May 20, 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 May 19, 2025.
This week, our top 3 issues are these: 1) we explain why this year’s PFD cut — which is the 10th in a row and the largest yet — is, like the others before it, nothing more than a bailout paid for by middle & lower-income Alaska families of the Top20%, non-residents, and the oil companies (2:18); 2) we discuss how, in its latest press release, the Permanent Fund Corporation is trying to divert attention away from its recent performance (19:40) and 3) we explain how dealing with supersized and uneconomic Alaska energy projects is like a game of whack-a-mole; just when you have one down, another pops up (38:31).
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 May 19, 2025.
The weekly top three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:33):
as well as via streaming audiofrom the show's website,
weekdays from 6 to 8 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 project's 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
(01:16):
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 discussed
this year's PFD cut the 10thyear in a row and the largest
(01:39):
yet and why?
Like the others, it's nothingmore than a bailout paid for by
middle and lower income Alaskafamilies of the top 20%,
non-residents and the oilcompanies.
Second, we discuss the latestnumbers from the Permanent Fund
Corporation and why they arejust their latest effort to spin
the narrative about theirperformance their performance.
(02:08):
And third, we discuss howdealing with supersized and
uneconomic Alaska energyprojects is like a game of
whack-a-mole Just when you haveone down, another pops up.
And now let's join Michael.
Speaker 2 (02:18):
All right.
Well, brad, surprise, no, yes,I mean mean there's a lot of
things going on here, but uh,you know, of course, the the big
thing is the biggest cut to thepfd ever, the biggest tax on
alaskans ever.
A thousand dollar pfd, that'sall we're getting adjusted for
inflation.
(02:38):
It's the smallest pfd since theprogram's inception.
Um, and they're shocked,shocked, shocked.
I tell you, if the Alaskaeconomy is in the toilet, they
just don't understand how thatcould possibly happen.
Speaker 1 (02:51):
All right, Give it to me, brad.
Lowest PFD adjusted forinflation since the inception of
the program.
There's a milestone that we'rehitting that I think you know.
I could do it next week, Icould do it the week after that,
but I'm going to do it thisweek.
This is the 10th year of PFDcuts, the 10th year that the
(03:12):
Alaska legislature has failed tofollow the Alaska governor.
In the first year and insubsequent years the Alaska
legislature has failed to followthe PFD statute and it is
noteworthy for a number ofreasons.
It's the 10th year.
It is the smallest PFD adjustedfor inflation since the
(03:36):
beginning of the program.
This year is the largest PFDcut in the last 10 years in
terms of percentage of the PFDbeing cut.
This year 72% of the PFD isbeing withheld and diverted over
(03:58):
to spending for Is it 72 or 82?
Speaker 2 (04:03):
72%, 72%, 72%, okay.
Speaker 1 (04:07):
So the deficit is taking 82%.
To fill the deficit it's taking82% of the POMV draw, but the
percent of the cut of the PFD is72%.
Got it, we were at 71% beforein 2022, but this goes above and
(04:28):
beyond that.
Over the course of the 10 yearsyou know I do these charts and
I just keep running totals Overthe course of the 10 years the
amount of the PFD cut, theamount per PFD taken from Alaska
families, is roughly $18,000.
I mean, if you do it to thedollars and cents it's $17,829
(04:53):
and some odd, but $18,000 takenper PFD from Alaska families.
So it's a.
I mean, and it's the year after, this is the year after the
Senate said absolutely 2575 POMVdraw, we're going to keep 25
(05:14):
for the PFD.
We promise we're drawing a linein the sand.
That's what we're doing andthen the very next year rubs out
that line and crosses over andcuts even more deeply.
That's the 82% number thatthey're taking from the POMV
draw for government now, asopposed to the 75-25 that they
(05:36):
said they would keep in place.
So from a number of differentperspectives, it is sort of the
bottom of the barrel.
Not that we can't go deeper insubsequent years, but this year
is sort of the bottom of thebarrel in terms of PFD cuts.
I want to flip it for a secondand talk about what it also is.
(05:59):
It is the largest singlebailout in Alaska history of the
top 20% and oil companies andnon-residents those who are
getting bailed out are beingprotected from having to
(06:19):
contribute to the additionalcosts of Alaska government by
PFD cuts.
I ran some other numbers.
This year's PFD cut will takeroughly 28% of nope, that's not
it.
I think that's in the nextsegment.
Speaker 2 (06:35):
Michael, no, no, ignore that, ignore the man
behind the curtain.
Speaker 1 (06:41):
This year's PFD cut will take roughly 28% of the
adjusted gross income from thelowest 20% of Alaska residents,
roughly 12.5% from the lowermiddle income bracket lower
(07:11):
middle income bracket roughly9.2% from the upper middle
income bracket.
That's the effect of thisyear's PFD Cup.
How much is being taken out ofthe pockets, out of the income
of Alaska families?
9.2% of adjusted gross incomefrom the upper middle income
bracket, but only 3% from thetop 20%, only 1.5% from the top
(07:33):
5%, only 0.7%, 0.7% from the top1% and zero, of course, from
non-residents.
The overall average that'sbeing taken of adjusted gross
income from Alaska families isabout 5.5 percent, a little
under 5.5 percent, 5.4 percentfrom overall from the pockets of
(07:58):
Alaska families.
That's the effect of the PFDcut.
That's the tax rate.
If you want to think about PFDcuts in terms of taxes.
That's the overall tax ratefrom Alaska families, if the
burden was spread evenly flatacross all Alaska families.
(08:19):
But against that 5.5%, more isbeing taken from 80% of Alaska
families, from middle and lowerincome Alaska families.
More is being taken from 80% ofAlaska families than is being
taken from the top 20% and ofcourse, none is being taken from
non-residents and the oilcompanies who haven't had a tax
(08:41):
code revision since 2013,.
The old companies are avoidingpaying the additional costs of
government.
So we've hit, in terms of the10th year, we've hit a milestone
where we ought to be lookingback at what the impact is.
That 10 years also coincides,incidentally, with the period of
(09:04):
time during which we've hadworking Alaska families, working
age working Alaska families out, migrating from the state, the
decline in the state'spopulation, working age
population.
It's also not coincidentally.
It's also coincides with theperiod of time where the top 20
(09:27):
percent has increased, has grownin terms of want to admit it or
not.
We're seeing the effects of thePFD cut over that period of
(09:52):
time.
There was an interesting RobMeyer sent a clip last night of
a debate on the House flooryesterday where they were
debating a bill to where thelegislature was proposing or
some of the legislature wereproposing, to subsidize the
(10:12):
student loans, pay back thestudent loans or pay the student
loans for those moving toAlaska to fill certain slots,
teaching slots or governmentslots.
There was an interesting debateyesterday about where those in
the legislature proposing thatsubsidy were describing it as
important to stem the tide onout-migration and to bring
(10:34):
Alaska families, bring people,back into Alaska to grow Alaska
families to spend governmentmoney in terms of paying for
student loans, paying offstudent loans, to bring those a
select group of outsiders orinsiders to Alaska and help them
(10:56):
subsidize their student loans.
The only person who mentionedthe PFD was Kevin McCabe.
To his credit, kevin pointedout that, at the same time that
some are proposing to do that,the PFD has been cut and we've
had out migration in those whoare most affected by the PFD
(11:17):
cuts and the private economy hasdeclined during that period of
time, has declined during thatperiod of time.
And so it's really I mean youcan just see what's going on in
the legislature in terms of someproposing to take PFDs.
Make the situation worse formiddle and lower income Alaska
families.
Take income from them.
(11:38):
Shield the top 20%non-residents and the oil
companies from contributing tothe share to government costs.
Take money from middle andlower income Alaska families and
then give it to a certainsubset of Alaska families and
subsidize them.
Provide financial incentives togrow that sector of the economy
(11:59):
at the same time as you'retaking out the PFD and providing
disincentives.
As you're taking out the PFDand providing disincentives
obvious disincentives to broadscale, you know, working class,
working age, alaska familiestaking the incentive away from
them, creating disincentives byPFD cuts.
So it is, oh and, by the way,that bill passed the House to
(12:23):
tell you where we are, to tellyou where we are in the
legislature.
So we've come to sort of a spotin the road where it's useful
to reflect back on what'shappened.
We've had 10 years of PFD cuts.
We've taken roughly $18,000 outof the pockets of Alaska
families or out of the pocketsof individual Alaskans.
Over that period.
We've had out-migration pocketsof individual Alaskans.
(12:47):
Over that period We've hadout-migration.
We have disproportionatelyfunded government on the backs
of middle and lower-incomeAlaska families.
We've shielded, we've bailedout the top 20% and
non-residents and the oilcompanies from contributing a
share of costs really any shareof costs toward the increased
costs of government over thatperiod.
And we are where we are we haveout-migration and we have a
(13:09):
poorer state as a result of it.
Speaker 2 (13:13):
Yeah, and again, shocked, shocked.
I tell you that we continue tohave this out-migration and all
we need to do is make sure thatthe government workers get their
incentives to come in and getpaid.
Meanwhile, the private sectoris out there scrambling and
again we're losing working agefamilies and folks like that.
But don't worry, we'll keepspending it better than you can.
That's the bottom line.
(13:34):
We'll keep spending it betterthan you can.
I mean talk about tone deafness, passing the House last night
after all that debate andeverything else, after cutting
thousands of dollars from ourPFD to give to some no-neck who
couldn't figure out that theirstudent debt might swamp them in
the long run.
It's just so insulting.
(13:56):
It is just so insulting at thispoint and folks should be you
know, they should be furiousabout this.
Speaker 1 (14:03):
I mean we clearly have a we-they attitude in the
state and it shows up in anumber of places.
We have a we.
Government workers are moreimportant than the private
sector.
We need to subsidize thegovernment sector.
Don't worry about the privatesector.
We'll just take the money outof, you know, working-age Alaska
families in the private sectorto help subsidize the government
(14:24):
sector.
We clearly have a we-they there.
We clearly have a we-theybetween the top 20% non-resident
industries and the oilcompanies.
They don't want to pay.
They are big advocates I meanSarah Hannon and the Juneau
delegation that were pushing thebill last night.
(14:46):
They're in the top 20%.
They're in the top 20% byvirtue of just being legislators
, because the legislators votedthemselves a raise to put
themselves in the top 20%.
They're in the top 20% andthey're saying we don't want to
pay for it.
We want these subsidies.
We want this loan forgiveness.
We want to pay for it.
We want these subsidies.
We want this loan forgiveness.
We want to pay for people tocome to Alaska.
(15:08):
We just want it to be our kindof people.
We don't want it to be the restof you out there, the private
sector people We've got toprotect our team, not your team.
Speaker 2 (15:18):
Your team is evil, brad, this whole thing is just a
microcosm of everything that'sgoing on and it's wrong in the
government.
They take the PFD and then theyargue yesterday about how they
need to give money to again abunch of nitwits who can't
figure out how to take care oftheir own debt, went into it
(15:38):
eyes wide open but now can'tfigure out.
