November 11, 2025 • 55 mins
Welcome to The Weekly Top 3 — our look at the top 3 things on our mind here at Alaskans for Sustainable Budgets — for the week of November 10, 2025.
This week, our top 3 issues are these: 1) we explain what, to us, seems missing so far from this year’s Governor’s race (2:02); 2) we explain what irritates us about how many in the Top20% support taxes (18:00); and 3) we review the Permanent Fund’s first quarter investment returns and what they tell us about the Permanent Fund Corporation’s performance (37:33).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:10):
Hi, this is Brad Keithley, Managing Director of
Alaskans for SustainableBudgets.
Welcome to the Weekly Top Three,the Top Three Things on Our Mind
here at Alaskans for SustainableBudgets for the week of November
10th, 2025.
The Weekly Top Three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live,
(00:33):
as well as via streaming audiofrom the show's website weekdays
from 6 to 8 a.m.
I join Michael weekly in thefirst hour of Tuesday's show
from 6.10 to 7 a.m.
for a discussion between the twoof us about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, YouTube,
(00:56):
SoundCloud, Spotify, andSubstack pages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site, medium.com.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that in addition tothese podcasts, during the week,
(01:18):
you can also follow andparticipate in the discussion
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
Twitter.
This week, our top three issuesare these.
First, we explain what to usseems missing so far from the
(01:40):
governor's race.
Second, we explain whatirritates us about how the top
20% support taxes.
And third, we review thepermanent fund's first quarter
investment returns and what theytell us about the permanent fund
corporation's performance.
And now let's join Michael.
SPEAKER_00 (02:02):
Brad Keithley from Alaskans for Sustainable Budget.
You can find him at aK4SB.com.
And uh he bro comes in everyweek to uh do a deep dive with
us on a bunch of differenttopics, usually three big
issues.
And uh today is no different.
And boy, I gotta tell you, it'sum what's missing from the
(02:23):
governor's race so far?
Well, apparently it was a MattClayman because he's just jumped
in at the last minute, so nowthere's 14.
What else is missing from thegovernor's race so far?
Bradley, hit me with what'sgoing on here.
SPEAKER_01 (02:34):
Well, Michael, I was I was flipping through the uh
ADN and other publications tosort of come up with this week's
list.
And um my eye got caught on theADN article that has the picture
of all of the then candidates,pre-claimant, uh, then
candidates, uh, with under theheadline, in an already crowded
(02:56):
race for Alaska governor,candidates looked to fundraising
as a barometer.
And I just finished reading acouple of politico articles that
were analyzing the results ofthe of the off-year elections in
uh New Jersey and Virginia andelsewhere and analyzing why
those candidates did as well,why those the issues in those
(03:19):
races and the position that thewinning candidates took versus
the positions that the that thelosing candidates took.
And the politico articlearticles uh emphasized that the
winning candidates had focusedon the state of the economy,
particularly the impact of theeconomy on middle-income uh
(03:40):
families in those particularstates, and had just ground and
ground and ground uh on thoseissues, talking about health
care, the cost of health care,talking about the cost of food,
talking about the the just thecosts of living in those states
and what could be what could bedone uh at the state level and
what the and what thosecandidates were proposing to do
(04:02):
at the state level to deal withthose issues.
But the but the articles reallyemphasized it, we there was an
empathy that the winningcandidates had an empathy with
what middle income families werefacing in those states, um,
regardless of party, regardlessof race, regardless of any other
discriminator uh among the amongthe uh uh the voters, and just
(04:25):
and and how they were emphasizeempathizing, emphasizing the
empathy that they had for uh forthe economic circumstances those
candidates were facing.
Right.
I thought, well, that'sinteresting.
So then I came back to Alaskaand I looked at I came back to
the ADN article and I looked atall the pictures of all the
candidates that are running.
(04:46):
And none, to my knowledge, and Ifollow it as closely as I can,
none of those candidates arepicking up on that theme and
emphasizing the same thing.
Maybe you know, Alaska pollingtells you that it's different,
that that middle income familiesaren't concerned about their own
economic situation in Alaska.
(05:07):
And by middle income families, II mean 80% of Alaska families,
those between the low 20% andthe top 20%, 80% uh of families.
SPEAKER_00 (05:18):
Um, that's actually a 60%, but but it's 10%, right,
on both ends.
It's math.
Math is hard in the morning.
SPEAKER_01 (05:26):
It's hard sometimes.
Let's take the 20% out of it.
But but the the but but youknow, maybe Alaska is different,
but I don't see any of thosecandidates uh focused on that
issue.
I what I see is various specialinterests, that they're focusing
on various special interests andhoping that they that that those
(05:48):
voters who are concerned aboutthat special interest will adopt
that candidate because of thatcandidate's focus on special
interests.
For example, just to just to gothrough the ADN light up a
little bit, Tom Begage talks alot about education and the K
through 12 industry and needingmore spending on K through 12.
Uh Click Bishop talks a lotabout infrastructure and more
(06:08):
spending on construction andinfrastructure.
Bronson talks a lot about aboutsocial issues.
Crum, I don't know what crumbtalks about, but but it goes on
and on and on about specialinterest issues that they're
hoping to slice and dice theelectorate on.
Maybe, maybe that's aconsequence of of the way we're
(06:31):
going about elections with uhwith rank choice voting.
Because to get into the finalfour, especially with a crowd
this big, you're gonna have tohave you know maybe 10%, 12%,
15% to get you into the into thefinal four.
And maybe they're focusing onthose slice and dice issues
because they think that willgenerate the the the you know
(06:54):
the narrow slice they need toget uh to get into the final
four.
Maybe that's maybe that's what'sgoing on.
SPEAKER_00 (07:00):
Right, to get them across the finish line.
They need just to attract thespecial interest just so they
make it to the top four.
SPEAKER_01 (07:06):
Right.
And then in the top four, maybethe maybe the the theme changes,
but but and maybe that's what'sgoing on.
But it just struck me that thatthere's really not a focus in
Alaska on on the economy and onthe and on the economic impact
on on middle income familiesthat you saw in other states.
(07:27):
It's not that we don't, it's notthat we don't have issues in
Alaska.
At the same time I was goingthrough the articles, there's
there's one in by James Brooks,it's in the Alaska Beacon, uh,
and in the uh Alaska PublicMedia and elsewhere, the
headline of which is the numberof debt collection cases in
Alaska state courts is soaring,uh following national trends.
(07:48):
It's not that we don't haveissues, economic issues, uh in
uh uh in the in middle income uhfamilies in Alaska, uh, but it's
just that it just that we're notconcentrating on it.
And and in fact, we have onecandidate who's who is who is
affirmatively running away fromit.
And it's just odd.
I mean, so the Democrats werethe winners in New Jersey and
(08:11):
Virginia, right?
Both sort of bluish states, andso you would sort of expect that
they would do well.
Yeah, but they were they werethe ones appealing to the to the
to the middle income economicinterests.
Here's Begich in an interview inthe Juno Independent, which is
frankly, you know, a paper worthfollowing uh in the state uh as
uh as we go through sort of theevolution of the state's press.
(08:33):
Uh, but Begich hasn't had anextended interview with Mark
Sabatini in the JunoIndependent.
And and this is what he this iswhat Sabatini wrote and what uh
Begich said about the permanentfund, uh the PFD.
Off discussed proposals bylawmakers and permanent fund
officials include a stateconstitutional amendment
amendment mandating a dividendand altering state law to
(08:55):
establish a baseline amount tiedto the success or failure of the
permanent fund.
Well, we already have thestatute that ties to the success
or failure of the permanentfund.
But Begage said he supportsthese proposals without yet
setting a definitive baselineamount.
It could be$1,000.
That's what we've been gettingon average, if you don't take
into account inflation.
It could be twelve hundreddollars, he said.
(09:16):
That's a negotiation that youhave to have with the
legislature and the populationbecause if you don't, it doesn't
matter what you do.
You have to have a majority ofthe people supporting that
constitutional change.
Well, either$1,000 or$1,200 is ahuge tax on middle-income
families.
You're taking money out of thepockets at a time when
(09:38):
politicians elsewhere aretalking about emphasizing the
economic needs of middle-incomefamilies.
You're taking money, uh a PFD of$1,000 or$1,200 compared to the
current statute, is taking moneyout of the pockets of
middle-income families.
Money that is their share bystatute, their share of the
state's commonly held wealth.
(10:00):
And if you cut it, it's notgoing to their benefit.
The benefit's going to the top20%, oil companies, the
non-residents who don't have topay taxes for their share of
government costs.
It's it's subsidizing them.
So in an environment, in an erawhere winning candidates
elsewhere are trying toemphasize things that the state
(10:25):
can do to help middle incomefamilies.
Beggic is running away from it.
And I just I just think that's Ithink that's odd.
And I think it's I think it'ssomething, an issue that if a
candidate started honing in onit, the candidate would find
more success than uh than maybethey are honing in on a special
interest.
SPEAKER_00 (10:41):
Isn't that indicative, though, of most
candidates at this point, ormost politicians, or most
people, they they they there isno empathy for what's going on
in the middle class.
Again, there's complete andtotal disconnect from what's
happening in the middle classand the private economy.
We've said that a dozen times, Imean, dozens of times, that
they're more focused on what,like you said, you pointed out.
(11:03):
They're focusing on the specialinterest, who's getting paid by
what?
The construction industry, theeducation lobby, the this lobby,
the that lobby.
You know, that's what'simportant.
But the private economy as awhole and the effect of the
economy on the middle class orthe lower middle class, that
doesn't matter.
It's a complete and totalnon-starter for most of these
(11:24):
people when it comes to it.
SPEAKER_01 (11:26):
Yeah, and and and maybe it also reflects how
dominant we have allowedgovernment to become in the
economy of Alaska.
That that that the that thedebate is how you divide up the
spoils of government.
The debate is how you divide upthe richness of government uh
and who gets to benefit fromthat richness, where we where we
(11:47):
take the state's money and andwho gets who do we direct it to
and who gets to benefit fromthat.
Maybe that's maybe it's anindication of how of how
dominant we've allowedgovernment in Alaska to become
uh in the economy compared toNew Jersey or Virginia, which
which don't share that same uhthat same characteristic,
notwithstanding the fact they'reblue states or blue states.
(12:10):
Um it maybe maybe it's areflection of that.
But I but I think it's I thinkit's sad.
I think it's a sad state ofaffairs that we don't have at
least one or two candidates whoare who are focusing on their
empathy and on the andemphasizing the economic
situation faced by middle-incomefamilies and trying to be
(12:31):
responsive to that, not in termsof increasing government
largesse that's going to thosefamilies, but allowing them to
keep more of their income, theirshare of the commonly owned
wealth, uh in their pockets asopposed to taking taking more
and more and more of it forgovernment so government can
redirect it to one segment oranother.
SPEAKER_00 (12:52):
Yeah.
No, I mean it is, and it that isthe sad part of uh what we seem
to be missing um in thegovernor's race, um, which is
kind of where we're going.
Uh Matt Klayman jumping into therace now.
And I mean I, you know, I justyou know, one more that's all we
(13:12):
needed.
We just needed one more personin the race to make it all
better, right?
That's what it was all about.
SPEAKER_01 (13:18):
I mean, Matt Klayman, Matt Klayman's worse
than Tom Begage.
I mean, is worse than the thanthe thousand twelve hundred
dollars Tom uh Klayman has saidthat we don't need the PFD.
It all should go, it all shouldgo to government so government
can re can redirect it back out.
Yeah, I mean, you know, Mondami,they're they're they're farther
along down that curve than thanMondami is.
(13:41):
I mean, yeah, to some degree, uhI I won't take this too far, but
to some degree, the the Alaskarace in terms of its emphasis on
what what government can do, youknow, the economic might of
government can do and redirectit in certain ways, and and and
it it reflects more the New Yorkrace, the New York City race,
(14:03):
even from the Republicans.
It reflects more the New YorkCity mayoral race than it does
the uh than it does the the theraces in New Jersey and
Virginia.
Um, because it's because the theAlaska race is government has
all this money.
We're gonna take even more of itfrom you through deeper PFD
cuts.
Government has all this money,and the race is who can give me
(14:26):
the most votes?
