In part two of this three part interview, Jeff Jessee continues being interviewed by Bill Schneider with videography by Deborah Lawton and Aaron Elterman of KUAC radio/tv, Fairbanks on November 30, 2009 in a recording studio at KUAC radio/tv on the University of Alaska Fairbanks campus.
Digital Asset Information
Project: Alaska Mental Health Trust History
Date of Interview: Nov 30, 2009
Narrator(s): Jeff Jessee
Interviewer(s): Bill Schneider
Videographer: Deborah Lawton , Aaron Elterman
Transcriber: Carol McCue
People Present: Karen Brewster
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Section 1: Developing ideas for how to re-work settlement of the Mental Health Trust lawsuit, and involvement of Anchorage attorney, Julian Mason.
Section 2: Involvement of stakeholders in making decisions and negotiating details of the Mental Health Trust lands aspect of the settlement.
Section 3: How the Mental Health Trust Authority obtained its current office in Anchorage.
Section 4: Continuation of how the Mental Health Trust Authority obtained its current office in Anchorage, and disparate stakeholders working together to negotiate a settlement.
Section 5: Assessment, valuation and selection of the land for settlement of the Mental Health Trust lawsuit, and back and forth negotiating with the State of Alaska.
Section 6: Negotiating options for management of the Mental Health Trust lands and assets as part of the settlement, and developing the idea of the Mental Health Trust Authority framework.
Section 7: Integrating the Mental Health Trust Authority with the state’s existing mental health programs to produce a comprehensive mental health plan, and negotiating with the state legislature and administration over management of the programs and budgets.
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Section 1: BILL SCHNEIDER: So you guys were back in the game?
JEFF JESSEE: We were back in the game. And now we were in the front of the pack as opposed to the back of the pack. And so we started fleshing out some of these ideas that we had about how to maximize the benefit to the beneficiaries regardless of whether we ended up with a hundred percent recovery on the asset side.
And a story I tell about that is that the issue was control; who was going to control the assets in the trust. Was it going to be the legislature or could we find some way of developing a substitute trustee that could have more control over whatever assets we got.
And the story I tell, it's a true story, my daughter was just a little over 2, and a very bright child, and I took her to Carrs, and I showed her $20. And she knew $20 was a lot of money. And I said, Morgan, you can have this $20, but here's the deal.
We're going to go through the store and I'm going to pick out $20 worth of things that I think would be really good for you, or you can have $2, but you can get anything you want with your $2.
And at a little over 2, she asked me one question, anything? And I said, anything. And she had those $2, and we left with the biggest package of Skittles I've ever seen in my life. And at just over 2, she knew that $2 you controlled was way better than $20 that somebody else controlled.
And that actually formed the basis for our approach to settlement, that it would be way worth it to give ground on the asset side if we could construct a framework in which a trustee would truly act with an undivided duty of loyalty to the beneficiaries.
And so we took the beginning framework of the Trust Authority that Jim and David had worked on and put teeth into it, and ‑‑ and worked on that side of the equation, but the asset side was still tricky. You know, we couldn't just write off half a million acres.
And then Harry did something that turned out to be, well, I think without a doubt, one of the best things that he did toward settlement is he hired an attorney named Julian Mason of Ashburn & Mason in Anchorage.
And Julian was a very ‑‑ is and was a very well‑known and respected attorney who had settled, negotiated and settled on behalf of the state some of the big oil tax royalty cases in the past, and definitely a heavy hitter. And so Harry brought Julian in, and said, here, I need you to work on settling this case with these guys.
And Julian is one of the most incredible people I've ever met. First of all, he's just flat out brilliant. I mean, he's just brilliant. Second, he's totally unassuming and exceedingly polite and kind, and you know, even though I was still way out of my league, you know, Julian was ‑‑ always treated me with great respect.
Section 2: And Julian ‑‑ it doesn't seem like much now, but Julian had this sort of basic way of going about being a catalyst for settlement. He took a legal pad and he turned it sideways and he made a bunch of columns, and then he listed each of the stakeholder or interest groups or antagonists in this whole drama in each of the columns, and then he went around and interviewed them all.
And said, well, what do you need out of a settlement for this to be a success for you? And you know, of course, the coal miners needed their leases cleared and the ability to lease additional coal lands. Local governments that had selected good trust land wanted good title to the lands that they had selected.