Now they need a bailout.
They need a bailout.
Meanwhile, they're going totake an ax to every Alaskan
family out there to the tune ofthousands of dollars.
I mean, my family just in thisyear alone lost $12,000 plus in
dividends because they decidedthey needed to spend that money
(16:02):
on somebody else who couldn'tpay their bills.
Speaker 1 (16:03):
Apparently they decided they needed to spend
that money on somebody else whocouldn't pay their bills.
Apparently, yeah, I mean.
People often say that the PFDprogram's a wealth transfer.
It's not because the PFD comesfrom the commonly held wealth.
It is a share of the commonlyheld wealth.
We're not taking money fromanybody else to pay the PFD.
(16:24):
It's coming from income earnedoff royalties deposited in the
permanent fund.
We're not taking top 20% money.
We're not taking oil companymoney because it's royalties.
It's not even taxes.
We're not taking any money fromanybody else.
And so when people claim thatthe PFD is a wealth transfer
program, I just sort of see red.
(16:46):
But there is a wealth transfergoing on, and yesterday's debate
encapsulated it.
It's a wealth transfer frommiddle and lower income Alaska
families, from those whose PFDsare being cut to create these
subsidies that are going toselect groups.
And that is a wealth transferbecause they're taking money
(17:09):
that otherwise is due under thestatutes, is otherwise due to
middle and lower income Alaskafamilies, and they're
transferring that wealth $18,000in the aggregate per PFD now
over the 10 years.
They're taking that wealth andsprinkling it on other people
and it's just you know, it'sjust aggravating, or just, you
(17:32):
know, ludicrous that that theydo that and then to have the
people in the top 20 percent,like Sarah Hannon and others
Andy Story from Andy Story fromothers from Juno have those
people say, oh, they need it.
Those people need it.
Those people you know we needto subsidize them.
They, you know, they've gotstudent debt.
We need to help them.
We need to help them, bringthem up to Alaska.
(17:54):
To have those people who are inthe top 20% and won't make any
significant contribution tothose costs to have them argue
that we need to make thattransfer out of the pockets of
middle and lower income Alaskafamilies is just infuriating.
But we've had that for 10 yearsand can't seem to stop it.
Speaker 2 (18:15):
Yep, I mean, that's exactly where we're at right now
and we keep sending the samefolks back and expecting
different results.
And again, I don't know exactlyhow to change some of this,
although I will say, brad, Idon't know if you caught my
interview with Bernadette Wilsonthis last week, but it was good
(18:36):
it was.
I mean, well, let's just saythat she said all the right
things and she's talked about it.
You know she talked about she'sfine being a one-term governor.
She wants to go in there andstart just whack-a-moling
everything.
I mean, it's it.
It gives me a little bit ofhope that maybe there's still
somebody out there that sees thereal problem for the trees.
But you know, it's, it's.
(18:58):
I don't know of any othersolution right now, because we
keep sending the Burt Stedman'sand the Gary Stevens's and the
and the Bryce Edgman's of theworld back to the legislature
and they're just going to keepdoing the same thing they've
been doing.
Speaker 1 (19:11):
Yeah, I'll say.
I'll say this.
I'm skeptical of those who whowho argue that spending cuts are
going to do it.
We had that with Dunleavy in2018.
Didn't happen in 2019.
Hasn't happened since.
I am much more receptive tothose like Ben Carpenter, who
talk about comprehensivesolutions and not only talk
about comprehensive solutions,but have walked the talk in
(19:34):
terms of making proposals forcomprehensive solutions to solve
the fiscal situation.
Speaker 2 (19:38):
Proposals for comprehensive solutions to solve
the fiscal situation.
Okay, we're continuing on withBrad Keithley, alaska's Four
Sustainable Budgets.
The weekly top three continues.
The Permanent Fund oh, they'respinning some numbers out there.
We're doing great.
We're doing great, don't worryabout us, we're doing fantastic.
That 4.8% return is exactlywhat we what, what do you mean?
(20:04):
Harvard is doing a 9% return.
We don't care, we're doing fine.
Fine, just fine, brad.
Speaker 1 (20:07):
Well, there was an article at must read.
Uh, that, uh, that was just theregurgitation of a press
release written by the permanentfund corporation, and I and I
really I want to make adistinction anymore between the
permanent fund corporation andthe permanent fund.
Permanent fund corporation ispeople, permanent fund
corporation is the manager ofthe permanent fund.
(20:29):
That's where the problem is.
The permanent fund itself isjust numbers, it's just deposits
in various accounts and that'sdoing whatever it's doing.
It's the permanent fundcorporation that's managing it
and that's where I think ourfocus should be on the permanent
fund corporation.
But there's a press releasethat they issued oddly way late
(20:52):
in the cycle.
The March results have been outfor a half a month, more than a
half a month, from thepermanent fundent Fund
Corporation, but they're justnow getting around to issuing a
press release.
Suzanne Downing on Must Readreprinted it sort of verbatim.
The headline of it was despitevolatility in markets, permanent
Fund exceeds benchmarks andthey're patting themselves on
(21:15):
the back for having achieved areturn that is equal to one of
their three benchmarks or thatexceeds one of their three
benchmarks.
And I thought to sort ofevaluate this.
It might be useful to sort oflook at what the numbers have
been for the last several years.
So, michael, if you've got thetable that, you can pop up there
(21:38):
.
This table looks at the returnsthe permanent fund has earned
per fiscal year against all ofthe benchmarks that the
permanent fund corporation hasused over the last 10 years,
over the period I guess it's 12,13 years over the last 13 years
(21:58):
, and they've changed benchmarksover time.
Interestingly enough, theyhaven't stuck with specific
benchmarks.
They kept changing them overtime.
The permanent fund return is inthe second column and totals,
over the full period from FY12to FY24, averages out at 8.12%.
(22:21):
And then the total fund.
Well, I'll talk about the S&P500 here in a second.
The third column is the totalfund return objective, that's
CPI plus 5%.
That's basically what the POMBdraw is based on.
And then they have variousother benchmarks they've used
over time performance benchmark,the passive index benchmark,
(22:42):
risk benchmark, and it goes onand on and on.
Over the last, what the pressrelease is focusing on is, over
the last 10 years, that thepermanent fund return has
exceeded its benchmarks.
It's exceeded the total fundreturn.
The CPI plus five has exceededits performance benchmarks.
It's exceeded its passive indexbenchmarks.
(23:05):
But when you look at theindividual numbers.
When you look at the numbers byyear, the reason that's
occurred is because of theperformance back in the 20-teens
, because of the performanceback in FY 15, 16, 17, 18,
strong performances during thoseyears.
(23:25):
If you look at the year-by-yearreturn, including this year, the
permanent funds returns havebeen below its benchmarks on a
year-by-year basis.
In five of the last six yearsthe permanent fund return has
been below the CPI plus five.
I mean people talk about we'vegot a problem with the earnings
(23:46):
reserve and there's severalreasons for that.
But one of the reasons, a bigpart of the reason, is that the
permanent fund corporation, inmanaging the permanent fund's
assets, the permanent fundcorporation, isn't earning a
return that's equal to thewithdrawal, that's equal to the
CPI plus 5%.
(24:06):
Draw In five of the six lastyears, the last six years, they
haven't earned a return that'sequivalent to that.
And then that's just theirbenchmarks that they're picking
and keep in mind, except for theCPI plus five.
These are all benchmarks thatthe Permanent Fund Corporation
(24:27):
has made up, has developed foritself.
So when it says it's exceedingthe benchmarks, what it's saying
is we're exceeding a standardthat we set for ourselves and,
look, we exceeded it.
But when you look at somethingexternal to that, when you look
at, for example, the S&P 500,which is the second column I've
got here, you can see that thePermanent Fund Corporation has
(24:50):
vastly under-earned compared toan external benchmark, the S&P
500.
Over the course of the 12 yearsor 13 years that are on the
chart the S&P 500, the averagereturn for the S&P 500 is 15.3%.
The average return for thepermanent fund is 8.12% a little
(25:11):
over half, but not much overhalf, of what we would have
gotten if we had used the S&P500 as our tool, the S&P 500
exchange-traded fund, as ourtool for returns.
Putting that in another context,if you can go to the line chart
for a second, if you can flipthat up, this chart shows what
(25:39):
the permanent fund balance wouldbe.
If we'd use the S&P 500, thepermanent fund balance now, as
(26:06):
of FY25, the beginning of theyear of FY25, would be $113
billion Invested the way thepermanent fund corporation has
done.
The permanent fund balance atthe beginning of FY25 was $80
billion, $33 billion less thanmore than a third less than what
(26:30):
it would have been had weinvested in the S&P 500.
You looked at it another way.
The red and blue bars at thebottom of that chart show what
the POMV draw would be if weinvested in the S&P 500 over
that period beginning of FY20instead of the way the Permanent
(26:50):
Fund Corporation invested it.
The POMV draw in FY25 wouldhave been $4.02 billion compared
to what the POMV draw was,given how the Permanent Fund
(27:12):
Corporation invested it, of$3.66 billion.
The POMV draw would have beenmore than $300 million, nearly
$400 million more, if we'dinvested in the S&P 500, if we'd
used that as our approach, asopposed to the active management
that the PFC is extollingitself for in the press release.
(27:33):
And you can see we already knowwhat the FY26 numbers are for
the POMB draw.
We don't know what the endingbalances are going to be for the
permanent fund yet, but we knowwhat the POMV draw is for FY26.
The POMV draw for FY26, the waythe permanent fund has invested
it, is $3.8 billion.
The permanent the POMV draw, hadit been invested in the S&P 500
(27:57):
, would be $4.5 billion, $700million more than the way it was
, than the POMB draw, the waythat the Permanent Fund
Corporation has invested it.
So you have got to look at thisPermanent Fund Corporation
(28:17):
press release extollingthemselves for how well they've
done.
You've got to look at it incontext and you've got to look
at it for what the alternativesare and you've got to look at it
by year to understand that allof the pluses that they're
claiming are nearly 10 years agonow, when in the last six years
(28:38):
five of those last six yearsthey haven't even met the CPI
plus 5%.
There is a problem I mean, Ispent a lot of time focused on
revenue side, because part ofour problem, at least, is a
revenue problem.
There is a problem in what thepermanent fund corporation is
doing.
There is a problem in howthey're investing the permanent
(29:03):
fund amount and it's costingAlaskans money in terms of under
earnings and in terms of lowerPOMB draws and in terms of lower
permanent fund balances thatthe otherwise would have.
If the permanent fundcorporation were here right now,
what they would say is oh, butthe S&P is more volatile.
(29:24):
When the S&P goes down, it goesdown harder than the permanent
fund corporation, than thepermanent fund does under
permanent fund corporationmanagement.
Because we moderate, we balanceout those that variability.
Well, balance out thatvariability, well, yes, and you
can see from FY22 on the chart,you can see from FY22 to FY23,
(29:47):
both funds went down and the S&P500 went down harder, more than
the permanent fund corporationapproach did.