Who has the most votes outthere?
That if I promise to give youthe money, you'll vote for me.
Give give the money to yoursegment, you'll vote for me, and
I'll be able to get into thefinal four.
That's sort of what's going onhere.
Yeah, and and it's and that's alot more New York.
Yeah, that's a lot more the NewYork race than it is the New
(14:47):
Jersey and Virginia race.
SPEAKER_00 (14:49):
It's uh it's kind of crazy to watch.
And of course, now we're nowwe've got the whole uh uh you
know, now we've got the thewhole kind of breakdown of 15
different candidates.
And as you just said, nobody'sreally showing empathy as of yet
for the plight of the everyman.
Uh probably um probably uh uhBernadette has probably been the
(15:14):
one that's been closest to anyof that, but even she fumbles
the ball on some of thequestions on budgets and and
breakdowns and things like that.
What's it gonna take, Brad?
What's it gonna take to get allthis squared away?
I I just I don't have an answerfor you.
SPEAKER_01 (15:28):
I don't I don't have an answer either, Michael.
I mean, I would think there wasout of 13, 14, 15, whatever the
heck we're up to now.
14.
Out of out of out of out of thatnumber, you would at least have
one who is trying to carve in onthe on on middle income families
and and and recognize that 60 or80 or 70 or whatever percent it
(15:49):
is, recognize that percent ofthe population as as an
important segment of thepopulation that should be
appealed to.
And but we don't.
I mean, we've got we've gotpeople who are just you know
flitting off of I can buildmore, I can use your money, take
your money through PFD cuts andbuild more infrastructure than
anybody else that we can'tmaintain, right?
(16:12):
We don't have enough money evennow to maintain what we got, but
I can do more of it, I can buildmore of it, or I can you know
have a bigger K through 12education, or I can have a four
more defined benefits forgovernment.
I mean, it's just that's what'sgoing on.
It's everybody's you know,slicing and dicing into into all
these segments and how they cantake your money and and give it
(16:33):
and give it to those folks.
It's just disappointing.
SPEAKER_00 (16:39):
I mean, I don't want to be gloom and doom, but it
feels a lot like people arestanding over the corpse and
they're carving it up, you knowwhat I mean?
I mean, really the the the thethe turkey dinner, it's like
we're just getting carved up andthe people are taking their
little sections of specialinterests off, and the rest of
us are just laying there like,what do we do?
I mean, it's crazy.
SPEAKER_01 (17:01):
Out migration is an issue in this state, it's an
issue, it's a middle, it's amiddle income issue.
I mean, yeah we have anincreasing number of top 20
percent, we don't need to worryabout them, but we're losing in
the in the middle incomebrackets, working family,
working age uh families.
We got nobody talking aboutthat.
I mean, I would think that wouldbe an issue that you would want
(17:22):
to appeal to.
Maybe you're concerned that yourvoters are leaving and so they
can't they won't be voting foryou because they're walking out
the door.
But I would think that is amiddle income issue that you
might that you might want to betalking about.
But you know, nobody's doingthat.
I haven't heard the word outmigration once uh in this camp
in this campaign.
It's certainly not in TomBegitch's interview with the
(17:43):
with the Juno Independent.
SPEAKER_00 (17:45):
Well, I know we did talk about that with uh we
talked about that with Showerand with Bernadette as well.
We've talked about that withboth of them, so I know that it
is an issue and they are awareof it.
So at least they've mentionedit.
But like you said, not manyother people are talking about
it.
Brad's over here distracting mewith so much good news.
I just didn't know what to do.
Um, all right, Brad, the numberone irritating thing in the top
(18:09):
twenty when the top 20% um uh,you know, when they support
taxes, that's the thing.
When they support taxes, it'suh, you know, because you but
you've talked about how youbelieve that it's gonna take
some form of tax to try and fixthe problem, but when they jump
on board, then things getproblematic.
SPEAKER_01 (18:28):
Yeah, and this was triggered by, you know, I very
seldom read letters to theeditor, because you know, I read
the opinion columns and the andthe community voice columns and
and the longer pieces.
I very rarely read the theshort-formed uh letter, uh
letters to the editor.
But this one, the title of thisone in the in the ADN caught my
attention.
It's letter time for more taxes,and it's real short, and this is
(18:51):
what it says Are you tired ofour state and local politicians
complaining about financialissues, disappointed about poor
public service, decayinginfrastructure and schools?
Look in the mirror.
The free ride is over, Alaska.
Time to pay the fiddler.
Here's how, here's how so,here's how.
No more PFD checks.
Reinstate the state income tax,mandatory minimum sales tax for
(19:13):
anchorage of five percent, alleffective immediately.
That would be a good that wouldbe a good start.
Okay, I get it.
Top 20% are starting torecognize, at least those who
are dependent on government,government largesse, they're
starting to recognize the goodtimes may be over.
Um, and that, and then there maybe a need for uh additional
revenue.
(19:34):
But the thing that ticks me offis is every time, and Natasha
you ticked me off when she didthis, and Klayman ticks me off
when he does it, and all everall of these guys in the top 20
percent, when they start talkingabout taxes, the first thing
they say is no more PFD checks.
So, what does that mean?
(19:55):
What that means is they want tocut the the revenue source, cut
a revenue source, the share ofthe state's commonly owned
wealth, that revenue source thatgoes to middle and lower income
Alaska families that make it hasthe largest impact, is the
largest uh uh uh has the has thelargest uh uh impact on the on
the economics of middle andlower income Alaska families.
(20:17):
They want to cut that first.
And what does that do when youcut that?
It buffers the top 20%non-resident and oil companies
because that means they don'thave to sh they don't have to
contribute as much, if any, togovernment costs, because those
government costs are being arebeing buffered, are being
(20:39):
subsidized, are being are beingtaken care of by the amount that
you've taken out of the pocketsof middle and lower income
Alaska families.
The biggest beneficiaries of PFDcuts are is not government
spending, as as some peoplethink.
The biggest beneficiaries of PFDcuts are the top 20%
non-resident industries and theoil companies who don't have to
(21:02):
pay taxes, who don't have to paya share, a share of of the
increased costs.
They get to free ride on thebacks of the PFD cuts.
They get to free ride on thebacks of the dollars that are
being taken out of middle andlower income Alaska families.
So when I see one of these oneof these articles or one of
(21:22):
these commentaries that say,yeah, I'm ready for taxes, but
first cut the PFD.
What that really is saying isfirst subsidize the heck out of
me to the maximum extent you inthe top 20%.
First subsidize the heck out ofme to the maximum extent you can
by taking the state's share, thethe cotton the share of commonly
(21:43):
owned wealth that otherwise isgoing to middle and lower income
Alaska families and using thatto subsidize my taxes to prevent
me from having to pay taxesfirst, and then maybe I'll pay a
little bit more.
This shows up all sorts ofplaces.
So, you know, uh Zach Fields andElise Galvan in not this
legislature, but in thelegislature before last
(22:05):
introduced income taxes.
They were ready to stand up andsay, we need to pay our fair
share.
Top 20% need to pay our fairshare.
Well, you go in and you analyzewhat their income taxes would
do.
In the case of Fields, it didn'teven raise$100 million.
In the case of Galvin, it raiseda little bit more than$100
million, depending upon whatassumptions you made.
(22:28):
The deficit's$1.7 billion,$1.8billion.
So what they were doing was theywere putting on this thin veneer
and saying, yeah, we're payingour fair share.
But behind that was continueddeep, deep, deep, deep PFD cuts
on middle and lower incomeAlaska families uh to make up
(22:49):
the difference between thehundred million dollars that
their two tax approaches wouldmake and the$1.8 billion, the
$1.7,$1.8 billion deficit uhthat uh that the state's
running.
So it just it just, I mean, Imaybe some of these people mean
well.
Maybe they say, oh, maybe maybethey're saying, oh, it's time
(23:09):
for me to pay my fair share.
But when they start it with nomore PFD checks, wipe out the
free stuff for wipe out the freemoney for middle and lower
income Alaska families, and usethat free money to subsidize my
taxes.
Use that free money to make sureI don't have to pay taxes.
The top 20%, the non-resident,and the and the all companies,
(23:30):
that just that just irritatesthe heck out of me.
It's like it's like grating on achalkboard or fingernails on a
chalkboard or whatever,whatever.
Yeah, you're gonna come up withthat sound, aren't you?
SPEAKER_00 (23:39):
It's like yarn yarn between your teeth, right?
SPEAKER_01 (23:41):
I mean, it's like, you know, oh it's just it's just
irritating as heck because whatwhat they're really saying is,
yeah, I'm sort of ready to payready to pay.
I'm I'm I'm ready to say I'mready to pay taxes, but I'm not
really ready to pay.
I mean, taxes, god no, I'm notready to pay the rates, the the
rate of taxes that we'reimposing on middle and lower
income Alaska families.
(24:02):
God no, I'm not real ready topay that.
I don't want to pay, you know,eight percent, ten percent,
thirty percent, like we'retaking from middle and lower
income Alaska families.
Uh-uh.
I want to pay my little onepercent, right?
Um 0.06, right?
Or whatever it is.
Yeah, 0.6%.
And and and that's just I, youknow, it just I part of it is
(24:26):
the media, part of it ispoliticians haven't done
anywhere near a good jobexplaining what's going on with
PFD cuts, who's reallybenefiting from PFD cuts.
So maybe people don't understandit, and and part of it is maybe
just you know, the the ignoranceof of the the the fact that
they're in the top 20 percent,and and so they don't feel the
(24:50):
effect that that middle andlower income Alaska can families
are feeling through PFD cuts.
Maybe that's part of it, butit's just irritating because
it's it it it it it it it it itit indicates that they just
don't understand economics, theyjust don't understand the impact
of what PFD cuts are doing tomiddle and lower income Alaska
(25:12):
families, and that they don'tunderstand the benefit of the
free ride that they're gettingfrom shifting that free money
from from you know being spreadprorrata across all across all
families to being concentratedto the benefit of of upper
income non-resident and uh andthe oil companies.
SPEAKER_00 (25:35):
I just have to chuckle because I feel so
vindicated in everything thatwe've said because the the the
they used the actual words thatI said.
I said, one day they're gonnacome back and they're gonna tell
us what are they gonna tell us?
The free ride is over.
And what does he say?
The free ride is over.
This is exactly the tack that Iknew that they were gonna take.
(25:58):
And like you said, I knew thatthey were gonna take all of the
PFD and bolster all of that, andthey would consume all the
money, and then they would lookus in the eye and say, Oh, the
free ride is over.
I mean, you know, that that'sthe that the irony of this, they
don't understand how this worksand what's actually going on,
but they know all the money'sthere, and that's what they want
(26:20):
to take.
And but now the free ride's overfor everybody else.
SPEAKER_01 (26:24):
Yeah, exactly.
That's the point.
The free ride is over foreverybody else.
We want to we want to take thatfree money, and that it's
actually your share of thecommonly owned wealth.
We want to take that free money,take it away from you, and they
want we want to use it all forour benefit by by subsidizing
taxes we would otherwise have topay.
We're willing to pay a littlebit, we're willing to pay$100
million or so uh in taxes, butwe want the other$1.7 billion,
(26:48):
$1.6,$1.7 billion.
We want that covered by freemoney.
We want the benefit of the freeride as opposed to the benefit
as opposed to the free ride, thebenefit of the free ride being
spread across across all Alaskafamilies.
And and some of it is ignorance,but you know, people, Zach
Fields ought to understand this,at least Galvin ought to
(27:11):
understand this.
People who are who are you knowgoing out there and saying, oh,
I'm in favor of an income tax,this minuscule income tax
compared to the size of thedeficit.
I'm in favor of an income tax,they know what they were doing.
They know what they're doingbecause they have fiscal notes
that show the revenue raisedthrough their so-called income
tax, and they have budget budgetdocuments that show the size of
(27:33):
the deficit, and they know thatthey aren't covering anywhere
near the deficit, and they knowthat the remainder of it's going
to be paid up by shifting thefree money from the for the
benefit of all Alaskans over tothe benefit of the top 20%
non-residents and and oilcompanies.
So some of it, some of it isignorance, but some of it's
(27:53):
malicious.
