April 22, 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 April 21, 2025.
This week, our top 3 issues are these: 1) we discuss what the latest projections from the Permanent Fund Corporation are telling us about where the Permanent Fund is headed on its current course (2:02); 2) we examine the opportunity to make some small headway in generating substitute revenues and reducing the need for PFD cuts (20:13); and 3) we explore some budget-related good news (40:56).
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 1 (00:10):
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the weekly top threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of April 21st 2025.
The weekly top three is aregular segment on the Michael
Dukes 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 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 6.10 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:55):
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site mediumcom.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
(01:15):
week, 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 discuss what
the latest projections from thePermanent Fund Corporation are
(01:39):
telling us about where thePermanent Fund is headed on its
current course.
Second, we examine theopportunity to make some small
headway in generating substituterevenues and reducing the need
for PFD cuts.
And third, we explore some goodbudget-related news.
And now let's join Michael.
Speaker 2 (02:03):
So, brad, we've got some things to discuss this
morning and we're going to talka little bit.
There's been a lot of movementhere in the legislature over the
last few days.
Of course, we had the passingof the Senate education and then
the sending it back and thegovernor now has vetoed it, and
today they're supposed to have auh and an attempt to override
(02:27):
it.
But we've also got pf, the, thenew permanent fund correction,
or corporation projections andstuff.
So tell us what are we out herewith number one, so number.
Speaker 1 (02:36):
I'm not going to talk about the veto today because
I'd um, it's either gonna, it'seither going to be sustained or
not by the end of the day, andthere's really not that much to
say about it, I suspect it won'tbe sustained.
(02:59):
Exactly change, substantiallychange, the, the constitutional
provision regarding thepermanent fund to to to merge
the two account fund that'sestablished by the corporation,
that are established by theconstitution, the, the corpus
and the earnings reserve.
The permanent fundcorporation's proposal to merge
(03:19):
those two together into a singlefund.
And I I continue to be troubledby that.
I continue to do numbers onthat and I continue to try to
understand what's really goingon with the permanent fund
corporation, their earnings andwhat the motivation is behind or
what the effect of motivationalso, but what the effect of
(03:41):
merging those two accounts wouldbe, because I oppose it.
I think it's bad, but I reallywant to understand what's going
on.
Monthly the Permanent FundCorporation publishes a number
of reports.
One of them is their financialstatement for the month.
That shows what they've gained,what they've lost, what they've
(04:01):
contributed to the general fundin terms of the POMV draw, what
they've received in from theirshare of royalties, the
permanent fund share of stateroyalties, and then the
financial reports, or thefinancial report.
Financial statement for themonth is pretty interesting and
(04:21):
we do a couple of charts basedon that Well, several charts
actually based on that.
Each month they also publishthe Permanent Fund Corporation
also publishes what they callhistory and projections each
month and that takes a look backat the earnings and the draws
that have been made on thePermanent Fund.
It looks at the gains and thelosses in the permanent fund
(04:44):
from a backwards perspective andthen sort of a projection
forward, not only for thecurrent fiscal year but also for
the 10 years forward, plus orminus Sometimes it's more,
sometimes it's less, but for theprojection forward for a number
of years about where they seethe permanent fund going.
And this month I spent a lot oftime looking at the history and
(05:06):
projections and trying tounderstand exactly what their
cash flow is and what theirobligations are, as well as what
their cash flow in is.
Tried to sum it up in a chart.
And if you snag that chart andcontrol oh my God, Michael, you
were sitting there, weren't you,With your finger ready to go,
(05:27):
You're on the finger on thetrigger, ready to go, All right.
So this month I summed it up ina chart and this is based upon
the history and projections thatthe permanent fund has given
for the as of March.
They do it in arrears, so it'shistory up to March and then
(05:49):
it's projections for Marchforward.
And for those on the radio, thechart really is.
It has three lines on it.
Well, two lines and a bar on it.
The two lines are the statutorynet income, which is basically
the cash flow into the permanentfund, except for their share of
(06:10):
royalties, the deposit, theroyalty deposit.
The state is making it's cashflow in from interest, from
dividends, cash dividends thathave been declared sales, cash
they've made on stock sales orasset sales during the period,
and so it's cash in and the redline.
(06:31):
And then we've got a red lineon there essentially for cash
out, and that is the POMV drawthat's being distributed to the
state under the POMV statute,plus inflation proofing, which
is the portion of the earningsreserve that is being
(06:53):
transferred back or projected tobe transferred back to the
corpus to compensate forinflation.
So the red line is thecombination of those two.
(07:23):
No-transcript, and I start thechart in FY19, which is the
first year of the POMV draw.
So, because we're calculatingthe effect of the POMV draw and
we're calculating the effect ofinflation proofing, I start at
the first year of the POMV drawand what you see there is from
(07:44):
FY19 through FY24, which is thehistory part of this.
And that's one, two, three,four, five, six years.
In those six years the cash inthe statutory net income has
exceeded the cash out only oneyear of those six years and the
(08:05):
other six years the cash in hasbeen less than the cash out, has
been less than the POMV drawplus inflation proofing.
Speaker 2 (08:15):
And I need to dumb this down because I haven't had
all my coffee this morning formost people but what you're
saying is, over the last sixyears, in only one year did the
earnings reserve make enoughmoney to actually fund the 5%
POMB draw?
Plus inflation-proofing, plusinflation-proofing In only one
year out of the last six sincewe started this have we had
(08:36):
enough money to actually coverthe draw.
Speaker 1 (08:39):
Right difference in that has been covered by.
In the case of up to 24, it'sbeen covered by drawing down the
accumulated earnings reservethat had built up from prior
years, and so there's been areserve in the earnings reserve
from cash in exceeding cash out,statutory net income exceeding
(09:03):
cash out.
There's been a reserve that'sbuilt up in the prior years, and
so what they've been riding onfor the last six years is that
built up reserve that existedprior to that time.
Now keep in mind that thatreserve got depleted by $8
(09:25):
billion as a result of two $4billion ad hoc draws that were
made off from the earningsreserve transfers into the
permanent fund corpus.
So that reserve isn't very biganymore.
But what they've been riding onover those last four years is
the or the last six years,rather is the reserve that built
(09:47):
up.
Going forward this is theshocking part.
Going forward, this is thePermanent Fund Corporation's own
projection.
Going forward, the PermanentFund projects that the cash out
the POMV plus inflation proofing, will exceed earnings in every
(10:07):
year, every year through theremainder of the projection
period, which is a 10-yearprojection period, through FY34.
So you see red bars, which isthe difference between the cash
out and the cash in red barsevery year on out through the
remainder of the projectionperiod.
(10:28):
And when they talk aboutdepleting the earnings reserve,
that's what they're talkingabout.
I mean, they're talking aboutdepleting all of the reserves
that have been built up to thispoint that they've been writing
down through the last six years,and they're talking about
writing those out basicallythrough the remaining 10 years.
(10:48):
There's a lot of problems withthis, but what this is
essentially saying is we're notearning enough cash into the
earnings reserve.
We're not earning enough cashinto the permanent fund.
The permanent fund isn'tgenerating enough earnings to
(11:09):
cover the 5% POMV draw plus thedeposit for inflation proofing
that the statute requires thatthey're supposed to make.
So where's the difference goingto be made up?
I mean, once we go through allthe accumulated earnings reserve
that we've been drawing on thelast six years and we'll draw on
(11:29):
a couple more years, where arethey going to make up this
difference and the difference?
There's two other sources ofincome to the permanent fund
that you would have to use tocover once the earnings reserve,
the accumulated earningsreserve, is drawn down.
(11:49):
Two other sources of incomeyou'd have to use to cover One
is the deposit that's comingfrom royalties.
I mean there's a quarter of theroyalties are supposed to be
deposited into the permanentfund and they're supposed to be
used to build up the permanentfund.
Make the permanent fundpermanent over time, build up
this corpus.
That's generating the earnings.
(12:10):
One is that and that's eatingyour seed corn.
I mean you've used this phrasebefore and it's very appropriate
here to count on using thepermanent fund share of
royalties to cover the draw,cover the POMV draw.
You're essentially just recycle, recycling royalties that are
(12:35):
supposed to be put into thepermanent fund.
You're recycling those into thegeneral fund If you, if you,
use those.
The other is the, the, theunrealized gains that the
permanent fund has built up.
Now, unrealized gains are thegains you realize out of stock.
(12:57):
Let's say you bought stock at100 and the market price now is
110.
So you've had a gain of 10.
That's unrealized if you had.
It's realized if you sell thestock and take the 10 as profit.
It's unrealized if you hold thestock and it tells you you've
made 10, but you haven't tradedit into cash yet.
(13:20):
The permanent fund has alwaystold us that it's holding that
stock.
It has unrealized gains becauseit anticipates that that stock
is going to go even higher, thatthere's a value to holding the
stock as opposed to cashing itout, because there's additional
appreciation that's going to goon in that stock or on in the
asset or whatever represents theunrealized gain.
(13:43):
There's additional gain that'sgoing to come out of that and
you don't want to cash it tooearly.
You want to keep riding thatgain on up, and so you don't
want to cash out.
But what this is telling you isyou're going to have to come up
with some additional source torealize that cash gap that's in
(14:06):
there.
So what this really tells me isone of two things is going on.
What this really tells me is oneof two things is going on.
Either the 5% draw that weprojected for the permanent fund
is too high.
We can't support it.
The only way we're going to beable to support it is to start
writing down, start eitherconverting the share of
(14:27):
royalties that's coming in tocash out, essentially
recirculating them to thegeneral fund or we're going to
have to start doing somethingwith respect to the unrealized
gains.
And so either the 5% is toohigh or what I really think is
(14:49):
going on is the permanent fundisn't earning enough.
It isn't earning enough tocover the cash obligations, to
cover the obligations that it'sbuilt for itself.
And when you compare this we'vetalked about this in a prior
segment when you compare thepermanent fund earnings to the
S&P earnings, for example, thepermanent fund is way deficient
(15:09):
compared to the S&P.
We would have a permanent fundof over $110 billion now, as
opposed to the $80 billion wehave over $110 billion, if we'd
been investing in the S&P justsince FY20.
So this is telling you thatthere's a problem, and even the
permanent fund's own numbers aretelling you that there's a
(15:30):
problem here.
Speaker 2 (15:31):
This is a lot on this chart, but essentially what
it's saying is and, brad, Ithink you said it was one of two
things you said it's either thelegislature is overspending or
the permanent fund is notearning enough.
It's not doing a good enoughjob earning money.
I would argue that it's both,because if we were spending less
(15:52):
, this wouldn't be as big anissue we still wouldn't be
earning as much as we could, butthis wouldn't be as big an
issue.
But, on top of that, we're notearning as much as we could, and
so the divergence between thosetwo is pretty spectacular.
But basically, bill, for you andme who haven't had enough
coffee yet today, just look atthat bottom line there, the red,
(16:13):
starting at 2025, and moveoutward Every year for at least
the next 10 years.