Of course, the moms and pops, the people that had gotten little parcels needed to have their title cleared. The environmentalists were concerned about any additional environmental degradation or development of pristine areas, and they didn't want to see that happen. And of course, Philip and I needed to see that there was a way for the assets to be used on behalf of the beneficiaries.
And so after he had sort of filled out this chart, he got us all together in a room and said, well, I guess this is how it has to work. There has to be some replacement land but not too much and not the wrong kind, and all of the existing leases and ownership has to be cleared of title, and you know, kind of goes down the list, and there has to be a trustee, a substitute trustee, and you know, let's get busy.
And so we started negotiating with all of these folks, which was really the first time that the stakeholders had been that intimately involved in the negotiation process.
And so we sat down and we got to, well, let's say timber. We knew what ‑‑ we were losing a lot of timber, a lot of the big trees in Haines and areas like that, so we needed to get some timber back.
You know, and of course, half of the land we could still get back. So we started with a half a million, we needed about another half a million acres of replacement land.
And so okay.
The environmentalists came in and said, well, we don't want you to have any pristine timber, you know, old growth or, you know, stuff that hasn't been logged, so if you're going to get timber, get it where timber is already being harvested, Icy Cape, Thorne Bay.
Well, that was good for us. You know, those areas already had log transfer facilities, they had roads. If you're going to go into the timber business, it's better to get timber lands near other timber activities. And so we were able to get some timber back.
When it came to local governments, they wanted their selections honored, so they were told they had to kick something in. And so basically, each community said, all right, all right, you know, we don't want to give you this original trust land because, you know, we have something going on here, but here's this other piece of municipal land, we'll give you this.
Section 3: And in fact, there's a sidebar story, that's how the trust ended up with our office in Anchorage, by mistake, as it turned out. I don't know if you want to hear that story.
BILL SCHNEIDER: Yeah, sure. Sure.
JEFF JESSEE: Oh, this is a great story. So we're looking at all these maps, and there's this parcel in Anchorage that starts at Northern Lights and Bragaw, and there's a big empty lot, and then there's the Trust Authority building.
Well, the Trust Authority building was originally built in the '80s by a consortium of five nonprofits: Campfire, Youth and Parent Network, a couple of other organizations. And again, in the roaring '80s, they had gone to Juneau and talked the legislature into giving them several million dollars to build this building for them to have their programs in;
and then got the Municipality of Anchorage to give them a dollar a year lease for 25 years on this parcel, which included not only where the building was built, but also this vacant lot on the corner, which is a very valuable piece of property.
And so when ‑‑ and Jim was helping us with the land selections, you know, because, you know, now, we had sort of made up.
BILL SCHNEIDER: Jim Gottstein?
JEFF JESSEE: Jim Gottstein. And so we looked at that parcel. And at first we were sort of saying, well, no, let's not take this because the ‑‑ you know, these nonprofits, you know, have this building, and the parcel wasn't subdivided. And we don't have time to subdivide it. You know, so, nah, let's not take it because, you know, they own the building and that won't work.
Well, but then Anchorage didn't really want to give us anything else, and so we ended up coming back to it. And ‑‑ finally we decided that, well, no, why don't we go ahead and take it. We won't get the part the building's on, but later, you know, we'll subdivide it and then we'll have the corner parcel. And so we said, all right, all right, we'll take it. So it goes on the list.
Well, long after the settlement was done, and the Trust Land Office came into existence, somebody went, at the Land Office, and read the lease that the municipality had given the Family Resource Center. And it turns out that under the terms of the lease, at the expiration of the lease, all the improvements returned to the ownership of the landowner, which apparently is a fairly common lease term.
Well, that would have been okay if the muni still owned it because they would have given the Family Resource Center another dollar a year lease on the building and the land, but we were going to own it. And we couldn't do that because we had to get fair market value.
Section 4: Well, the problem was that, over the years, some of these agencies had either gone out of business or had moved to bigger quarters, and the survivors in the building, rather than bringing other agencies in to use that space since it was so cheap because all they were paying were operations and maintenance, they had just expanded.
And so Campfire, for example, had a huge percentage of this building occupied. Well, they were going to have to pay fair market rent. Well, they couldn't afford it.
And they were very unhappy. In fact, I remember when the Land Office called and told me that, hey, by the way, you know, we're going to get ownership of this building. I remember going, oh, no.
