Mental Health Trust Lands that could not be returned to the trust, and the expenditures that had been spent.

Well, when it looked like there was going to be some real money involved here, a group of other folks who feel they should have been covered by Alaska's mental health program emerged.

They included not just the traditionally ‑‑ what we traditionally think as the mentally ill, clinical depression, bipolar disorder, things like that, older people with dementia, chronic alcoholics, developmentally disabled, what used to be mentally retarded.

So they argued that they should be covered by whatever program comes out of this Mental Health Trust. And the Court agreed. So now the population entitled to benefits from this program expanded greatly, but the lands didn't expand any greater.

The lands were still the same. But obviously, mental health expenditures for these other groups now needed to be counted against the state's debt to the trust as part of that setoff, what the Court called the setoff.

It was really, really difficult with this array of parties involved in the litigation, and so during the Hickel administration, an effort was made to, let's eliminate all these counting issues and let's reconstitute a land trust. Let's just go back and rebuild the trust with land.

Well, as you might imagine, if you're going to start dedicating state land to a single purpose, which is to make money, a lot of people in Alaska don't think that's the best use of some of this land. And because the best way to make money is to use high quality land, a lot of this was land that had high qualities for other things, like parks and wildlife refuges. So the environmental community joined the lawsuit to try to prevent the dedication of land to making money.

So now you have the mental health plaintiffs who want a land trust where the land will be dedicated to making money, you have the environmental money that really doesn't want to see a lot of this land developed because the highest and best use of this land, in their opinion at least, is for other things that may not generate much in the way of money.

So it's ‑‑ it's really, really complicated. And I think at ‑‑ at some point during the Hickel administration, the conclusion was reached that you can't really do that. You can't really reconstitute an entire land trust. It's going to have to be something else.

Section 9: The final solution was what we now have in place. It was the creation of the Alaska Mental Health Board, I think, which encompasses what we traditionally think of the mentally ill, developmentally disabled folks, older people with dementia, chronic alcoholics with psychosis, four groups, beneficiary groups of the trust.

Some of the land that the state still had title to was transferred to the trust to be administered by ‑‑ by the trust to generate funds for mental health programs, and $100 million was put in a fund to be invested along the same lines that the Permanent Fund invests its ‑‑ the corpus of its monies and generates revenue.

All of these are to be used for mental health purposes, and the legislature appropriates the funds to the Trust Authority and to various mental health programs around the state. I hope I got that ‑‑ BILL SCHNEIDER: Yeah. TOM KOESTER: ‑‑ in an understandable explanation. BILL SCHNEIDER: No, I think that's good. But let's go back to what your role in this was.

TOM KOESTER: Well, my role was to try to walk down the middle. And depending on what ‑‑ my first role was to represent the state in the lawsuit before the Alaska Supreme Court pointing out to the Court that this trust is somewhat different than the school trusts.

It ‑‑ because the state had the power to sell the land and spend the money, my view has always been that if we were to go back to the date of statehood and we could somehow reach an agreement as to what the value of the lands were, and reach some sort of an agreement, whether it was consensual or the Court made a final determination, we could total up all the state expenditures since statehood.

And if we were to do that, my suspicion is that the total of the state expenditures on mental health programs greatly would have exceeded the value of the land. I think if ‑‑ if we've learned much about land in Alaska, it has an inherent value that doesn't always translate directly into a monetary value.

If you happen to get lucky and hit a Prudhoe Bay, it's worth a lot. If you think it's a mineral belt, it may not be worth much.

And as evidence of that, most of this mental health land in the mineral belt has been available for mining claims, which basically can be obtained for free. And yet it's never been claimed. Nobody's even tried.

The plaintiffs in the mental health case, obviously, were trying to maximize the value of the land because that would mean more money. So there were huge difficulties trying to reach an agreement. We're talking a million acres of land. This isn't like, you know, it's a 10‑acre parcel at the end of the road and you can have an appraiser go out and tell you what.

We're talking a million acres. That's a hundred thousand 10‑acre parcels. And trying to appraise land in that quantity, a lot of which obviously is still undeveloped in the wilderness, much of it's not even surveyed, it would be a Herculean task. And so we tried to come up with a number of ways to sort of shortcut that process.