But the S&P came right out ofit and has shot off, gone from
$80 billion from FY23 to abalance of $113 billion by FY25,
while the actively managedpermanent fund under the
(30:11):
Permanent Fund Corporation hasonly gone from $76 billion to
$80 billion.
So, yes, there is the potentialfor a bigger downside on the
S&P, but that's more than offsetby the bigger upside that
you're getting out of some toollike the S&P 500 ETF.
Speaker 2 (30:30):
Right.
But again, if you look at iteven in the longer term, you'll
see that even though it is morevolatile, it earns more in the
long run, which is why peopleare investing in the major fund
that way, in a broad fund,because overall, on the 10 and
20 year charts, it does muchbetter overall.
I mean, if we'd started fromthe beginning, I mean we could
(30:50):
have had 100 million, 100billion dollars more, you know,
if we started from the verybeginning.
But we wanted to be special andwe wanted to do it our way.
And yet here we are.
Speaker 1 (31:02):
So what?
The permanent fund corporationpress release that must read,
just regurgitated what thatpress release is.
And I've done this in my timein the private sector.
What you've done is okay, I'vegot to issue a press release and
I've got to claim victory onsomething least worst and I'll
(31:29):
pat myself on the back.
I'll pat myself on the back andso, yes, you write a press
release that says oh, look atthis, we were able to exceed in
this one category.
And if you look at the 10 yearswe're able to exceed in all of
these categories against thebenchmarks that we created in
order to judge ourselves, yes,we're doing great, aren't we
wonderful?
But when you look at theexternal world, the world
(31:50):
outside the permanent fundcorporation, you look at the
returns that people are gettingoutside the permanent fund
corporation, you see how bad ajob that they're truly doing.
And when you look at the yearby year numbers and see that in
five of the last six yearsthey've underperformed compared
to the CPI plus five, which isthe benchmark we're using for
(32:13):
the POMV draw, you see, five ofthe last six years they've
underperformed relative to that.
That they're using to praisethemselves is just a pile of
very misleading words and notsomething that reflects the
reality out in the greater world.
Speaker 2 (32:34):
Wait, what you mean to say is I'll just BS.
I mean, you know that's what'sgoing on.
It's just a pile of hooey.
At this point, All right.
Well, that takes us out of theweekly top three.
You should be sharing thischart, by the way, with all your
friends and relatives out there.
Folks on the radio can't see it.
You should go back to the videoon Facebook and take a look at
these charts, because theydefinitely line out exactly
(32:57):
where the problems lie on this.
Yeah, david just said thatmirrors the AK, the K-12 system.
Big bucks for mediocre results.
That's kind of what we'refacing right now.
Right, I mean, that's whatwe're doing.
Big bucks, and it's a billiondollars a year.
Right, brad, to manage thatfund.
That's about what they're 800and something billion dollars a
year.
Speaker 1 (33:18):
Yeah, the management fee report, which they haven't
published for a while, by theway, I'm a little concerned
about the delay About a monthpassed when they should have
published the next one.
But the last one they publishedshowed that they were spending
about a billion dollars a year900, some odd million dollars a
year on management fees for thisactively managed fund.
(33:40):
When they say, oh look, weequaled the passive benchmark,
well, yeah, after spending abillion dollars, you were able
to equal the passive benchmark.
If you hadn't spent the billiondollars and you invested in the
S&P, look at the results thatwe would have achieved with that
(34:02):
extra billion dollars.
But yeah, it is big bucks,we're spending a lot of dollars
through the Permanent FundCorporation.
Speaker 2 (34:13):
And this is really a quiet.
Nobody's talking about this.
You're the only guy talkingabout this anywhere.
It seems like Nobody else isreally bringing this up.
Everybody's lauding, and ifthey are bringing it up, they're
bringing it up in in the uh, inthe context of, um, how they
need to combine the funds.
That's pretty much.
(34:33):
That's pretty much what they're.
You know where they're, wherethey're at.
That's what.
That's what they're combiningit to.
Oh, we need to.
Uh, you know, we need tocombine the funds to protect
them, otherwise they're going togo away.
Speaker 1 (34:45):
Yeah, I think people are just, you know, a, they
don't do the charts the waymaybe I do, but B, I think it's
just the complexity of it.
You know somebody's going tostand up and say, oh, you're not
doing the job you should.
You're spending a billiondollars and having significant
underperformance.
And then they're concernedabout, you know, the PFC, the
(35:06):
supposed experts, standing upand saying, oh, you're wrong,
and, you know, throwing a bunchof flash at it.
We've seen that this session,with the various hearings that
the PFC has been at.
They have these glossy chartsthat show, oh, compared to our
benchmarks, compared to you know, we get to make up the standard
that we're comparing ourselvesagainst, compared to our
benchmarks, we're doing greatand you know and have the you
(35:31):
know sort of the MBA backgroundof doing that.
But you just look at thenumbers.
All you have to do is look atthe numbers.
All you have to look is at theyear by year performance, even
against their own numbers, evenagainst their own benchmarks,
even against their own CPI plusfive inflation plus five percent
return benchmark.
They're deficient five of thelast six years.
(35:53):
All you need to do is look atthose numbers and understand
what's going on.
Speaker 2 (35:58):
So I don't want you to look at those, Just look at
the 10-year number.
Don't look at the one year,Look at the 10-year number.
We're doing better.
Oh and then and then you knowsome.
Speaker 1 (36:06):
What's what's really interesting about that, michael,
is when they publish theirresults.
They they publish them monthly,and monthly it's.
They use a one, three and five,one one year, three year and
five measure.
Right, they don't publish the10 year measure because it's not
important enough to publish.
But when they get caught andwhen they get in a hearing and
(36:27):
they have to defend themselvesand say how good they're doing,
all of a sudden the 10 yearmeasure comes out and the 10
year measure is loaded is ispreloaded from all the, from the
good years about a decade ago,and so they get to say, oh, look
at these 10 year numbers.
Well, we can't look at the 10year numbers, 10 year number,
because you don't publish them.
You only haul them out herewhen you're trying to defend
(36:49):
yourself.
So it's well, I do not have awhole lot.
I used to have a lot, but Idon't have a whole lot of
respect for the Permanent FundCorporation anymore.
Speaker 2 (36:58):
Well, what happens when those 10 years, when they
start to fall off, the 10-yearsweep?
Right, that's the worst part.
What's it going to look like?
What's it going to look like?
What's it going to look likewhen those first couple, three
years start to fall off and allof a sudden they're like, oh my
God, we're underwater.
I mean it's going to.
Yeah, I mean, what happens then?
Speaker 1 (37:14):
Well then, we're going to hear about 15-year
numbers and then we're going tohear about 20-year numbers,
because, oh God, we don't wantto talk about those.
We're going to hear aboutwhatever period of time it takes
to haul in those early goodyears and keep our numbers up.
Speaker 2 (37:39):
It's amazing and this is a.
Is this a function that the,that the, that the governor this
is something the legislature isgoing to have to deal with
right?
This is not a gubernatorialpower.
He can't he can't change howthey do those things.
This is going to be somethingthat the, that the legislature,
is going to have to deal withright.
Speaker 1 (37:57):
No, no, it's, it's the permanent fund board, and
and that that sets the, sets theallocation policy, sets the
investment policy.
And the permanent fund board isentirely appointed by the
governor.
It doesn't even havelegislative oversight in terms
of who's appointed.
The governor has free reign toappoint whoever he wants to, and
(38:18):
the parameters of what thepermanent fund can invest in now
legislative parameters are verybroad, so it's the discretion
being exercised by the permanentfund board, entirely appointed
by the governor, that's drivingthis train.
Speaker 2 (38:31):
All right, let's continue on.
Brad Keithley, alaskans forSustainable Budgets.
Whack-a-mole never my favoritegame, to begin with, but now
we're playing it here in thestate of Alaska, brad.
It just keeps popping up and wesmack it, pops it up and we
smack it.
What are we?
What are we doing here?
What are we playingwhack-a-mole with?
Speaker 1 (38:51):
Well, it it, this.
This refers to investment,so-called investments by the
state in energy projects for thelast decade or so, including
and we're still at it but forthe last decade or so, the big,
(39:11):
the big you know we ought to beinvesting in this thing has been
the Alaska LNG project.
You know nobody else will payfor it, but we ought to pay for
it, we ought to, we ought toinvest in it, we ought to invest
the permanent fund in it or weought to invest in it somehow,
and we and we certainly ought tokeep paying consultants on an
annual basis to keep it alive.
We ought to keep thatinvestment going.
And now that I think people arefinally running out of patience
(39:33):
with it and they've sort ofoutsourced that project to Glen
Farn and outsourced theinvestment of it, hopefully, to
Glen Farn, and the legislaturehas finally sort of calmed down
in terms of, in terms of, oh, weneed to be investing in this.
Well, what happened then was wehad the Cook Inlet pop up.
(39:55):
Right, we need to invest in theCook Inlet, we need to have oil
and gas tax credits back in theearly 20-teens, or we need to
have a royalty holiday toencourage investment in the Cook
Inlet In some fashion, usestate money or by giving away
state revenue, reducing staterevenue.
(40:16):
We ought to encourage CookInlet that sort of died down too
, after people ran the numbersand understood what a bad
investment that would have been.
But you can't keep people down.
You can't keep people down whowant to spend on consultants and
run the traps.
(40:36):
And the latest one is anarticle by Nat Hertz that's in
the ADN and the Alaska Beaconand is showing up in all of the
other state newspapers.
The headlines in the ADNversion, the Alaska Daily News
version, was Alaska utilityexecs to lawmakers let's revive
the Susitna hydroelectricmegaproject 30 years to build a
(41:03):
big, huge dam across this.
You sit in a river to generateelectricity for for the rail
belt still for the rail belt,because you'd have to have to
distribute it through throughpower lines, build a dam.
And now that, now that we'vesort of played whack-a-mole with
the Alaska LNG project, took ahard look, took a look at the
(41:25):
numbers, that and said, well,that's really not a great deal
to do.
Now we played whack-a-mole withthe Cook Inlet and and not you
know, knock down additionalinvestments, state investments
in the Cook Inlet for a while.
You can't, you can't keep thesepeople down.
The next thing that pops up islet's revive Sousa.
Now they're going back to theoldies and goodies, right, what
(41:47):
project haven't we done that weneed to do that.
We need to spend another 100 or200 or 300 million on
consultants to to figure out.
And the next one that's poppedup is uh, is to revive the
susitna hydroelectric project.
And it's just I mean michael,some people just, or some some
interests just won't be stopped.
You can whack them down on oneproject, you can whack them down
(42:11):
on another project and theyjust pop up yet again with a
third project.
We never run out of ideas inthis state, it seems, on how to
spend state money, things theprivate sector won't invest in,
how to spend state money onthese various projects.