This is going to be a mess, a big mess. And it was. And because they thought they ‑‑ they had no idea this lease read like this; those agencies thought they owned the building. Well, they didn't own anything.
And so we tried to help them as best we could and ‑‑ and it took a couple of years for them to kind of get used to the idea, but eventually ‑‑ and we helped them financially ‑‑ they had to move. And so we ended up with this building.
The state ‑‑ we were in the Atwood Building in downtown Anchorage, and the state's a terrible landlord. And so finally, we decided that, rather than keep fighting the state for more space in the Atwood Building, we would just go to our building.
So we accidentally ended up with the Trust Authority Building. But that was an example of how we cobbled together all this replacement land. In fact, this group became known as the Unholy Alliance because you had the miners and the developers sitting down with Cliff Eames from the Center For the Environment and, you know, and then once we had kind of negotiated this package, then we were all selling it in the legislature.
Section 5: BILL SCHNEIDER: But you didn't have a background in lands. How did you do the assessment planning?
JEFF JESSEE: Well, that was really Jim's job, Jim Gottstein.
BILL SCHNEIDER: Yeah.
JEFF JESSEE: And he had a former Division of Lands director, Tom Hawkins, who had worked for Jim for a number of years on the land side of the settlement.
And so they had a whole Land Office. And so we worked with them very collaboratively, and they pored over the different proposals for this parcel or that parcel, and checked out the record of title and uses and existing obligations and made sure that, you know, it was worth taking.
Now, the ‑‑ the problem was, of course, we weren't getting back land of nearly the value of our original trust land, and as you know, in a rather controversial process, the total land million acres, original million acres had been valued at 2.2 billion.
And so we weren't getting that value back, and so the idea was, well, we needed to get some cash in addition to the replacement land to help make up this difference.
And I always thought that in these billion dollar cases and you were talking about hundreds of millions of dollars that that must be arrived at in some very scientific, thoughtful, data‑driven sort of process. No. We said 400 million, the state said 50 million. We said 300 million, they said not a penny more than 100 million.
We said 250 million or we're out of here. You know. They said 150 million is our last best offer. Everybody went away mad. We came back together a week later, I don't even know who it was, somebody said 200 million, and the other side said deal.
Section 6: And so now we have our million acres of replacement land. Well, a million acres total, half original and half replacement, and $200 million.
Now the question was, well, how was it going to be managed. And, well, we had this Trust Authority concept, but there wasn't an actual Trust Authority.
And the legislature was pretty uncomfortable turning over management of these assets to an unknown, unproven entity, as were others.
I mean, the development community wasn't crazy about some new land manager springing up out of nowhere.
And of course, $200 million in cash is a lot of money. And so the idea was, well, all right. What we'll do is the cash will be managed by the Permanent Fund Corporation. It will be like a mutual fund, it will be managed as part of their portfolio, and we'll pay our share of expenses and get our share of their profit or, most recently, loss.
The land we managed by a separate unit within DNR called the Trust Land Office. They'll have their own set of regulations because you can't manage trust lands under the type of public interest balancing that DNR has to do for public lands, general public lands. And the trust will pay for the Land Office to manage the land.
And then, of course, the key to all this was that the Trust Authority had to have the ability to oversee the management of these assets and to spend the income without a legislative appropriation, which was huge, and engendered a fair amount of resistance in the legislature because, after all, that's why they are there is to spend the money.
And so this delegation was difficult for them to accept as part of the settlement.
But at this point, people were pretty desperate to resolve this case. And once the asset side had kind of gotten resolved, the land was an arrangement that everyone could live with because it wasn't contingent on something happening later.
We had the list of every single parcel. So everybody knew what was going to go back into the trust and what wasn't. The cash was manageable as an appropriation. And so eventually, the legislature agreed to this overall framework.
The one ‑‑ one of the exceptions was Senator Tim Kelly who passed away not too long ago, called me into his office one day as we were nearing the final phases of getting the settlement approved, and he says, I'm putting an amendment in here.
And I said, well, what did you have in mind, Senator?
He says, well, yeah, I understand that this Trust Authority is going to spend this money on the mental health program, but you know ‑‑ without a legislative appropriation, but that's not going to work for their administrative budget.