And and and the maliciousnessirritates me even more than the
ignorance of it us does.
But all of it, all of itirritates me.
SPEAKER_00 (28:01):
Well, you know, let's let's let's let's give me
a solution then, Brad, because Imean they often complain, we
complain about this, but wedon't.
I mean, what is the solutionhere?
Is it a combination of thingslike the fiscal policy working
group talked about?
Is it a cut?
Is it a tax?
Is it a is it more oil revenue?
I mean, what is the solutionhere of all this stuff?
(28:22):
And this guy, if you had thisguy, this letter writer across
Matt, whatever his name is, MattNewman, some random human being,
Matt R Matt Newton, if you hadhim across the table and said,
Okay, well, that's not going towork, and here's why, and you
just explained everything to himand you're frothing at the mouth
about all what's the solutionthen?
What is the solution in BradKeithly's mind?
SPEAKER_01 (28:44):
Well, it is the fiscal policy working group.
It and the fiscal policy workinggroup is basically a little of
all of it.
It's a little bit of PFD cutsbecause the proposal was to
restructure the PFD from itscurrent statutory structure,
which doesn't take into accountinflation proofing, and move it
down to 50-50 of the POMV, whichshares inflation proofing
(29:04):
between the government andcitizens.
Uh, it was uh some oil taxes, itwas some spending cuts, it was,
and it was some revenue, somebroad-based revenue uh from
Alaska, from some broad-basedrevenue.
And the benefit of broad-basedrevenue is that you then pick up
contributions by non-residents.
(29:25):
Reforming oil taxes pick upcontributions by uh uh pick up
contributions from the oilcompanies, broad-based taxes
would pick up comparedcontributions from the top 20%
who are who are making like zerocontributions now, and it would
pick up contributions from nonfrom non residents.
And the benefit of picking upcontributions of from non
residents is it would reduce theburden on Alaska families, they
(29:48):
would get to keep more of theirmoney.
15 let's let's assume 15% eithera broad based sales tax or a
flat tax, broad based incometax.
Let's assume that 15% of thatcomes.
From nonresidents.
Well, that means that Alaskafamilies can reduce the burden
on Alaska families is reduced bythat 15% because that's now
(30:11):
being picked up by of the of therevenue base, because that's now
being picked up bynon-residents.
So so it's a combination of somespending cuts, some oil tax
reform, some PFD restructuring,and some um some broad-based
taxes.
The other benefit of broad-basedtaxes, I would tell Matt, the
other benefit of broad-basedtaxes is that you then have
(30:35):
broad-based pressure ongovernment to reduce spending.
Right now, the top 20% saysspending, oh, that's fine.
Yeah, we don't care about itbecause it comes out of PFD cuts
and they don't care about PFDcuts.
And it's funding a lot of theirstuff.
Right.
So they don't, so they don'tcare about additional government
spending.
In fact, they support it.
If you look at who's supporting,you know, child care, Julie
(30:56):
Cologne's child care, or or youlook at, you know, K012
spending, it's the top 20% who'ssupporting that.
They don't care because theydon't they don't pay for it.
If you had a broad-based taxthat picked up non-residents,
picked up the oil companies andsaid, oil companies, you're
going to pay a part of thesedeficits, too.
Also, uh, you would have a morebroad-based pushback on spending
(31:17):
because everybody would have topay for it.
Right now, using PFD cuts, noteverybody pays for it.
So it is the fiscal policyworking group.
It is the little bit ofeverything because the little
bit of everything, some spendingcuts, some uh restructuring of
the PFD, some uh broad-basedrevenue source, and some
(31:38):
restructuring of all taxes, thelittle bit of everything spreads
the burden in a way that getseverybody to start pushing back
on government spending, asopposed to the structure we have
now, where we have a segment ofthe population who actually
cheers for government spendingbecause they don't have to pay
for it.
The costs are shoved over onsomebody else.
SPEAKER_00 (31:58):
All right.
Brad's now giving you asolution, a possible solution.
You can't complain that we don'tever all we do is complain.
You can't complain that all weever do is complain.
Corey said no one should pay atax in the private sector until
the oil developers are payingtheir fair share, which is, I
mean, they are Brad.
We'll we'll talk about that in asecond, because then then
(32:20):
Kevin's response was, and don'tforget the oil companies are the
private sector.
We need to get rid of the suckof government on encourage the
private sector.
Taxing the oil companies above acertain amount discourages the
private sector.
So, I mean, there's a balancethere though, Brad, right?
I mean, you have some backgroundin this because this is where
you came from, so you have alittle bit of background on
(32:40):
this, and even you have saidthere is room there to for them
to pay their fair share inregards to what's going on on a
finite non-renewable resource.
SPEAKER_01 (32:51):
Yeah, exactly.
Um yeah, I have a lot ofbackground in this, and there is
there is additional room.
The constitution, theconstitution, the constitutional
standard is the development ofthe state's resources for the
maximum benefit of its people.
And we are not at the point atwhich we are revenue optimizing,
at which we are getting the mostrevenue we we can.
Not not not the maximum, not notthe extreme revenue of running
(33:15):
them out of business, but therevenue at which you know they
would continue in business andwe would get we would get the
most revenue we could, uh, asinstead of going around going
down the other side of the ofthe curve, the development
curve.
And we're not at that point yet.
We're four or five hundredmillion dollars short.
The the the and so we need torestructure oil taxes as part of
this.
The problem with Corey's point,and the problem with with with
(33:38):
the point that people make aboutI'm not gonna go for taxes until
the oil company, the deficitsare too big.
I mean, what the fiscal policyworking group had to confront,
because they're they wereresponsible people put in a room
to actually confront this stuff,what they had to confront is the
deficits are huge.
And so it's not just you can'tjust say we're gonna tax one
(34:00):
thing and close the deficit.
If you tried to tax the oilcompanies one point an
additional$1.8 billion,$1.7 to$1.8 billion, which is what what
the deficit is, you'd you would,they'd leave the state.
They would they'd shut down alldevelopment, they'd leave the
state.
$500 million they can afford,but a billion eight, they that
it would it would just changethe economics too much in the
(34:21):
state.
But if you say, I'm not gonnago, I'm not gonna support
anything else until we until wedo oil taxes, well, then you're
you're you're not you're notcoming up with a solution to to
the problem to the 1.7, 1.8billion dollars.
Okay, because there's yes, oiltaxes is part of it, but it's
not oil taxes alone can't solvethis issue.
SPEAKER_00 (34:40):
There's no again, there's no single magic bullet
here.
We didn't get here by what byone specific thing.
It was a combination of things,and it's gonna take a
combination of things to fix it.
It's a holistic approach.
You when you have a whole wallfull of levers, you don't just
pull one lever to get the to getthe thing back on track.
You know, you've got to pull acombination of we do a little
(35:02):
bit of this, we do a little bitof that, we do it a little, you
know, because there's no onething that's gonna fill up that
hole.
SPEAKER_01 (35:08):
That's the problem.
I mean, Corey's point is thesame, is is is sort of the same
thing as the top 20% saying,well, let's just wipe out the
PFD.
That'll solve the problem, uh,and and just fully subsidize our
taxes, non-resident taxes, andand and the taxes of oil
companies.
Let's that'll that'll do it.
Well, no, it won't cause hugeproblems in middle and lower
(35:28):
income Alaska families to wipeout the PFD.
The same thing's true if we putthe entire burden on the oil
companies.
You can't, the burden is too bigto be put on any one segment.
The genius, the genius of bothHammond and the fiscal policy
working group was to spread itout and have everything be a
(35:50):
little and have everything playa role of a little bit, um, uh
making a little bit of the of acontribution toward the toward
the full solution.
When you do that, and when youspread that burden out long
enough, that far enough, theburden on any one segment
doesn't tip that segment over.
Everybody can afford a littlebit more.
(36:10):
Governor Dunleavy evenrecognized at that at that point
in his famous news conferencewhere he talked about a sales
tax.
He said, What you want to do isget a little bit from here and a
little bit of there.
You can't ask one segment tobear the entire burden.
He forgot that like three dayslater.
But but everybody shouldunderstand that concept.
(36:31):
And so for Corey to say, or forothers to say, oh, I'm not gonna
do this until they do that.
Well, okay, how about this?
Everybody does it at once.
That's what the fiscal policy,that's what the fiscal policy
working group suggested.
And it's and and it's the adultin the room solution as opposed
to the child in the room.
I'm gonna hold my breath untilyou do, until you do X.
(36:53):
The adult in the room solutionis everybody makes a little bit
of a contribution.
That is that is the the focus.
I mean, that's the solution thatsomeone who's focusing on middle
income families ought to betalking about.
They ought to be talking aboutwe've got a problem, we've got
we've got a government that wecan't pay for.
(37:13):
We need everybody, everything tobe part of this solution.
We need some people tocontribute more, everybody to
contribute a little bit more.
We need a little bit of cut inin government spending.
That's the solution that focuseson middle-income families.
And I don't find any of thecandidates talking about the
fiscal policy working group asthe core of their of their
agenda.
SPEAKER_00 (37:33):
Uh, continuing now, Brad Keithley is our guest.
The weekly top three continues.
Number three.
We're talking about thepermanent fund corporation, not
the dividend, but the permanentfund corporation and the
permanent fund earnings, thebig, the big fund itself.
What do the earnings look like?
And we're getting some Q, we'regetting some quarterly earnings
(37:55):
reports here.
Uh, and Brad has some thoughts,obviously, on this.
He's got some thoughts on thisbecause we ain't been doing so
great uh comparatively uh in thepast here.
So, Brad, tell us what'shappening.
SPEAKER_01 (38:10):
So we've talked a lot about this on the show, and
we'll talk about it a lot in thefuture, which is, in my opinion,
the failure of the permanentfund corporation, who's the
manager of the permanent fund.
They are the they are theinvestment bankers, they're the
investment advisors, thefinancial advisors to to that
guide the permanent fund, thethe investments made by the
(38:31):
permanent fund of the permanentfund money.
Uh the the the the failure ofthe permanent fund corporation,
I think, to to maximize, tooptimize, to achieve the maximum
benefit for Alaska, for Alaskansuh out of the out of the
permanent fund uh corpus.
And and so we've talked a lotabout that on the show.
This is a good point to to sortof step in and see what's going
(38:52):
on, because the permanent fundcorporation just released their
first quarter, um, theirSeptember, uh uh month ending
September, which is the also themonth ending of the first
quarter, the ending of the firstquarter of their uh of their
returns.
And we keep a running chart thatwe publish as part of as part of
our charts, uh, our regularcharts on Facebook and Twitter
(39:14):
and elsewhere.
Uh, but we also talk about it onthe show and we also put it in
the Alaska Landmine column fromtime to time.
So since this is the end of thefirst quarter and since we can
sort of see what they're doingin the first quarter, I thought
it'd be a good time to sort ofcheck in and see see what their
results are.
If you have that detailed chart,Michael, and pop it up, that the
spreadsheet or the chart?
SPEAKER_00 (39:32):
The spreadsheet.
The spreadsheet or thespreadsheet.
SPEAKER_01 (39:34):
The spreadsheet.
Okay, there you go.
That might be helpful for thosewho who want to follow along.
And this will be, you can alsofind this on the posts we make
on the Alaskans for SustainableBudgets uh website and on the
posts we make on Facebook pageand on Twitter and sort of all
over the place.
But this is a chart that showsthe the the returns uh in very
(39:54):
by various categories that thethat the that that's that the
permanent fund has achieved andalso that other uh uh
comparative uh uh investmentapproaches have achieved over a
period of time.
We go back, this goes all theway back to fiscal year 12 and
does it by fiscal year upthrough the end of fiscal year
25.
And then it does it uh fiscalyear uh uh to date, uh the FESP
(40:18):
FY26 to date, which is thebottom line before the gray bar
at the at the bottom that saysPF PFC averaging periods.
And then it also does it byfive-year average, three-year
average, and one-year rollingaverage, 12 month rolling
average.
And we do those because that'swhat the permanent fund
corporation itself does in termsof analyzing its own results.