And even though you know theproject won't pencil out, even
though you sit there and knowthe project won't pencil out in
(42:34):
the long term, we neverthelessspend money on consultants.
We nevertheless spend money on$100 million I think the quote
in here is $100 million just tolet's revive, let's re-up the
data, let's look at the dataagain.
Speaker 2 (42:47):
Yeah, they spent $200 million on the project already.
They want to spend another $100million.
You're talking about the Alaskastudy industry, right?
That's what it is.
It's the Alaska study industrywho promises to study the study
that they studied before onemore time to see if the study
needs another study.
That's, I mean, that's whathappened.
Now, all things being equal, weshould have built the dam, the
(43:09):
damn dam, as Tim says.
We should have built the dam,you know, 30 years ago.
It would have provided, youknow, 50% of the electricity for
the rail belt all by itself andbeen a project that made sense.
But we just, we keep shootingourselves in the foot over the
years and instead we focus,focus on all this pie-in-the-sky
stuff, whether it's solar orwind or the gas line or anything
(43:30):
else.
That won't make it.
I mean again, but it's thestudying of the study, of the
one more study that needed to bestudied before we studied the
whole thing one more time.
Speaker 1 (43:40):
And this literally is that I mean this $100 million.
The next $100 million thatthey're talking about is
literally that it's to go backand restudy the prior studies to
see what permits would need tobe done now that we don't have
or that have expired, to seewhat the economics are now, what
the cost projections are now.
(44:00):
It's literally another $100million to restudy the prior
studies.
And, yeah, if there was somesense, some world in which this
would pencil out and be a goodreturn project, a project that
produced a good financial return, there's some world that, if
(44:21):
that existed, yeah, you mightwant to go back and update the
studies and you might want to goback and look at the permits.
You might want to do that, butyou can tell now, just like
you've been able to tell all theway along with the Alaska LNG
project, you can tell now thatit's not going to work, that
it's not going to pencil out,but nonetheless, like a
(44:42):
whack-a-mole, we have people whowant to go back and study it
again just to prove, just toupdate all that stuff that's
useless, the stuff that wasuseless before.
We want to update it so it canbe even more modern and updated
useless list as opposed to theold updated or the old useless
list.
Speaker 2 (45:04):
And so your assertion here is that the damn thing was
never going to work out, and itbasically just shows that we're
just stuck in a rut of studyingeverything, essentially
Spending money, spinning ourwheels to basically show like
we're doing something instead.
But we, I mean, what is your inthis regard?
And I know you're making adifferent point than what I'm
(45:26):
trying to say here but if wedon't do something like hydro or
something else, how do we, youknow, how do we?
How do we?
How do we take care of the everexpanding need for electricity
and energy here in the state we?
Speaker 1 (45:38):
let the utilities.
We let the utilities do theirjob.
We let utility management dowhat they're supposed to do.
And the RCA, regulatoryCommission of Alaska, who
oversees the utilities?
We let them do their job.
And their job is to meet theneeds of their customers in the
most reasonable cost fashionpossible.
Now, if you can get the stateto pay for a bunch of it, yeah,
(46:01):
that's a reasonable cost, but itdoesn't produce a return to the
state.
These projects don't produce areturn to the state.
These projects don't produce areturn to the state.
So you just you have theutilities have willingly
undertaken these obligations.
Nstar has undertaken theobligation to provide gas.
We've given them a monopoly inthe areas in which they serve to
provide that gas.
(46:22):
They've undertaken theobligation to provide it in a
cost reasonable manner and we'veset up the RCA to oversee them.
Same thing with the electricutilities.
So we let them do what they'resupposed to do and let the RCA
oversee them.
Now it'd be a different thing ifutilities did a study and said
look, this will produce apositive return to Alaska and to
(46:45):
our rate payers if we make thisinvestment and if the RCA
signed off on it.
It'd be a different thing if wedid that.
But we had the Susitna projectback before.
It didn't produce those sortsof economics or else we would
have gone down that road.
We've had the LNG project.
It hasn't produced those sortsof economics, so it's more
(47:06):
incremental.
What the utilities have beendoing is what utilities in the
lower 48 do is they doincremental steps to meet demand
as it grows in the mostcost-effective manner that's
available at the time.
They foresee that additionalgrowth.
Speaker 2 (47:23):
So if they were serious about it, they would
essentially climb together andfigure out how to build it
themselves.
Is what you're saying.
Speaker 1 (47:29):
Yeah, yeah it's.
We get into these Hail Marys inAlaska.
We get into oh my gosh, youknow, we're so far behind, we've
got to, we've got to dosomething, sort of like I mean,
it's not that different fromwhat we're doing on the
financial side.
We're so far behind, we've gotto do something, so you throw
these Hail Marys.
We're doing on the financialside.
We're so far behind, we got todo something, so you throw these
(47:51):
Hail Marys.
The Alaska LNG project oh, thatwould do it.
Or the Susitna project, thatwould do it.
Rather than the Hail Mary, weought to be doing the Woody
Hayes three yards in a cloud ofdust at a time.
Speaker 2 (48:03):
It's about economics and I would love to see
something like a large hydroproject in the state.
But it's got to pencil out.
I mean it's got to make sense.
And if it did make sense tobegin with, I think the
utilities because they've beenbuilding other hydro projects
that one may have just been alittle too ambitious, you know,
(48:23):
and now they want to spend moremoney to go after it, and all of
the utilities are in agreementon this.
All the utilities in the statewere basically on that letter to
the legislature which, by theway, they had that for like
three weeks and didn't sayanything to anybody until the
story broke yesterday.
Even Kevin McCabe is like well,this is the first time I've
(48:44):
ever hearing about it.
I mean, nobody knew anythingabout it, so I don't know.
It just seems like there's alot of smoke and mirrors going
on here.
Speaker 1 (48:52):
I mean the utilities, I guess the utilities.
You got to give them credit forthis.
If they can get somebody elseto build it, they can get.
They can get somebody.
If they get state money to meetthe obligation they have, then
good for them.
To meet the obligation theyhave, then good for them.
I mean if they can findsomebody else to finance their
(49:12):
business while they get to runthe business and get the returns
off the business.
If they can do that, then goodfor them.
But you've got to look at theoverall effect.
And it's state money thatotherwise can be invested,
otherwise could be producing areturn or otherwise could be
injected into the privateeconomy through PFDs.
(49:32):
You got to look at thosealternative uses of the money to
figure out whether it's a gooduse of state money.
And I just I mean you don'thave to spend $100 million to
figure out.
It's not.
But yet they want to spend the$100 million to claim it is.
Speaker 2 (49:50):
And again, as much as I'd like to see a large-scale
hydro project, this project,like the gas line, has been
sitting out there for 50 years.
They've been talking about theSusitna-Watana hydro project
Almost 50 years.
This has been kind of sittingwaiting in the wings and they
dust it off every now and then.
The last time was about 25years ago.
(50:11):
They dusted it off and talked alittle bit about it, but that's
all they do.
I mean, how much have theyspent?
Terry said something If wespent the money we spend on
studies, if we spent the moneyon projects, the projects would
be done essentially.
And that's the thing we get intothese studies.
On many of these things, someare not, some are not
economically feasible, but otherones I mean again studying the
(50:31):
study of the study that westudied before.
That said, by the way, thiswasn't economical 10 years ago.
Do you think it's going to beeven any more economical today?
When it was 10 years ago, itwasn't economical.
No, it's not.
Oh, it'll be fine.
It's not.
Oh, it'll be fine today.
Today is a different day.
It'll be fine.
Speaker 1 (50:47):
We just we need to.
I mean, I'm not sure how manypeople remember Woody Hayes, but
we need to grind this stuff out.
The utilities are there, haveobligations to grind this stuff
out, to figure it out on anincremental basis as we add
additional demand.
These sorts of out on anincremental basis as we add
(51:08):
additional demand, these sortsof oh my gosh, you know, if we
throw the hail Mary and 50things go exactly right, we
might break even those sorts ofthings.
I mean, I understand why theydo them, I understand why, as
you put it, the study industry,the state's study industry,
pushed them.
But it's just like whack-a-mole.
I mean you no more get oneknockdown than the next one pops
(51:31):
up, and then you got to go overand knock it down and the next
one pops up and you just got to,I guess, deal with them, or
else, my God, somebody mightactually spend money on it.
Yeah.
Speaker 2 (51:45):
Well, it's frustrating, but here's where we
are.
Any quick, we've got about twominutes here.
Any project predictions,projections, predictions on
what's going to happen with theoverride this morning at 9am.
They're supposed to have ajoint session this morning at
9am to try and override andeverything else Does.
Do they override the governor?
(52:05):
If they do, does he then goback and veto out the funding
part of it for another override,which is an even higher
threshold?
What do you think is happeninghere?
You got any predictions?
Speaker 1 (52:15):
Well, the bill is fiscally irresponsible.
It doesn't have the revenuessupporting it.
The legislature has gotten outin front of itself again.
It wants to spend withoutsaying how they're going to fund
it, other than throughadditional PFD cuts, other than
taking it out of middle andlower income Alaska families.
It's fiscally irresponsible soit'll probably pass.
I mean, the veto override willprobably.
(52:38):
The veto will probably beoverridden because this
legislature fundamentally isfiscally irresponsible.
And the thing that I'm reallygoing to focus on are the
Republicans that vote for theso-called, the self-proclaimed
fiscal conservatives who votefor this, who vote to override.
They don't have revenuesunderwriting it so, or
(52:59):
underwriting it so why are they?
Why are they voting to overrideit?
That'll be a question for themin the next election cycle.
Speaker 2 (53:06):
Yeah, no, and I and I see that uh already the, uh,
the uh.
A whole slew of women's clubscame out last night the
Anchorage Republican women'sclub, the Valley Republican
women, the Republican women ofKenai and the Kenai peninsula
Republican women all basicallysaid, if you vote for this,
you're dead to me.
Uh, if you vote to override no,we won't knock doors, we won't
(53:28):
make phone calls, we won't raisemoney, we won't wave signs, we
won't do anything for you.
Which is probably one of thestrongest things, I've,
strongest reactions I've seenfrom any of these places in a
while that they're, yeah,they're, they're, they're upset
about it, they're upset about it.
So, yeah, well, we'll see.
I mean, the governor's got acouple different options here.
If it does get overwrittenagain, he could still override
(53:55):
the funding itself or veto thefunding itself, and then it
takes a 45 out of 60 instead of40 out of 60.
So let's hope he's fiscallyresponsible.
Go ahead quickly.
Speaker 1 (54:03):
We've got to force.
We've got to force a fiscaldiscussion.
We've got to force a discussionabout a fiscal plan and this
veto and if the veto isoverridden, governor line item
vetoing the amount is thebiggest step I know of to help
force that fiscal discussion.
So I don't think we shouldoverride the veto and I would
(54:23):
support the Governor in cuttingthe amount down.
Speaker 2 (54:26):
if they do override the veto Because, Because, again
, there's no money underwritingthe whole thing.