Well, any time you do a shortcut, it's easy to criticize it and to say, well, well, that's not fair or not accurate or not correct. And I think that's the reason that we ‑‑ we never got to the point where we could say, this is what the land is worth, this is how much was spent on mental health programs, do the simple arithmetic and either the state has already bought the trust by all of its past expenditures, or it owes some money in the future.

Section 10: Much like the Native Claims Settlement Act, there was political impetus to solve this problem. The Native Claims Settlement Act grew out of the fact that oil was discovered on the North Slope, oil companies had leased it from the state and wanted to move forward with development.

Alaska Natives said there's a legal doctrine called Aboriginal Title which basically means that indigenous people have an ownership interest in land unless and until Congress extinguishes it. Congress never did it, so we still have an ownership interest in this land that the state has leased and the oil companies want to develop.

In effect, that stopped the development of Prudhoe Bay until this title issue was resolved. And I think it was recognized on the political front that it's a whole lot easier to negotiate a resolution than it is to try to impose one unilaterally.

And the consequence was the Alaska Native Claims Settlement Act. 44 million acres of land, nearly a billion dollars, $999 million in cash, the creation of the Native corporations, and the extinguishment of aboriginal title. That freed up the development of the North Slope.

The same sort of situation applied here. I mean, cities had Mental Health Trust Lands that they wanted to develop, there were Mental Health Trust Lands in parks, in wildlife refuges, and the Court said there's this cloud on the title that has to be resolved before we can move forward.

Again, we're sort of back in the pre‑1978 situation where we want to use the land for the highest and best use. The only way to do that is to resolve this issue. And that's what the impetus was, to ‑‑ to try to settle it politically.

The mental health community, properly so, is a very sympathetic constituency, not a very powerful one in terms of being able to get in there with the schools, public safety issue, road construction, when it's fighting in the legislature for funding. This really gave it a weapon, I mean, a considerable leverage, political leverage.

And so the consequence was that the series of statutes, the Interim Mental Health Trust Commission, the effort to reconstitute it as a total land trust, and the one that we now have where we have the Alaska Mental Health Commission with a land arm that manages mental health land to generate revenue,

and an investment pool, a pool of funds that it invests to generate revenue was politically feasible because it would eliminate these issues, eliminate the issues in terms of how the lands are going to be used.

And I think it's a resolution that ‑‑ that since 1994 has actually proved to be pretty satisfactory. I don't think the mental health community feels that it yet is getting the kind of attention and funding that is appropriate. On the other hand, that's a debate that I think if you ask any particular constituency, whether it be educators or people concerned about crime, it's easy to find people to say we're not getting enough, you know, we should be a higher priority.

But I think it has worked at least on resolving the questions with respect to the land management. And it's no longer nearly as much of an issue. I mean, there ‑‑ there are localized issues. For example, the Mental Health Trust Authority owns some very attractive waterfront property in downtown Juneau. And my guess is they will find a way at some point to make a significant amount of money out of that.

How that will occur, obviously, is going to be a big public debate. Many people would like to see a waterfront park. But it may be that the most revenue can be generated by building a high‑rise hotel. So there ‑‑ there are going to be sort of localized conflicts with respect to the land that the Mental Health Trust Authority owns, but it's a much smaller pool of land.

And all of the transactions that have occurred in the past have now been validated. So there's not a threat to people who have purchased Mental Health Trust land and built a home on it. And prior to the resolution, prior to the settlement in '94, there was a cloud on their title because of this lawsuit.

Section 11: BILL SCHNEIDER: So you were really walking that tight rope between the state's position of highest and best uses, and provisions of being able to sell off ‑‑ a provision that they could sell off trust lands as long as they had met the Mental Health Trust needs. TOM KOESTER: Uh‑hum.

BILL SCHNEIDER: And this other question that you raised of the fact that the money that the state had spent on the Mental Health Trust equaling the value of those lands? Is that correct? TOM KOESTER: Well, we never reached that point. BILL SCHNEIDER: Yeah.

TOM KOESTER: And, you know, in my mind, looking at interest strictly from the point of view of the state and trying to fulfill the highest and best use mandate in the Alaska Constitution, one of the ‑‑ Article 8, the natural resources article, the legislature is directed to provide for the utilization of all the state's land for the maximum benefit of the people. And that's sort of a ‑‑

BILL SCHNEIDER: Is that a conflict with the Mental Health Trust?