It's a minimum of half abillion dollars in the red,
meaning, over the next 10 years,we will draw $5 billion more
from the earnings reserve thanit is.
That is in it, and that's themoney that's going to come out
(16:35):
of the permanent fund itself,the corpus of the fund, and so I
mean that you again eating yourseed corn.
This is the argument they'remaking and, um, again, this just
goes to show you that we areoverspending and not earning
enough.
Speaker 1 (16:52):
Both of those.
Brad.
Yeah, basically, what's goingon with this proposed
constitutional amendment is thepermanent fund sees this.
The legislature may see this,although I'm not sure they've
seen these numbers displayed inthis way.
But the permanent fundcorporation sees this, knows
they can't sustain the 5% draw,knows that there won't be enough
(17:16):
cash coming into the earningsreserve to sustain that 5% draw
and sustain inflation proofing,statutory inflation proofing,
and so they're seeing this andthey're going up.
Can't have that.
We need to sustain the 5% draw.
So if we merge the two accountstogether, if we merge the
earnings reserve and the corpustogether, we'll set up a
(17:37):
situation where we can startdrawing from the corpus to cover
that gap and no one will seethat because we've created a
backdoor into the corpus.
Speaker 2 (17:48):
We no longer see those separate accounts.
That's the thing, though.
Brad right, this doesn't fixthe problem.
All this does is fix theproblem.
All this does is obscure theproblem.
The problem still remains theproblem of we're spending too
much and we're not earningenough for the permanent fund.
Those two problems still remain.
Combining the funds simplyobscures the problem.
Speaker 1 (18:09):
It obscures the problem, but it also creates a
backdoor into the corpus.
I mean, it obscures what'sgoing on.
The problem remains.
It obscures what's going on,which is they've got a backdoor
now into the corpus and theystart pulling the corpus down,
either by rerouting thepermanent funds portion of
(18:31):
royalties or by cashing out umuh on on appreciating assets,
cashing out too early in orderto generate cash to to cover the
5% draw.
Speaker 2 (18:44):
So I think it was Rick who asked why.
I mean, are you giving this tothe legislature?
Are you addressing thelegislature with this
information?
And you know he said I think itwould be better served there.
But Brian asked the questionthat I asked.
You think they would actuallylisten, would they actually look
at?
This is all information that'sreadily available to them.
Why aren't we talking?
(19:05):
I mean, why aren't they talkingabout this as well in these
kinds of ways?
I mean, this is pretty, prettybleak hard facts, when you can
look at this and say, okay,here's where we're going to go,
and and these are based on, I'msure, the rosy numbers of the
department of department ofrevenue and the governor's
10-year forecast and everythingelse this doesn't include any
(19:27):
major spending boons, I'm sure,like defined benefits or
anything else.
Speaker 1 (19:33):
Now let's be clear.
These aren't deficit numbers,these are shortfalls in the POMV
draw.
These are shortfalls in thePOMV draw plus inflation
proofing.
So it is the failure togenerate revenue to support the
spending that's going on.
Speaker 2 (19:50):
Right, I mean it is a deficit in terms of we're going
to be drawing from the corpusof the fund because we're not
earning enough, but it's stillagain based on the average
revenue that the state is goingto need, right, I mean?
So it's, it is based on anumber that is based on real,
you know, projections that havebeen put forward.
So it's not technically adeficit, but it just shows that
(20:12):
the problem is there.
All right, Brad Keithley,Alaskans for Sustainable Budgets
, Our guests.
We're continuing on with theweekly top three.
We just finished up with a lotof numbers and colors and bars
and graphs and everything elseto basically tell us that we
have a couple of problems.
One, the permanent fund is notearning enough money.
A couple of problems.
(20:33):
One, the permanent fund is notearning enough money.
Even if it just pegged itselfto the indexes, we would have
made tons more money rather thanwhatever fancy manipulations
that they're doing right now.
And two, we're obviouslyspending too much, because if
the 5% draw isn't being coveredby the earnings of the fund, I
mean that's obviously anearnings problem, but we should
also be cutting back on ourspending to make it fit what
(20:55):
we're actually taking in.
That's the bottom line, butnumber two of the weekly top
three is a small ante.
I don't know what you mean bythat, Brad.
What do you mean?
A small ante?
Hit me with it.
Speaker 1 (21:08):
Well, the Senate passed a corporate law, what
James Brooks describes in anarticle in the Beacon and in the
ADN as a corporate tax update.
The Senate passed it 16 to 4.
It's on its way to the Houseand it is something that I think
is a small ante into thesolution of our fiscal problems
(21:33):
in the state.
The update itself, thecorporate tax update itself, is
only generate 65 million a yearat best.
The range that the fiscal notegives it is somewhere between 25
million and 65 million.
Even at 65 million, that's only3% of the deficit we're running
(21:56):
, so it's not the solution toanything.
The headline says it couldgenerate millions for dividends
and services, leaving theimpression that it's a big part
of the solution.
It's not.
It only covers 3% of thedeficit, but it is part of the
solution.
Even at 3%, it is part of thesolution and I think it's
(22:18):
something that is important tounderstand and discuss.
A lot of people have complainedthat.
Some have complained that it isa change in the corporate rate.
This is not the Hillcorploophole we're talking about.
This is an entirely differentstatute.
What this statute does isexpand the definition of the
(22:43):
corporate income tax to includecompanies like Amazon and others
that are delivering onlinesales into Alaska.
Right now, our definition ofthe corporate income tax only
includes from the standpoint ofonline businesses only includes
(23:03):
companies whose costs arelargely in Alaska.
It doesn't include companieswhose costs are largely outside
Alaska but who do business inAlaska by delivering products
into Alaska.
And so we're not.
Amazon is not subject to thecorporate income tax.
(23:24):
Other online sellers are notsubject to the corporate income
tax.
A share of their profits fromdoing business in Alaska.
They're not subject to thecorporate income tax.
A share of their profits fromdoing business in Alaska.
They're not subject to thecorporate income tax because of
the way that our corporateincome tax code is written
Elsewhere.
As online businesses havebecome much more a big part of
(23:47):
commerce elsewhere, other stateshave updated their corporate
income tax codes to includecorporations who make sales into
the state, even though theircosts may be located elsewhere,
even though the origin of theproducts may be elsewhere.
They've updated the corporateincome tax to include companies
(24:10):
who make sales into their states.
Alaska is operating on a priorversion of a multi-state to
(24:37):
reflect that our corporateincome tax will apply also to
corporations who are doingbusiness in Alaska through sales
not just cost, not just wherethey're sending the product from
.
Good bill, a good update, keepsus on par with what's going on
in other states and pass theSenate, as I said, 16-4.
(24:58):
It's going over to the Houseand basically, what I want to
say here is this is an ante intothe game.
This is an ante of get a smallante, but nevertheless an ante
into the game of getting ourbudget under control.
I know there are advocates outthere that say we can only,
we're only going to be able tosolve the budget by cutting
(25:20):
spending.
But Dunleavy tried that in 2019, did an accomplishment,
couldn't even get, didn'taccomplish it, couldn't even get
16 to back him up in thelegislature, to back him up on
the level of cuts that heproposed, and we've been running
deficits ever since.
Actually, we've been runningdeficits since 2013.
So this is a small ante intoupdating the Alaska corporate
(25:46):
code to put us on a par withother states in terms of how
we're calculating our corporateincome tax, and I think it's an
important thing to do.
I'm concerned that those aregoing to have a knee-jerk
reaction that says tax eventhough it's not an increase in
tax, even though it's a taxessentially on non-resident,
(26:08):
out-of-state industries that aredoing business in Alaska.
I'm concerned that there arethose who are going to have a
knee-jerk reaction saying tax no.
Speaker 2 (26:16):
But you and I have talked about the effects of
taxes because, again, this is atax that wasn't being levied
before on businesses, like yousaid, like Amazon, that are
outside.
In a lot of ways it's a hiddentax because it't affect directly
affect businesses here in thestate of Alaska.
But if you think that Amazon isgoing to just eat whatever tax
(26:39):
increase that is in there, Imean you and I both know that's
going to be passed on to theAlaskan consumer I mean it's it,
is it?
I mean they're quoted in thearticle as saying, oh, this
isn't a tax increase?
Well it, it is a tax increase.
Well, it is a tax increase,because it's a tax that you
haven't received before.
So therefore it's an increaseand it's going to be paid by
(27:01):
someone.
And I guarantee you thecorporations that are involved
are not going to just eat thecost.
They'll just tack a portiononto whatever they're selling to
do it or pass it directly ontoyou.
Speaker 1 (27:13):
Michael, in large part what's going to happen with
this tax is it's going to comeout of taxes that are being paid
to other states.
So since Alaska is notcalculating corporate income tax
on this basis, other states aregetting a bigger share of tax
as a result of calculating it onthis basis, in part because
(27:36):
Alaska isn't.
It's sort of like, when youthink of it, it's the equivalent
on a personal level of theOklahoma income tax.
We've got guys who come up fromOklahoma, work on the slope,
non-residents here, go back toOklahoma and Oklahoma has an
income tax and so when they goback to Oklahoma they're taxed
(27:59):
on the income that isn't taxedanyplace else.
If Alaska had an income tax I'mnot advocating at this point
that we do, but if Alaska had anincome tax what that would do
is reduce their Oklahoma incometax.
It would count as tax in Alaska.
That would reduce the taxburden in Oklahoma.
(28:22):
So in a lot of respects it'snot increasing the cost to the
company.
It's simply shifting the coststhat they're the taxes that
they're paying from onejurisdiction to another
jurisdiction.
I mean, the loser in theOklahoma income tax case is the
state of Oklahoma, and I don'tthink the state of Oklahoma is
(28:44):
going to be able to find a wayto increase costs, to increase
costs to Alaska.
Speaker 2 (28:48):
But that's assuming that every state has something
similar that they're alreadytaking and it won't be something
additional, and there's noguarantee that that is the case.
So in some cases this may causean increase, right, I mean?
I'm just I'm trying to be aboveboard and intellectually honest
on this.
Not every case is going to bean Oklahoma style case is going
(29:14):
to be an Oklahoma style case.
Speaker 1 (29:15):
But this isn't a sales tax.
It isn't a tax that is a tax onthe sale that the company will
say okay, we're paying a 3% taxon this delivery and so we need
to increase your cost by 3%.
It's a cost on the corporation,a cost of business on the
corporation, and it's hard tothink I mean what you're what
you're.
What you're essentially arguingis that somehow they would do
(29:37):
Alaska Alaska centric pricing.
That would that would charge adifferent rate to Alaska for the
product than they're chargingin in other States.
The underlying, the underlyingcharge would be different to
Alaska, not the charge for thefor transportation, which is
which to Alaska, not the chargefor transportation, which is
separate, not the charge forsales tax that would apply in
(30:01):
other states.
What you're essentially arguingis that they would somehow
increase the underlying price.
