Transcript

IN THE SUPREME COURT OF THE UNITED STATES

RONALD M. ZOBEL AND PATRICIA L. ZOBEL, Appellants v. THOMAS WILLIAMS, COMMISSIONER OF REVENUE, AND ALASKA

No. 80-1146

October 7, 1981

The above-entitled matter came on for oral argument before the Supreme Court of the United States at 10:02 a.m.

APPEARANCES:

MARK A. SANDBERG, ESQ., Anchorage, Alaska; on behalf of the Appellants.

AVRUM M. GROSS, ESQ., Special Counsel to the Attorney General of Alaska, Juneau, Alaska; on behalf of the Appellees.

PROCEEDINGS

CHIEF JUSTICE BURGER: Zobel against Williams.

Mr. Sandburg, you may proceed whenever you're ready.

ORAL ARGUMENT OF MARK A. SANDBERG, ESQ., ON BEHALF OF THE APPELLANTS

MR. SANDBERG: Thank you.

Mr. Chief Justice, and may it please the Court:

This is an appeal from a decision of the Alaska Supreme Court. That decision declared constitutional a statute which distributes income from Alaska's permanent fund based solely on the duration of the residency of the recipient.

The fund itself was set up in 1976 as a respository for surplus revenues. In 1980, some four years after the fund was created, this statute was passed, and it proposes to allocate one-half of the income of the fund. It is this statute and not the existence of the fund itself which the Appellants challenge.

The case is unlike every other durational residency case which has come before this Court. In those cases the durational residency requirement was being used as a test; it was being used as a test of domicile. Here the Appellants are unquestioned Alaskans. Here it's not being used as a test. Here it's simply being used to assign legal status to persons who are unquestionably Alaskans.

QUESTION: Mr. Sandberg, a couple of questions to straighten me out. Do you know of any other case where a state has been paying out, in effect issuing a dividend to residents?

MR. SANDBERG: No, sir, I do not.

QUESTION: And suppose a ten-year resident leaves for five years and then come backs. Would he have to start all over again under your system?

MR. SANDBERG: Well, there's a series of regulations that have been promulgated, and I forget precisely what they say, but there's a formula which would, I believe -- and Mr. Gross will correct me if I am wrong -- but I believe that he would basically pick up where he left off, but he certainly would not get credit for the time he was away.

QUESTION: If Alaska paid an equal dividend -- I call it that; it's in quotation marks -- to every resident, you wouldn't be here.

MR. SANDBERG: That is true. That is true. In other words, this case, although I have personal doubts about the wisdom or validity of giving money away to begin with, that's not what this case is about. And we haven't argued that, and we've not attempted to present that issue.

QUESTION: And may an Alaska resident qualify even though he's never paid a dime in taxes?

MR. SANDBERG: That's right.

QUESTION: And if a young man were 18 now would he qualify even though he never voted?

MR. SANDBERG: That's right.

QUESTION: So that a family of five would get five shares based on their respective units.

MR. SANDBERG: That's right. A family of five would, as long as they were all adults -- children are not included in the plan -- but as long as they were all adults, a family of five would accrue five separate shares.

QUESTION: Children are not included then.

MR. SANDBERG: That's right. No one under 18 participates in the plan.

QUESTION: What if one became 18 two years ago, would he have two units?

MR. SANDBERG: No. He would have 20, but he would not receive -- well, if someone were 17 this year, for example, he would receive nothing. If he became 18 next year, he would receive 18 units, but he would not receive the 17 that he would have received this year. In other words, it's not put in a trust fund anywhere for him; they simply don't receive it.

If the right of interstate migration and the right to acquire citizenship in the state in which one resides mean anything, they must mean that a state is not free to hand a new migrant a number at the border and say here, this number is going to determine your legal status in our local tax system for as long as you remain here.

Durational residency requirements are sometimes permissible as a test of the bona fides of a claim of state citizenship, but the constitutional minimum has to be that at some point the test is over. At some point the new resident has to acquire full, equal and undifferentiated citizenship the same as all other citizens of the state possess.

That very point was recognized by this Court 110 years ago in the Slaughterhouse cases when the Court observed that the 14th Amendment itself created a substantive federally guaranteed right to become a citizen of any state through bona fide residence with the same rights as other citizens of that state.

The Constitution doesn't allow a state to have classes of citizens. Ranking the citizenry based upon when they acquired their citizenship we believe is a direct infringement on the right of interstate migration.

QUESTION: What about classes of citizens who are denied their right to vote because of felony convictions?

MR. SANDBERG: Well, this Court has obviously dealt with that question on a number of occasions, and it has -- as I recall, what it said was that the 14th Amendment expressly allowed that. Here there's no analogous provision, we believe.

QUESTION: So your statement isn't categorically true.

MR. SANDBERG: That's correct. We certainly don't believe that this is a permissible classification of citizens, though. It is true that felons do indeed enjoy less civil rights than other people.

QUESTION: Counsel, is it your position that if the period of time were, let's say, a year before one could get the full amount, that that would be a reasonable time and therefore a valid provision? Is that your position?

MR. SANDBERG: I think that's right. We're not questioning the state's ability to impose a waiting period as one element of proving domicile.

QUESTION: How long?

MR. SANDBERG: Well, that in itself is a constitutional question, and that's the question that we believe Shapiro and Maricopa County and Sosna were about.

QUESTION: Thirty days, sixty days, something like that might be all right?