TOM KOESTER: It -- it -- it can be a conflict with using the land only to generate revenue. For example, if the highest and best use is as a wildlife refuge, you're not going to make money on a wildlife refuge. If anything, it's going to make it pretty much valueless in terms of dollars because it has a very high intrinsic value for wildlife purposes.

It's hard to get the ‑‑ I would say, and perhaps an easy way to think of it is if the trust owns waterfront property that would sell for $250,000 an acre, but it's perfect for a waterfront park with picnic tables and campfire rings, it's ‑‑ it's very unlikely you're going to get $100,000 out of each acre of that waterfront with picnic tables and campfire rings.

You'd have to charge so much nobody could ‑‑ nobody would go. But if that's the highest and best use of that land, the Constitution says, well, that's what it should be used for. It should be used for that.

Well, some people might not believe it, the state never has totally unlimited funds, and so you're always competing. Well, should we give the trust $100,000 for this acre and make it a park? Maybe we don't have $100,000. If you have a million acres and they are worth $100,000 each, that's a hundred thousand million. Whatever ‑‑ whatever that is. And there's not that much money to ‑‑ to buy all of that land.

BILL SCHNEIDER: Was this problem realized at the time of statehood?

TOM KOESTER: No. I mean, it ‑‑ it becomes ‑‑ it becomes a problem when the decisions are made, and at statehood, not all of those decisions had made. Not everybody knew what they wanted to do with all this land.

And so that's ‑‑ that's an ongoing process where someone will come in with a proposal to put ‑‑ let's add a thousand acres of mental health land to Creamer's Field Wildlife Refuge in Fairbanks. So now there's a proposal on the table. That's when the conflict arises is when you have a proposal on the table.

Otherwise, it's just sort of an abstract notion, here's a million acres of land to generate revenue for this purpose, and then according to the Court, if you spend money for that purpose, then you can get that as a setoff or a credit against your debt.

BILL SCHNEIDER: But at the time of statehood, had the Mental Health Trust Lands been designated?

TOM KOESTER: I'm not sure all of them had been selected. It ‑‑ it was a ‑‑ it was a pretty rigorous selection process. And it ‑‑ it's very complicated, as anyone who has dealt with the other Statehood Act grants to the state and then the Native Claims Settlement Act, which came along and granted lands to the Native corporations that were created as a consequence.

So it becomes a very ‑‑ a very complicated administrative task first to identify the lands, determine if there are any prior conflicts, prior conveyances, encumbrances like rights‑of‑way and things like that, and then to go through the process of getting trans ‑‑ title transferred from the federal government to the state.

Section 12: There was one other sort of kicker that came into this whole situation, and that is that the Alaska Constitution has a prohibition on dedicating funds. In the Lower 48 and the school trust, all of the revenues from those lands are dedicated to the specific purpose of schools.

During the Constitutional Convention, the framers of the Constitution looked at the experience in other states where revenues from a particular source were dedicated to a particular purpose, and basically concluded that that's not a very good idea.

The classic example is the Texas Railroad Commission, which has hugely valuable lands for oil and gas development, and its purpose is to fund the University of Texas, not the public schools in Texas. So the University of Texas is probably the ‑‑ the best endowed, if that's a proper term, has the largest endowment of any public university.

Before going to law school, I worked at the University of California San Diego, and the ‑‑ the concept was that the University of Texas was buying Nobel laureates from other universities by offering more money because they had so much. And at the same time, the Texas public schools were ‑‑ were very poor. They were ‑‑ they were very poorly rated.

The ‑‑ the point was the constitutional framers here in Alaska looked at that and said, that's not a good thing. So to the extent we are able and unless it's required by federal law, we're going to prohibit people from dedicating any particular revenue source to any particular purpose, which is why we don't have a ‑‑ a mental health trust where the money automatically goes to mental health programs.

It's funneled through the legislature, and the legislature can choose whether or not to appropriate all of the money from the Mental Health Trust to mental health programs or not because that was what the federal law provided.

And because the federal law provided that the state could have that discretion, this constitutional prohibition on dedicating the funds to that purpose requires that there be a decision made whether to appropriate all, part, or more.

And I don't know what the ‑‑ what the budgetary implications of that have been. If I had to guess, my guess would be that the legislature appropriates more money for those programs than is generated from the land and the revenue from the trust funds, but I don't know that for sure. But that's my suspicion.