So where does it come from?
That's the big question.
Brad Keithley, Alaska's forsustainable budgets the weekly
top three.
Brad, thanks for coming onboard and joining us.
Speaker 1 (54:39):
Michael as always, thanks for having me Appreciate
you coming on board.
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.
(55:01):
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 May 19, 2025.
The weekly top three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:33):
as well as via streaming audiofrom the show's website,
weekdays from 6 to 8 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 project's 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
(01:16):
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 discussed
this year's PFD cut the 10thyear in a row and the largest
(01:39):
yet and why?
Like the others, it's nothingmore than a bailout paid for by
middle and lower income Alaskafamilies of the top 20%,
non-residents and the oilcompanies.
Second, we discuss the latestnumbers from the Permanent Fund
Corporation and why they arejust their latest effort to spin
the narrative about theirperformance their performance.
(02:08):
And third, we discuss howdealing with supersized and
uneconomic Alaska energyprojects is like a game of
whack-a-mole Just when you haveone down, another pops up.
And now let's join Michael.
Speaker 2 (02:18):
All right.
Well, brad, surprise, no, yes,I mean mean there's a lot of
things going on here, but uh,you know, of course, the the big
thing is the biggest cut to thepfd ever, the biggest tax on
alaskans ever.
A thousand dollar pfd, that'sall we're getting adjusted for
inflation.
(02:38):
It's the smallest pfd since theprogram's inception.
Um, and they're shocked,shocked, shocked.
I tell you, if the Alaskaeconomy is in the toilet, they
just don't understand how thatcould possibly happen.
Speaker 1 (02:51):
All right, Give it to me, brad.
Lowest PFD adjusted forinflation since the inception of
the program.
There's a milestone that we'rehitting that I think you know.
I could do it next week, Icould do it the week after that,
but I'm going to do it thisweek.
This is the 10th year of PFDcuts, the 10th year that the
(03:12):
Alaska legislature has failed tofollow the Alaska governor.
In the first year and insubsequent years the Alaska
legislature has failed to followthe PFD statute and it is
noteworthy for a number ofreasons.
It's the 10th year.
It is the smallest PFD adjustedfor inflation since the
(03:36):
beginning of the program.
This year is the largest PFDcut in the last 10 years in
terms of percentage of the PFDbeing cut.
This year 72% of the PFD isbeing withheld and diverted over
(03:58):
to spending for Is it 72 or 82?
Speaker 2 (04:03):
72%, 72%, 72%, okay.
Speaker 1 (04:07):
So the deficit is taking 82%.
To fill the deficit it's taking82% of the POMV draw, but the
percent of the cut of the PFD is72%.
Got it, we were at 71% beforein 2022, but this goes above and
(04:28):
beyond that.
Over the course of the 10 yearsyou know I do these charts and
I just keep running totals Overthe course of the 10 years the
amount of the PFD cut, theamount per PFD taken from Alaska
families, is roughly $18,000.
I mean, if you do it to thedollars and cents it's $17,829
(04:53):
and some odd, but $18,000 takenper PFD from Alaska families.
So it's a.
I mean, and it's the year after, this is the year after the
Senate said absolutely 2575 POMVdraw, we're going to keep 25
(05:14):
for the PFD.
We promise we're drawing a linein the sand.
That's what we're doing andthen the very next year rubs out
that line and crosses over andcuts even more deeply.
That's the 82% number thatthey're taking from the POMV
draw for government now, asopposed to the 75-25 that they
(05:36):
said they would keep in place.
So from a number of differentperspectives, it is sort of the
bottom of the barrel.
Not that we can't go deeper insubsequent years, but this year
is sort of the bottom of thebarrel in terms of PFD cuts.
I want to flip it for a secondand talk about what it also is.
(05:59):
It is the largest singlebailout in Alaska history of the
top 20% and oil companies andnon-residents those who are
getting bailed out are beingprotected from having to
(06:19):
contribute to the additionalcosts of Alaska government by
PFD cuts.
I ran some other numbers.
This year's PFD cut will takeroughly 28% of nope, that's not
it.
I think that's in the nextsegment.
Speaker 2 (06:35):
Michael, no, no, ignore that, ignore the man
behind the curtain.
Speaker 1 (06:41):
This year's PFD cut will take roughly 28% of the
adjusted gross income from thelowest 20% of Alaska residents,
roughly 12.5% from the lowermiddle income bracket lower
(07:11):
middle income bracket roughly9.2% from the upper middle
income bracket.
That's the effect of thisyear's PFD Cup.
How much is being taken out ofthe pockets, out of the income
of Alaska families?
9.2% of adjusted gross incomefrom the upper middle income
bracket, but only 3% from thetop 20%, only 1.5% from the top
(07:33):
5%, only 0.7%, 0.7% from the top1% and zero, of course, from
non-residents.
The overall average that'sbeing taken of adjusted gross
income from Alaska families isabout 5.5 percent, a little
under 5.5 percent, 5.4 percentfrom overall from the pockets of
(07:58):
Alaska families.
That's the effect of the PFDcut.
That's the tax rate.
If you want to think about PFDcuts in terms of taxes.
That's the overall tax ratefrom Alaska families, if the
burden was spread evenly flatacross all Alaska families.
(08:19):
But against that 5.5%, more isbeing taken from 80% of Alaska
families, from middle and lowerincome Alaska families.
More is being taken from 80% ofAlaska families than is being
taken from the top 20% and ofcourse, none is being taken from
non-residents and the oilcompanies who haven't had a tax
(08:41):
code revision since 2013,.
The old companies are avoidingpaying the additional costs of
government.
So we've hit, in terms of the10th year, we've hit a milestone
where we ought to be lookingback at what the impact is.
That 10 years also coincides,incidentally, with the period of
(09:04):
time during which we've hadworking Alaska families, working
age working Alaska families out, migrating from the state, the
decline in the state'spopulation, working age
population.
It's also not coincidentally.
It's also coincides with theperiod of time where the top 20
(09:27):
percent has increased, has grownin terms of want to admit it or
not.
We're seeing the effects of thePFD cut over that period of
(09:52):
time.
There was an interesting RobMeyer sent a clip last night of
a debate on the House flooryesterday where they were
debating a bill to where thelegislature was proposing or
some of the legislature wereproposing, to subsidize the
(10:12):
student loans, pay back thestudent loans or pay the student
loans for those moving toAlaska to fill certain slots,
teaching slots or governmentslots.
There was an interesting debateyesterday about where those in
the legislature proposing thatsubsidy were describing it as
important to stem the tide onout-migration and to bring
(10:34):
Alaska families, bring people,back into Alaska to grow Alaska
families to spend governmentmoney in terms of paying for
student loans, paying offstudent loans, to bring those a
select group of outsiders orinsiders to Alaska and help them
(10:56):
subsidize their student loans.
The only person who mentionedthe PFD was Kevin McCabe.
To his credit, kevin pointedout that, at the same time that
some are proposing to do that,the PFD has been cut and we've
had out migration in those whoare most affected by the PFD
(11:17):
cuts and the private economy hasdeclined during that period of
time, has declined during thatperiod of time.
And so it's really I mean youcan just see what's going on in
the legislature in terms of someproposing to take PFDs.
Make the situation worse formiddle and lower income Alaska
families.
Take income from them.
(11:38):
Shield the top 20%non-residents and the oil
companies from contributing tothe share to government costs.
Take money from middle andlower income Alaska families and
then give it to a certainsubset of Alaska families and
subsidize them.
Provide financial incentives togrow that sector of the economy
(11:59):
at the same time as you'retaking out the PFD and providing
disincentives.
As you're taking out the PFDand providing disincentives
obvious disincentives to broadscale, you know, working class,
working age, alaska familiestaking the incentive away from
them, creating disincentives byPFD cuts.
So it is, oh and, by the way,that bill passed the House to
(12:23):
tell you where we are, to tellyou where we are in the
legislature.
So we've come to sort of a spotin the road where it's useful
to reflect back on what'shappened.
We've had 10 years of PFD cuts.
We've taken roughly $18,000 outof the pockets of Alaska
families or out of the pocketsof individual Alaskans.
Over that period.
We've had out-migration pocketsof individual Alaskans.
(12:47):
Over that period We've hadout-migration.
We have disproportionatelyfunded government on the backs
of middle and lower-incomeAlaska families.
We've shielded, we've bailedout the top 20% and
non-residents and the oilcompanies from contributing a
share of costs really any shareof costs toward the increased
costs of government over thatperiod.
And we are where we are we haveout-migration and we have a
(13:09):
poorer state as a result of it.
Speaker 2 (13:13):
Yeah, and again, shocked, shocked.
I tell you that we continue tohave this out-migration and all
we need to do is make sure thatthe government workers get their
incentives to come in and getpaid.
Meanwhile, the private sectoris out there scrambling and
again we're losing working agefamilies and folks like that.
But don't worry, we'll keepspending it better than you can.
That's the bottom line.
(13:34):
We'll keep spending it betterthan you can.
I mean talk about tone deafness, passing the House last night
after all that debate andeverything else, after cutting
thousands of dollars from ourPFD to give to some no-neck who
couldn't figure out that theirstudent debt might swamp them in
the long run.
It's just so insulting.
(13:56):
It is just so insulting at thispoint and folks should be you
know, they should be furiousabout this.
Speaker 1 (14:03):
I mean we clearly have a we-they attitude in the
state and it shows up in anumber of places.
We have a we.
Government workers are moreimportant than the private
sector.
We need to subsidize thegovernment sector.
Don't worry about the privatesector.
We'll just take the money outof, you know, working-age Alaska
families in the private sectorto help subsidize the government
(14:24):
sector.
We clearly have a we-they there.
We clearly have a we-theybetween the top 20% non-resident
industries and the oilcompanies.
They don't want to pay.
They are big advocates I meanSarah Hannon and the Juneau
delegation that were pushing thebill last night.
(14:46):
They're in the top 20%.
They're in the top 20% byvirtue of just being legislators
, because the legislators votedthemselves a raise to put
themselves in the top 20%.
They're in the top 20% andthey're saying we don't want to
pay for it.
We want these subsidies.
We want this loan forgiveness.
We want to pay for it.
We want these subsidies.
We want this loan forgiveness.
We want to pay for people tocome to Alaska.
(15:08):
We just want it to be our kindof people.
We don't want it to be the restof you out there, the private
sector people We've got toprotect our team, not your team.
Speaker 2 (15:18):
Your team is evil, brad, this whole thing is just a
microcosm of everything that'sgoing on and it's wrong in the
government.
They take the PFD and then theyargue yesterday about how they
need to give money to again abunch of nitwits who can't
figure out how to take care oftheir own debt, went into it
(15:38):
eyes wide open but now can'tfigure out.
Now they need a bailout.
They need a bailout.
Meanwhile, they're going totake an ax to every Alaskan
family out there to the tune ofthousands of dollars.