MR. SANDBERG: That's right. And in fact, the cases certainly seem to suggest that perhaps up to a year depending on the nature of the individual interest and the state interest being asserted.

QUESTION: What was the time in Shapiro against New York?

MR. SANDBERG: Well, it was a year, which was struck down there.

QUESTION: One year.

MR. SANDBERG: Yes.

QUESTION: So one year was too much.

MR. SANDBERG: For the welfare interest, that's right, because that was a significant individual interest. In other cases the Court, for example, has suggested that a year might be appropriate for higher education.

QUESTION: Mr. Sandberg, I think I heard you say that you thought this whole case was settled by a sentence in the 14th Amendment. Which sentence?

MR. SANDBERG: The first sentence. The first sentence of the 14th Amendment creates the right to be a state citizen. It's a federally secured right. That sentence was intended to overrule Dread Scott and make people citizens of the state in which they resided, as a matter of federal law.

QUESTION: It went a little further. Dread Scott was only about Negroes, but the 14th Amendment brought everybody in.

MR. SANDBERG: That certainly is our view of the situation, and that's the way the law's developed.

QUESTION: Everybody got citizenship at the same time.

MR. SANDBERG: That's right. And the citizenship which the 14th Amendment granted in our opinion is the same citizenship that was enjoyed by persons who were able to claim citizenship without reference to the 14th Amendment before its passage.

QUESTION: Yes, but your Slaughterhouse cases also said this only applied to the newly freed slaves.

MR. SANDBERG: Well, that's --

QUESTION: Which you think was wrong.

QUESTION: You have to.

MR. SANDBERG: Of course I think that's wrong.

QUESTION: How about the second sentence of the amendment: "Nor shall any state deprive any person of life, liberty or property." Does that give you any help or support?

MR. SANDBERG: We have not specifically advocated that as a basis, and I guess I honestly would have to concede that I don't know.

QUESTION: Do you make an equal protection argument?

MR. SANDBERG: Yes, we do.

QUESTION: So you do rely on that last clause.

MR. SANDBERG: That's right. We say that this is a substantive violation of the right to acquire citizenship, and we also say it is a fundamental right strand of equal protection case.

QUESTION: Well, can't it be argued that this is a classical case for the application of Justice Brandeis' doctrine in Newstate Ice versus Liebman; that we have now 50 experimental laboratories, and Alaska has now a very peculiar situation which has existed since the time of the Klondike days where there have been tremendous resources that have just been squandered away, and they are now making an effort to preserve them, and they should be given some latitude in experimentation?

MR. SANDBERG: Well, we think the Constitution can't be different from state to state, and we think that while the state puts this forth as a revolutionary new idea in government, we think it's a very old idea in government. We think the idea than some people have superior legal rights over others is as old as kings and pharoahs. We think it's a converse idea, that all citizens are equal, which is truly revolutionary.

QUESTION: Do you think this is comparable to a statute which would provide that the people in this preferred class would pay taxes according to the length of time they lived in the state; in other words, the old residents would pay half as much as the newcomers?

MR. SANDBERG: We began this lawsuit by filing against two statutes, and the first of them was almost analogous to the hypothetical which you suggested, and that was struck down on state equal protection grounds. And so yes, I certainly think that would be analogous to this.

QUESTION: This is sort of an anticipatory refund, isn't it, in your view?

MR. SANDBERG: I suppose that's right. What it really is in our view is a way of rewarding long-term residents simply for being long-term residents, and we believe that that's constitutionally impermissible. And while the state does assert that it serves various other purposes, in our view -- certainly I would never say that I don't believe that, but what I would say is that it's remarkable that it serves those only indirectly, but it's perfectly fitted to an impermissible purpose, and that's recognizing past contributions of the citizenry.

QUESTION: Mr. Sandberg, I don't understand why the first sentence of the 14th Amendment answers the question. I gather the one-year resident of the state is just as much a citizen of the state by force of that first sentence as is the ten-year resident of the state, isn't he?

MR. SANDBERG: I'm sorry. The one-year resident, if you imposed the one-year waiting requirement?

QUESTION: No, no, no. Under the statute I gather a one-year resident gets less of a bonus or whatever this proper label is than does the ten-year resident, but the one-year resident is just as much a citizen of Alaska as is the ten-year resident, is he not?

MR. SANDBERG: It's true that he has a driver's license and he votes, but he certainly has less legal rights, and he has less legal rights purely --

QUESTION: No. He simply doesn't get as much of this largesse as does the ten-year resident, isn't that it?

MR. SANDBERG: He has less legal rights purely because of when he acquired his citizenship. And thus we think you have to do more than call someone a citizen; we think you have to treat them like one.

QUESTION: Well, the theory of your case is the combination of the first sentence and the last, is it not?

MR. SANDBERG: That's right.

QUESTION: That once he's a citizen he may not or she may not be treated in any way different from any other citizen, whether it's on the tax rate imposed or receiving this bonus, as Justice Brennan called it.

MR. SANDBERG: Well, one citizen may certainly be treated differently from another when judged by neutral criteria and unrelated to the quality of their citizenship. For example, I'm not standing here telling the Court that if one person gets welfare, everybody's got to get welfare; neither certainly a neutral criterion unrelated to the quality of one's citizenship.

But what I am saying is that once a person is citizen, once they've satisfied a waiting requirement and the test is over, then they cannot be ranked on the basis of the quality of their citizenship or when they acquired it.

