In return for the cash, ex-security guard Dan Bussard promised not to sue.
The settlement, signed on Tuesday, also calls for the Legislature to review its policy forbidding security guards from telling the news media about anything they see or hear while patrolling the halls of Alaska's seat of government.
After losing his job, Bussard approached the Alaska Civil Liberties Union. ACLU staff attorney Jason Brandeis brokered the settlement.
"He spoke publicly on a matter of public concern," Brandeis said. "For the Legislature to fire him for that was just really, really inappropriate."
The Legislative Affairs Agency admits no wrongdoing in the settlement. In fact, legislative lawyer Pam Finley said she thinks Bussard would have lost in court. But she said a court fight could have been costly.
"It was probably cheaper to settle it than to fight it and win," Finley said.
Bussard told his lawyers he had no public comment to make about the deal. Ten thousand dollars of the settlement will go to Bussard himself. The other $2,500 will go to the Alaska Civil Liberties Union to offset its costs.
Bussard's letter and subsequent firing caused an uproar last spring. Alcohol is not allowed in other state buildings, but the Legislature makes its own rules for the Capitol, and alcohol is allowed. It is undisputed that some legislators and staff members have a drink now and then in their Capitol offices.
"Do you know who can and does drink on the job?" Bussard's letter said. "Our elected state officials, that's who. ...On any given afternoon it is not hard to find several people in different offices sitting around having a drink."
But lawmakers said it happens after-hours or on weekends and not nearly as often as Bussard claimed. House Speaker John Harris, a Valdez Republican, said the practice is discreet and legislators are not allowed to abuse it.
"Do I think there is alcohol at the Capitol? Sure there is. But is it a problem? I don't see it as a problem. ... It's not like people are walking around drunk," he said.
The Legislative Affairs Agency, in firing Bussard, said it wasn't happy with his job performance and that his letter to the editor violated the confidentiality requirements.
"No employee may disclose any information overheard during the course of their employment between an elected official or a staff member and others, to any member of the news media," the rules say.
Part of the settlement Brandeis negotiated is that the Legislative Affairs Agency will review the rules to see if they can be changed with an eye toward free speech rights. The agency will give the Alaska Civil Liberties Union a chance to look at any proposed changes and make comments, under the settlement.
Legislative lawyer Finley said she wants to look at tightening the rules so security guards can't report confidential information to the general public -- not just the media. But she said there also might need to be wriggle room to allow for cases of whistle-blowing, for instance, if a security guard witnessed a bribe.