Section 13: BILL SCHNEIDER: So who were some of the players that you were involved with on a day‑to‑day basis on this case? TOM KOESTER: Well, the ‑‑ Steve Cowper filed the case on behalf of Vern Weiss, so I was obviously involved with Steve Cowper. It was assigned to Judge Taylor in Fairbanks, and it was before Judge Taylor that we had our first hearings.

Steve Cowper was succeeded by Bill Counsel and David Crosby, when he became Governor, transferred the case to them. They were succeeded by David Walker and Jim Gottstein.

When the interveners came in, Phil Volland represented, I believe, alcoholics with psychosis; Jeff Jessee represented the developmentally disabled. The Sierra Club Legal Defense Fund, which is now Earth Justice, came in on behalf of the environmental community.

The Interim Mental Health Trust Commission, George Rogers was the chair. I don't remember all the other ‑‑ all the other members. I'm sure I'm leaving ‑‑ BILL SCHNEIDER: That's fine. TOM KOESTER: ‑‑ leaving a bunch of people out at this point.

Section 14: BILL SCHNEIDER: So you were ‑‑ you were trying to argue the state's position on ‑‑ TOM KOESTER: Right. BILL SCHNEIDER: ‑‑ on the issue? TOM KOESTER: Right. Trying to determine the state's position is always somewhat difficult. My sense always was my client ‑‑ the ultimate client is the people of the state of Alaska.

So I'm trying to do what ‑‑ what I think is the best way to advance the interests of all the people; not just the mental health community, but everybody else. I would take my direction from the Governor, who would filter it through the Attorney General.

BILL SCHNEIDER: And the governor then was? TOM KOESTER: Well, the governor was Hammond when the lawsuit was filed, and then it proceeded, you know, from governor to governor through 1994. So it's probably in 1982, that's a 12‑year period. BILL SCHNEIDER: Yeah. But you had ‑‑ which administrations were you involved in that with? TOM KOESTER: All of them. BILL SCHNEIDER: All of them? TOM KOESTER: It would have been ‑‑ BILL SCHNEIDER: Okay.

TOM KOESTER: ‑‑ Jay Hammond, Steve Cowper, and Bill Sheffield, I think ‑‑ BILL SCHNEIDER: Uh‑hum. TOM KOESTER: ‑‑ were the ‑‑ I think that's the ‑‑ and Walter Hickel. So there were ‑‑ there were at least those four governors that ‑‑ that I worked ‑‑ in effect worked for.

And all of this comes through the lens of statutes passed by the legislature. So it's not like there's total discretion to decide what your position is. The statutes constrain the discretion that the Governor has to decide which direction to move on a particular issue.

And ‑‑ and things did change over time. The first ‑‑ the first thing was the Mental Health Trust ‑‑ Interim Mental Health Trust Commission, the one that was to value the lands and determine how much money was spent. And then see what the ‑‑ what that difference was, if any, and which way it went.

That became unworkable so that then that shifted to let's reconstitute a land trust. Let's just go do it again. You know, rebuild it the way it was. That brought in the environmental community, and so politically, that was no longer a very viable solution.

Section 15: So it ‑‑ it continued to evolve to the point where finally the least onerous alternative, which is probably a way to think of it, the least onerous alternative was we'll create a smaller land trust and a pool of money and create a new state agency, the Alaska Mental Health Trust Authority, to administer both.

To administer the lands to generate revenue, to administer the pool of money to generate revenue through investments, and then to make recommendations to the legislature about how to spend the money generated. And then the legislature makes the final decision on whether or not to spend the money in that way.

And that's probably the best way to do it. I think it has ‑‑ it has helped the mental health community considerably in that now there is a centralized voice for their concerns, the Mental Health Trust Authority.

In the past, there wasn't, and the unfortunate scenario, in my mind, has always been that because the mental health constituency is not real large and is not real powerful and was fragmented among these groups, the aged dementia, alcoholics with psychosis, developmentally disabled, and what we traditionally thought of as mentally ill, you had these four groups competing with each other.

And so it was sort of like here are the people around the table, the construction industry wanting capital projects, educators wanting school funding, people concerned about crime wanting public safety dealt with, the kinds of things that government does on a huge scale, here were these four small constituent groups kind of like scrambling for the crumbs that happen to fall off.