(40:41):
So let's go, let's go to the uhthe the bottom bar, the PFC
averaging periods, which arereally sort of a good way of
looking how the permanent at howthe permanent fund corporation
is is is doing.
Um there are four columns inhere that I that that I'll talk
about.
One is the first column is thepermanent fund corporation's
(41:02):
returns.
The second column is the returnthat's been generated by the
Vanguard uh 500 ETP uh ETF uhelectronic uh traded fund uh
over the over the same period.
That's sort of the the key ofthe Warren Buffett 9010
approach, uh investmentapproach.
The total fund return, which isinflation uh plus 5%, which is
(41:24):
the permanent fund's statedgoal.
And then the other one is thepassive index benchmark, the
second uh under the other uh PFCbenchmarks, the other column.
And that is that is what thereturn would be, what the
permanent fund corporation saysthe return would be if they
didn't aggressively manage thefund, if they didn't, you know,
try to pick and choose winners,if they just put it sort of on
(41:46):
autopilot.
That's what the that's what thepassive index benchmark uh tells
you.
You can see on the five-yearaverage that the permanent fund
corporation has achieved a 9.54percent return.
That is about the same as thetotal fund objective, the
inflation plus 5%, 9.53% overthe period.
(42:06):
And it's and it's greater thanthe passive index benchmark.
So when you look at a five-yearperiod, the the permanent fund
corporation against thosebenchmarks is doing pretty well.
It's still doing very poorcompared to the to the Buffett
9010 rule, uh, which uh WarrenBuffett once said, you know, you
have all these advisors, theseadvisors just you know make you
(42:27):
spend money and they throw youin circles.
Here's a better way to do it.
Just put it on autopilot with9010, uh 90% in the Vancard 500
and 10% in a uh uh in a bondmarket uh ETF.
And and against that 9010 rule,the Buffett 9010 rule, uh, the
permanent fund corporation'sperformance even over the
five-year period pales.
(42:48):
Uh it's 9.54% compared to theBuffett 9010 of 16.45.
The three-year average and theone-year average are showing how
they're doing much closer intime.
The five-year average sort ofpicks up a year that's that's in
the past that that the permanentfund corporation did really well
compared to its peers, andthat's sort of continuing to
(43:10):
influence the five-year average.
The three-year average and theone-year average, rolling
average, are telling you how thepermanent fund's doing on the on
the current basis.
And there you see that thepermanent fund is at uh on a
three-year average is 10.41.
That's that's over uh the thewhat they need to achieve in in
terms of generating revenue toto uh uh uh meet the 5% plus
(43:33):
POMV or 5% plus inflation rule,but it's particularly poor.
That 10.41 is poor compared tothe passive index benchmark.
What would have happened if thepermanent fund hadn't paid out
nearly a billion dollars in ininvestment fees, what Buffett
tells you you'll be taken to thecleaners over.
Right, right.
It's particularly poor againstthat.
(43:54):
And then the one-year average isthe same.
The permanent fund corporationis at 10.10, that's higher than
the total fund return objective.
So they're at least paying forthe POMV draw on a on a one-year
rolling average basis.
But again, it it is less thanthe passive index passive index
index benchmark, which is morethan 50 50 basis points higher
(44:15):
uh at 10.78.
And it's again very poorcompared to the to the Buffett
9010 rule uh of 17.54%.
So I think I think the takeawayfrom the first quarter, and when
you look at these averages,these rolling averages, the
takeaway from the first quarteris the permanent funds
improving.
The permanent fund corporations'returns are improving.
(44:37):
They are better than they wereat year-end, uh fiscal year 25,
which you can see is in thehighlighted in the yellow stripe
across there.
The the the the one-year, thenine, the nine year, excuse me,
the five-year average,three-year average, and ten-year
average or one-year average areall better than the fiscal year
25 uh results.
(44:59):
But so they're improving, andthey're improving against the
the P the inflation plus fivepercent uh objective, which is
what you need to fund the POMVdraw, they're improving against
that.
But when you look, and and sothey will say, Oh, we're doing
okay, you know, we're we'rewe're funding the POMV draw, so
we're we're doing fine, don'tworry about us.
(45:21):
But when you look uh when youcompare it against what they
could be doing, if they eitherjust put this thing on autopilot
and use their passive index uhpassive index benchmark, or did
the Buffett rule and put it asat 9010 or something approaching
9010, uh, which is the WarrenBuffett recommendation, they
could be doing much, much, muchbetter, much better than uh than
(45:44):
what they're doing.
If you've got the graph, thegraph, let's throw that up for
uh just a second.
Thank you.
So this this compares theresults.
The blue line is what would havehappened under the buffet rule,
the red line is how the PFC isuh the permanent fund
corporation is actually doing.
Both the the lines at the topare what the balance of the
permanent fund would be if you'dfollowed the buffet rule since
(46:07):
2020.
It'd be roughly$50 billionhigher than what the than than
what the PFC has achieved overthe same period.
And the bars at the bottom arewhat the POMV draw would be if
you took into account uh if thethe higher balances coming from
uh from the buffet rule uhinvestment.
And as you can see there, thePOMV draw would be significantly
(46:29):
higher, would fund bothadditional dividends and take
care of part of the deficit thatthe that the that the government
has uh has created uh for itselfdo it due to the spending
levels.
It would it would helpcontribute to the solution, it
would be part of the all of theabove solution if we had better
investment uh strategy comingfrom the permanent fund
corporation.
(46:50):
So first quarter results, someimprovement.
They'll claim that hey, we'recovering the POMV draw finally.
Uh and so we're doing great.
But when you compare it againstthe alternatives of what they
could be doing, even just put iton autopilot, one way or the
other, we'd be doing muchbetter.
SPEAKER_00 (47:07):
Yeah, and how much did the permanent fund spend for
such poor results?
Almost a billion dollars, right?
800 and something million inchange in management fees.
Yep.
It's it's as opposed to justsetting it and forgetting it and
getting a 15.97% return on thethree-year average.
They spent a billion dollarsinstead, uh, and got a and got a
(47:31):
10% return.
I mean, this chart right herejust shows the the thing, you
know, the permanent fund, andand for those of you who are you
look closely at the chart here,the per the left column says
permanent fund, and then theblue one is the vanguard SP 500
ETF, right?
So you got the three-yearaverage of 10.4 percent.
(47:53):
The Vanguard returns 24.88percent, and then you go all the
way over to the final columnwith numbers in it, which is the
passive benchmark, meaning ifyou just left it be, you didn't
put it in the vanguard, you justleft it be, it would have still
had five and a half more percentreturn, just leaving it alone
and not spending nearly abillion dollars to manage it.
(48:17):
Yeah, I mean, this is this justnutty, and you look down that
whole passive benchmark column,and for the most part, it's
pretty comparative with the withthe you know, you could have
left the whole thing in thereand still had a better return.
SPEAKER_01 (48:32):
Yeah, that's what that's that's the basis for the
Buffett rule.
I mean, what Warren Buffett inhis famous 2013, I think, letter
to shareholders, um, uh, wastalking about what he was going
to do with his estate after hedied and how he was gonna take
care of his wife.
And he said, you know, I'm gonnaput my estate, the portion of my
estate that I leave to my wife,I'm gonna put in in a 9010 uh
(48:55):
approach, a 90% uh tied to theSP uh uh ETF and 10% uh sort of
a uh a fringe over there, 10% uhin uh uh in bonds.
And I'm gonna put on anautopilot.
And the reason he said he wasgonna do that is because these
these fund managers, theseinvestment advisors, will take
(49:16):
you to the cleaners.
They'll say, you need to bedoing this, pay us, pay us a
bunch of money to tell us thatyou need to be doing this, or
pay us a bunch of money to haveyou to invest your money this
way, or pay us a bunch of moneyto go that way.
And he said, Yeah, they theytalk about these great returns
they get, but after you take outtheir fees, it's like it's like
a uh a return that's much lessthan if you just stuck it in the
(49:38):
Buffett Rule 9010 approach.
Or and the and the and the PFChas sort of their own approach
to that, which is the passiveindex benchmark.
And what's going on is thepermanent fund corporation is
has a bunch of advisors who aretaking fees either in the form
of advisory fees or in the formof a percentage of whatever
(49:59):
returns are generated when theyput it with that with that
advisor.
Uh, and those fees are eating upthe returns that that the
permanent fund would otherwisebe achieving, either by putting
it in their passive and uh uh uhinvesting it according to their
passive index index benchmark orinvesting it according to the
Buffett rule.
Warren Buffett's exactly WarrenBuffett's letter in 2013 was
(50:21):
exactly right.
You will be eaten alive by themanagement fees that that are
taken out of uh, you know, theylook like spectacular earnings,
but by the time you deduct thefees, they aren't.
And that's what's going on withthe with the permanent fund
returns.
You can see it by comparing itto the passive index
benchmarking.
You can see it by comparing itto the Buffett 9010 uh uh rule
(50:43):
uh returns.
SPEAKER_00 (50:45):
It's uh it's pretty obvious when you look at the
actual numbers.
Uh it's uh it's it's it's it'spretty crazy what they continue
to return.
I mean, look at the just look atthe Vanguard S P numbers.
Yep, sure, some numbers are downoccasionally, and occasionally
it'll be down further than whatthe permanent fund earns, but
look at the overall returns.
(51:06):
24.88 percent on a three-year,the 10-year average is 14.3834
percent over 10 years versus8.35 percent for the managed
fund.
It's just it doesn't make anysense.
SPEAKER_01 (51:20):
What what the permanent fund will tell you is
we don't like variability, wedon't like you know the ups and
downs that you get in the SP.
And the SP does, you do havemore ups and downs in the SP.
We don't like those.
We want we want reliability, wewant, we want, you know,
something that doesn't have thatvariability.
And what you get is you you youyou you you get these these
(51:42):
minimal returns because you'repaying a hell of a lot for the
insurance of not having thevariability.
What the yes, the SP isvariable, but the variability
over time goes up and up and upand up.
As you said, the 10-year average14.34 percent goes up and up and
up.
What the permanent fund is doingby by by not having the
variability, not takingadvantage of the variability
(52:04):
that goes up over time, is theyhave these you know middling
returns of eight point ofmiddling return of 8.35 percent.
So it's I I I guess I guess ifif your if your criteria is no
variability, then yeah, thepermanent fund's doing great.
But if your criteria is actuallygetting the maximum benefit for
(52:24):
Alaskans out of the out of thefund, you ought to be doing
something else.
SPEAKER_00 (52:28):
That's the thing.
If you don't care, I mean if youif you if what you're looking
for is returns, you don't reallycare about the variability
between the time you get thereand the return at the end,
right?
That's the thing.
Sure, it may have some wildswings, but if its long-term
trend is up, up, up, why wouldyou know what is why would you
care?
SPEAKER_01 (52:48):
And that's and that's what the permanent fund
is.
The permanent fund is along-term investment.
You know, some people say, well,it's a retirement fund, and so
you, you know, you have to havethe money there.
You don't.
I mean, it it it it it it it isnow at a size.
If you look at the second chart,it is now at a size that is
going to generate a pretty goodchunk of change, regardless of
(53:10):
the variability.
And so what you want out of thisis you want long-term returns,
you want long-term, long-termbenefits.
And that's what the SP 500,that's what the passive index
would give you.
What's happening, thatdifference between the blue line
and the red line is the valuethat the permanent fund
corporation is giving up inorder to not have variability.
(53:34):
It is, it is, it is the lossthat Alaskans are taking against
maximum benefit, just so theline sort of looks like it stays
the same, so it doesn't jump upand down.
SPEAKER_00 (53:44):
Well, and you're losing three quarters of a
billion dollars in POMB drawbecause you can't, because
you're not doing it.
That's the biggest part of theproblem.
All right, Brad.
Well, thank you so much for uhcoming on board as always.
This has been uh educational,and uh you got uh people people
love to see you get a littlewrapped up about stuff
(54:04):
sometimes.
So it should be fun, and you gota chance to tell people what
they what the answer is, and weappreciate that.
So all right, Brad.
Well, thank you so much.
It uh we appreciate you comingon board, Michael.
As always, thanks for having me.
SPEAKER_01 (54:17):
All right, we will catch you, we'll catch you
later.