Speaker 2 (30:06):
I'm saying that the underlying price across the
board and maybe not justAlaskans would be paying it, but
everybody is going to be payingit because if a corporation has
a 3% cost increase in costs, um, they're again.
They're not just going to eatit, it's going to go in
somewhere, uh and and so I thinkagain, I think it's just
disingenuous for folks to sayit's not really a tax because we
(30:27):
won't pay it.
We probably will.
Maybe in some cases we won't,but in other cases we will.
I just think again, weshouldn't soft sell it to say,
don't worry, it's a net zerothing and it's free money.
I think it's just important tosay that.
Speaker 1 (30:42):
Well, we're talking about a fraction, I mean.
So what you're suggesting issomehow Amazon reflects it in
its overall cost and somehowAmazon bumps up the price
slightly to cover thisadditional cost, or cover this
additional cost in its overallprice.
(31:02):
And so the price to NewHampshire, the price to Maine,
the price to Washington, theprice to Illinois is all bumped
up a little bit.
So the fraction of cost thatultimately gets to Alaska is
going to be even in thatsituation, the fraction of cost
that's going to get to Alaska isgoing to be minute.
Speaker 2 (31:22):
Well, and I agree, I'm not saying that it's not.
Here's my problem.
Again, it's thedisingenuousness of saying this
could not cause an increase,which is how they're acting,
like this couldn't be.
And maybe it's a nickel, maybeit's a buck, I don't know.
But again, just to say thatthis is not a tax, is, uh, you
(31:42):
know, to say this isn't a taxincrease, it is a tax.
It'll be minute and probablyalmost unfelt, but don't blow
smoke up my skirt and tell meit's raining.
You know what I mean.
Don't, uh, don't, don't, donmean.
Don't tell me what it's, notwhen it is.
Speaker 1 (31:59):
You know this is how we never solve the problem you
and I had a debate about when wedid the tax on e-cigarettes.
I say, as you take a draw onyour e-cigarette, we've got to
have.
We are not going to cut our wayout of this.
I know that there are people inthe chat room right now who are
screaming all caps that we'regoing to cut our way out of this
(32:21):
.
It's not going to happen.
We have gotten we saw in 2019,there are too many buildup
forces, even in conservativedistricts.
There's too many buildup forcesto cut our way out of this.
So there's going to be revenuesomewhere.
Having a revenue option thataccepting all of your arguments,
having a revenue option thathas a minute effect on Alaskans
(32:44):
off off off shores a bunch ofthe, a bunch of the cost effect.
Having a revenue option thatdoes that is a hell of a lot
better than a lot of otherrevenue options.
Speaker 2 (32:58):
Again, you're missing my point.
I don't disagree with you onthat.
What I'm saying is don't tellme it's one thing when it's not.
That's my whole point.
See, this is the problem whenwe start to lose trust in our
leadership is when they look atour face with a straight face
and say, well, this isabsolutely not a tax, this is
absolutely won't and maybe itwon't cost us much, but it was
(33:18):
something, and that's the thing.
That's what gets me, brad, notthe fact that we don't.
We need the revenue.
I'm not arguing that.
I'm not arguing about anything.
I'm just saying when you look,all right, let's accept that I
mean it is a tax.
Speaker 1 (33:35):
Let's accept that for a moment.
It's a hell of a lot better taxthan a lot of other options.
Speaker 2 (33:40):
Not disagreeing with you on that.
That's what I'm saying.
I'm not disagreeing on that.
My point was don't tell me it'sone thing when it's not, or
don't tell me it's not somethingwhen it obviously is.
And that's the bigger problem,the heartache that I have with
this.
I don't have a problem with theoverall idea of it.
Yeah, everybody's going to payit.
I mean, people in New Hampshirewill be paying a tax because we
(34:00):
increased our tax.
Maybe it's a nickel, maybe it'sa penny, maybe it's whatever.
But again, it's just thedisingenuousness from these
people refusing to address theactual issue, saying that they
don't want to say tax, theydon't want to, they are afraid
to say it, they don't want totalk about it.
It's always new revenue, right,it's not.
It's again.
(34:21):
Just don't call it what it is.
Speaker 1 (34:24):
The actual issue is we're running huge deficits.
That's the actual issue, ahundred percent.
And, and the actual and theactual impact of this is to
reduce those deficits in, in, in, in, in.
Not in a huge fashion, again,it's only 3% of the of the size
of the deficit.
The projected revenue, even atbest, is only 3% of the size of
(34:45):
the deficit, but it reduces it,at least some, and it reduces it
in a way that, again, acceptingyour, accepting your argument
it reduces it away in a way thathas a minute impact.
Speaker 2 (34:57):
Yeah, it does have a minute impact.
I'm not going to disagree withany of that.
Again, that wasn't my wholepoint.
My point was don't tell me it'ssomething, it's not, when it is
obviously Anybody that looks atit.
It's obviously, again, of allthe things that could have been
done out there, definitelyprobably the least harmful of
all things that could be doneout there.
(35:18):
But again, it's the fact thatthey're trying to tell us that
it's not a tax.
That's what gets me, because,again, it's that
disingenuousness that we keephearing, because they're
refusing to acknowledge theproblem that we're spending too
much, we're in deficit spending.
We're in deficit spending, youknow, and then we did so again.
(35:38):
This is my fear, if we ever didcome up with some other form of
tax, um, without any kind ofcontrols, is that they'll just
spend it all.
They still won't acknowledgethe problem.
The problem is we, we, we werespending too much money.
That's the bottom line andthey're just not acknowledging
it.
Speaker 1 (35:54):
Yeah, but we are spending too much money.
We are, we are running hugedeficits.
We've got to close thosedeficits.
We've been closing them withthe most regressive tax ever
proposed in terms of, in termsof PFD cuts.
Um, we've got to close themsomehow.
And this is, this is in in the,in the broad range of things,
(36:16):
the broad range of things thatyou can use to close the
deficits.
It is got to be one of theleast burdensome, least
impactful of the options.
Speaker 2 (36:30):
Because it's the most broad based.
I mean, let's face it,everybody's paying.
I mean, people from all overthe US will be paying for our
little stipend for sure.
So I agree with you on thatAbsolutely.
Speaker 1 (36:40):
What I'm concerned about is that we just have
people just say, oh, it's a tax,so no.
Well, how do we ever solve theproblem?
How are we ever going to solvethe deficits?
Because we are solving themthrough the most aggressive tax
ever proposed.
We are solving them through themost aggressive tax ever
proposed.
We're solving them through PFDcuts.
We're solving them by takingmoney out of middle and lower
income Alaska, alaska familiesnot even any other families,
(37:03):
only Alaska families.
We're solving them by takingmoney out of their pockets.
We've got to solve thesituation and, okay, I will
grant you, it may be viewed as atax under the circumstances
that we described in the segment.
I will grant you, it may beviewed as a tax, but in terms of
the range of taxes, it is waythe hell at the far end of low
(37:32):
impact, as you say, broad-basedtaxes.
Speaker 2 (37:36):
Right?
Well, and I guess my wholepoint is, brad, words matter,
Definitions matter, truthmatters, right, and in showing
that it is a tax and saying thisis the best thing we could do
because it affects you the least, somebody could embrace that
and acknowledge that we've gotproblems.
That's the whole point.
The point is avoidance.
(37:57):
See, they're doing stuff foroutside, things that hit people
outside, that it's the lowestimpact stuff that nobody will
see because they don't want toacknowledge.
Because then people might say,well, why are they taxing us?
They're already getting allthis money from the permanent
fund, they're getting this moneyfrom royalties, they're getting
this money from the dividend.
Why do they need more?
Right, and that might makepeople question what's going on.
(38:19):
To me, it's about the avoidanceof the issue more than anything
else.
I'm not squawking about thenickel that it might cost me on
an Amazon order.
I'm saying this whole thing isdon't continue to lie to me and
tell me it's a sunny day whenit's pissing rain all over us,
right?
I mean, that's what's going onand that's what irritates me is
that they continue, with astraight face, to look in the
camera and say it's not a tax.
(38:40):
We don't do taxes around here.
You're taxing the hell out ofus.
You're taking our PFD.
You've gotten all the moneystraight from the oil companies.
You're getting all this otherstuff.
We are some of the most heavilytaxed people in the country.
We just don't see it becauseit's stealth.
So they're continuing theirstealth tax by putting it on
something that's outside that wewon't really even see or notice
(39:01):
.
That's what I'm saying.
Speaker 1 (39:03):
Okay, all right.
Well, that's a fair point, butwe've got to close.
It's also a fair point thatwe've got a huge deficit that's
not going to go away by justmagically saying we, magically,
magically saying we're going to,we're going to cut spending
down to whatever the hell therevenues are.
Speaker 2 (39:19):
Again, I'm not disagreeing with you on this.
See, that's the thing you thinkI'm disagreeing with you.
I'm not.
I'm just saying we're violentlyagreeing.
I'm violently agreeing.
Use truth.
Don't try and deceive andobfuscate what the actual truth
is.
Just tell me true, tell me likeit is.
You know, the thing is, again,they don't want to have this
conversation, brad, because itwould expose what's going on,
(39:43):
that the reason we have thedeficits which you are right
100%, we must fill, we mustsquash the reason we're having
these deficits is because we'respending more than we take in,
which, at its root, is aspending problem.
But again, there is nopolitical will to fix that.
I'm with you, 100%.
I agree.
We've been trying that on thisprogram.
You and I have been talkingabout it for 10 years.
(40:04):
I've been talking about it for15 years before that.
There is no political will tofix that and I don't know how to
.
Honestly, we had thisconversation last week.
I have no idea how to fix that.
Honestly, we had thisconversation last week.
I have no idea how to fix that.
No, I thought if we talkedabout it enough, people would
listen, but people just don'tgive a crap, apparently.
Speaker 1 (40:23):
Well, it's because they're not personally affected,
michael.
I mean the top 20%, the donorclass, the old companies, the
non-residents aren't personallyaffected, aren't being affected
by the deficit because theydon't have to contribute to the
costs.
And the 80% that are affected Imean a lot of them are on this
program.
We're bitching about the costs,we're bitching about the
(40:46):
spending because we'repersonally affected by it, but
the people who can actually movethe needle aren't affected by
it by the way we're doing it.
Speaker 2 (40:56):
All right, brad, keith Lee Alaskans for
Sustainable Budgets the weeklytop three.
We're on to number three, whichis some good news.
Brad saved the good news forlast, for all the beatings that
we've taken here.
Now we've got some good Brad.
What is the good news?
What is?
Speaker 1 (41:14):
Well, I your our conversation last week.
At the end of the last segmentlast week to heart, you said
maybe I should do a good newssegment.
I'm not sure I can come up withit every week, but at least I
at least I can come up with itsome weeks.
And this one, this one's sortof backwards, um, in the sense
that the good news is it wasn'tas bad as it could have been.
(41:37):
But as we approach the end ofthis session, there is some good
news out there.
The first of it, I think, isthat the capital budget passed
the Senate, and the capitalbudget passed the Senate
unanimously.