We're not giving some bureaucracy the ability to spend unlimited amounts of money on themselves before ‑‑ without any supervision or oversight. So I'm putting an amendment in here that the Trust Authority's administrative budget does require legislative approval.
And at the time, I remember calling it the Briar Patch Amendment because that made a lot of sense to me. You never want a bureaucracy that can pay itself first. Now, had I known I would become the CEO, I might have been a little more concerned about this amendment, but it ‑‑ it made total sense. In fact, it still does today.
And so with a few modifications like that, we were able to ‑‑ to get the settlement approved. And passed by the legislature. We had not yet gotten Court approval.
Section 7: BILL SCHNEIDER: What about the connection between Health and Social Services and the Mental Health Trust? Was there a provision in there for Mental Health ‑‑ Mental Health and Health and Social Services to work in conjunction, together?
JEFF JESSEE: In a couple of significant ways.
One was that there was one thing Jim and David brought up in the course of the ‑‑ what I called the circle‑the‑wagons‑and‑shoot‑inward phase when we were arguing over whom the beneficiaries were going to be, and that was that the state had fragmented these beneficiary groups and put them in different departments, in different divisions, and there were separate plans.
And going back even to the Enabling Act language, the intent was to have a comprehensive and integrated mental health program. And so we wanted to go back to that concept. And so we did that in a couple of ways.
One was we required Health and Social Services to develop a comprehensive integrated mental health program plan in conjunction with the Trust Authority. Now, that word "conjunction with" was critical because we had to find a word that basically no one really knew what it meant, but it conveyed some kind of a partnership.
BILL SCHNEIDER: Tell us a story of how that word got used ‑‑ developed.
JEFF JESSEE: Well, for a while, they were saying, well, the Department of Health and Social Services is going to develop this plan. Well, that was unacceptable to us because the bureaucracy would serve its own interests over that of the beneficiaries and we weren't interested in that.
Then we went through a phase where the Trust Authority was going to develop the plan. Well, that was unacceptable to Health and Social Services because, you know, they weren't willing to have some outside entity drive the department's priorities.
And so we started saying, well, all right, it has to be some kind of a partnership, but someone needs to be in charge. And so we tried a whole bunch of different words. And I remember sitting down one day and writing out, well, in cooperation with, you know, with advice from, consultation with.
I mean, went through all these things, and then finally we got to this "conjunction." And we said, well, what does that mean to do something in conjunction with someone? And everyone said, well, I don't know what that means. And we said, well, that's good because you didn't want to be nailed down very tightly to this. So that was the first thing planned.
The other thing was the budget was all over the place. And so there was nowhere that you could get a look at the entire mental health budget at once. It was broken up into these little pieces and parts. And so we came up with the idea of a separate appropriation bill just for the mental health program.
And there were two ideas behind that. One was it would give people a chance to see the entire mental health budget in one bill, both trust funding and general funds, and it would elevate ‑‑ in our hopes, it would elevate mental health to a status more like education and transportation and public safety.
You know, it would be a big piece of the budget scenario and would be easier to advocate for. And so we created this separate appropriation bill with the planning process.
And then we threw one more little wrinkle in there. And that was that the trustees would recommend to the Governor and the legislature not only what trust funds they could spend but also what they should spend out of the general fund because one thing the settlement made clear is that the settlement didn't obviate the state's responsibility to provide for the mental health program of the state.
For one thing, we knew this trust with reduced assets was not going to generate enough money to fund all these services. And so we were very specific in the settlement that the trustees would make this recommendation, and that if the Governor or the legislature failed to follow those recommendations, then they would write the trustees a letter and explain why they didn't.
And that has worked sometimes better and sometimes not over the years. It is an opportunity to have policy dialogue between the legislative and executive branch and the trust. You know, particularly in the case of the administration, the executive branch, they are often, and particularly under the current administration, pretty articulate and able to explain what their thinking is.
The legislative letters tend to be a little less ‑‑ I don't know if I want to say coherent, but you know, I mean, that's a budget that was put together by 60 people, so there were probably 60 reasons why they did one thing over another thing.
Now, there's no consequence for anything, I mean, and frankly, most of the reasons come down to we didn't have enough money, but anyway, it was a ‑‑ an attempt to ‑‑ to get that dialogue going back and forth between these branches of government and the trust. And as it turned out, the strategies the trustees used for administering the trust generated a lot of that policy discussion in any event.