Well, that's a wrap for anotherweek's edition of the weekly top
three from Alaskans forSustainable Budgets.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
SoundCloud, Spotify, andSubstack pages, and keep track
of us during the week onFacebook and Twitter.
(54:38):
This has been Brad Keithley,Managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week on the weekly
top three.
Hi, this is Brad Keithley, Managing Director of
Alaskans for SustainableBudgets.
Welcome to the Weekly Top Three,the Top Three Things on Our Mind
here at Alaskans for SustainableBudgets for the week of November
10th, 2025.
The Weekly Top Three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live,
(00:33):
as well as via streaming audiofrom the show's website weekdays
from 6 to 8 a.m.
I join Michael weekly in thefirst hour of Tuesday's show
from 6.10 to 7 a.m.
for a discussion between the twoof us about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, YouTube,
(00:56):
SoundCloud, Spotify, andSubstack pages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site, medium.com.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that in addition tothese podcasts, during the week,
(01:18):
you can also follow andparticipate in the discussion
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
Twitter.
This week, our top three issuesare these.
First, we explain what to usseems missing so far from the
(01:40):
governor's race.
Second, we explain whatirritates us about how the top
20% support taxes.
And third, we review thepermanent fund's first quarter
investment returns and what theytell us about the permanent fund
corporation's performance.
And now let's join Michael.
SPEAKER_00 (02:02):
Brad Keithley from Alaskans for Sustainable Budget.
You can find him at aK4SB.com.
And uh he bro comes in everyweek to uh do a deep dive with
us on a bunch of differenttopics, usually three big
issues.
And uh today is no different.
And boy, I gotta tell you, it'sum what's missing from the
(02:23):
governor's race so far?
Well, apparently it was a MattClayman because he's just jumped
in at the last minute, so nowthere's 14.
What else is missing from thegovernor's race so far?
Bradley, hit me with what'sgoing on here.
SPEAKER_01 (02:34):
Well, Michael, I was I was flipping through the uh
ADN and other publications tosort of come up with this week's
list.
And um my eye got caught on theADN article that has the picture
of all of the then candidates,pre-claimant, uh, then
candidates, uh, with under theheadline, in an already crowded
(02:56):
race for Alaska governor,candidates looked to fundraising
as a barometer.
And I just finished reading acouple of politico articles that
were analyzing the results ofthe of the off-year elections in
uh New Jersey and Virginia andelsewhere and analyzing why
those candidates did as well,why those the issues in those
(03:19):
races and the position that thewinning candidates took versus
the positions that the that thelosing candidates took.
And the politico articlearticles uh emphasized that the
winning candidates had focusedon the state of the economy,
particularly the impact of theeconomy on middle-income uh
(03:40):
families in those particularstates, and had just ground and
ground and ground uh on thoseissues, talking about health
care, the cost of health care,talking about the cost of food,
talking about the the just thecosts of living in those states
and what could be what could bedone uh at the state level and
what the and what thosecandidates were proposing to do
(04:02):
at the state level to deal withthose issues.
But the but the articles reallyemphasized it, we there was an
empathy that the winningcandidates had an empathy with
what middle income families werefacing in those states, um,
regardless of party, regardlessof race, regardless of any other
discriminator uh among the amongthe uh uh the voters, and just
(04:25):
and and how they were emphasizeempathizing, emphasizing the
empathy that they had for uh forthe economic circumstances those
candidates were facing.
Right.
I thought, well, that'sinteresting.
So then I came back to Alaskaand I looked at I came back to
the ADN article and I looked atall the pictures of all the
candidates that are running.
(04:46):
And none, to my knowledge, and Ifollow it as closely as I can,
none of those candidates arepicking up on that theme and
emphasizing the same thing.
Maybe you know, Alaska pollingtells you that it's different,
that that middle income familiesaren't concerned about their own
economic situation in Alaska.
(05:07):
And by middle income families, II mean 80% of Alaska families,
those between the low 20% andthe top 20%, 80% uh of families.
SPEAKER_00 (05:18):
Um, that's actually a 60%, but but it's 10%, right,
on both ends.
It's math.
Math is hard in the morning.
SPEAKER_01 (05:26):
It's hard sometimes.
Let's take the 20% out of it.
But but the the but but youknow, maybe Alaska is different,
but I don't see any of thosecandidates uh focused on that
issue.
I what I see is various specialinterests, that they're focusing
on various special interests andhoping that they that that those
(05:48):
voters who are concerned aboutthat special interest will adopt
that candidate because of thatcandidate's focus on special
interests.
For example, just to just to gothrough the ADN light up a
little bit, Tom Begage talks alot about education and the K
through 12 industry and needingmore spending on K through 12.
Uh Click Bishop talks a lotabout infrastructure and more
(06:08):
spending on construction andinfrastructure.
Bronson talks a lot about aboutsocial issues.
Crum, I don't know what crumbtalks about, but but it goes on
and on and on about specialinterest issues that they're
hoping to slice and dice theelectorate on.
Maybe, maybe that's aconsequence of of the way we're
(06:31):
going about elections with uhwith rank choice voting.
Because to get into the finalfour, especially with a crowd
this big, you're gonna have tohave you know maybe 10%, 12%,
15% to get you into the into thefinal four.
And maybe they're focusing onthose slice and dice issues
because they think that willgenerate the the the you know
(06:54):
the narrow slice they need toget uh to get into the final
four.
Maybe that's maybe that's what'sgoing on.
SPEAKER_00 (07:00):
Right, to get them across the finish line.
They need just to attract thespecial interest just so they
make it to the top four.
SPEAKER_01 (07:06):
Right.
And then in the top four, maybethe maybe the the theme changes,
but but and maybe that's what'sgoing on.
But it just struck me that thatthere's really not a focus in
Alaska on on the economy and onthe and on the economic impact
on on middle income familiesthat you saw in other states.
(07:27):
It's not that we don't, it's notthat we don't have issues in
Alaska.
At the same time I was goingthrough the articles, there's
there's one in by James Brooks,it's in the Alaska Beacon, uh,
and in the uh Alaska PublicMedia and elsewhere, the
headline of which is the numberof debt collection cases in
Alaska state courts is soaring,uh following national trends.
(07:48):
It's not that we don't haveissues, economic issues, uh in
uh uh in the in middle income uhfamilies in Alaska, uh, but it's
just that it just that we're notconcentrating on it.
And and in fact, we have onecandidate who's who is who is
affirmatively running away fromit.
And it's just odd.
I mean, so the Democrats werethe winners in New Jersey and
(08:11):
Virginia, right?
Both sort of bluish states, andso you would sort of expect that
they would do well.
Yeah, but they were they werethe ones appealing to the to the
to the middle income economicinterests.
Here's Begich in an interview inthe Juno Independent, which is
frankly, you know, a paper worthfollowing uh in the state uh as
uh as we go through sort of theevolution of the state's press.
(08:33):
Uh, but Begich hasn't had anextended interview with Mark
Sabatini in the JunoIndependent.
And and this is what he this iswhat Sabatini wrote and what uh
Begich said about the permanentfund, uh the PFD.
Off discussed proposals bylawmakers and permanent fund
officials include a stateconstitutional amendment
amendment mandating a dividendand altering state law to
(08:55):
establish a baseline amount tiedto the success or failure of the
permanent fund.
Well, we already have thestatute that ties to the success
or failure of the permanentfund.
But Begage said he supportsthese proposals without yet
setting a definitive baselineamount.
It could be$1,000.
That's what we've been gettingon average, if you don't take
into account inflation.
It could be twelve hundreddollars, he said.
(09:16):
That's a negotiation that youhave to have with the
legislature and the populationbecause if you don't, it doesn't
matter what you do.
You have to have a majority ofthe people supporting that
constitutional change.
Well, either$1,000 or$1,200 is ahuge tax on middle-income
families.
You're taking money out of thepockets at a time when
(09:38):
politicians elsewhere aretalking about emphasizing the
economic needs of middle-incomefamilies.
You're taking money, uh a PFD of$1,000 or$1,200 compared to the
current statute, is taking moneyout of the pockets of
middle-income families.
Money that is their share bystatute, their share of the
state's commonly held wealth.
(10:00):
And if you cut it, it's notgoing to their benefit.
The benefit's going to the top20%, oil companies, the
non-residents who don't have topay taxes for their share of
government costs.
It's it's subsidizing them.
So in an environment, in an erawhere winning candidates
elsewhere are trying toemphasize things that the state
(10:25):
can do to help middle incomefamilies.
Beggic is running away from it.
And I just I just think that's Ithink that's odd.
And I think it's I think it'ssomething, an issue that if a
candidate started honing in onit, the candidate would find
more success than uh than maybethey are honing in on a special
interest.
SPEAKER_00 (10:41):
Isn't that indicative, though, of most
candidates at this point, ormost politicians, or most
people, they they they there isno empathy for what's going on
in the middle class.
Again, there's complete andtotal disconnect from what's
happening in the middle classand the private economy.
We've said that a dozen times, Imean, dozens of times, that
they're more focused on what,like you said, you pointed out.
(11:03):
They're focusing on the specialinterest, who's getting paid by
what?
The construction industry, theeducation lobby, the this lobby,
the that lobby.
You know, that's what'simportant.
But the private economy as awhole and the effect of the
economy on the middle class orthe lower middle class, that
doesn't matter.
It's a complete and totalnon-starter for most of these
(11:24):
people when it comes to it.
SPEAKER_01 (11:26):
Yeah, and and and maybe it also reflects how
dominant we have allowedgovernment to become in the
economy of Alaska.
That that that the that thedebate is how you divide up the
spoils of government.
The debate is how you divide upthe richness of government uh
and who gets to benefit fromthat richness, where we where we
(11:47):
take the state's money and andwho gets who do we direct it to
and who gets to benefit fromthat.
Maybe that's maybe it's anindication of how of how
dominant we've allowedgovernment in Alaska to become
uh in the economy compared toNew Jersey or Virginia, which
which don't share that same uhthat same characteristic,
notwithstanding the fact they'reblue states or blue states.
(12:10):
Um it maybe maybe it's areflection of that.
But I but I think it's I thinkit's sad.
I think it's a sad state ofaffairs that we don't have at
least one or two candidates whoare who are focusing on their
empathy and on the andemphasizing the economic
situation faced by middle-incomefamilies and trying to be
(12:31):
responsive to that, not in termsof increasing government
largesse that's going to thosefamilies, but allowing them to
keep more of their income, theirshare of the commonly owned
wealth, uh in their pockets asopposed to taking taking more
and more and more of it forgovernment so government can
redirect it to one segment oranother.
SPEAKER_00 (12:52):
Yeah.
No, I mean it is, and it that isthe sad part of uh what we seem
to be missing um in thegovernor's race, um, which is
kind of where we're going.
Uh Matt Klayman jumping into therace now.
And I mean I, you know, I justyou know, one more that's all we
(13:12):
needed.
We just needed one more personin the race to make it all
better, right?
That's what it was all about.
SPEAKER_01 (13:18):
I mean, Matt Klayman, Matt Klayman's worse
than Tom Begage.
I mean, is worse than the thanthe thousand twelve hundred
dollars Tom uh Klayman has saidthat we don't need the PFD.
It all should go, it all shouldgo to government so government
can re can redirect it back out.
Yeah, I mean, you know, Mondami,they're they're they're farther
along down that curve than thanMondami is.
(13:41):
I mean, yeah, to some degree, uhI I won't take this too far, but
to some degree, the the Alaskarace in terms of its emphasis on
what what government can do, youknow, the economic might of
government can do and redirectit in certain ways, and and and
it it reflects more the New Yorkrace, the New York City race,
(14:03):
even from the Republicans.
It reflects more the New YorkCity mayoral race than it does
the uh than it does the the theraces in New Jersey and
Virginia.
Um, because it's because the theAlaska race is government has
all this money.
We're gonna take even more of itfrom you through deeper PFD
cuts.
Government has all this money,and the race is who can give me
(14:26):
the most votes?
Who has the most votes outthere?
That if I promise to give youthe money, you'll vote for me.
Give give the money to yoursegment, you'll vote for me, and
I'll be able to get into thefinal four.
That's sort of what's going onhere.
Yeah, and and it's and that's alot more New York.