Now that doesn't mean thateverybody was in love with
spending on the capital budget,but it does mean that people
(42:00):
recognize we need a capitalbudget, that there are things in
this state that need a capitalbudget.
The match with the federalgovernment so we can have roads
for one thing is a huge part ofthat that we do need a capital
budget, and I think theunanimity in the Senate passing
(42:21):
the capital budget was arecognition that it was probably
the lowest cost, most efficient, least impactful capital budget
that we could possibly get awaywith.
That there was capital budgetrestraint, and that's good news.
I mean in the sense that itcould have been worse.
It could have been a hugecapital budget because everybody
(42:43):
wanted to spend and the Senatejust kept adding more and more
and more and more to it.
That's not what happened.
What happened was the Senatehad restraint on the capital
budget, was the Senate hadrestraint on the capital budget.
Additional good news, I think,out of that capital budget is
(43:04):
that a significant part of itwas paid by reappropriations.
Reappropriations are where theSenate has appropriated money in
prior years to various budgetsor to various projects.
The capital spending isincluded.
Appropriations to thoseprojects Uh, the Senate has
found, or the, the thelegislative body finds that the
uh, the projects are no longerneeded or are not as important
(43:27):
uh as using that cash for otherpurposes, or or or saving the
cash by not pursuing that proper, that, that appropriation or
that particular project andreappropriating the money to
other projects, essentiallysaying we're not going to go
forward with that project, we'renot going to spend that on that
project right now.
We're going to take the moneyand reappropriate it to
(43:48):
someplace that we need to spendit.
I think the recognition.
Otherwise, that money just sitsout there and somebody will
find a way to spend it at somepoint.
So reappropriating, taking backmoney from projects that no
longer have a priority, I think,is another good thing.
The ADA dividend ADA, theAlaska Industrial Development
(44:13):
and Export Authority, earnsmoney not as much as it should,
but earns money off of variousprojects or has appropriations
made to it by the legislaturethat are essentially capital
appropriations.
They're essentially part of thecapital budget, if you think
about it right, and that moneyis sitting over in ADA and that
(44:36):
money is sitting over in ADA andthe legislature in this
instance ADA normally decideswhat it's going to dividend back
excess cash that it says itdoesn't need.
Well, the legislature in thiscase is pulling more money back
from ADA.
Essentially that's are-approach.
If you think about it that way,it's a re-appropriation from
ADA back to the budget.
So I think that's another goodthing.
(44:59):
There's increasing recognition,I think, as we get through this
session, that the legislaturedoes not want to make additional
subsidies to the LNG project,the AKLNG project.
If it lives, if it's able toget money from outside, great
good thing, go ahead and do it,but the legislature is not going
to put any more state money init.
At least this session of thelegislature is not going to put
(45:20):
any more state money in it.
And also the same on Cook InletGas.
We're not going to subsidizeCook Inlet Gas.
We found a market solution toCook Inlet Gas and we're not
going to either forgiveroyalties that are otherwise due
, reduce royalties that areotherwise due or subsidize Cook
(45:40):
Inlet gas solutions.
So I think that's a good thingthat the legislature has gotten
out of the business ofsubsidizing the LNG project or
subsidizing Cook Inlet.
Another piece of goodinformation.
Another piece there's aheadline this past week in the
ADN that says Alaska lawmakerssay pension reform is a two-year
(46:05):
project.
I think, recognizing thepension reform, the defined
benefits, conversion to definedbenefits or re-creation of
defined benefits, it's notsomething the legislature is
going to accomplish this sessionand I think in large part
that's due to the pushback thelegislature has been getting on
defined benefits, the emphasison show us a fiscal note that
(46:28):
shows what the actual cost ofthis thing is going to be, and
the legislature having to dealwith the fact that there is a
cost to it, that they can't justsay there's no cost, similar to
your no tax argument.
You can't say that there's nocost.
So I think there's a bunch ofgood things that are coming out
of the legislature in the sensethat they're not bad things in
(46:51):
the sense of the legislature isholding back, reappropriating,
pulling back on the capitalbudget and and sort of standing
standing on where we are, asopposed to continually expanding
on that side.
Speaker 2 (47:04):
This is.
This is analogous to you know,looking in the couch and finding
all the money under the couchcushions, right?
I mean, this is sweeping outall the accounts for all this
money that's been sitting thesevarious accounts for all this
time and basically been doingnothing.
And the argument is and I'vetalked to several people in the
legislature on this there arethousands of accounts out there
with money just sitting in themthat's been stagnant for years,
(47:26):
for some project that was funded10 years ago that hasn't really
gone anywhere.
There's millions and millionsof dollars sitting out there.
We should be doing this everyyear.
Speaker 1 (47:34):
Well, there are some re-approves every year.
I think what's going on in thisone is these were two fairly
high projects.
One is the Juneau Road.
They're pulling back from theJuneau Road and they're pulling
back from the Port of Nomebecause the feds are pulling out
of the Port of Nome.
So it's basically think it'swhat we're getting attention to
(47:56):
is is they're pulling back evenfrom high profile projects, not
those that have gone stale andsince been forgotten.
They're pulling back from highprofile projects as well.
Speaker 2 (48:05):
No, I mean there's you know how many, how many
accounts are sitting out thereand it just not just on the
capital component of it but on,you know, on all the components
of it.
I mean how many accounts aresitting out there with a million
here, two million there, youknow, 500,000 here, 10 million
here.
I mean pretty soon you starttalking about real money and
(48:29):
this is part of that problem.
When they're supposed to besweeping some of the accounts
out that have money in them,when they're supposed to be
sweeping some of the accountsout that have money in them and
the stuff that's appropriated,they need to have like a
reappropriation committee wherethey go back and look and say,
have we done anything on this?
There's just money sitting inthis account doing nothing.
If we're not going to doanything must not have been that
critical, let's pull it back in.
Speaker 1 (48:49):
To some degree.
I think that's right To somedegree.
This is like empty positions orunfilled positions right, this
is the capital side equivalentof unfilled positions.
You've got this money sittingout in the accounts for projects
that are no longer viable orcertainly aren't high priority,
(49:09):
but you don't want to pull thoseback because it is sort of like
the money in the couch cushion.
It's sort of like the savingsaccount that no one knows about
or the checking account that noone knows about.
It's money that they're sort ofholding in reserve in years
like this maybe, where they'repulling it back in to help fund
when oil's down or when thepermanent fund isn't producing
(49:32):
the earnings you want.
It's sort of sitting out there.
So you're right.
Yeah, the other thing I thinkthere's a big thing about
pulling back from ADA, makingADA a dividend or having ADA a
dividend more than what ADAwanted a dividend.
If you think about ADA, it isjust another capital
appropriation.
It's another way of doing acapital appropriation.
(49:54):
It's essentially giving moneyover to an agency that the
governor controls, but you'reessentially putting a bunch of
money over that organization,some of which is to be spent on
specified identified capitalprojects that the legislature
says here.
We're giving you money topursue this project sort of off
(50:14):
books or in a separate set ofbooks.
Some of it is just money thatADA has generated, earned off of
projects they've been involvedin and they're holding on to.
But pulling that money back in,dividending that money back
into the general fund, which iswhere it originally came from
back in the day, I think is agood thing also.
(50:35):
So as you think about thesere-approves and pulling money
back in from projects that aredead, you ought to think about
is the money that we've givenADA for the projects that
they're pursuing.
Is that more important thanhaving the money back in the
general fund to either close thedeficit, help close the deficit
or pay for the capital spendingthat we need to do?
(51:00):
That has a higher prioritycurrently.
Speaker 2 (51:02):
Yeah, no, I agree.
And again, it's not just Frankjust said well, hey, a lot of
that's federal money.
If we take it back the federalgovernment, it will demand some.
I'm not talking about drainingstuff out of federal matches or
anything else, but there's tonsof money out there that the
state just put into funds, andit's not all about capital or
construction.
There are monies in differentaccounts out there.
(51:22):
I can't remember who told methis, that they had started
looking at this.
It is billions of dollars.
There's billions of dollars inthe various accounts out there
that could potentially be sweptback in if we really were
serious about it.
But of course you know theywon't even cut unfilled
positions.
So I mean that have been vacantfor 10 years.
They won't even cut those.
(51:42):
Do you think they're reallygoing to want to go through and
sweep money out of all theseaccounts?
They may need that money oneday for a rainy day.
They may want to spend it onsomething else.
Speaker 1 (51:51):
Yeah, or a project or a capital budget.
They want to, they want topursue for certain reasons.
Speaker 2 (52:01):
So they keep it.
They keep it sitting out there,yeah, holding it in reserve for
that day when they need to bethe hero or whatever, to about
two and a half minutes here,brad.
So what do you think happenstoday If the, if the veto, which
I think is going to happen,it's not going to be overridden,
it's going to stand.
What do you project for therest of this session?
Are you think that they'regoing to try and the governor's
got his proposal in there?
Do you think that's going to goanywhere?
Or do you think we're lookingat a special session?
(52:23):
What are you?
What are you thinking?
Speaker 1 (52:25):
Well, we may be looking at a special session for
the budget.
I mean, we're still, there'sstill a deficit in the budget
and I take the Senate at itsword that it wants to hang on to
a 2575 PFD.
And so a 2575 PFD, there'sstill going to be a deficit.
Even if you reduce the BSA fromthe $1,000 that's in the
(52:46):
current House operating billdown to 680 or 650 or whatever
the heck that number was we usedlast year, you still have a
deficit.
So there may be a specialsession on the deficit.
I don't think, unless thegovernor really just wants to
flail this horse to death, Idon't think there's going to be
a special session on education.
(53:06):
I mean, people are gettingexhausted by the issue and it's
not making any progress and it'snot a must have in the sense
that the budget is you've got to.
You can't end a session unlessyou have a budget signed by the
governor.
So it's not, it's not a musthave and it can be papered over
(53:27):
again with another.
You know, one time, one timecontribution to, to the, to the,
to the BSA, and try it againnext year.
And frankly, I think that'swhere we end up.
The governor has a bill outthere.
Maybe people will talk about it, but I don't think there's
enough time left in the sessionto pass it and I really hope we
don't.
We don't go to a specialsession on that, because I'm not
(53:49):
sure it's an ever-endingspecial session.
Speaker 2 (53:52):
Yeah, well, I mean, I'm not sure exactly what
happens, even though there wasone of the I think it was
Hemshoot who proposed theoriginal big increase said well,
I could look at the governor'sproposal.
It might work.
I mean, I don't know, it's allpie in the sky at this point.
We'll have to see where it goes.
All right, brad.
Well, thank you for coming onboard and sharing all this with
(54:14):
us today and arguing with us.
I appreciate that.
I think it's fun.
Iron sharpens, iron baby that'swhat it's all about.
So we all understand wherewe're coming from.
Thank you for coming on board,brad.
As always, it's good to talkwith you, my friend.
Speaker 1 (54:26):
Michael, as always, thanks for having me Appreciate
it.