QUESTION: In the voting area you wouldn't go for giving a 15-year resident 15 votes and a one-year resident one vote.

MR. SANDBERG: Obviously not.

This Court has repeatedly rejected the idea that a state is free to distinguish between new and old residents in its consistent rejection of the contribution rationale.

QUESTION: Mr. Sandberg, I think your clients came into your state in 1978.

MR. SANDBERG: That's correct.

QUESTION: Would you be making the same arguments if your clients had come into the state in 1975 or 1972?

MR. SANDBERG: They would certainly have standing to file that claim.

QUESTION: What would be the difference between your position if you were representing the earlier arrivals and the position you take here today?

MR. SANDBERG: It would be no different, in my opinion.

QUESTION: And the same would be true if you went back to someone who had been there, what, 18 years?

MR. SANDBERG: Well, at least theoretically the class is everyone other than the people who were there in 1959, but as a practical matter it's perhaps like a reapportionment case that a person at some level achieves enough so that he doesn't want to rock the boat. You may not live in the most overrepresented district, but you don't want to file the lawsuit either.

QUESTION: Well, this emphasizes the first statement you made that this is entirely different from any durational residency case we've had.

MR. SANDBERG: That's right, because a durational residency requirement here is a lifetime. As long as someone's alive in the state of Alaska who got there before my clients did, they will never achieve the maximum benefit under this plan. So the waiting period here is forever.

QUESTION: But there is no more penalty imposed on your client in terms of theory than imposed on any resident who came in subsequent to the first year.

MR. SANDBERG: That's right.

QUESTION: Well, and as long as someone is alive who arrived before your clients did, they will be paying more taxes to Alaska than your clients will, will they not?

MR. SANDBERG: That's entirely possible.

QUESTION: It's possible but not necessarily true.

QUESTION: Not because of any statute.

MR. SANDBERG: It certainly would have nothing to do with this program if that were true. It's entirely possible that it could be.

QUESTION: Well, but it's also possible that these people who have been there 20 years may have never paid a dime in taxes, I suppose, isn't it?

MR. SANDBERG: Of course.

QUESTION: You may have some Indians or Eskimos who haven't contributed mightily to the economy.

QUESTION: Mr. Sandberg, would you find that the state requirements that impose, for example, a seven-year residence requirement before the person can be a candidate for a certain public office to be invalid under your theory?

MR. SANDBERG. Personally, I would have decided Chimento differently. That's quite right. I recognize there are a variety of possibilities to explain Chimento, though. One is that the lower court did indeed find a compelling interest for doing that, and it is possible that this Court accepted that. That was simply a summary affirmance, so all we know is that the Court accepted the results. Or it could be that in the political area itself, as with aliens, the rules become somewhat different. I don't know. In my view I would have decided Chimento differently.

QUESTION: This Court has not always applied the same test, has it, in determining the validity of durational residence requirements; in other words, a strict scrutiny versus some other level of examination?

MR. SANDBERG: That's correct.

QUESTION: And where do you think this case ought to fit in the level of scrutiny?

MR. SANDBERG: I think that once the state goes beyond imposing a waiting period -- well, first of all, let me address the waiting period.

When you have a waiting period, I think it may be appropriate to have a penalty-type analysis or weighing of competing interests to see how long the waiting period could be; but once you go beyond the waiting period and start classifying people who are unquestionably citizens based solely on when they acquired their citizenship, then I think you ought to demonstrate a compelling interest for doing that.

QUESTION: What about age, Mr. Sandberg? Suppose a state in its income tax setup gave someone over 70 a special exemption. Is that valid or invalid?

MR. SANDBERG: Oh, I think that's valid, but that has nothing to do with our case as long as they gave it to everyone in the state who was over 70 without regard to when they got there. Then that's simply a regular, straightforward equal protection case concerning age discrimination; and in my view that particular exemption would be valid.

QUESTION: Well, they're giving this to every resident of the state. It just differs as to amount.

MR. SANDBERG: Well, it's quite true, and the state does argue that everyone participates in the plan; therefore, it must be all right. I've heard them make that argument, but to my way of thinking that's sort of like saying Plessey vs. Ferguson there was no problem because everybody rode the train.

The real question is not does everyone participate in the program. It's how do we divide up the participants. And the way they're being divided up here is a way which we suggest is offensive.

QUESTION: That's why you rest on your equal protection argument.

MR. SANDBERG: That's right.

The state advances two purposes in its brief here: stabilizing the population and conserving the fund. We believe that neither of those may fairly be deemed compelling, but interestingly enough, neither of them are even rationally related to the retrospective features of this plan. In other words, awarding for past residents, residents since 1959 --

QUESTION: Mr. Sandberg, you used the word "compelling." Does this answer Justice O'Connor's question to you earlier? The level of scrutiny should be compelling state interest?

MR. SANDBERG: That's correct.

QUESTION: To justify this.

MR. SANDBERG: Yes. I think the state should have to demonstrate a compelling state interest to justify this sort of a classification.

QUESTION: What is your definition of a compelling state interest?

MR. SANDBERG: Well, certainly one that's more significant than stabilizing the population. I think it's --

QUESTION: Well, it's one that compels a result, isn't it? Aren't we --

MR. SANDBERG: It's where the state is really left with no choice, in my opinion.

QUESTION: Sure.