Yeah, that's a lot more the NewYork race than it is the New
(14:47):
Jersey and Virginia race.
SPEAKER_00 (14:49):
It's uh it's kind of crazy to watch.
And of course, now we're nowwe've got the whole uh uh you
know, now we've got the thewhole kind of breakdown of 15
different candidates.
And as you just said, nobody'sreally showing empathy as of yet
for the plight of the everyman.
Uh probably um probably uh uhBernadette has probably been the
(15:14):
one that's been closest to anyof that, but even she fumbles
the ball on some of thequestions on budgets and and
breakdowns and things like that.
What's it gonna take, Brad?
What's it gonna take to get allthis squared away?
I I just I don't have an answerfor you.
SPEAKER_01 (15:28):
I don't I don't have an answer either, Michael.
I mean, I would think there wasout of 13, 14, 15, whatever the
heck we're up to now.
14.
Out of out of out of out of thatnumber, you would at least have
one who is trying to carve in onthe on on middle income families
and and and recognize that 60 or80 or 70 or whatever percent it
(15:49):
is, recognize that percent ofthe population as as an
important segment of thepopulation that should be
appealed to.
And but we don't.
I mean, we've got we've gotpeople who are just you know
flitting off of I can buildmore, I can use your money, take
your money through PFD cuts andbuild more infrastructure than
anybody else that we can'tmaintain, right?
(16:12):
We don't have enough money evennow to maintain what we got, but
I can do more of it, I can buildmore of it, or I can you know
have a bigger K through 12education, or I can have a four
more defined benefits forgovernment.
I mean, it's just that's what'sgoing on.
It's everybody's you know,slicing and dicing into into all
these segments and how they cantake your money and and give it
(16:33):
and give it to those folks.
It's just disappointing.
SPEAKER_00 (16:39):
I mean, I don't want to be gloom and doom, but it
feels a lot like people arestanding over the corpse and
they're carving it up, you knowwhat I mean?
I mean, really the the the thethe turkey dinner, it's like
we're just getting carved up andthe people are taking their
little sections of specialinterests off, and the rest of
us are just laying there like,what do we do?
I mean, it's crazy.
SPEAKER_01 (17:01):
Out migration is an issue in this state, it's an
issue, it's a middle, it's amiddle income issue.
I mean, yeah we have anincreasing number of top 20
percent, we don't need to worryabout them, but we're losing in
the in the middle incomebrackets, working family,
working age uh families.
We got nobody talking aboutthat.
I mean, I would think that wouldbe an issue that you would want
(17:22):
to appeal to.
Maybe you're concerned that yourvoters are leaving and so they
can't they won't be voting foryou because they're walking out
the door.
But I would think that is amiddle income issue that you
might that you might want to betalking about.
But you know, nobody's doingthat.
I haven't heard the word outmigration once uh in this camp
in this campaign.
It's certainly not in TomBegitch's interview with the
(17:43):
with the Juno Independent.
SPEAKER_00 (17:45):
Well, I know we did talk about that with uh we
talked about that with Showerand with Bernadette as well.
We've talked about that withboth of them, so I know that it
is an issue and they are awareof it.
So at least they've mentionedit.
But like you said, not manyother people are talking about
it.
Brad's over here distracting mewith so much good news.
I just didn't know what to do.
Um, all right, Brad, the numberone irritating thing in the top
(18:09):
twenty when the top 20% um uh,you know, when they support
taxes, that's the thing.
When they support taxes, it'suh, you know, because you but
you've talked about how youbelieve that it's gonna take
some form of tax to try and fixthe problem, but when they jump
on board, then things getproblematic.
SPEAKER_01 (18:28):
Yeah, and this was triggered by, you know, I very
seldom read letters to theeditor, because you know, I read
the opinion columns and the andthe community voice columns and
and the longer pieces.
I very rarely read the theshort-formed uh letter, uh
letters to the editor.
But this one, the title of thisone in the in the ADN caught my
attention.
It's letter time for more taxes,and it's real short, and this is
(18:51):
what it says Are you tired ofour state and local politicians
complaining about financialissues, disappointed about poor
public service, decayinginfrastructure and schools?
Look in the mirror.
The free ride is over, Alaska.
Time to pay the fiddler.
Here's how, here's how so,here's how.
No more PFD checks.
Reinstate the state income tax,mandatory minimum sales tax for
(19:13):
anchorage of five percent, alleffective immediately.
That would be a good that wouldbe a good start.
Okay, I get it.
Top 20% are starting torecognize, at least those who
are dependent on government,government largesse, they're
starting to recognize the goodtimes may be over.
Um, and that, and then there maybe a need for uh additional
revenue.
(19:34):
But the thing that ticks me offis is every time, and Natasha
you ticked me off when she didthis, and Klayman ticks me off
when he does it, and all everall of these guys in the top 20
percent, when they start talkingabout taxes, the first thing
they say is no more PFD checks.
So, what does that mean?
(19:55):
What that means is they want tocut the the revenue source, cut
a revenue source, the share ofthe state's commonly owned
wealth, that revenue source thatgoes to middle and lower income
Alaska families that make it hasthe largest impact, is the
largest uh uh uh has the has thelargest uh uh impact on the on
the economics of middle andlower income Alaska families.
(20:17):
They want to cut that first.
And what does that do when youcut that?
It buffers the top 20%non-resident and oil companies
because that means they don'thave to sh they don't have to
contribute as much, if any, togovernment costs, because those
government costs are being arebeing buffered, are being
(20:39):
subsidized, are being are beingtaken care of by the amount that
you've taken out of the pocketsof middle and lower income
Alaska families.
The biggest beneficiaries of PFDcuts are is not government
spending, as as some peoplethink.
The biggest beneficiaries of PFDcuts are the top 20%
non-resident industries and theoil companies who don't have to
(21:02):
pay taxes, who don't have to paya share, a share of of the
increased costs.
They get to free ride on thebacks of the PFD cuts.
They get to free ride on thebacks of the dollars that are
being taken out of middle andlower income Alaska families.
So when I see one of these oneof these articles or one of
(21:22):
these commentaries that say,yeah, I'm ready for taxes, but
first cut the PFD.
What that really is saying isfirst subsidize the heck out of
me to the maximum extent you inthe top 20%.
First subsidize the heck out ofme to the maximum extent you can
by taking the state's share, thethe cotton the share of commonly
(21:43):
owned wealth that otherwise isgoing to middle and lower income
Alaska families and using thatto subsidize my taxes to prevent
me from having to pay taxesfirst, and then maybe I'll pay a
little bit more.
This shows up all sorts ofplaces.
So, you know, uh Zach Fields andElise Galvan in not this
legislature, but in thelegislature before last
(22:05):
introduced income taxes.
They were ready to stand up andsay, we need to pay our fair
share.
Top 20% need to pay our fairshare.
Well, you go in and you analyzewhat their income taxes would
do.
In the case of Fields, it didn'teven raise$100 million.
In the case of Galvin, it raiseda little bit more than$100
million, depending upon whatassumptions you made.
(22:28):
The deficit's$1.7 billion,$1.8billion.
So what they were doing was theywere putting on this thin veneer
and saying, yeah, we're payingour fair share.
But behind that was continueddeep, deep, deep, deep PFD cuts
on middle and lower incomeAlaska families uh to make up
(22:49):
the difference between thehundred million dollars that
their two tax approaches wouldmake and the$1.8 billion, the
$1.7,$1.8 billion deficit uhthat uh that the state's
running.
So it just it just, I mean, Imaybe some of these people mean
well.
Maybe they say, oh, maybe maybethey're saying, oh, it's time
(23:09):
for me to pay my fair share.
But when they start it with nomore PFD checks, wipe out the
free stuff for wipe out the freemoney for middle and lower
income Alaska families, and usethat free money to subsidize my
taxes.
Use that free money to make sureI don't have to pay taxes.
The top 20%, the non-resident,and the and the all companies,
(23:30):
that just that just irritatesthe heck out of me.
It's like it's like grating on achalkboard or fingernails on a
chalkboard or whatever,whatever.
Yeah, you're gonna come up withthat sound, aren't you?
SPEAKER_00 (23:39):
It's like yarn yarn between your teeth, right?
SPEAKER_01 (23:41):
I mean, it's like, you know, oh it's just it's just
irritating as heck because whatwhat they're really saying is,
yeah, I'm sort of ready to payready to pay.
I'm I'm I'm ready to say I'mready to pay taxes, but I'm not
really ready to pay.
I mean, taxes, god no, I'm notready to pay the rates, the the
rate of taxes that we'reimposing on middle and lower
income Alaska families.
(24:02):
God no, I'm not real ready topay that.
I don't want to pay, you know,eight percent, ten percent,
thirty percent, like we'retaking from middle and lower
income Alaska families.
Uh-uh.
I want to pay my little onepercent, right?
Um 0.06, right?
Or whatever it is.
Yeah, 0.6%.
And and and that's just I, youknow, it just I part of it is
(24:26):
the media, part of it ispoliticians haven't done
anywhere near a good jobexplaining what's going on with
PFD cuts, who's reallybenefiting from PFD cuts.
So maybe people don't understandit, and and part of it is maybe
just you know, the the ignoranceof of the the the fact that
they're in the top 20 percent,and and so they don't feel the
(24:50):
effect that that middle andlower income Alaska can families
are feeling through PFD cuts.
Maybe that's part of it, butit's just irritating because
it's it it it it it it it it itit indicates that they just
don't understand economics, theyjust don't understand the impact
of what PFD cuts are doing tomiddle and lower income Alaska
(25:12):
families, and that they don'tunderstand the benefit of the
free ride that they're gettingfrom shifting that free money
from from you know being spreadprorrata across all across all
families to being concentratedto the benefit of of upper
income non-resident and uh andthe oil companies.
SPEAKER_00 (25:35):
I just have to chuckle because I feel so
vindicated in everything thatwe've said because the the the
they used the actual words thatI said.
I said, one day they're gonnacome back and they're gonna tell
us what are they gonna tell us?
The free ride is over.
And what does he say?
The free ride is over.
This is exactly the tack that Iknew that they were gonna take.
(25:58):
And like you said, I knew thatthey were gonna take all of the
PFD and bolster all of that, andthey would consume all the
money, and then they would lookus in the eye and say, Oh, the
free ride is over.
I mean, you know, that that'sthe that the irony of this, they
don't understand how this worksand what's actually going on,
but they know all the money'sthere, and that's what they want
(26:20):
to take.
And but now the free ride's overfor everybody else.
SPEAKER_01 (26:24):
Yeah, exactly.
That's the point.
The free ride is over foreverybody else.
We want to we want to take thatfree money, and that it's
actually your share of thecommonly owned wealth.
We want to take that free money,take it away from you, and they
want we want to use it all forour benefit by by subsidizing
taxes we would otherwise have topay.
We're willing to pay a littlebit, we're willing to pay$100
million or so uh in taxes, butwe want the other$1.7 billion,
(26:48):
$1.6,$1.7 billion.
We want that covered by freemoney.
We want the benefit of the freeride as opposed to the benefit
as opposed to the free ride, thebenefit of the free ride being
spread across across all Alaskafamilies.
And and some of it is ignorance,but you know, people, Zach
Fields ought to understand this,at least Galvin ought to
(27:11):
understand this.
People who are who are you knowgoing out there and saying, oh,
I'm in favor of an income tax,this minuscule income tax
compared to the size of thedeficit.
I'm in favor of an income tax,they know what they were doing.
They know what they're doingbecause they have fiscal notes
that show the revenue raisedthrough their so-called income
tax, and they have budget budgetdocuments that show the size of
(27:33):
the deficit, and they know thatthey aren't covering anywhere
near the deficit, and they knowthat the remainder of it's going
to be paid up by shifting thefree money from the for the
benefit of all Alaskans over tothe benefit of the top 20%
non-residents and and oilcompanies.
So some of it, some of it isignorance, but some of it's
(27:53):
malicious.
And and and the maliciousnessirritates me even more than the
ignorance of it us does.
But all of it, all of itirritates me.
SPEAKER_00 (28:01):
Well, you know, let's let's let's let's give me
a solution then, Brad, because Imean they often complain, we
complain about this, but wedon't.