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 and Substackpages, and keep track of us
during the week on Facebook andTwitter.
(54:46):
This has been Brad Keithley,managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week for the next
edition of the Weekly Top Three.
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the weekly top threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of April 21st 2025.
The weekly top three is aregular segment on the Michael
Dukes 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 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 6.10 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:55):
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site mediumcom.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
(01:15):
week, 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 discuss what
the latest projections from thePermanent Fund Corporation are
(01:39):
telling us about where thePermanent Fund is headed on its
current course.
Second, we examine theopportunity to make some small
headway in generating substituterevenues and reducing the need
for PFD cuts.
And third, we explore some goodbudget-related news.
And now let's join Michael.
Speaker 2 (02:03):
So, brad, we've got some things to discuss this
morning and we're going to talka little bit.
There's been a lot of movementhere in the legislature over the
last few days.
Of course, we had the passingof the Senate education and then
the sending it back and thegovernor now has vetoed it, and
today they're supposed to have auh and an attempt to override
(02:27):
it.
But we've also got pf, the, thenew permanent fund correction,
or corporation projections andstuff.
So tell us what are we out herewith number one, so number.
Speaker 1 (02:36):
I'm not going to talk about the veto today because
I'd um, it's either gonna, it'seither going to be sustained or
not by the end of the day, andthere's really not that much to
say about it, I suspect it won'tbe sustained.
(02:59):
Exactly change, substantiallychange, the, the constitutional
provision regarding thepermanent fund to to to merge
the two account fund that'sestablished by the corporation,
that are established by theconstitution, the, the corpus
and the earnings reserve.
The permanent fundcorporation's proposal to merge
(03:19):
those two together into a singlefund.
And I I continue to be troubledby that.
I continue to do numbers onthat and I continue to try to
understand what's really goingon with the permanent fund
corporation, their earnings andwhat the motivation is behind or
what the effect of motivationalso, but what the effect of
(03:41):
merging those two accounts wouldbe, because I oppose it.
I think it's bad, but I reallywant to understand what's going
on.
Monthly the Permanent FundCorporation publishes a number
of reports.
One of them is their financialstatement for the month.
That shows what they've gained,what they've lost, what they've
(04:01):
contributed to the general fundin terms of the POMV draw, what
they've received in from theirshare of royalties, the
permanent fund share of stateroyalties, and then the
financial reports, or thefinancial report.
Financial statement for themonth is pretty interesting and
(04:21):
we do a couple of charts basedon that Well, several charts
actually based on that.
Each month they also publishthe Permanent Fund Corporation
also publishes what they callhistory and projections each
month and that takes a look backat the earnings and the draws
that have been made on thePermanent Fund.
It looks at the gains and thelosses in the permanent fund
(04:44):
from a backwards perspective andthen sort of a projection
forward, not only for thecurrent fiscal year but also for
the 10 years forward, plus orminus Sometimes it's more,
sometimes it's less, but for theprojection forward for a number
of years about where they seethe permanent fund going.
And this month I spent a lot oftime looking at the history and
(05:06):
projections and trying tounderstand exactly what their
cash flow is and what theirobligations are, as well as what
their cash flow in is.
Tried to sum it up in a chart.
And if you snag that chart andcontrol oh my God, Michael, you
were sitting there, weren't you,With your finger ready to go,
(05:27):
You're on the finger on thetrigger, ready to go, All right.
So this month I summed it up ina chart and this is based upon
the history and projections thatthe permanent fund has given
for the as of March.
They do it in arrears, so it'shistory up to March and then
(05:49):
it's projections for Marchforward.
And for those on the radio, thechart really is.
It has three lines on it.
Well, two lines and a bar on it.
The two lines are the statutorynet income, which is basically
the cash flow into the permanentfund, except for their share of
(06:10):
royalties, the deposit, theroyalty deposit.
The state is making it's cashflow in from interest, from
dividends, cash dividends thathave been declared sales, cash
they've made on stock sales orasset sales during the period,
and so it's cash in and the redline.
(06:31):
And then we've got a red lineon there essentially for cash
out, and that is the POMV drawthat's being distributed to the
state under the POMV statute,plus inflation proofing, which
is the portion of the earningsreserve that is being
(06:53):
transferred back or projected tobe transferred back to the
corpus to compensate forinflation.
So the red line is thecombination of those two.
(07:23):
No-transcript, and I start thechart in FY19, which is the
first year of the POMV draw.
So, because we're calculatingthe effect of the POMV draw and
we're calculating the effect ofinflation proofing, I start at
the first year of the POMV drawand what you see there is from
(07:44):
FY19 through FY24, which is thehistory part of this.
And that's one, two, three,four, five, six years.
In those six years the cash inthe statutory net income has
exceeded the cash out only oneyear of those six years and the
(08:05):
other six years the cash in hasbeen less than the cash out, has
been less than the POMV drawplus inflation proofing.
Speaker 2 (08:15):
And I need to dumb this down because I haven't had
all my coffee this morning formost people but what you're
saying is, over the last sixyears, in only one year did the
earnings reserve make enoughmoney to actually fund the 5%
POMB draw?
Plus inflation-proofing, plusinflation-proofing In only one
year out of the last six sincewe started this have we had
(08:36):
enough money to actually coverthe draw.
Speaker 1 (08:39):
Right difference in that has been covered by.
In the case of up to 24, it'sbeen covered by drawing down the
accumulated earnings reservethat had built up from prior
years, and so there's been areserve in the earnings reserve
from cash in exceeding cash out,statutory net income exceeding
(09:03):
cash out.
There's been a reserve that'sbuilt up in the prior years, and
so what they've been riding onfor the last six years is that
built up reserve that existedprior to that time.
Now keep in mind that thatreserve got depleted by $8
(09:25):
billion as a result of two $4billion ad hoc draws that were
made off from the earningsreserve transfers into the
permanent fund corpus.
So that reserve isn't very biganymore.
But what they've been riding onover those last four years is
the or the last six years,rather is the reserve that built
(09:47):
up.
Going forward this is theshocking part.
Going forward, this is thePermanent Fund Corporation's own
projection.
Going forward, the PermanentFund projects that the cash out
the POMV plus inflation proofing, will exceed earnings in every
(10:07):
year, every year through theremainder of the projection
period, which is a 10-yearprojection period, through FY34.
So you see red bars, which isthe difference between the cash
out and the cash in red barsevery year on out through the
remainder of the projectionperiod.
(10:28):
And when they talk aboutdepleting the earnings reserve,
that's what they're talkingabout.
I mean, they're talking aboutdepleting all of the reserves
that have been built up to thispoint that they've been writing
down through the last six years,and they're talking about
writing those out basicallythrough the remaining 10 years.
(10:48):
There's a lot of problems withthis, but what this is
essentially saying is we're notearning enough cash into the
earnings reserve.
We're not earning enough cashinto the permanent fund.
The permanent fund isn'tgenerating enough earnings to
(11:09):
cover the 5% POMV draw plus thedeposit for inflation proofing
that the statute requires thatthey're supposed to make.
So where's the difference goingto be made up?
I mean, once we go through allthe accumulated earnings reserve
that we've been drawing on thelast six years and we'll draw on
(11:29):
a couple more years, where arethey going to make up this
difference and the difference?
There's two other sources ofincome to the permanent fund
that you would have to use tocover once the earnings reserve,
the accumulated earningsreserve, is drawn down.
(11:49):
Two other sources of incomeyou'd have to use to cover One
is the deposit that's comingfrom royalties.
I mean there's a quarter of theroyalties are supposed to be
deposited into the permanentfund and they're supposed to be
used to build up the permanentfund.
Make the permanent fundpermanent over time, build up
this corpus.
That's generating the earnings.
(12:10):
One is that and that's eatingyour seed corn.
I mean you've used this phrasebefore and it's very appropriate
here to count on using thepermanent fund share of
royalties to cover the draw,cover the POMV draw.
You're essentially just recycle, recycling royalties that are
(12:35):
supposed to be put into thepermanent fund.
You're recycling those into thegeneral fund If you, if you,
use those.
The other is the, the, theunrealized gains that the
permanent fund has built up.
Now, unrealized gains are thegains you realize out of stock.
(12:57):
Let's say you bought stock at100 and the market price now is
110.
So you've had a gain of 10.
That's unrealized if you had.
It's realized if you sell thestock and take the 10 as profit.
It's unrealized if you hold thestock and it tells you you've
made 10, but you haven't tradedit into cash yet.
(13:20):
The permanent fund has alwaystold us that it's holding that
stock.
It has unrealized gains becauseit anticipates that that stock
is going to go even higher, thatthere's a value to holding the
stock as opposed to cashing itout, because there's additional
appreciation that's going to goon in that stock or on in the
asset or whatever represents theunrealized gain.
(13:43):
There's additional gain that'sgoing to come out of that and
you don't want to cash it tooearly.
You want to keep riding thatgain on up, and so you don't
want to cash out.
But what this is telling you isyou're going to have to come up
with some additional source torealize that cash gap that's in
(14:06):
there.
So what this really tells me isone of two things is going on.
What this really tells me is oneof two things is going on.
Either the 5% draw that weprojected for the permanent fund
is too high.
We can't support it.
The only way we're going to beable to support it is to start
writing down, start eitherconverting the share of
(14:27):
royalties that's coming in tocash out, essentially
recirculating them to thegeneral fund or we're going to
have to start doing somethingwith respect to the unrealized
gains.
And so either the 5% is toohigh or what I really think is
(14:49):
going on is the permanent fundisn't earning enough.
It isn't earning enough tocover the cash obligations, to
cover the obligations that it'sbuilt for itself.
And when you compare this we'vetalked about this in a prior
segment when you compare thepermanent fund earnings to the
S&P earnings, for example, thepermanent fund is way deficient
(15:09):
compared to the S&P.
We would have a permanent fundof over $110 billion now, as
opposed to the $80 billion wehave over $110 billion, if we'd
been investing in the S&P justsince FY20.
So this is telling you thatthere's a problem, and even the
permanent fund's own numbers aretelling you that there's a
(15:30):
problem here.
Speaker 2 (15:31):
This is a lot on this chart, but essentially what
it's saying is and, brad, Ithink you said it was one of two
things you said it's either thelegislature is overspending or
the permanent fund is notearning enough.
It's not doing a good enoughjob earning money.
I would argue that it's both,because if we were spending less
(15:52):
, this wouldn't be as big anissue we still wouldn't be
earning as much as we could, butthis wouldn't be as big an
issue.
But, on top of that, we're notearning as much as we could, and
so the divergence between thosetwo is pretty spectacular.
But basically, bill, for you andme who haven't had enough
coffee yet today, just look atthat bottom line there, the red,
(16:13):
starting at 2025, and moveoutward Every year for at least
the next 10 years.
It's a minimum of half abillion dollars in the red,
meaning, over the next 10 years,we will draw $5 billion more
from the earnings reserve thanit is.