I mean, my family just in thisyear alone lost $12,000 plus in
dividends because they decidedthey needed to spend that money
(16:02):
on somebody else who couldn'tpay their bills.
Speaker 1 (16:03):
Apparently they decided they needed to spend
that money on somebody else whocouldn't pay their bills.
Apparently, yeah, I mean.
People often say that the PFDprogram's a wealth transfer.
It's not because the PFD comesfrom the commonly held wealth.
It is a share of the commonlyheld wealth.
We're not taking money fromanybody else to pay the PFD.
(16:24):
It's coming from income earnedoff royalties deposited in the
permanent fund.
We're not taking top 20% money.
We're not taking oil companymoney because it's royalties.
It's not even taxes.
We're not taking any money fromanybody else.
And so when people claim thatthe PFD is a wealth transfer
program, I just sort of see red.
(16:46):
But there is a wealth transfergoing on, and yesterday's debate
encapsulated it.
It's a wealth transfer frommiddle and lower income Alaska
families, from those whose PFDsare being cut to create these
subsidies that are going toselect groups.
And that is a wealth transferbecause they're taking money
(17:09):
that otherwise is due under thestatutes, is otherwise due to
middle and lower income Alaskafamilies, and they're
transferring that wealth $18,000in the aggregate per PFD now
over the 10 years.
They're taking that wealth andsprinkling it on other people
and it's just you know, it'sjust aggravating, or just, you
(17:32):
know, ludicrous that that theydo that and then to have the
people in the top 20 percent,like Sarah Hannon and others
Andy Story from Andy Story fromothers from Juno have those
people say, oh, they need it.
Those people need it.
Those people you know we needto subsidize them.
They, you know, they've gotstudent debt.
We need to help them.
We need to help them, bringthem up to Alaska.
(17:54):
To have those people who are inthe top 20% and won't make any
significant contribution tothose costs to have them argue
that we need to make thattransfer out of the pockets of
middle and lower income Alaskafamilies is just infuriating.
But we've had that for 10 yearsand can't seem to stop it.
Speaker 2 (18:15):
Yep, I mean, that's exactly where we're at right now
and we keep sending the samefolks back and expecting
different results.
And again, I don't know exactlyhow to change some of this,
although I will say, brad, Idon't know if you caught my
interview with Bernadette Wilsonthis last week, but it was good
(18:36):
it was.
I mean, well, let's just saythat she said all the right
things and she's talked about it.
You know she talked about she'sfine being a one-term governor.
She wants to go in there andstart just whack-a-moling
everything.
I mean, it's it.
It gives me a little bit ofhope that maybe there's still
somebody out there that sees thereal problem for the trees.
But you know, it's, it's.
(18:58):
I don't know of any othersolution right now, because we
keep sending the Burt Stedman'sand the Gary Stevens's and the
and the Bryce Edgman's of theworld back to the legislature
and they're just going to keepdoing the same thing they've
been doing.
Speaker 1 (19:11):
Yeah, I'll say.
I'll say this.
I'm skeptical of those who whowho argue that spending cuts are
going to do it.
We had that with Dunleavy in2018.
Didn't happen in 2019.
Hasn't happened since.
I am much more receptive tothose like Ben Carpenter, who
talk about comprehensivesolutions and not only talk
about comprehensive solutions,but have walked the talk in
(19:34):
terms of making proposals forcomprehensive solutions to solve
the fiscal situation.
Speaker 2 (19:38):
Proposals for comprehensive solutions to solve
the fiscal situation.
Okay, we're continuing on withBrad Keithley, alaska's Four
Sustainable Budgets.
The weekly top three continues.
The Permanent Fund oh, they'respinning some numbers out there.
We're doing great.
We're doing great, don't worryabout us, we're doing fantastic.
That 4.8% return is exactlywhat we what, what do you mean?
(20:04):
Harvard is doing a 9% return.
We don't care, we're doing fine.
Fine, just fine, brad.
Speaker 1 (20:07):
Well, there was an article at must read.
Uh, that, uh, that was just theregurgitation of a press
release written by the permanentfund corporation, and I and I
really I want to make adistinction anymore between the
permanent fund corporation andthe permanent fund.
Permanent fund corporation ispeople, permanent fund
corporation is the manager ofthe permanent fund.
(20:29):
That's where the problem is.
The permanent fund itself isjust numbers, it's just deposits
in various accounts and that'sdoing whatever it's doing.
It's the permanent fundcorporation that's managing it
and that's where I think ourfocus should be on the permanent
fund corporation.
But there's a press releasethat they issued oddly way late
(20:52):
in the cycle.
The March results have been outfor a half a month, more than a
half a month, from thepermanent fundent Fund
Corporation, but they're justnow getting around to issuing a
press release.
Suzanne Downing on Must Readreprinted it sort of verbatim.
The headline of it was despitevolatility in markets, permanent
Fund exceeds benchmarks andthey're patting themselves on
(21:15):
the back for having achieved areturn that is equal to one of
their three benchmarks or thatexceeds one of their three
benchmarks.
And I thought to sort ofevaluate this.
It might be useful to sort oflook at what the numbers have
been for the last several years.
So, michael, if you've got thetable that, you can pop up there
(21:38):
.
This table looks at the returnsthe permanent fund has earned
per fiscal year against all ofthe benchmarks that the
permanent fund corporation hasused over the last 10 years,
over the period I guess it's 12,13 years over the last 13 years
(21:58):
, and they've changed benchmarksover time.
Interestingly enough, theyhaven't stuck with specific
benchmarks.
They kept changing them overtime.
The permanent fund return is inthe second column and totals,
over the full period from FY12to FY24, averages out at 8.12%.
(22:21):
And then the total fund.
Well, I'll talk about the S&P500 here in a second.
The third column is the totalfund return objective, that's
CPI plus 5%.
That's basically what the POMBdraw is based on.
And then they have variousother benchmarks they've used
over time performance benchmark,the passive index benchmark,
(22:42):
risk benchmark, and it goes onand on and on.
Over the last, what the pressrelease is focusing on is, over
the last 10 years, that thepermanent fund return has
exceeded its benchmarks.
It's exceeded the total fundreturn.
The CPI plus five has exceededits performance benchmarks.
It's exceeded its passive indexbenchmarks.
(23:05):
But when you look at theindividual numbers.
When you look at the numbers byyear, the reason that's
occurred is because of theperformance back in the 20-teens
, because of the performanceback in FY 15, 16, 17, 18,
strong performances during thoseyears.
(23:25):
If you look at the year-by-yearreturn, including this year, the
permanent funds returns havebeen below its benchmarks on a
year-by-year basis.
In five of the last six yearsthe permanent fund return has
been below the CPI plus five.
I mean people talk about we'vegot a problem with the earnings
(23:46):
reserve and there's severalreasons for that.
But one of the reasons, a bigpart of the reason, is that the
permanent fund corporation, inmanaging the permanent fund's
assets, the permanent fundcorporation, isn't earning a
return that's equal to thewithdrawal, that's equal to the
CPI plus 5%.
(24:06):
Draw In five of the six lastyears, the last six years, they
haven't earned a return that'sequivalent to that.
And then that's just theirbenchmarks that they're picking
and keep in mind, except for theCPI plus five.
These are all benchmarks thatthe Permanent Fund Corporation
(24:27):
has made up, has developed foritself.
So when it says it's exceedingthe benchmarks, what it's saying
is we're exceeding a standardthat we set for ourselves and,
look, we exceeded it.
But when you look at somethingexternal to that, when you look
at, for example, the S&P 500,which is the second column I've
got here, you can see that thePermanent Fund Corporation has
(24:50):
vastly under-earned compared toan external benchmark, the S&P
500.
Over the course of the 12 yearsor 13 years that are on the
chart the S&P 500, the averagereturn for the S&P 500 is 15.3%.
The average return for thepermanent fund is 8.12% a little
(25:11):
over half, but not much overhalf, of what we would have
gotten if we had used the S&P500 as our tool, the S&P 500
exchange-traded fund, as ourtool for returns.
Putting that in another context,if you can go to the line chart
for a second, if you can flipthat up, this chart shows what
(25:39):
the permanent fund balance wouldbe.
If we'd use the S&P 500, thepermanent fund balance now, as
(26:06):
of FY25, the beginning of theyear of FY25, would be $113
billion Invested the way thepermanent fund corporation has
done.
The permanent fund balance atthe beginning of FY25 was $80
billion, $33 billion less thanmore than a third less than what
(26:30):
it would have been had weinvested in the S&P 500.
You looked at it another way.
The red and blue bars at thebottom of that chart show what
the POMV draw would be if weinvested in the S&P 500 over
that period beginning of FY20instead of the way the Permanent
(26:50):
Fund Corporation invested it.
The POMV draw in FY25 wouldhave been $4.02 billion compared
to what the POMV draw was,given how the Permanent Fund
(27:12):
Corporation invested it, of$3.66 billion.
The POMV draw would have beenmore than $300 million, nearly
$400 million more, if we'dinvested in the S&P 500, if we'd
used that as our approach, asopposed to the active management
that the PFC is extollingitself for in the press release.
(27:33):
And you can see we already knowwhat the FY26 numbers are for
the POMB draw.
We don't know what the endingbalances are going to be for the
permanent fund yet, but we knowwhat the POMV draw is for FY26.
The POMV draw for FY26, the waythe permanent fund has invested
it, is $3.8 billion.
The permanent the POMV draw, hadit been invested in the S&P 500
(27:57):
, would be $4.5 billion, $700million more than the way it was
, than the POMB draw, the waythat the Permanent Fund
Corporation has invested it.
So you have got to look at thisPermanent Fund Corporation
(28:17):
press release extollingthemselves for how well they've
done.
You've got to look at it incontext and you've got to look
at it for what the alternativesare and you've got to look at it
by year to understand that allof the pluses that they're
claiming are nearly 10 years agonow, when in the last six years
(28:38):
five of those last six yearsthey haven't even met the CPI
plus 5%.
There is a problem I mean, Ispent a lot of time focused on
revenue side, because part ofour problem, at least, is a
revenue problem.
There is a problem in what thepermanent fund corporation is
doing.
There is a problem in howthey're investing the permanent
(29:03):
fund amount and it's costingAlaskans money in terms of under
earnings and in terms of lowerPOMB draws and in terms of lower
permanent fund balances thatthe otherwise would have.
If the permanent fundcorporation were here right now,
what they would say is oh, butthe S&P is more volatile.
(29:24):
When the S&P goes down, it goesdown harder than the permanent
fund corporation, than thepermanent fund does under
permanent fund corporationmanagement.
Because we moderate, we balanceout those that variability.
Well, balance out thatvariability, well, yes, and you
can see from FY22 on the chart,you can see from FY22 to FY23,
(29:47):
both funds went down and the S&P500 went down harder, more than
the permanent fund corporationapproach did.
But the S&P came right out ofit and has shot off, gone from
$80 billion from FY23 to abalance of $113 billion by FY25,
while the actively managedpermanent fund under the
(30:11):
Permanent Fund Corporation hasonly gone from $76 billion to
$80 billion.