MR. SANDBERG: But the only purpose which plausibly explains the 1959 date and the retrospective features of this plan is giving more money to people who live there. It's a perfect fit with that one. It's a very rational relationship. And that's the purpose which this Court has long said was impermissible.

QUESTION: Mr. Sandburg, following up on your suggestion that there might be a distinction between prospective and retrospective application, would you say that it was irrational if the program were purely prospective and said after the date of enactment, in order to encourage people to reside in the state, we will have this bonus for long-time residents?

MR. SANDBERG: No. I think if the plan began in 1980 and ran forward and the appropriate level of review was minimum rationality, which I certainly don't think it is; but if that was the appropriate level of review, then I probably wouldn't be here.

But in this country it's never mattered that your family came over on the Mayflower. That may confer social status, but until now that sort of distinction has never conferred legal status.

QUESTION: Sometimes in Boston it's pretty important.

MR. SANDBERG: But they don't legislate it.

If I may, I'd stand down.

CHIEF JUSTICE BURGER: Mr. Gross.

ORAL ARGUMENT OF AVRUM M. GROSS, ESQ., ON BEHALF OF THE APPELLEES

MR. GROSS: Mr. Chief Justice, may it please the Court:

In the end this plan is going to stand or fall on whether I can convey to you the rationality of the dividend distribution system that's used in the plan; and that dividend distribution system is just a part of an overall plan that the State of Alaska is using to deal with a very unusual and unique problem.

We have a great deal of temporary oil wealth in the State of Alaska. The state has been poverty-stricken for literally hundreds of year, and we now have, because of the fortuity of oil being discovered on state land, temporary influx of a great deal of money.

QUESTION: Is it on state land or federal land?

MR. GROSS: It's on state land, primarily the land in Prudhoe Bay.

QUESTION: Why do you say temporary?

MR. GROSS: I'm sorry.

QUESTION: Why do you say temporary?

MR. GROSS: Because it's a finite resource, Justice Brennan.

QUESTION: But temporary is a long way off, isn't it?

MR. GROSS: No. Temporary is very quick. We're talking 20 to 30 years. That's a popular, I think, misconception, but the field depletes at something like the rate of one percent every 60 days. And there have been no other major oil finds in the State of Alaska, so we are dealing with a resource which for a short period of time will produce several billions of dollars for the state -- it's like the gold at the turn of the century -- but then will be gone, forever.

And what we are talking about is a system which will avoid repeating Alaska's past, which is great periods of wealth and then total deprivation thereafter.

Now, to do that -- I should say that our early start at this problem was not very successful. The state had its first and most major oil lease sale in 1969. It collected from that sale $900 million in a state that had a budget at the time of roughly $150 million per annum. And within six years the money was all gone, and government programs which had been established by legislators who were interested in both the pressing needs of the state and their own political futures were running out of funds. The state was on the edge of bankruptcy.

What happened then was, of course, that finally the oil money started to come in again, primarily through the construction of the pipeline; and now we are faced with the same problem: a temporary influx of oil dollars, and the problem is how to make them last.

Now, to do that we have embarked on a rather unique plan in Alaska. It's never been tried before. The Governor proposed, and the legislature eventually adopted, and the people overwhelmingly passed a constitutional amendment establishing what has been referred to as the Permanent Fund.

The constitutional amendment provided that at least 25 percent of the bonuses and royalties from oil would be placed in this fund. The fund itself may not be appropriated for any purpose by the legislature. The only thing that may be used is the interest from the fund.

Now, of course, that does two things.

QUESTION: Can the state borrow from that fund itself?

MR. GROSS: I don't believe the state may borrow from the fund. The fund can certainly be invested in certain programs.

QUESTION: Can the fund be invested?

MR. GROSS: Yes.

QUESTION: Can it be invested in state bonds, which would be another way of putting the same question.

MR. GROSS: To my knowledge, no, Justice Burger.

The creation of the fund does two things. First of all, of course it saves a portion of the money for the future, 25 percent at a minimum. But more important, it transforms a finite resource into an infinite source of revenue. By restricting the legislature to the use only of the interest on the fund, that interest can continue in perpetuity, at least in theory; so that government programs constructed on it, social programs and the like, can continue long after the oil is gone. Public expectations will be based not on the principle of the fund because that is not appropriated.

QUESTION: Well, I assume you're going to relate that program to this issue.

MR. GROSS: Yes, I am. Yes, I am.

Now, when you set that up, it creates an immediate public and a political conflict. On the one hand you have the legislature which is faced with rather pressing public needs, to say nothing of their own political futures, faced with large infusions of oil wealth. They have use of 75 percent of all the oil wealth that comes in, plus the interest from the 25 percent that goes into the Permanent Fund. And on the other hand there is the public interest in trying to preserve as much as this oil wealth for the long term as humanly possible.

Now, it's easy to see the political pressures on the legislature to spend the money; we're all familiar with those. But there was no countering political pressure for the legislature to increase the payments into the Permanent Fund, to put more than the 25 percent mandated by the constitutional amendment, and to put more of the oil money in there to be saved for future generations.

So the Governor proposed what is I call a unique program, but it's perfectly tailored to this situation. He suggested that since the residents of the state owned the resources, owned the oil resources, that to the extent that oil revenues placed in the Permanent Fund produced income, interest which was surplus to present government needs, that those monies should be distributed directly to the people.