That is in it, and that's themoney that's going to come out
(16:35):
of the permanent fund itself,the corpus of the fund, and so I
mean that you again eating yourseed corn.
This is the argument they'remaking and, um, again, this just
goes to show you that we areoverspending and not earning
enough.
Speaker 1 (16:52):
Both of those.
Brad.
Yeah, basically, what's goingon with this proposed
constitutional amendment is thepermanent fund sees this.
The legislature may see this,although I'm not sure they've
seen these numbers displayed inthis way.
But the permanent fundcorporation sees this, knows
they can't sustain the 5% draw,knows that there won't be enough
(17:16):
cash coming into the earningsreserve to sustain that 5% draw
and sustain inflation proofing,statutory inflation proofing,
and so they're seeing this andthey're going up.
Can't have that.
We need to sustain the 5% draw.
So if we merge the two accountstogether, if we merge the
earnings reserve and the corpustogether, we'll set up a
(17:37):
situation where we can startdrawing from the corpus to cover
that gap and no one will seethat because we've created a
backdoor into the corpus.
Speaker 2 (17:48):
We no longer see those separate accounts.
That's the thing, though.
Brad right, this doesn't fixthe problem.
All this does is fix theproblem.
All this does is obscure theproblem.
The problem still remains theproblem of we're spending too
much and we're not earningenough for the permanent fund.
Those two problems still remain.
Combining the funds simplyobscures the problem.
Speaker 1 (18:09):
It obscures the problem, but it also creates a
backdoor into the corpus.
I mean, it obscures what'sgoing on.
The problem remains.
It obscures what's going on,which is they've got a backdoor
now into the corpus and theystart pulling the corpus down,
either by rerouting thepermanent funds portion of
(18:31):
royalties or by cashing out umuh on on appreciating assets,
cashing out too early in orderto generate cash to to cover the
5% draw.
Speaker 2 (18:44):
So I think it was Rick who asked why.
I mean, are you giving this tothe legislature?
Are you addressing thelegislature with this
information?
And you know he said I think itwould be better served there.
But Brian asked the questionthat I asked.
You think they would actuallylisten, would they actually look
at?
This is all information that'sreadily available to them.
Why aren't we talking?
(19:05):
I mean, why aren't they talkingabout this as well in these
kinds of ways?
I mean, this is pretty, prettybleak hard facts, when you can
look at this and say, okay,here's where we're going to go,
and and these are based on, I'msure, the rosy numbers of the
department of department ofrevenue and the governor's
10-year forecast and everythingelse this doesn't include any
(19:27):
major spending boons, I'm sure,like defined benefits or
anything else.
Speaker 1 (19:33):
Now let's be clear.
These aren't deficit numbers,these are shortfalls in the POMV
draw.
These are shortfalls in thePOMV draw plus inflation
proofing.
So it is the failure togenerate revenue to support the
spending that's going on.
Speaker 2 (19:50):
Right, I mean it is a deficit in terms of we're going
to be drawing from the corpusof the fund because we're not
earning enough, but it's stillagain based on the average
revenue that the state is goingto need, right, I mean?
So it's, it is based on anumber that is based on real,
you know, projections that havebeen put forward.
So it's not technically adeficit, but it just shows that
(20:12):
the problem is there.
All right, Brad Keithley,Alaskans for Sustainable Budgets
, Our guests.
We're continuing on with theweekly top three.
We just finished up with a lotof numbers and colors and bars
and graphs and everything elseto basically tell us that we
have a couple of problems.
One, the permanent fund is notearning enough money.
A couple of problems.
(20:33):
One, the permanent fund is notearning enough money.
Even if it just pegged itselfto the indexes, we would have
made tons more money rather thanwhatever fancy manipulations
that they're doing right now.
And two, we're obviouslyspending too much, because if
the 5% draw isn't being coveredby the earnings of the fund, I
mean that's obviously anearnings problem, but we should
also be cutting back on ourspending to make it fit what
(20:55):
we're actually taking in.
That's the bottom line, butnumber two of the weekly top
three is a small ante.
I don't know what you mean bythat, Brad.
What do you mean?
A small ante?
Hit me with it.
Speaker 1 (21:08):
Well, the Senate passed a corporate law, what
James Brooks describes in anarticle in the Beacon and in the
ADN as a corporate tax update.
The Senate passed it 16 to 4.
It's on its way to the Houseand it is something that I think
is a small ante into thesolution of our fiscal problems
(21:33):
in the state.
The update itself, thecorporate tax update itself, is
only generate 65 million a yearat best.
The range that the fiscal notegives it is somewhere between 25
million and 65 million.
Even at 65 million, that's only3% of the deficit we're running
(21:56):
, so it's not the solution toanything.
The headline says it couldgenerate millions for dividends
and services, leaving theimpression that it's a big part
of the solution.
It's not.
It only covers 3% of thedeficit, but it is part of the
solution.
Even at 3%, it is part of thesolution and I think it's
(22:18):
something that is important tounderstand and discuss.
A lot of people have complainedthat.
Some have complained that it isa change in the corporate rate.
This is not the Hillcorploophole we're talking about.
This is an entirely differentstatute.
What this statute does isexpand the definition of the
(22:43):
corporate income tax to includecompanies like Amazon and others
that are delivering onlinesales into Alaska.
Right now, our definition ofthe corporate income tax only
includes from the standpoint ofonline businesses only includes
(23:03):
companies whose costs arelargely in Alaska.
It doesn't include companieswhose costs are largely outside
Alaska but who do business inAlaska by delivering products
into Alaska.
And so we're not.
Amazon is not subject to thecorporate income tax.
(23:24):
Other online sellers are notsubject to the corporate income
tax.
A share of their profits fromdoing business in Alaska.
They're not subject to thecorporate income tax.
A share of their profits fromdoing business in Alaska.
They're not subject to thecorporate income tax because of
the way that our corporateincome tax code is written
Elsewhere.
As online businesses havebecome much more a big part of
(23:47):
commerce elsewhere, other stateshave updated their corporate
income tax codes to includecorporations who make sales into
the state, even though theircosts may be located elsewhere,
even though the origin of theproducts may be elsewhere.
They've updated the corporateincome tax to include companies
(24:10):
who make sales into their states.
Alaska is operating on a priorversion of a multi-state to
(24:37):
reflect that our corporateincome tax will apply also to
corporations who are doingbusiness in Alaska through sales
not just cost, not just wherethey're sending the product from
.
Good bill, a good update, keepsus on par with what's going on
in other states and pass theSenate, as I said, 16-4.
(24:58):
It's going over to the Houseand basically, what I want to
say here is this is an ante intothe game.
This is an ante of get a smallante, but nevertheless an ante
into the game of getting ourbudget under control.
I know there are advocates outthere that say we can only,
we're only going to be able tosolve the budget by cutting
(25:20):
spending.
But Dunleavy tried that in 2019, did an accomplishment,
couldn't even get, didn'taccomplish it, couldn't even get
16 to back him up in thelegislature, to back him up on
the level of cuts that heproposed, and we've been running
deficits ever since.
Actually, we've been runningdeficits since 2013.
So this is a small ante intoupdating the Alaska corporate
(25:46):
code to put us on a par withother states in terms of how
we're calculating our corporateincome tax, and I think it's an
important thing to do.
I'm concerned that those aregoing to have a knee-jerk
reaction that says tax eventhough it's not an increase in
tax, even though it's a taxessentially on non-resident,
(26:08):
out-of-state industries that aredoing business in Alaska.
I'm concerned that there arethose who are going to have a
knee-jerk reaction saying tax no.
Speaker 2 (26:16):
But you and I have talked about the effects of
taxes because, again, this is atax that wasn't being levied
before on businesses, like yousaid, like Amazon, that are
outside.
In a lot of ways it's a hiddentax because it't affect directly
affect businesses here in thestate of Alaska.
But if you think that Amazon isgoing to just eat whatever tax
(26:39):
increase that is in there, Imean you and I both know that's
going to be passed on to theAlaskan consumer I mean it's it,
is it?
I mean they're quoted in thearticle as saying, oh, this
isn't a tax increase?
Well it, it is a tax increase.
Well, it is a tax increase,because it's a tax that you
haven't received before.
So therefore it's an increaseand it's going to be paid by
(27:01):
someone.
And I guarantee you thecorporations that are involved
are not going to just eat thecost.
They'll just tack a portiononto whatever they're selling to
do it or pass it directly ontoyou.
Speaker 1 (27:13):
Michael, in large part what's going to happen with
this tax is it's going to comeout of taxes that are being paid
to other states.
So since Alaska is notcalculating corporate income tax
on this basis, other states aregetting a bigger share of tax
as a result of calculating it onthis basis, in part because
(27:36):
Alaska isn't.
It's sort of like, when youthink of it, it's the equivalent
on a personal level of theOklahoma income tax.
We've got guys who come up fromOklahoma, work on the slope,
non-residents here, go back toOklahoma and Oklahoma has an
income tax and so when they goback to Oklahoma they're taxed
(27:59):
on the income that isn't taxedanyplace else.
If Alaska had an income tax I'mnot advocating at this point
that we do, but if Alaska had anincome tax what that would do
is reduce their Oklahoma incometax.
It would count as tax in Alaska.
That would reduce the taxburden in Oklahoma.
(28:22):
So in a lot of respects it'snot increasing the cost to the
company.
It's simply shifting the coststhat they're the taxes that
they're paying from onejurisdiction to another
jurisdiction.
I mean, the loser in theOklahoma income tax case is the
state of Oklahoma, and I don'tthink the state of Oklahoma is
(28:44):
going to be able to find a wayto increase costs, to increase
costs to Alaska.
Speaker 2 (28:48):
But that's assuming that every state has something
similar that they're alreadytaking and it won't be something
additional, and there's noguarantee that that is the case.
So in some cases this may causean increase, right, I mean?
I'm just I'm trying to be aboveboard and intellectually honest
on this.
Not every case is going to bean Oklahoma style case is going
(29:14):
to be an Oklahoma style case.
Speaker 1 (29:15):
But this isn't a sales tax.
It isn't a tax that is a tax onthe sale that the company will
say okay, we're paying a 3% taxon this delivery and so we need
to increase your cost by 3%.
It's a cost on the corporation,a cost of business on the
corporation, and it's hard tothink I mean what you're what
you're.
What you're essentially arguingis that somehow they would do
(29:37):
Alaska Alaska centric pricing.
That would that would charge adifferent rate to Alaska for the
product than they're chargingin in other States.
The underlying, the underlyingcharge would be different to
Alaska, not the charge for thefor transportation, which is
which to Alaska, not the chargefor transportation, which is
separate, not the charge forsales tax that would apply in
(30:01):
other states.
What you're essentially arguingis that they would somehow
increase the underlying price.
Speaker 2 (30:06):
I'm saying that the underlying price across the
board and maybe not justAlaskans would be paying it, but
everybody is going to be payingit because if a corporation has
a 3% cost increase in costs, um, they're again.