So, yes, there is the potentialfor a bigger downside on the
S&P, but that's more than offsetby the bigger upside that
you're getting out of some toollike the S&P 500 ETF.
Speaker 2 (30:30):
Right.
But again, if you look at iteven in the longer term, you'll
see that even though it is morevolatile, it earns more in the
long run, which is why peopleare investing in the major fund
that way, in a broad fund,because overall, on the 10 and
20 year charts, it does muchbetter overall.
I mean, if we'd started fromthe beginning, I mean we could
(30:50):
have had 100 million, 100billion dollars more, you know,
if we started from the verybeginning.
But we wanted to be special andwe wanted to do it our way.
And yet here we are.
Speaker 1 (31:02):
So what?
The permanent fund corporationpress release that must read,
just regurgitated what thatpress release is.
And I've done this in my timein the private sector.
What you've done is okay, I'vegot to issue a press release and
I've got to claim victory onsomething least worst and I'll
(31:29):
pat myself on the back.
I'll pat myself on the back andso, yes, you write a press
release that says oh, look atthis, we were able to exceed in
this one category.
And if you look at the 10 yearswe're able to exceed in all of
these categories against thebenchmarks that we created in
order to judge ourselves, yes,we're doing great, aren't we
wonderful?
But when you look at theexternal world, the world
(31:50):
outside the permanent fundcorporation, you look at the
returns that people are gettingoutside the permanent fund
corporation, you see how bad ajob that they're truly doing.
And when you look at the yearby year numbers and see that in
five of the last six yearsthey've underperformed compared
to the CPI plus five, which isthe benchmark we're using for
(32:13):
the POMV draw, you see, five ofthe last six years they've
underperformed relative to that.
That they're using to praisethemselves is just a pile of
very misleading words and notsomething that reflects the
reality out in the greater world.
Speaker 2 (32:34):
Wait, what you mean to say is I'll just BS.
I mean, you know that's what'sgoing on.
It's just a pile of hooey.
At this point, All right.
Well, that takes us out of theweekly top three.
You should be sharing thischart, by the way, with all your
friends and relatives out there.
Folks on the radio can't see it.
You should go back to the videoon Facebook and take a look at
these charts, because theydefinitely line out exactly
(32:57):
where the problems lie on this.
Yeah, david just said thatmirrors the AK, the K-12 system.
Big bucks for mediocre results.
That's kind of what we'refacing right now.
Right, I mean, that's whatwe're doing.
Big bucks, and it's a billiondollars a year.
Right, brad, to manage thatfund.
That's about what they're 800and something billion dollars a
year.
Speaker 1 (33:18):
Yeah, the management fee report, which they haven't
published for a while, by theway, I'm a little concerned
about the delay About a monthpassed when they should have
published the next one.
But the last one they publishedshowed that they were spending
about a billion dollars a year900, some odd million dollars a
year on management fees for thisactively managed fund.
(33:40):
When they say, oh look, weequaled the passive benchmark,
well, yeah, after spending abillion dollars, you were able
to equal the passive benchmark.
If you hadn't spent the billiondollars and you invested in the
S&P, look at the results thatwe would have achieved with that
(34:02):
extra billion dollars.
But yeah, it is big bucks,we're spending a lot of dollars
through the Permanent FundCorporation.
Speaker 2 (34:13):
And this is really a quiet.
Nobody's talking about this.
You're the only guy talkingabout this anywhere.
It seems like Nobody else isreally bringing this up.
Everybody's lauding, and ifthey are bringing it up, they're
bringing it up in in the uh, inthe context of, um, how they
need to combine the funds.
That's pretty much.
(34:33):
That's pretty much what they're.
You know where they're, wherethey're at.
That's what.
That's what they're combiningit to.
Oh, we need to.
Uh, you know, we need tocombine the funds to protect
them, otherwise they're going togo away.
Speaker 1 (34:45):
Yeah, I think people are just, you know, a, they
don't do the charts the waymaybe I do, but B, I think it's
just the complexity of it.
You know somebody's going tostand up and say, oh, you're not
doing the job you should.
You're spending a billiondollars and having significant
underperformance.
And then they're concernedabout, you know, the PFC, the
(35:06):
supposed experts, standing upand saying, oh, you're wrong,
and, you know, throwing a bunchof flash at it.
We've seen that this session,with the various hearings that
the PFC has been at.
They have these glossy chartsthat show, oh, compared to our
benchmarks, compared to you know, we get to make up the standard
that we're comparing ourselvesagainst, compared to our
benchmarks, we're doing greatand you know and have the you
(35:31):
know sort of the MBA backgroundof doing that.
But you just look at thenumbers.
All you have to do is look atthe numbers.
All you have to look is at theyear by year performance, even
against their own numbers, evenagainst their own benchmarks,
even against their own CPI plusfive inflation plus five percent
return benchmark.
They're deficient five of thelast six years.
(35:53):
All you need to do is look atthose numbers and understand
what's going on.
Speaker 2 (35:58):
So I don't want you to look at those, Just look at
the 10-year number.
Don't look at the one year,Look at the 10-year number.
We're doing better.
Oh and then and then you knowsome.
Speaker 1 (36:06):
What's what's really interesting about that, michael,
is when they publish theirresults.
They they publish them monthly,and monthly it's.
They use a one, three and five,one one year, three year and
five measure.
Right, they don't publish the10 year measure because it's not
important enough to publish.
But when they get caught andwhen they get in a hearing and
(36:27):
they have to defend themselvesand say how good they're doing,
all of a sudden the 10 yearmeasure comes out and the 10
year measure is loaded is ispreloaded from all the, from the
good years about a decade ago,and so they get to say, oh, look
at these 10 year numbers.
Well, we can't look at the 10year numbers, 10 year number,
because you don't publish them.
You only haul them out herewhen you're trying to defend
(36:49):
yourself.
So it's well, I do not have awhole lot.
I used to have a lot, but Idon't have a whole lot of
respect for the Permanent FundCorporation anymore.
Speaker 2 (36:58):
Well, what happens when those 10 years, when they
start to fall off, the 10-yearsweep?
Right, that's the worst part.
What's it going to look like?
What's it going to look like?
What's it going to look likewhen those first couple, three
years start to fall off and allof a sudden they're like, oh my
God, we're underwater.
I mean it's going to.
Yeah, I mean, what happens then?
Speaker 1 (37:14):
Well then, we're going to hear about 15-year
numbers and then we're going tohear about 20-year numbers,
because, oh God, we don't wantto talk about those.
We're going to hear aboutwhatever period of time it takes
to haul in those early goodyears and keep our numbers up.
Speaker 2 (37:39):
It's amazing and this is a.
Is this a function that the,that the, that the governor this
is something the legislature isgoing to have to deal with
right?
This is not a gubernatorialpower.
He can't he can't change howthey do those things.
This is going to be somethingthat the, that the legislature,
is going to have to deal withright.
Speaker 1 (37:57):
No, no, it's, it's the permanent fund board, and
and that that sets the, sets theallocation policy, sets the
investment policy.
And the permanent fund board isentirely appointed by the
governor.
It doesn't even havelegislative oversight in terms
of who's appointed.
The governor has free reign toappoint whoever he wants to, and
(38:18):
the parameters of what thepermanent fund can invest in now
legislative parameters are verybroad, so it's the discretion
being exercised by the permanentfund board, entirely appointed
by the governor, that's drivingthis train.
Speaker 2 (38:31):
All right, let's continue on.
Brad Keithley, alaskans forSustainable Budgets.
Whack-a-mole never my favoritegame, to begin with, but now
we're playing it here in thestate of Alaska, brad.
It just keeps popping up and wesmack it, pops it up and we
smack it.
What are we?
What are we doing here?
What are we playingwhack-a-mole with?
Speaker 1 (38:51):
Well, it it, this.
This refers to investment,so-called investments by the
state in energy projects for thelast decade or so, including
and we're still at it but forthe last decade or so, the big,
(39:11):
the big you know we ought to beinvesting in this thing has been
the Alaska LNG project.
You know nobody else will payfor it, but we ought to pay for
it, we ought to, we ought toinvest in it, we ought to invest
the permanent fund in it or weought to invest in it somehow,
and we and we certainly ought tokeep paying consultants on an
annual basis to keep it alive.
We ought to keep thatinvestment going.
And now that I think people arefinally running out of patience
(39:33):
with it and they've sort ofoutsourced that project to Glen
Farn and outsourced theinvestment of it, hopefully, to
Glen Farn, and the legislaturehas finally sort of calmed down
in terms of, in terms of, oh, weneed to be investing in this.
Well, what happened then was wehad the Cook Inlet pop up.
(39:55):
Right, we need to invest in theCook Inlet, we need to have oil
and gas tax credits back in theearly 20-teens, or we need to
have a royalty holiday toencourage investment in the Cook
Inlet In some fashion, usestate money or by giving away
state revenue, reducing staterevenue.
(40:16):
We ought to encourage CookInlet that sort of died down too
, after people ran the numbersand understood what a bad
investment that would have been.
But you can't keep people down.
You can't keep people down whowant to spend on consultants and
run the traps.
(40:36):
And the latest one is anarticle by Nat Hertz that's in
the ADN and the Alaska Beaconand is showing up in all of the
other state newspapers.
The headlines in the ADNversion, the Alaska Daily News
version, was Alaska utilityexecs to lawmakers let's revive
the Susitna hydroelectricmegaproject 30 years to build a
(41:03):
big, huge dam across this.
You sit in a river to generateelectricity for for the rail
belt still for the rail belt,because you'd have to have to
distribute it through throughpower lines, build a dam.
And now that, now that we'vesort of played whack-a-mole with
the Alaska LNG project, took ahard look, took a look at the
(41:25):
numbers, that and said, well,that's really not a great deal
to do.
Now we played whack-a-mole withthe Cook Inlet and and not you
know, knock down additionalinvestments, state investments
in the Cook Inlet for a while.
You can't, you can't keep thesepeople down.
The next thing that pops up islet's revive Sousa.
Now they're going back to theoldies and goodies, right, what
(41:47):
project haven't we done that weneed to do that.
We need to spend another 100 or200 or 300 million on
consultants to to figure out.
And the next one that's poppedup is uh, is to revive the
susitna hydroelectric project.
And it's just I mean michael,some people just, or some some
interests just won't be stopped.
You can whack them down on oneproject, you can whack them down
(42:11):
on another project and theyjust pop up yet again with a
third project.
We never run out of ideas inthis state, it seems, on how to
spend state money, things theprivate sector won't invest in,
how to spend state money onthese various projects.
And even though you know theproject won't pencil out, even
though you sit there and knowthe project won't pencil out in
(42:34):
the long term, we neverthelessspend money on consultants.
We nevertheless spend money on$100 million I think the quote
in here is $100 million just tolet's revive, let's re-up the
data, let's look at the dataagain.