Now, it's immediately obvious that when you do that two things happen. The first of all is that since the people will receive dividends directly and only from interest within the Permanent Fund, on monies placed in the Permanent Fund, it puts enormous pressure on the legislature to put as much money in the Permanent Fund as possible. Now people have a personal interest in seeing the Permanent Fund maximized, because they will receive greater dividends the more and more money is placed in the Permanent Fund.

And the second thing it does is that it creates in Alaska the type of check on political spending which is present in every other state but not present in ours. For instance, in Kansas if you want to establish a government program, you have to tax for it. You have to impose a tax on the people, and it better be a good government program or you better not impose the tax. There's a political debit to meet the political credit.

In Alaska since the legislature can simply fund government programs through the sale of oil leases, which people are sufficiently remote from that they do not really consider their own, that when you transform those oil leases and the money from them into the Permanent Fund and say to the people there's going to be money produced from this oil, now, if it's surplus to the government needs it will be distributed to you in some form, and on the other hand the legislature can spend it.

Now, the legislature is free to spend it --

QUESTION: Mr. Gross.

MR. GROSS: Yes.

QUESTION: Can I shorten this a little by saying --

MR. GROSS: Certainly.

QUESTION: -- That I for one think that the 14th Amendment applied to states with all the money as well as states with no money.

MR. GROSS: Oh, I agree with you, Justice Marshall.

QUESTION: Well, I think you're all saying that you're in a special position because you've got a lot of money.

MR. GROSS: No, not at all. I'm not suggesting that.

QUESTION: Okay.

MR. GROSS: I'm suggesting that there is a clear public purpose for the distribution of the dividends in the first place. Now, the question -- I tried to establish that because once you get to that point, Justice Marshall, then you are trying to determine how to distribute the dividends, what is the best manner in which to distribute the dividends, certainly consistent with the 14th Amendment. Alaska has no exemption from the 14th Amendment, nor do we claim it.

Now, in distributing the dividends the legislature selected a system whereby they tried to make the individual interest in receipt of the dividends identical with the public interest in maintaining a long-term and healthy Permanent Fund.

Now, let me take, for example, Justice Marshall, you suggest the 14th Amendment applies, and I would suggest, of course, that the 14th Amendment --

QUESTION: I don't suggest it. I insist.

MR. GROSS: I agree with you. The 14th Amendment requires, of course, that classifications be rational and rationally related to valid public purposes.

Now, I've talked about the public purpose. Now, let's think for a moment about how these dividends could be distributed. I don't think that the 14th Amendment requires necessarily that everyone be treated identically. The candidate in New Hampshire who has to wait for seven years to run for governor is not being treated exactly the same as a candidate who doesn't have to wait. But at the same time it's a rational distinction. What we're talking about is are the distinctions made in this dividend plan rational or are they not rational.

Now, let's take a perfectly equal distribution for a moment. Suppose the state determined to distribute dividends one to each resident each year regardless of how long they had lived in the state. Now, if you do that, it's, I think, immediately obvious that, to every resident, that as more and more people come to the State of Alaska, an individual's interest in a dividend distribution, his personal stake in the dividend fund is going to decrease.

QUESTION: That's true under your plan, too.

MR. GROSS: Yes, but not quite the same way.

QUESTION: As more people come in, there's less money to divide.

MR. GROSS: Not quite the same way, Justice Stevens.

QUESTION: But it is true.

MR. GROSS: Yes, it is true, but less, substantially less. You have basically a curve which goes up.

Now, all right. So if the feeling is that as more and more people come to the state the individual dividend share will decrease, I think it's fairly obvious --

QUESTION: Are you saying that one of the purposes of the plan is to discourage people from coming to Alaska?

MR. GROSS: No, not at all.

QUESTION: Well, it seems to me that's what you're arguing.

MR. GROSS: No, no. I said the purpose of the plan, Justice Stevens, is first of all to provide -- of dividends at all -- is to provide an incentive for the legislature to put a maximum amount of money in the Permanent Fund and to provide a check on legislative expenditure of the oil money.

Now, once you have done that, once you have decided that the issuance of dividends is for a valid public purpose, what you are doing is using people's personal desire to get the money as opposed to be using for a government program, let's say, as an incentive to accomplish this fact.

All right. You've done that. Now, if you take the dividends and you distribute them on a per capita basis each year, having nothing to do with the length of residency in the state, each person, what you have is a situation where people's psychology, the very incentive that you're using here -- personal desire to get the money -- isn't going to take long that the more people that come, the less they're going to take.

Now, they can't stop people from coming, nor is there any desire to stop people from coming. But when you do that, it's going to create some other pressures. It's going to create, for instance, pressures on the legislature to get the maximum money not only in the Permanent Fund but out of the Permanent Fund as quickly as possible; because if they get it now, they don't have to worry about sharing it with five million people who will come to Alaska in ten years or twenty years.

Now, if you're saying that, you know, people shouldn't think this way, you may have a point; but I think individuals do think this way when they're looking at money that they're going to receive. So I think that what you're dealing with is people. You would create by distributing dividends in a purely per capita fashion, you would create the following pressures.

QUESTION: Isn't that true of all sorts of things the government do, that the more you tend to encourage people to come to your state, the more populated it gets, you generate all sorts of problems.

MR. GROSS: No. But there's one difference.

QUESTION: It seems to me the argument you're making is one that says we just would like to keep the state about the same density of population as we now have.