They're not just going to eatit, it's going to go in
somewhere, uh and and so I thinkagain, I think it's just
disingenuous for folks to sayit's not really a tax because we
(30:27):
won't pay it.
We probably will.
Maybe in some cases we won't,but in other cases we will.
I just think again, weshouldn't soft sell it to say,
don't worry, it's a net zerothing and it's free money.
I think it's just important tosay that.
Speaker 1 (30:42):
Well, we're talking about a fraction, I mean.
So what you're suggesting issomehow Amazon reflects it in
its overall cost and somehowAmazon bumps up the price
slightly to cover thisadditional cost, or cover this
additional cost in its overallprice.
(31:02):
And so the price to NewHampshire, the price to Maine,
the price to Washington, theprice to Illinois is all bumped
up a little bit.
So the fraction of cost thatultimately gets to Alaska is
going to be even in thatsituation, the fraction of cost
that's going to get to Alaska isgoing to be minute.
Speaker 2 (31:22):
Well, and I agree, I'm not saying that it's not.
Here's my problem.
Again, it's thedisingenuousness of saying this
could not cause an increase,which is how they're acting,
like this couldn't be.
And maybe it's a nickel, maybeit's a buck, I don't know.
But again, just to say thatthis is not a tax, is, uh, you
(31:42):
know, to say this isn't a taxincrease, it is a tax.
It'll be minute and probablyalmost unfelt, but don't blow
smoke up my skirt and tell meit's raining.
You know what I mean.
Don't, uh, don't, don't, donmean.
Don't tell me what it's, notwhen it is.
Speaker 1 (31:59):
You know this is how we never solve the problem you
and I had a debate about when wedid the tax on e-cigarettes.
I say, as you take a draw onyour e-cigarette, we've got to
have.
We are not going to cut our wayout of this.
I know that there are people inthe chat room right now who are
screaming all caps that we'regoing to cut our way out of this
(32:21):
.
It's not going to happen.
We have gotten we saw in 2019,there are too many buildup
forces, even in conservativedistricts.
There's too many buildup forcesto cut our way out of this.
So there's going to be revenuesomewhere.
Having a revenue option thataccepting all of your arguments,
having a revenue option thathas a minute effect on Alaskans
(32:44):
off off off shores a bunch ofthe, a bunch of the cost effect.
Having a revenue option thatdoes that is a hell of a lot
better than a lot of otherrevenue options.
Speaker 2 (32:58):
Again, you're missing my point.
I don't disagree with you onthat.
What I'm saying is don't tellme it's one thing when it's not.
That's my whole point.
See, this is the problem whenwe start to lose trust in our
leadership is when they look atour face with a straight face
and say, well, this isabsolutely not a tax, this is
absolutely won't and maybe itwon't cost us much, but it was
(33:18):
something, and that's the thing.
That's what gets me, brad, notthe fact that we don't.
We need the revenue.
I'm not arguing that.
I'm not arguing about anything.
I'm just saying when you look,all right, let's accept that I
mean it is a tax.
Speaker 1 (33:35):
Let's accept that for a moment.
It's a hell of a lot better taxthan a lot of other options.
Speaker 2 (33:40):
Not disagreeing with you on that.
That's what I'm saying.
I'm not disagreeing on that.
My point was don't tell me it'sone thing when it's not, or
don't tell me it's not somethingwhen it obviously is.
And that's the bigger problem,the heartache that I have with
this.
I don't have a problem with theoverall idea of it.
Yeah, everybody's going to payit.
I mean, people in New Hampshirewill be paying a tax because we
(34:00):
increased our tax.
Maybe it's a nickel, maybe it'sa penny, maybe it's whatever.
But again, it's just thedisingenuousness from these
people refusing to address theactual issue, saying that they
don't want to say tax, theydon't want to, they are afraid
to say it, they don't want totalk about it.
It's always new revenue, right,it's not.
It's again.
(34:21):
Just don't call it what it is.
Speaker 1 (34:24):
The actual issue is we're running huge deficits.
That's the actual issue, ahundred percent.
And, and the actual and theactual impact of this is to
reduce those deficits in, in, in, in, in.
Not in a huge fashion, again,it's only 3% of the of the size
of the deficit.
The projected revenue, even atbest, is only 3% of the size of
(34:45):
the deficit, but it reduces it,at least some, and it reduces it
in a way that, again, acceptingyour, accepting your argument
it reduces it away in a way thathas a minute impact.
Speaker 2 (34:57):
Yeah, it does have a minute impact.
I'm not going to disagree withany of that.
Again, that wasn't my wholepoint.
My point was don't tell me it'ssomething, it's not, when it is
obviously Anybody that looks atit.
It's obviously, again, of allthe things that could have been
done out there, definitelyprobably the least harmful of
all things that could be doneout there.
(35:18):
But again, it's the fact thatthey're trying to tell us that
it's not a tax.
That's what gets me, because,again, it's that
disingenuousness that we keephearing, because they're
refusing to acknowledge theproblem that we're spending too
much, we're in deficit spending.
We're in deficit spending, youknow, and then we did so again.
(35:38):
This is my fear, if we ever didcome up with some other form of
tax, um, without any kind ofcontrols, is that they'll just
spend it all.
They still won't acknowledgethe problem.
The problem is we, we, we werespending too much money.
That's the bottom line andthey're just not acknowledging
it.
Speaker 1 (35:54):
Yeah, but we are spending too much money.
We are, we are running hugedeficits.
We've got to close thosedeficits.
We've been closing them withthe most regressive tax ever
proposed in terms of, in termsof PFD cuts.
Um, we've got to close themsomehow.
And this is, this is in in the,in the broad range of things,
(36:16):
the broad range of things thatyou can use to close the
deficits.
It is got to be one of theleast burdensome, least
impactful of the options.
Speaker 2 (36:30):
Because it's the most broad based.
I mean, let's face it,everybody's paying.
I mean, people from all overthe US will be paying for our
little stipend for sure.
So I agree with you on thatAbsolutely.
Speaker 1 (36:40):
What I'm concerned about is that we just have
people just say, oh, it's a tax,so no.
Well, how do we ever solve theproblem?
How are we ever going to solvethe deficits?
Because we are solving themthrough the most aggressive tax
ever proposed.
We are solving them through themost aggressive tax ever
proposed.
We're solving them through PFDcuts.
We're solving them by takingmoney out of middle and lower
income Alaska, alaska familiesnot even any other families,
(37:03):
only Alaska families.
We're solving them by takingmoney out of their pockets.
We've got to solve thesituation and, okay, I will
grant you, it may be viewed as atax under the circumstances
that we described in the segment.
I will grant you, it may beviewed as a tax, but in terms of
the range of taxes, it is waythe hell at the far end of low
(37:32):
impact, as you say, broad-basedtaxes.
Speaker 2 (37:36):
Right?
Well, and I guess my wholepoint is, brad, words matter,
Definitions matter, truthmatters, right, and in showing
that it is a tax and saying thisis the best thing we could do
because it affects you the least, somebody could embrace that
and acknowledge that we've gotproblems.
That's the whole point.
The point is avoidance.
(37:57):
See, they're doing stuff foroutside, things that hit people
outside, that it's the lowestimpact stuff that nobody will
see because they don't want toacknowledge.
Because then people might say,well, why are they taxing us?
They're already getting allthis money from the permanent
fund, they're getting this moneyfrom royalties, they're getting
this money from the dividend.
Why do they need more?
Right, and that might makepeople question what's going on.
(38:19):
To me, it's about the avoidanceof the issue more than anything
else.
I'm not squawking about thenickel that it might cost me on
an Amazon order.
I'm saying this whole thing isdon't continue to lie to me and
tell me it's a sunny day whenit's pissing rain all over us,
right?
I mean, that's what's going onand that's what irritates me is
that they continue, with astraight face, to look in the
camera and say it's not a tax.
(38:40):
We don't do taxes around here.
You're taxing the hell out ofus.
You're taking our PFD.
You've gotten all the moneystraight from the oil companies.
You're getting all this otherstuff.
We are some of the most heavilytaxed people in the country.
We just don't see it becauseit's stealth.
So they're continuing theirstealth tax by putting it on
something that's outside that wewon't really even see or notice
(39:01):
.
That's what I'm saying.
Speaker 1 (39:03):
Okay, all right.
Well, that's a fair point, butwe've got to close.
It's also a fair point thatwe've got a huge deficit that's
not going to go away by justmagically saying we, magically,
magically saying we're going to,we're going to cut spending
down to whatever the hell therevenues are.
Speaker 2 (39:19):
Again, I'm not disagreeing with you on this.
See, that's the thing you thinkI'm disagreeing with you.
I'm not.
I'm just saying we're violentlyagreeing.
I'm violently agreeing.
Use truth.
Don't try and deceive andobfuscate what the actual truth
is.
Just tell me true, tell me likeit is.
You know, the thing is, again,they don't want to have this
conversation, brad, because itwould expose what's going on,
(39:43):
that the reason we have thedeficits which you are right
100%, we must fill, we mustsquash the reason we're having
these deficits is because we'respending more than we take in,
which, at its root, is aspending problem.
But again, there is nopolitical will to fix that.
I'm with you, 100%.
I agree.
We've been trying that on thisprogram.
You and I have been talkingabout it for 10 years.
(40:04):
I've been talking about it for15 years before that.
There is no political will tofix that and I don't know how to
.
Honestly, we had thisconversation last week.
I have no idea how to fix that.
Honestly, we had thisconversation last week.
I have no idea how to fix that.
No, I thought if we talkedabout it enough, people would
listen, but people just don'tgive a crap, apparently.
Speaker 1 (40:23):
Well, it's because they're not personally affected,
michael.
I mean the top 20%, the donorclass, the old companies, the
non-residents aren't personallyaffected, aren't being affected
by the deficit because theydon't have to contribute to the
costs.
And the 80% that are affected Imean a lot of them are on this
program.
We're bitching about the costs,we're bitching about the
(40:46):
spending because we'repersonally affected by it, but
the people who can actually movethe needle aren't affected by
it by the way we're doing it.
Speaker 2 (40:56):
All right, brad, keith Lee Alaskans for
Sustainable Budgets the weeklytop three.
We're on to number three, whichis some good news.
Brad saved the good news forlast, for all the beatings that
we've taken here.
Now we've got some good Brad.
What is the good news?
What is?
Speaker 1 (41:14):
Well, I your our conversation last week.
At the end of the last segmentlast week to heart, you said
maybe I should do a good newssegment.
I'm not sure I can come up withit every week, but at least I
at least I can come up with itsome weeks.
And this one, this one's sortof backwards, um, in the sense
that the good news is it wasn'tas bad as it could have been.
(41:37):
But as we approach the end ofthis session, there is some good
news out there.
The first of it, I think, isthat the capital budget passed
the Senate, and the capitalbudget passed the Senate
unanimously.
Now that doesn't mean thateverybody was in love with
spending on the capital budget,but it does mean that people
(42:00):
recognize we need a capitalbudget, that there are things in
this state that need a capitalbudget.