I mean, what is the solutionhere?
Is it a combination of thingslike the fiscal policy working
group talked about?
Is it a cut?
Is it a tax?
Is it a is it more oil revenue?
I mean, what is the solutionhere of all this stuff?
(28:22):
And this guy, if you had thisguy, this letter writer across
Matt, whatever his name is, MattNewman, some random human being,
Matt R Matt Newton, if you hadhim across the table and said,
Okay, well, that's not going towork, and here's why, and you
just explained everything to himand you're frothing at the mouth
about all what's the solutionthen?
What is the solution in BradKeithly's mind?
SPEAKER_01 (28:44):
Well, it is the fiscal policy working group.
It and the fiscal policy workinggroup is basically a little of
all of it.
It's a little bit of PFD cutsbecause the proposal was to
restructure the PFD from itscurrent statutory structure,
which doesn't take into accountinflation proofing, and move it
down to 50-50 of the POMV, whichshares inflation proofing
(29:04):
between the government andcitizens.
Uh, it was uh some oil taxes, itwas some spending cuts, it was,
and it was some revenue, somebroad-based revenue uh from
Alaska, from some broad-basedrevenue.
And the benefit of broad-basedrevenue is that you then pick up
contributions by non-residents.
(29:25):
Reforming oil taxes pick upcontributions by uh uh pick up
contributions from the oilcompanies, broad-based taxes
would pick up comparedcontributions from the top 20%
who are who are making like zerocontributions now, and it would
pick up contributions from nonfrom non residents.
And the benefit of picking upcontributions of from non
residents is it would reduce theburden on Alaska families, they
(29:48):
would get to keep more of theirmoney.
15 let's let's assume 15% eithera broad based sales tax or a
flat tax, broad based incometax.
Let's assume that 15% of thatcomes.
From nonresidents.
Well, that means that Alaskafamilies can reduce the burden
on Alaska families is reduced bythat 15% because that's now
(30:11):
being picked up by of the of therevenue base, because that's now
being picked up bynon-residents.
So so it's a combination of somespending cuts, some oil tax
reform, some PFD restructuring,and some um some broad-based
taxes.
The other benefit of broad-basedtaxes, I would tell Matt, the
other benefit of broad-basedtaxes is that you then have
(30:35):
broad-based pressure ongovernment to reduce spending.
Right now, the top 20% saysspending, oh, that's fine.
Yeah, we don't care about itbecause it comes out of PFD cuts
and they don't care about PFDcuts.
And it's funding a lot of theirstuff.
Right.
So they don't, so they don'tcare about additional government
spending.
In fact, they support it.
If you look at who's supporting,you know, child care, Julie
(30:56):
Cologne's child care, or or youlook at, you know, K012
spending, it's the top 20% who'ssupporting that.
They don't care because theydon't they don't pay for it.
If you had a broad-based taxthat picked up non-residents,
picked up the oil companies andsaid, oil companies, you're
going to pay a part of thesedeficits, too.
Also, uh, you would have a morebroad-based pushback on spending
(31:17):
because everybody would have topay for it.
Right now, using PFD cuts, noteverybody pays for it.
So it is the fiscal policyworking group.
It is the little bit ofeverything because the little
bit of everything, some spendingcuts, some uh restructuring of
the PFD, some uh broad-basedrevenue source, and some
(31:38):
restructuring of all taxes, thelittle bit of everything spreads
the burden in a way that getseverybody to start pushing back
on government spending, asopposed to the structure we have
now, where we have a segment ofthe population who actually
cheers for government spendingbecause they don't have to pay
for it.
The costs are shoved over onsomebody else.
SPEAKER_00 (31:58):
All right.
Brad's now giving you asolution, a possible solution.
You can't complain that we don'tever all we do is complain.
You can't complain that all weever do is complain.
Corey said no one should pay atax in the private sector until
the oil developers are payingtheir fair share, which is, I
mean, they are Brad.
We'll we'll talk about that in asecond, because then then
(32:20):
Kevin's response was, and don'tforget the oil companies are the
private sector.
We need to get rid of the suckof government on encourage the
private sector.
Taxing the oil companies above acertain amount discourages the
private sector.
So, I mean, there's a balancethere though, Brad, right?
I mean, you have some backgroundin this because this is where
you came from, so you have alittle bit of background on
(32:40):
this, and even you have saidthere is room there to for them
to pay their fair share inregards to what's going on on a
finite non-renewable resource.
SPEAKER_01 (32:51):
Yeah, exactly.
Um yeah, I have a lot ofbackground in this, and there is
there is additional room.
The constitution, theconstitution, the constitutional
standard is the development ofthe state's resources for the
maximum benefit of its people.
And we are not at the point atwhich we are revenue optimizing,
at which we are getting the mostrevenue we we can.
Not not not the maximum, not notthe extreme revenue of running
(33:15):
them out of business, but therevenue at which you know they
would continue in business andwe would get we would get the
most revenue we could, uh, asinstead of going around going
down the other side of the ofthe curve, the development
curve.
And we're not at that point yet.
We're four or five hundredmillion dollars short.
The the the and so we need torestructure oil taxes as part of
this.
The problem with Corey's point,and the problem with with with
(33:38):
the point that people make aboutI'm not gonna go for taxes until
the oil company, the deficitsare too big.
I mean, what the fiscal policyworking group had to confront,
because they're they wereresponsible people put in a room
to actually confront this stuff,what they had to confront is the
deficits are huge.
And so it's not just you can'tjust say we're gonna tax one
(34:00):
thing and close the deficit.
If you tried to tax the oilcompanies one point an
additional$1.8 billion,$1.7 to$1.8 billion, which is what what
the deficit is, you'd you would,they'd leave the state.
They would they'd shut down alldevelopment, they'd leave the
state.
$500 million they can afford,but a billion eight, they that
it would it would just changethe economics too much in the
(34:21):
state.
But if you say, I'm not gonnago, I'm not gonna support
anything else until we until wedo oil taxes, well, then you're
you're you're not you're notcoming up with a solution to to
the problem to the 1.7, 1.8billion dollars.
Okay, because there's yes, oiltaxes is part of it, but it's
not oil taxes alone can't solvethis issue.
SPEAKER_00 (34:40):
There's no again, there's no single magic bullet
here.
We didn't get here by what byone specific thing.
It was a combination of things,and it's gonna take a
combination of things to fix it.
It's a holistic approach.
You when you have a whole wallfull of levers, you don't just
pull one lever to get the to getthe thing back on track.
You know, you've got to pull acombination of we do a little
(35:02):
bit of this, we do a little bitof that, we do it a little, you
know, because there's no onething that's gonna fill up that
hole.
SPEAKER_01 (35:08):
That's the problem.
I mean, Corey's point is thesame, is is is sort of the same
thing as the top 20% saying,well, let's just wipe out the
PFD.
That'll solve the problem, uh,and and just fully subsidize our
taxes, non-resident taxes, andand and the taxes of oil
companies.
Let's that'll that'll do it.
Well, no, it won't cause hugeproblems in middle and lower
(35:28):
income Alaska families to wipeout the PFD.
The same thing's true if we putthe entire burden on the oil
companies.
You can't, the burden is too bigto be put on any one segment.
The genius, the genius of bothHammond and the fiscal policy
working group was to spread itout and have everything be a
(35:50):
little and have everything playa role of a little bit, um, uh
making a little bit of the of acontribution toward the toward
the full solution.
When you do that, and when youspread that burden out long
enough, that far enough, theburden on any one segment
doesn't tip that segment over.
Everybody can afford a littlebit more.
(36:10):
Governor Dunleavy evenrecognized at that at that point
in his famous news conferencewhere he talked about a sales
tax.
He said, What you want to do isget a little bit from here and a
little bit of there.
You can't ask one segment tobear the entire burden.
He forgot that like three dayslater.
But but everybody shouldunderstand that concept.
(36:31):
And so for Corey to say, or forothers to say, oh, I'm not gonna
do this until they do that.
Well, okay, how about this?
Everybody does it at once.
That's what the fiscal policy,that's what the fiscal policy
working group suggested.
And it's and and it's the adultin the room solution as opposed
to the child in the room.
I'm gonna hold my breath untilyou do, until you do X.
(36:53):
The adult in the room solutionis everybody makes a little bit
of a contribution.
That is that is the the focus.
I mean, that's the solution thatsomeone who's focusing on middle
income families ought to betalking about.
They ought to be talking aboutwe've got a problem, we've got
we've got a government that wecan't pay for.
(37:13):
We need everybody, everything tobe part of this solution.
We need some people tocontribute more, everybody to
contribute a little bit more.
We need a little bit of cut inin government spending.
That's the solution that focuseson middle-income families.
And I don't find any of thecandidates talking about the
fiscal policy working group asthe core of their of their
agenda.
SPEAKER_00 (37:33):
Uh, continuing now, Brad Keithley is our guest.
The weekly top three continues.
Number three.
We're talking about thepermanent fund corporation, not
the dividend, but the permanentfund corporation and the
permanent fund earnings, thebig, the big fund itself.
What do the earnings look like?
And we're getting some Q, we'regetting some quarterly earnings
(37:55):
reports here.
Uh, and Brad has some thoughts,obviously, on this.
He's got some thoughts on thisbecause we ain't been doing so
great uh comparatively uh in thepast here.
So, Brad, tell us what'shappening.
SPEAKER_01 (38:10):
So we've talked a lot about this on the show, and
we'll talk about it a lot in thefuture, which is, in my opinion,
the failure of the permanentfund corporation, who's the
manager of the permanent fund.
They are the they are theinvestment bankers, they're the
investment advisors, thefinancial advisors to to that
guide the permanent fund, thethe investments made by the
(38:31):
permanent fund of the permanentfund money.
Uh the the the the failure ofthe permanent fund corporation,
I think, to to maximize, tooptimize, to achieve the maximum
benefit for Alaska, for Alaskansuh out of the out of the
permanent fund uh corpus.
And and so we've talked a lotabout that on the show.
This is a good point to to sortof step in and see what's going
(38:52):
on, because the permanent fundcorporation just released their
first quarter, um, theirSeptember, uh uh month ending
September, which is the also themonth ending of the first
quarter, the ending of the firstquarter of their uh of their
returns.
And we keep a running chart thatwe publish as part of as part of
our charts, uh, our regularcharts on Facebook and Twitter
(39:14):
and elsewhere.
Uh, but we also talk about it onthe show and we also put it in
the Alaska Landmine column fromtime to time.
So since this is the end of thefirst quarter and since we can
sort of see what they're doingin the first quarter, I thought
it'd be a good time to sort ofcheck in and see see what their
results are.
If you have that detailed chart,Michael, and pop it up, that the
spreadsheet or the chart?
SPEAKER_00 (39:32):
The spreadsheet.
The spreadsheet or thespreadsheet.
SPEAKER_01 (39:34):
The spreadsheet.
Okay, there you go.
That might be helpful for thosewho who want to follow along.
And this will be, you can alsofind this on the posts we make
on the Alaskans for SustainableBudgets uh website and on the
posts we make on Facebook pageand on Twitter and sort of all
over the place.
But this is a chart that showsthe the the returns uh in very
(39:54):
by various categories that thethat the that that's that the
permanent fund has achieved andalso that other uh uh
comparative uh uh investmentapproaches have achieved over a
period of time.
We go back, this goes all theway back to fiscal year 12 and
does it by fiscal year upthrough the end of fiscal year
25.
And then it does it uh fiscalyear uh uh to date, uh the FESP
(40:18):
FY26 to date, which is thebottom line before the gray bar
at the at the bottom that saysPF PFC averaging periods.
And then it also does it byfive-year average, three-year
average, and one-year rollingaverage, 12 month rolling
average.
And we do those because that'swhat the permanent fund
corporation itself does in termsof analyzing its own results.
(40:41):
So let's go, let's go to the uhthe the bottom bar, the PFC
averaging periods, which arereally sort of a good way of
looking how the permanent at howthe permanent fund corporation
is is is doing.
Um there are four columns inhere that I that that I'll talk
about.
One is the first column is thepermanent fund corporation's
(41:02):
returns.