MR. GROSS: I must be not making myself clear, Justice Stevens. If more people come to a state, they generate more taxes. You know, you can argue about whether there is benefits or detriments from large migrations into a state. But the fact of the matter is that if a state population doubles from two million to four million, in theory your tax base doubles from two million -- you know, from a base produced by two million people --

QUESTION: It depends somewhat on whether there's a productivity factor involved there.

MR. GROSS: Absolutely.

QUESTION: Because if half of them were on relief, it wouldn't help your tax base much, would it?

MR. GROSS: No, it wouldn't. No, it wouldn't.

QUESTION: Let me ask you another question. Suppose you wanted to encourage -- or have you finished your answer to --

MR. GROSS: I just simply wanted to say in conclusion that but in this case we are dealing with revenues produced by a finite resource -- oil. It cannot be increased. No matter how many people come to the state, the amount of money produced by that oil is going to be the same.

QUESTION: No. But one of your arguments is that the way in which you manage the money -- that is, either saving it for the long term or distributing it right away -- will be influenced by this program.

MR. GROSS: That's correct. And my point is that if there's a set amount of money which is going to come out of the oil and you issue the dividends --

QUESTION: Let me just throw one other thing on the table, because I don't want to be interrupting you too often on this.

Your opponent argues that well, maybe there's rationality applying to the future, but how does any of this justify the fact that at the date of enactment of the statute those who had been there the longest got more. Just be sure you cover that before you finish.

MR. GROSS: I will. I would say just quickly that this is not a retroactive plan. It's simply a plan which is put in medias res. I mean it's a plan established. There are no retroactive rights.

QUESTION: Well, but you do make the beginning date 1959 instead of the date of enactment.

MR. GROSS: That's correct.

QUESTION: And what is the state purpose at the date of enactment for saying that a person who has been here since 1959 should get something more than someone who arrived two years ago?

MR. GROSS: Exactly. Let me put it this way, Justice Stevens. If the plan is constitutional vis-a-vis 1959, you're going to be facing exactly the same questions when you come to the year 2000 and look back. They're the same constitutional issues which are created.

So far as the feature of people participating in the plan, a plan was set up by which people qualify for certain benefits, and they qualify whenever they came. A three-year resident will participate in it on a three-year basis.

QUESTION: Then are you saying that the constitutionality of your plan would be just the same as if you had a one-time distribution in which you gave a big chunk of money based on length of residence?

MR. GROSS: No, it would not be. If it were a one-time plan based on distribution -- based on length of residency, then you would --

QUESTION: Well, insofar as you were talking about the retroactive feature of it, it is a one-time plan.

MR. GROSS: It goes on every year. Every person -- the Zobels have been in the state for three years. In 18 years they will be in exactly the same position as someone who came in 1958 or '59, and their dividends will increase each year. If no one had that ability, if you could not participate in the program on the same basis as everyone else and increase your dividends just as everyone else increases their dividends, then you would have a one-time distribution which would favor one class of people.

QUESTION: But I still don't understand how you can say same basis, "same" in quotes.

MR. GROSS: Every citizen --

QUESTION: You say that every other sentence. You say "same" basis.

MR. GROSS: They have exactly the same rights.

QUESTION: And I thought the whole argument in this case was that there wasn't a same basis.

MR. GROSS: This is, I think --

QUESTION: There were two different bases.

MR. GROSS: I think the argument that the Appellants are making, Justice Marshall, proceeds on that assumption, that there is a difference; but --

QUESTION: Well, isn't there a difference?

MR. GROSS: No. Each party receives --

QUESTION: Does everybody get the same amount of money?

MR. GROSS: Everybody has the same rights, Justice Marshall.

QUESTION: Well, I'm talking about cash in hand.

MR. GROSS: No.

QUESTION: Does everybody get the same?

MR. GROSS: Everybody gets the same over the same period of residency.

QUESTION: Well, once again, look at it with cash.

MR. GROSS: Okay.

QUESTION: That's what this case is about -- cash. You started off by saying you were loaded with cash.

MR. GROSS: I think this case, Justice Marshall, is about the participation in a plan where everyone has equal rights to receive the same amount of cash over the same period of residency for certain valid public purposes. That's what the case is about.

If you want to look at it on a one-year basis, yes, people get different amounts of cash, just as under welfare systems people get different amounts of welfare depending upon how they meet the criteria. And if it's a valid public purpose for giving some amount of welfare to one person and some to another, that's perfectly valid.

And the basic issue here is whether the criteria made in the length of residency to accomplish a valid public purpose is in fact rational. If it is not -- and I gather from Mr. Sandberg's suggestion he recognizes it as rational.

QUESTION: Mr. Gross.

MR. GROSS: I'm sorry, Justice O'Connor.

QUESTION: Do you think that the Shapiro case and the welfare and the hospital case that the Court had to decide would have been decided differently if the beneficiaries got a little bit of welfare the first year and more the second?

MR. GROSS: No.

QUESTION: Or a little bit of medical care the first year and more the second?

MR. GROSS: No. For several reasons.

QUESTION: Isn't that what you're arguing?

MR. GROSS: No, I don't think so, Justice O'Connor.

In the first instance, you must remember that the distinctions made in the Shapiro case, in Maricopa and those cases depended on a number of things, one being that people were divided into two classes -- new residents and everyone else. In this instance everyone is in the same class -- people who were born in the State of Alaska, people who moved to the State of Alaska at any time, new, old residents, whatever you call them; they're all subject to the same system. The same distinctions are made between an 18-year resident, a 21-year resident, or --

QUESTION: The benefit level differs, does it not, depending --

MR. GROSS: I'm sorry.