The match with the federalgovernment so we can have roads
for one thing is a huge part ofthat that we do need a capital
budget, and I think theunanimity in the Senate passing
(42:21):
the capital budget was arecognition that it was probably
the lowest cost, most efficient, least impactful capital budget
that we could possibly get awaywith.
That there was capital budgetrestraint, and that's good news.
I mean in the sense that itcould have been worse.
It could have been a hugecapital budget because everybody
(42:43):
wanted to spend and the Senatejust kept adding more and more
and more and more to it.
That's not what happened.
What happened was the Senatehad restraint on the capital
budget, was the Senate hadrestraint on the capital budget.
Additional good news, I think,out of that capital budget is
(43:04):
that a significant part of itwas paid by reappropriations.
Reappropriations are where theSenate has appropriated money in
prior years to various budgetsor to various projects.
The capital spending isincluded.
Appropriations to thoseprojects Uh, the Senate has
found, or the, the thelegislative body finds that the
uh, the projects are no longerneeded or are not as important
(43:27):
uh as using that cash for otherpurposes, or or or saving the
cash by not pursuing that proper, that, that appropriation or
that particular project andreappropriating the money to
other projects, essentiallysaying we're not going to go
forward with that project, we'renot going to spend that on that
project right now.
We're going to take the moneyand reappropriate it to
(43:48):
someplace that we need to spendit.
I think the recognition.
Otherwise, that money just sitsout there and somebody will
find a way to spend it at somepoint.
So reappropriating, taking backmoney from projects that no
longer have a priority, I think,is another good thing.
The ADA dividend ADA, theAlaska Industrial Development
(44:13):
and Export Authority, earnsmoney not as much as it should,
but earns money off of variousprojects or has appropriations
made to it by the legislaturethat are essentially capital
appropriations.
They're essentially part of thecapital budget, if you think
about it right, and that moneyis sitting over in ADA and that
(44:36):
money is sitting over in ADA andthe legislature in this
instance ADA normally decideswhat it's going to dividend back
excess cash that it says itdoesn't need.
Well, the legislature in thiscase is pulling more money back
from ADA.
Essentially that's are-approach.
If you think about it that way,it's a re-appropriation from
ADA back to the budget.
So I think that's another goodthing.
(44:59):
There's increasing recognition,I think, as we get through this
session, that the legislaturedoes not want to make additional
subsidies to the LNG project,the AKLNG project.
If it lives, if it's able toget money from outside, great
good thing, go ahead and do it,but the legislature is not going
to put any more state money init.
At least this session of thelegislature is not going to put
(45:20):
any more state money in it.
And also the same on Cook InletGas.
We're not going to subsidizeCook Inlet Gas.
We found a market solution toCook Inlet Gas and we're not
going to either forgiveroyalties that are otherwise due
, reduce royalties that areotherwise due or subsidize Cook
(45:40):
Inlet gas solutions.
So I think that's a good thingthat the legislature has gotten
out of the business ofsubsidizing the LNG project or
subsidizing Cook Inlet.
Another piece of goodinformation.
Another piece there's aheadline this past week in the
ADN that says Alaska lawmakerssay pension reform is a two-year
(46:05):
project.
I think, recognizing thepension reform, the defined
benefits, conversion to definedbenefits or re-creation of
defined benefits, it's notsomething the legislature is
going to accomplish this sessionand I think in large part
that's due to the pushback thelegislature has been getting on
defined benefits, the emphasison show us a fiscal note that
(46:28):
shows what the actual cost ofthis thing is going to be, and
the legislature having to dealwith the fact that there is a
cost to it, that they can't justsay there's no cost, similar to
your no tax argument.
You can't say that there's nocost.
So I think there's a bunch ofgood things that are coming out
of the legislature in the sensethat they're not bad things in
(46:51):
the sense of the legislature isholding back, reappropriating,
pulling back on the capitalbudget and and sort of standing
standing on where we are, asopposed to continually expanding
on that side.
Speaker 2 (47:04):
This is.
This is analogous to you know,looking in the couch and finding
all the money under the couchcushions, right?
I mean, this is sweeping outall the accounts for all this
money that's been sitting thesevarious accounts for all this
time and basically been doingnothing.
And the argument is and I'vetalked to several people in the
legislature on this there arethousands of accounts out there
with money just sitting in themthat's been stagnant for years,
(47:26):
for some project that was funded10 years ago that hasn't really
gone anywhere.
There's millions and millionsof dollars sitting out there.
We should be doing this everyyear.
Speaker 1 (47:34):
Well, there are some re-approves every year.
I think what's going on in thisone is these were two fairly
high projects.
One is the Juneau Road.
They're pulling back from theJuneau Road and they're pulling
back from the Port of Nomebecause the feds are pulling out
of the Port of Nome.
So it's basically think it'swhat we're getting attention to
(47:56):
is is they're pulling back evenfrom high profile projects, not
those that have gone stale andsince been forgotten.
They're pulling back from highprofile projects as well.
Speaker 2 (48:05):
No, I mean there's you know how many, how many
accounts are sitting out thereand it just not just on the
capital component of it but on,you know, on all the components
of it.
I mean how many accounts aresitting out there with a million
here, two million there, youknow, 500,000 here, 10 million
here.
I mean pretty soon you starttalking about real money and
(48:29):
this is part of that problem.
When they're supposed to besweeping some of the accounts
out that have money in them,when they're supposed to be
sweeping some of the accountsout that have money in them and
the stuff that's appropriated,they need to have like a
reappropriation committee wherethey go back and look and say,
have we done anything on this?
There's just money sitting inthis account doing nothing.
If we're not going to doanything must not have been that
critical, let's pull it back in.
Speaker 1 (48:49):
To some degree.
I think that's right To somedegree.
This is like empty positions orunfilled positions right, this
is the capital side equivalentof unfilled positions.
You've got this money sittingout in the accounts for projects
that are no longer viable orcertainly aren't high priority,
(49:09):
but you don't want to pull thoseback because it is sort of like
the money in the couch cushion.
It's sort of like the savingsaccount that no one knows about
or the checking account that noone knows about.
It's money that they're sort ofholding in reserve in years
like this maybe, where they'repulling it back in to help fund
when oil's down or when thepermanent fund isn't producing
(49:32):
the earnings you want.
It's sort of sitting out there.
So you're right.
Yeah, the other thing I thinkthere's a big thing about
pulling back from ADA, makingADA a dividend or having ADA a
dividend more than what ADAwanted a dividend.
If you think about ADA, it isjust another capital
appropriation.
It's another way of doing acapital appropriation.
(49:54):
It's essentially giving moneyover to an agency that the
governor controls, but you'reessentially putting a bunch of
money over that organization,some of which is to be spent on
specified identified capitalprojects that the legislature
says here.
We're giving you money topursue this project sort of off
(50:14):
books or in a separate set ofbooks.
Some of it is just money thatADA has generated, earned off of
projects they've been involvedin and they're holding on to.
But pulling that money back in,dividending that money back
into the general fund, which iswhere it originally came from
back in the day, I think is agood thing also.
(50:35):
So as you think about thesere-approves and pulling money
back in from projects that aredead, you ought to think about
is the money that we've givenADA for the projects that
they're pursuing.
Is that more important thanhaving the money back in the
general fund to either close thedeficit, help close the deficit
or pay for the capital spendingthat we need to do?
(51:00):
That has a higher prioritycurrently.
Speaker 2 (51:02):
Yeah, no, I agree.
And again, it's not just Frankjust said well, hey, a lot of
that's federal money.
If we take it back the federalgovernment, it will demand some.
I'm not talking about drainingstuff out of federal matches or
anything else, but there's tonsof money out there that the
state just put into funds, andit's not all about capital or
construction.
There are monies in differentaccounts out there.
(51:22):
I can't remember who told methis, that they had started
looking at this.
It is billions of dollars.
There's billions of dollars inthe various accounts out there
that could potentially be sweptback in if we really were
serious about it.
But of course you know theywon't even cut unfilled
positions.
So I mean that have been vacantfor 10 years.
They won't even cut those.
(51:42):
Do you think they're reallygoing to want to go through and
sweep money out of all theseaccounts?
They may need that money oneday for a rainy day.
They may want to spend it onsomething else.
Speaker 1 (51:51):
Yeah, or a project or a capital budget.
They want to, they want topursue for certain reasons.
Speaker 2 (52:01):
So they keep it.
They keep it sitting out there,yeah, holding it in reserve for
that day when they need to bethe hero or whatever, to about
two and a half minutes here,brad.
So what do you think happenstoday If the, if the veto, which
I think is going to happen,it's not going to be overridden,
it's going to stand.
What do you project for therest of this session?
Are you think that they'regoing to try and the governor's
got his proposal in there?
Do you think that's going to goanywhere?
Or do you think we're lookingat a special session?
(52:23):
What are you?
What are you thinking?
Speaker 1 (52:25):
Well, we may be looking at a special session for
the budget.
I mean, we're still, there'sstill a deficit in the budget
and I take the Senate at itsword that it wants to hang on to
a 2575 PFD.
And so a 2575 PFD, there'sstill going to be a deficit.
Even if you reduce the BSA fromthe $1,000 that's in the
(52:46):
current House operating billdown to 680 or 650 or whatever
the heck that number was we usedlast year, you still have a
deficit.
So there may be a specialsession on the deficit.
I don't think, unless thegovernor really just wants to
flail this horse to death, Idon't think there's going to be
a special session on education.
(53:06):
I mean, people are gettingexhausted by the issue and it's
not making any progress and it'snot a must have in the sense
that the budget is you've got to.
You can't end a session unlessyou have a budget signed by the
governor.
So it's not, it's not a musthave and it can be papered over
(53:27):
again with another.
You know, one time, one timecontribution to, to the, to the,
to the BSA, and try it againnext year.
And frankly, I think that'swhere we end up.
The governor has a bill outthere.
Maybe people will talk about it, but I don't think there's
enough time left in the sessionto pass it and I really hope we
don't.
We don't go to a specialsession on that, because I'm not
(53:49):
sure it's an ever-endingspecial session.
Speaker 2 (53:52):
Yeah, well, I mean, I'm not sure exactly what
happens, even though there wasone of the I think it was
Hemshoot who proposed theoriginal big increase said well,
I could look at the governor'sproposal.
It might work.
I mean, I don't know, it's allpie in the sky at this point.
We'll have to see where it goes.
All right, brad.
Well, thank you for coming onboard and sharing all this with
(54:14):
us today and arguing with us.
I appreciate that.
I think it's fun.
Iron sharpens, iron baby that'swhat it's all about.
So we all understand wherewe're coming from.
Thank you for coming on board,brad.
As always, it's good to talkwith you, my friend.
Speaker 1 (54:26):
Michael, as always, thanks for having me Appreciate
it.
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 and Substackpages, and keep track of us
during the week on Facebook andTwitter.
(54:46):
This has been Brad Keithley,managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week for the next
edition of the Weekly Top Three.
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