The second column is the returnthat's been generated by the
Vanguard uh 500 ETP uh ETF uhelectronic uh traded fund uh
over the over the same period.
That's sort of the the key ofthe Warren Buffett 9010
approach, uh investmentapproach.
The total fund return, which isinflation uh plus 5%, which is
(41:24):
the permanent fund's statedgoal.
And then the other one is thepassive index benchmark, the
second uh under the other uh PFCbenchmarks, the other column.
And that is that is what thereturn would be, what the
permanent fund corporation saysthe return would be if they
didn't aggressively manage thefund, if they didn't, you know,
try to pick and choose winners,if they just put it sort of on
(41:46):
autopilot.
That's what the that's what thepassive index benchmark uh tells
you.
You can see on the five-yearaverage that the permanent fund
corporation has achieved a 9.54percent return.
That is about the same as thetotal fund objective, the
inflation plus 5%, 9.53% overthe period.
(42:06):
And it's and it's greater thanthe passive index benchmark.
So when you look at a five-yearperiod, the the permanent fund
corporation against thosebenchmarks is doing pretty well.
It's still doing very poorcompared to the to the Buffett
9010 rule, uh, which uh WarrenBuffett once said, you know, you
have all these advisors, theseadvisors just you know make you
(42:27):
spend money and they throw youin circles.
Here's a better way to do it.
Just put it on autopilot with9010, uh 90% in the Vancard 500
and 10% in a uh uh in a bondmarket uh ETF.
And and against that 9010 rule,the Buffett 9010 rule, uh, the
permanent fund corporation'sperformance even over the
five-year period pales.
(42:48):
Uh it's 9.54% compared to theBuffett 9010 of 16.45.
The three-year average and theone-year average are showing how
they're doing much closer intime.
The five-year average sort ofpicks up a year that's that's in
the past that that the permanentfund corporation did really well
compared to its peers, andthat's sort of continuing to
(43:10):
influence the five-year average.
The three-year average and theone-year average, rolling
average, are telling you how thepermanent fund's doing on the on
the current basis.
And there you see that thepermanent fund is at uh on a
three-year average is 10.41.
That's that's over uh the thewhat they need to achieve in in
terms of generating revenue toto uh uh uh meet the 5% plus
(43:33):
POMV or 5% plus inflation rule,but it's particularly poor.
That 10.41 is poor compared tothe passive index benchmark.
What would have happened if thepermanent fund hadn't paid out
nearly a billion dollars in ininvestment fees, what Buffett
tells you you'll be taken to thecleaners over.
Right, right.
It's particularly poor againstthat.
(43:54):
And then the one-year average isthe same.
The permanent fund corporationis at 10.10, that's higher than
the total fund return objective.
So they're at least paying forthe POMV draw on a on a one-year
rolling average basis.
But again, it it is less thanthe passive index passive index
index benchmark, which is morethan 50 50 basis points higher
(44:15):
uh at 10.78.
And it's again very poorcompared to the to the Buffett
9010 rule uh of 17.54%.
So I think I think the takeawayfrom the first quarter, and when
you look at these averages,these rolling averages, the
takeaway from the first quarteris the permanent funds
improving.
The permanent fund corporations'returns are improving.
(44:37):
They are better than they wereat year-end, uh fiscal year 25,
which you can see is in thehighlighted in the yellow stripe
across there.
The the the the one-year, thenine, the nine year, excuse me,
the five-year average,three-year average, and ten-year
average or one-year average areall better than the fiscal year
25 uh results.
(44:59):
But so they're improving, andthey're improving against the
the P the inflation plus fivepercent uh objective, which is
what you need to fund the POMVdraw, they're improving against
that.
But when you look, and and sothey will say, Oh, we're doing
okay, you know, we're we'rewe're funding the POMV draw, so
we're we're doing fine, don'tworry about us.
(45:21):
But when you look uh when youcompare it against what they
could be doing, if they eitherjust put this thing on autopilot
and use their passive index uhpassive index benchmark, or did
the Buffett rule and put it asat 9010 or something approaching
9010, uh, which is the WarrenBuffett recommendation, they
could be doing much, much, muchbetter, much better than uh than
(45:44):
what they're doing.
If you've got the graph, thegraph, let's throw that up for
uh just a second.
Thank you.
So this this compares theresults.
The blue line is what would havehappened under the buffet rule,
the red line is how the PFC isuh the permanent fund
corporation is actually doing.
Both the the lines at the topare what the balance of the
permanent fund would be if you'dfollowed the buffet rule since
(46:07):
2020.
It'd be roughly$50 billionhigher than what the than than
what the PFC has achieved overthe same period.
And the bars at the bottom arewhat the POMV draw would be if
you took into account uh if thethe higher balances coming from
uh from the buffet rule uhinvestment.
And as you can see there, thePOMV draw would be significantly
(46:29):
higher, would fund bothadditional dividends and take
care of part of the deficit thatthe that the that the government
has uh has created uh for itselfdo it due to the spending
levels.
It would it would helpcontribute to the solution, it
would be part of the all of theabove solution if we had better
investment uh strategy comingfrom the permanent fund
corporation.
(46:50):
So first quarter results, someimprovement.
They'll claim that hey, we'recovering the POMV draw finally.
Uh and so we're doing great.
But when you compare it againstthe alternatives of what they
could be doing, even just put iton autopilot, one way or the
other, we'd be doing muchbetter.
SPEAKER_00 (47:07):
Yeah, and how much did the permanent fund spend for
such poor results?
Almost a billion dollars, right?
800 and something million inchange in management fees.
Yep.
It's it's as opposed to justsetting it and forgetting it and
getting a 15.97% return on thethree-year average.
They spent a billion dollarsinstead, uh, and got a and got a
(47:31):
10% return.
I mean, this chart right herejust shows the the thing, you
know, the permanent fund, andand for those of you who are you
look closely at the chart here,the per the left column says
permanent fund, and then theblue one is the vanguard SP 500
ETF, right?
So you got the three-yearaverage of 10.4 percent.
(47:53):
The Vanguard returns 24.88percent, and then you go all the
way over to the final columnwith numbers in it, which is the
passive benchmark, meaning ifyou just left it be, you didn't
put it in the vanguard, you justleft it be, it would have still
had five and a half more percentreturn, just leaving it alone
and not spending nearly abillion dollars to manage it.
(48:17):
Yeah, I mean, this is this justnutty, and you look down that
whole passive benchmark column,and for the most part, it's
pretty comparative with the withthe you know, you could have
left the whole thing in thereand still had a better return.
SPEAKER_01 (48:32):
Yeah, that's what that's that's the basis for the
Buffett rule.
I mean, what Warren Buffett inhis famous 2013, I think, letter
to shareholders, um, uh, wastalking about what he was going
to do with his estate after hedied and how he was gonna take
care of his wife.
And he said, you know, I'm gonnaput my estate, the portion of my
estate that I leave to my wife,I'm gonna put in in a 9010 uh
(48:55):
approach, a 90% uh tied to theSP uh uh ETF and 10% uh sort of
a uh a fringe over there, 10% uhin uh uh in bonds.
And I'm gonna put on anautopilot.
And the reason he said he wasgonna do that is because these
these fund managers, theseinvestment advisors, will take
(49:16):
you to the cleaners.
They'll say, you need to bedoing this, pay us, pay us a
bunch of money to tell us thatyou need to be doing this, or
pay us a bunch of money to haveyou to invest your money this
way, or pay us a bunch of moneyto go that way.
And he said, Yeah, they theytalk about these great returns
they get, but after you take outtheir fees, it's like it's like
a uh a return that's much lessthan if you just stuck it in the
(49:38):
Buffett Rule 9010 approach.
Or and the and the and the PFChas sort of their own approach
to that, which is the passiveindex benchmark.
And what's going on is thepermanent fund corporation is
has a bunch of advisors who aretaking fees either in the form
of advisory fees or in the formof a percentage of whatever
(49:59):
returns are generated when theyput it with that with that
advisor.
Uh, and those fees are eating upthe returns that that the
permanent fund would otherwisebe achieving, either by putting
it in their passive and uh uh uhinvesting it according to their
passive index index benchmark orinvesting it according to the
Buffett rule.
Warren Buffett's exactly WarrenBuffett's letter in 2013 was
(50:21):
exactly right.
You will be eaten alive by themanagement fees that that are
taken out of uh, you know, theylook like spectacular earnings,
but by the time you deduct thefees, they aren't.
And that's what's going on withthe with the permanent fund
returns.
You can see it by comparing itto the passive index
benchmarking.
You can see it by comparing itto the Buffett 9010 uh uh rule
(50:43):
uh returns.
SPEAKER_00 (50:45):
It's uh it's pretty obvious when you look at the
actual numbers.
Uh it's uh it's it's it's it'spretty crazy what they continue
to return.
I mean, look at the just look atthe Vanguard S P numbers.
Yep, sure, some numbers are downoccasionally, and occasionally
it'll be down further than whatthe permanent fund earns, but
look at the overall returns.
(51:06):
24.88 percent on a three-year,the 10-year average is 14.3834
percent over 10 years versus8.35 percent for the managed
fund.
It's just it doesn't make anysense.
SPEAKER_01 (51:20):
What what the permanent fund will tell you is
we don't like variability, wedon't like you know the ups and
downs that you get in the SP.
And the SP does, you do havemore ups and downs in the SP.
We don't like those.
We want we want reliability, wewant, we want, you know,
something that doesn't have thatvariability.
And what you get is you you youyou you you get these these
(51:42):
minimal returns because you'repaying a hell of a lot for the
insurance of not having thevariability.
What the yes, the SP isvariable, but the variability
over time goes up and up and upand up.
As you said, the 10-year average14.34 percent goes up and up and
up.
What the permanent fund is doingby by by not having the
variability, not takingadvantage of the variability
(52:04):
that goes up over time, is theyhave these you know middling
returns of eight point ofmiddling return of 8.35 percent.
So it's I I I guess I guess ifif your if your criteria is no
variability, then yeah, thepermanent fund's doing great.
But if your criteria is actuallygetting the maximum benefit for
(52:24):
Alaskans out of the out of thefund, you ought to be doing
something else.
SPEAKER_00 (52:28):
That's the thing.
If you don't care, I mean if youif you if what you're looking
for is returns, you don't reallycare about the variability
between the time you get thereand the return at the end,
right?
That's the thing.
Sure, it may have some wildswings, but if its long-term
trend is up, up, up, why wouldyou know what is why would you
care?
SPEAKER_01 (52:48):
And that's and that's what the permanent fund
is.
The permanent fund is along-term investment.
You know, some people say, well,it's a retirement fund, and so
you, you know, you have to havethe money there.
You don't.
I mean, it it it it it it it isnow at a size.
If you look at the second chart,it is now at a size that is
going to generate a pretty goodchunk of change, regardless of
(53:10):
the variability.
And so what you want out of thisis you want long-term returns,
you want long-term, long-termbenefits.
And that's what the SP 500,that's what the passive index
would give you.
What's happening, thatdifference between the blue line
and the red line is the valuethat the permanent fund
corporation is giving up inorder to not have variability.
(53:34):
It is, it is, it is the lossthat Alaskans are taking against
maximum benefit, just so theline sort of looks like it stays
the same, so it doesn't jump upand down.
SPEAKER_00 (53:44):
Well, and you're losing three quarters of a
billion dollars in POMB drawbecause you can't, because
you're not doing it.
That's the biggest part of theproblem.
All right, Brad.
Well, thank you so much for uhcoming on board as always.
This has been uh educational,and uh you got uh people people
love to see you get a littlewrapped up about stuff
(54:04):
sometimes.
So it should be fun, and you gota chance to tell people what
they what the answer is, and weappreciate that.
So all right, Brad.
Well, thank you so much.
It uh we appreciate you comingon board, Michael.
As always, thanks for having me.
SPEAKER_01 (54:17):
All right, we will catch you, we'll catch you
later.
Well, that's a wrap for anotherweek's edition of the weekly top
three from Alaskans forSustainable Budgets.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
SoundCloud, Spotify, andSubstack pages, and keep track
of us during the week onFacebook and Twitter.
(54:38):
This has been Brad Keithley,Managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week on the weekly
top three.
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