Speaker 2 (42:47):
Yeah, they spent $200 million on the project already.
They want to spend another $100million.
You're talking about the Alaskastudy industry, right?
That's what it is.
It's the Alaska study industrywho promises to study the study
that they studied before onemore time to see if the study
needs another study.
That's, I mean, that's whathappened.
Now, all things being equal, weshould have built the dam, the
(43:09):
damn dam, as Tim says.
We should have built the dam,you know, 30 years ago.
It would have provided, youknow, 50% of the electricity for
the rail belt all by itself andbeen a project that made sense.
But we just, we keep shootingourselves in the foot over the
years and instead we focus,focus on all this pie-in-the-sky
stuff, whether it's solar orwind or the gas line or anything
(43:30):
else.
That won't make it.
I mean again, but it's thestudying of the study, of the
one more study that needed to bestudied before we studied the
whole thing one more time.
Speaker 1 (43:40):
And this literally is that I mean this $100 million.
The next $100 million thatthey're talking about is
literally that it's to go backand restudy the prior studies to
see what permits would need tobe done now that we don't have
or that have expired, to seewhat the economics are now, what
the cost projections are now.
(44:00):
It's literally another $100million to restudy the prior
studies.
And, yeah, if there was somesense, some world in which this
would pencil out and be a goodreturn project, a project that
produced a good financial return, there's some world that, if
(44:21):
that existed, yeah, you mightwant to go back and update the
studies and you might want to goback and look at the permits.
You might want to do that, butyou can tell now, just like
you've been able to tell all theway along with the Alaska LNG
project, you can tell now thatit's not going to work, that
it's not going to pencil out,but nonetheless, like a
(44:42):
whack-a-mole, we have people whowant to go back and study it
again just to prove, just toupdate all that stuff that's
useless, the stuff that wasuseless before.
We want to update it so it canbe even more modern and updated
useless list as opposed to theold updated or the old useless
list.
Speaker 2 (45:04):
And so your assertion here is that the damn thing was
never going to work out, and itbasically just shows that we're
just stuck in a rut of studyingeverything, essentially
Spending money, spinning ourwheels to basically show like
we're doing something instead.
But we, I mean, what is your inthis regard?
And I know you're making adifferent point than what I'm
(45:26):
trying to say here but if wedon't do something like hydro or
something else, how do we, youknow, how do we?
How do we?
How do we take care of the everexpanding need for electricity
and energy here in the state we?
Speaker 1 (45:38):
let the utilities.
We let the utilities do theirjob.
We let utility management dowhat they're supposed to do.
And the RCA, regulatoryCommission of Alaska, who
oversees the utilities?
We let them do their job.
And their job is to meet theneeds of their customers in the
most reasonable cost fashionpossible.
Now, if you can get the stateto pay for a bunch of it, yeah,
(46:01):
that's a reasonable cost, but itdoesn't produce a return to the
state.
These projects don't produce areturn to the state.
These projects don't produce areturn to the state.
So you just you have theutilities have willingly
undertaken these obligations.
Nstar has undertaken theobligation to provide gas.
We've given them a monopoly inthe areas in which they serve to
provide that gas.
(46:22):
They've undertaken theobligation to provide it in a
cost reasonable manner and we'veset up the RCA to oversee them.
Same thing with the electricutilities.
So we let them do what they'resupposed to do and let the RCA
oversee them.
Now it'd be a different thing ifutilities did a study and said
look, this will produce apositive return to Alaska and to
(46:45):
our rate payers if we make thisinvestment and if the RCA
signed off on it.
It'd be a different thing if wedid that.
But we had the Susitna projectback before.
It didn't produce those sortsof economics or else we would
have gone down that road.
We've had the LNG project.
It hasn't produced those sortsof economics, so it's more
(47:06):
incremental.
What the utilities have beendoing is what utilities in the
lower 48 do is they doincremental steps to meet demand
as it grows in the mostcost-effective manner that's
available at the time.
They foresee that additionalgrowth.
Speaker 2 (47:23):
So if they were serious about it, they would
essentially climb together andfigure out how to build it
themselves.
Is what you're saying.
Speaker 1 (47:29):
Yeah, yeah it's.
We get into these Hail Marys inAlaska.
We get into oh my gosh, youknow, we're so far behind, we've
got to, we've got to dosomething, sort of like I mean,
it's not that different fromwhat we're doing on the
financial side.
We're so far behind, we've gotto do something, so you throw
these Hail Marys.
We're doing on the financialside.
We're so far behind, we got todo something, so you throw these
(47:51):
Hail Marys.
The Alaska LNG project oh, thatwould do it.
Or the Susitna project, thatwould do it.
Rather than the Hail Mary, weought to be doing the Woody
Hayes three yards in a cloud ofdust at a time.
Speaker 2 (48:03):
It's about economics and I would love to see
something like a large hydroproject in the state.
But it's got to pencil out.
I mean it's got to make sense.
And if it did make sense tobegin with, I think the
utilities because they've beenbuilding other hydro projects
that one may have just been alittle too ambitious, you know,
(48:23):
and now they want to spend moremoney to go after it, and all of
the utilities are in agreementon this.
All the utilities in the statewere basically on that letter to
the legislature which, by theway, they had that for like
three weeks and didn't sayanything to anybody until the
story broke yesterday.
Even Kevin McCabe is like well,this is the first time I've
(48:44):
ever hearing about it.
I mean, nobody knew anythingabout it, so I don't know.
It just seems like there's alot of smoke and mirrors going
on here.
Speaker 1 (48:52):
I mean the utilities, I guess the utilities.
You got to give them credit forthis.
If they can get somebody elseto build it, they can get.
They can get somebody.
If they get state money to meetthe obligation they have, then
good for them.
To meet the obligation theyhave, then good for them.
I mean if they can findsomebody else to finance their
(49:12):
business while they get to runthe business and get the returns
off the business.
If they can do that, then goodfor them.
But you've got to look at theoverall effect.
And it's state money thatotherwise can be invested,
otherwise could be producing areturn or otherwise could be
injected into the privateeconomy through PFDs.
(49:32):
You got to look at thosealternative uses of the money to
figure out whether it's a gooduse of state money.
And I just I mean you don'thave to spend $100 million to
figure out.
It's not.
But yet they want to spend the$100 million to claim it is.
Speaker 2 (49:50):
And again, as much as I'd like to see a large-scale
hydro project, this project,like the gas line, has been
sitting out there for 50 years.
They've been talking about theSusitna-Watana hydro project
Almost 50 years.
This has been kind of sittingwaiting in the wings and they
dust it off every now and then.
The last time was about 25years ago.
(50:11):
They dusted it off and talked alittle bit about it, but that's
all they do.
I mean, how much have theyspent?
Terry said something If wespent the money we spend on
studies, if we spent the moneyon projects, the projects would
be done essentially.
And that's the thing we get intothese studies.
On many of these things, someare not, some are not
economically feasible, but otherones I mean again studying the
(50:31):
study of the study that westudied before.
That said, by the way, thiswasn't economical 10 years ago.
Do you think it's going to beeven any more economical today?
When it was 10 years ago, itwasn't economical.
No, it's not.
Oh, it'll be fine.
It's not.
Oh, it'll be fine today.
Today is a different day.
It'll be fine.
Speaker 1 (50:47):
We just we need to.
I mean, I'm not sure how manypeople remember Woody Hayes, but
we need to grind this stuff out.
The utilities are there, haveobligations to grind this stuff
out, to figure it out on anincremental basis as we add
additional demand.
These sorts of out on anincremental basis as we add
(51:08):
additional demand, these sortsof oh my gosh, you know, if we
throw the hail Mary and 50things go exactly right, we
might break even those sorts ofthings.
I mean, I understand why theydo them, I understand why, as
you put it, the study industry,the state's study industry,
pushed them.
But it's just like whack-a-mole.
I mean you no more get oneknockdown than the next one pops
(51:31):
up, and then you got to go overand knock it down and the next
one pops up and you just got to,I guess, deal with them, or
else, my God, somebody mightactually spend money on it.
Yeah.
Speaker 2 (51:45):
Well, it's frustrating, but here's where we
are.
Any quick, we've got about twominutes here.
Any project predictions,projections, predictions on
what's going to happen with theoverride this morning at 9am.
They're supposed to have ajoint session this morning at
9am to try and override andeverything else Does.
Do they override the governor?
(52:05):
If they do, does he then goback and veto out the funding
part of it for another override,which is an even higher
threshold?
What do you think is happeninghere?
You got any predictions?
Speaker 1 (52:15):
Well, the bill is fiscally irresponsible.
It doesn't have the revenuessupporting it.
The legislature has gotten outin front of itself again.
It wants to spend withoutsaying how they're going to fund
it, other than throughadditional PFD cuts, other than
taking it out of middle andlower income Alaska families.
It's fiscally irresponsible soit'll probably pass.
I mean, the veto override willprobably.
(52:38):
The veto will probably beoverridden because this
legislature fundamentally isfiscally irresponsible.
And the thing that I'm reallygoing to focus on are the
Republicans that vote for theso-called, the self-proclaimed
fiscal conservatives who votefor this, who vote to override.
They don't have revenuesunderwriting it so, or
(52:59):
underwriting it so why are they?
Why are they voting to overrideit?
That'll be a question for themin the next election cycle.
Speaker 2 (53:06):
Yeah, no, and I and I see that uh already the, uh,
the uh.
A whole slew of women's clubscame out last night the
Anchorage Republican women'sclub, the Valley Republican
women, the Republican women ofKenai and the Kenai peninsula
Republican women all basicallysaid, if you vote for this,
you're dead to me.
Uh, if you vote to override no,we won't knock doors, we won't
(53:28):
make phone calls, we won't raisemoney, we won't wave signs, we
won't do anything for you.
Which is probably one of thestrongest things, I've,
strongest reactions I've seenfrom any of these places in a
while that they're, yeah,they're, they're, they're upset
about it, they're upset about it.
So, yeah, well, we'll see.
I mean, the governor's got acouple different options here.
If it does get overwrittenagain, he could still override
(53:55):
the funding itself or veto thefunding itself, and then it
takes a 45 out of 60 instead of40 out of 60.
So let's hope he's fiscallyresponsible.
Go ahead quickly.
Speaker 1 (54:03):
We've got to force.
We've got to force a fiscaldiscussion.
We've got to force a discussionabout a fiscal plan and this
veto and if the veto isoverridden, governor line item
vetoing the amount is thebiggest step I know of to help
force that fiscal discussion.
So I don't think we shouldoverride the veto and I would
(54:23):
support the Governor in cuttingthe amount down.
Speaker 2 (54:26):
if they do override the veto Because, Because, again
, there's no money underwritingthe whole thing.
So where does it come from?
That's the big question.
Brad Keithley, Alaska's forsustainable budgets the weekly
top three.
Brad, thanks for coming onboard and joining us.
Speaker 1 (54:39):
Michael as always, thanks for having me Appreciate
you coming on board.
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.
(55:01):
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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