QUESTION: The benefit level differs depending on the length of one's residency.

MR. GROSS: That is correct.

QUESTION: And do you think that the Court would have sustained that kind of a difference in Shapiro or in Memorial Hospital?

MR. GROSS: Probably not, Justice O'Connor, because you were dealing with what's basically a fundamental right.

QUESTION: All right. Do you recognize or concede that there is a fundamental right to migrate or travel?

MR. GROSS: Absolutely.

QUESTION: And do you think that Alaska's plan in any way inhibits someone's desire to move or to travel?

MR. GROSS: I hardly think so.

QUESTION: From Alaska.

MR. GROSS: Oh, from Alaska?

QUESTION: You don't think there would be a motivation to stay there and earn the thousand dollars instead of move to California?

MR. GROSS: I hope so.

QUESTION: And lose it?

MR. GROSS: I hope so. I don't know any case that this Court has decided that suggests that because a state provides a certain benefit which is unknown elsewhere on any scale, that because someone wants to stay in the state and doesn't want to leave it that that somehow violates the right to migration.

QUESTION: The purpose -- is one of the purposes to discourage people from migrating from Alaska?

MR. GROSS: I would say it differently. I would say the object is to encourage them to stay; but if you want to turn that around, I suppose that's true.

QUESTION: And does that fly in the face of any constitutional right?

MR. GROSS: I don't believe so, Justice O'Connor, any more than if one state, for instance, say one state has a welfare system which is double any other state's welfare system. You could say --

QUESTION: Or an old age pension?

MR. GROSS: Exactly, yes. That makes it so desirable to stay in that state that you don't want to leave that state and go to another state. I think that would be opening a can of worms which has never yet been opened by the Court. It would put states in relative -- you know, any good program would be considered constraining the right of migration from the state.

But there's no impact, Justice O'Connor, on the rights of migration into the state. I think that's --

QUESTION: Suppose Alaska wanted to encourage people to come there and passed a statute that for the first five years of your residence a new resident after a given date, they would be free from state income taxes or all of the state taxes? Do you think that would pass muster?

MR. GROSS: To encourage immigration, in essence? I suppose the public purpose to encourage immigration -- I don't really know, Justice Burger. I don't think any state has done that. It has done it with corporations, of course; and states do provide tax incentives to corporations. I don't know of any state that's ever done it for people.

QUESTION: Corporations are persons under the 14th Amendment.

MR. GROSS: It's true. I mean, if you take the analogy through, I assume states could do it, but I know of no case that that's ever been tried.

QUESTION: Has this Court ever passed on the corporate -- the constitutionality of these corporate benefits?

MR. GROSS: Well, the Court has certainly established the widest possible latitude for states in dealing with tax exemptions, and I assume that's that sort of a tax -- if the state determined that it was in the public interest to encourage new business to come to the state, I assume it could make that sort of exemption; but I'm not aware of any case which has been specifically on that point.

QUESTION: Mr. Gross?

MR. GROSS: Yes.

QUESTION: Do you think a state validly could impose an income tax graduated according to the residence of the people in the state?

MR. GROSS: I don't know what the public purpose of it would be.

QUESTION: Well, your answer is it could not do so validly?

MR. GROSS: I doubt it. I think -- I'm sorry.

QUESTION: If down the road five years from now Alaska found it necessary to impose an income tax, would not these graduated benefits result in effect in a graduated income tax based on residency?

MR. GROSS: I don't believe so.

QUESTION: In other words, if you owed under the state income tax a thousand dollars and received dividends for a thousand dollars, the net effect of what you paid the tax would be zero.

MR. GROSS: People receive benefits from the state from all sorts of programs which may be rational or not rational as the case may be.

QUESTION: Well, your answer to my question is that that would be valid.

MR. GROSS: If you determined it on its own merits, this plan has a rational foundation; and the nature of the dividend distribution is rational. Its impact subsequently on another state program I think is -- I don't think you can link the two is what I'm suggesting.

QUESTION: You think there's no relationship between the two.

MR. GROSS: No. Any more than there would be to any other state benefits a state would be giving out to people that would be rationally supported. I mean certainly a person that receives old age benefits from a state pays less income tax in toto than someone who does not, but because the program is rational and valid, that simply is what happens. It's not a constitutional issue over that. It doesn't result in the income tax being graduated on the basis of age.

QUESTION: But you wouldn't distribute old age benefits in accordance with residency duration, would you?

MR. GROSS: No, you wouldn't. I'm saying that therefore -- I mean, you have to determine the constitutionality of this program in and by itself. Should you determine that it is constitutional, just as you were determining that old age benefits were constitutional, once you reach that conclusion, the fact that you subsequently impose an income tax wouldn't make it unconstitutional any more than you could say that the income tax was based on age in comparison with old age benefits. I mean, people who received old age benefits pay less tax, but that, you know -- by deduction they pay less tax.

QUESTION: Mr. Gross, you keep referring to a rational basis test. What if the Court has to apply a stricter scrutiny to a durational residence scheme such as Alaska's?