Now that they're united under the Mental Health Trust Authority, under the umbrella of this agency that has land, it has money, I think their voice is stronger now. BILL SCHNEIDER: Even those the ‑‑ TOM KOESTER: ‑‑ than it has been in the past.

BILL SCHNEIDER: Even though the State has some control as to how that money's spent? TOM KOESTER: Right. I think the difference is that now there is a centralized authority that has a focus on all of these groups collectively and brings them together to make one more powerful voice than the four individual voices that used to be out there.

And there's a ‑‑ there's a lot of moral suasion, I ‑‑ in my mind, if this entity, the authority, is generating this revenue for the public, there's certainly a lot of moral authority that ‑‑ a moral imperative that that money should go back to the purpose that they are trying to advance.

And so in that sense, I think it has been that the benefits to the mental health community go beyond simply the re ‑‑ recreation of the trust itself. And I think that the goal on the Mental Health Trust community ‑‑ the ultimate goal has always been we want more for programs.

We want more and better treatment options and alternatives, certainly not ‑‑ so we can have them here in Alaska and not send people to Morningside Hospital or turn them loose on the street. And so to the extent that was the goal, I think it has been realized in ‑‑ in large part.

Section 16: BILL SCHNEIDER: Why don't you think the case was settled during the Cowper administration? TOM KOESTER: Because it was hard. I think that's ‑‑ I think that's the ‑‑ you know, the simple answer. Obviously, Steve had a ‑‑ had a conflict.

BILL SCHNEIDER: Explain that to me. You know, in my interview with Steve Cowper, I asked him that question, and I asked John Malone that question, and I'm still wondering about it. If I was Steve Cowper, wouldn't I, as Governor, want to champion this cause having ‑‑ TOM KOESTER: Absolutely. BILL SCHNEIDER: ‑‑ name on it? TOM KOESTER: Absolutely.

But the ‑‑ the distinction is when he was representing the mental health community when he filed the lawsuit, his obligation, his loyalty, his fiduciary duty was to that constituency. When you're the Governor, you have that duty to all constituencies. You can't say, I'm going to favor this constituency over everybody else because I really like them.

I mean, as a ‑‑ as a policy matter you can do that, you can ‑‑ but as a political matter, it's not ‑‑ it's unlikely because you do have all these political constituencies that are bringing their influence to bear not only on you, the Governor, whose constitutional duty is to everybody, you take an oath that you're going to uphold the laws.

BILL SCHNEIDER: But isn't his constitutional duty to settle the case, too, in that there was a determination of wrong? TOM KOESTER: Well, sure. Well, and that was ‑‑ that was the attempt that was being made. You know, the attempt that was being made was first through the Interim Mental Health Trust Commission, and it turned out to be a practical impossibility to do it in that way.

So then, okay, Plan B is we'll recreate the land trust. Well, as a political matter, that, too, was a practical impossibility. So it went to Plan C, which is what we now have. BILL SCHNEIDER: Uh‑hum.

TOM KOESTER: But I think each of these ‑‑ each of the potential solutions were explored in sufficient detail to ‑‑ to rationally conclude that really, they are not ‑‑ we can't do it this way. We need to come up with something new. And so any time you go back to the drawing board, obviously, the first step is you've got to come up with some creative ideas about how to do it.

Then explore whether that's politically doable as a concept, and then if it's politically doable as a concept, then whether it's political ‑‑ practically ‑‑ whether it's doable as a matter of practice, as a practical matter. And I think the third time we did it, we got it done. I ‑‑ I guess that's the way I would look at it.

Section 17: BILL SCHNEIDER: Yeah. Back to ‑‑ back to Cowper for just a moment. Was ‑‑ you said politically he couldn't do that. Legally, could he have pushed? TOM KOESTER: Certainly. Oh, yeah. But it would have had to ‑‑ you know, the legislature would have had to agree to it. Remember, it was a legislative act that was at issue, the 1978 law that re-designated the lands.

BILL SCHNEIDER: But, it seems to me, I would have argued that he could have pushed his commissioners harder. TOM KOESTER: Possibly -- Possibly. Let's see. I can't recall the date of the first Supreme Court decision.

BILL SCHNEIDER: I don't recall it. Let's stop for a minute. I'm going to change tapes. And then we'll come back on for a little bit. So, we're going to stop here and change tapes. TOM KOESTER: Okay.