MR. GROSS: Durational residency, at the outset, Justice O'Connor, I think has been only used by this Court, to my knowledge, in terms of classifying newcomers against old-timers in terms of states that deny benefits to people who have just arrived as opposed to people who haven't. And I know of no case in which this Court has dealt with a question of residency where it applies to every single person in the state born any length of time and is not singling out newcomers. The compelling state interest test.

QUESTION: But the level of benefits is different depending upon residence.

MR. GROSS: The people it applies to is different. In all the durational residency cases people are divided into two classes: people who have just arrived in the state and everyone else. In this case --

QUESTION: There are 18 levels or 20 levels.

MR. GROSS: There are an infinite number of levels, Justice O'Connor. Everyone in this state whether you're born there -- I mean, the majority of people of this state have basically put these distinctions on themselves. This is not some insular group like newcomers that are being dealt with. This is a distinction which has been imposed by the majority of the people of the State of Alaska on themselves. So you're not talking about the kind of situation you deal with in a right to travel case where you're talking about people who travel to the state. This as much applies to people that were born there.

QUESTION: Well, do you think that, for instance, voters in a state could adopt by vote a welfare scheme that would determine the level of benefits based on the number of years that the person had lived in the state and have a graduated scale?

MR. GROSS: I couldn't think of a valid public purpose for that, Justice O'Connor, whereas here, as I've tried to indicate, we have a complex and rather lengthy scheme to deal with a financial situation in the state which is unique.

But to answer your question originally, you asked me what would happen if we came to a compelling state interest. My initial answer was to suggest that it is not a compelling state interest test. Were it to be a compelling state interest, I could not justify it here and would not attempt to. There are other ways, I am sure, that these same ends could be reached or at least attempted to be reached. This is an unusual one in an effort to try something new, in an effort to make this work.

You know, I only have a few minutes, and I just -- did I answer your question?

As I understand the principle which is being advocated here, it is in essence that the state can never make distinctions based on length of residency. That is simply an erroneous statement. I mean, this Court has upheld instances in which the state has done so. In Chimento with the seven-year residency requirement it didn't even find it to be a substantial federal question. And in Sosna, aside from an individualized residency -- I believe which Justice Rehnquist suggested -- that whether she could prove individualized residency or not was irrelevant because Iowa required that she reside there for a full year. So that the flat statement is simply wrong.

Now, we're dealing with, you know, a federal constitution. You're talking about citizenship rights which should be expounded to the limit, to the extent they are necessary to hold this country together, to protect fundamental rights, to protect the kind of national interest that you talk about on a federal level.

This program doesn't have anything to do with national interest. It has no impact on the right to travel whatsoever, theoretical or real. You are protecting no insular minority within this state such as newcomers to the state or a racial classification or such. This is the program that the majority has adopted for themselves, not against a minority, not against the poor or anyone else, but -- I'm sorry.

QUESTION: Have we ever had a state statute that wasn't adopted by the majority?

MR. GROSS: You have had state statutes which are adopted --

QUESTION: That weren't adopted by the majority of the voters. Why do you keep emphasizing that?

MR. GROSS: Because in this case the class is the majority. I know of many unconstitutional state statutes which have been adopted by the majority against a minority class. In this case you're talking about a state statute adopted by the majority to make them the class, to separate them into the class. And all the distinctions I know this Court has made have been aimed at protecting minority classifications against infringement by a majority.

QUESTION: Do you think the equal protection clause is limited to majority and minority?

MR. GROSS: Majority and minority? No. But I think the tests which are imposed --

QUESTION: Did you read Maricopa County?

MR. GROSS: Yes. I think the tests which are imposed by the equal protection clause, Justice Marshall, differ, dependent upon the types of classifications which are being imposed. If you're dealing with a racial classification, or newcomers to a state, or recent migrants, the test is far different. That's all I'm suggesting, not that it doesn't apply.

QUESTION: Well, race wasn't in Maricopa, was it?

MR. GROSS: I'm sorry.

QUESTION: Was race involved in Maricopa?

MR. GROSS: No. Newcomers. New residents

QUESTION: Race was not involved.

MR. GROSS: No. It was newcomers, which were classified. --

QUESTION: Well, doesn't this involve newcomers?

MR. GROSS: What?

QUESTION: Doesn't this statute involve --

MR. GROSS: Not as a classification.

QUESTION: -- Recent newcomers.

MR. GROSS: No. Not as a classification.

QUESTION: It doesn't.

MR. GROSS: This is about --

QUESTION: Well, why do you draw the line between those who came ahead of time?

MR. GROSS: Because people were born there, and it applies to them as well.

QUESTION: So?

MR. GROSS: Well, certainly then, I mean you'd have --

QUESTION: Aren't people born newcomers?

MR. GROSS: Yes. They're not recent migrants, unless you stretch the term a bit, I think.

QUESTION: I'm just worried about the language, that's all.

MR. GROSS: I understand.

Thank you very much.

CHIEF JUSTICE BURGER: Do you have anything further, Mr. Sandberg?

MR. SANDBERG: Unless there are questions I would waive the remainder of my time.

QUESTION: How many lawyers are there in Anchorage? I'm just curious.

MR. SANDBERG: I think at last count there are somewhere around 750.

QUESTION: And what's the population?

MR. SANDBERG: Several hundred thousand of the state -- I mean of the city. The state is about 400,000.

QUESTION: Thank you.

CHIEF JUSTICE BURGER: Thank you, gentlemen.

The case is submitted.

(Whereupon, at 10:54 a.m., the case in the above-entitled matter was submitted.)