July 29, 2025 • 56 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 July 28, 2025.
This week, our top 3 issues are these: 1) we explain how a recent op-ed demonstrates why some legislators seem not to grasp how Alaska oil taxes work (2:15), 2) we explain why Sen. Shelley Hughes potentially has a significant leg up on fiscal issus over other candidates in the coming Governor’s race (20:49), and 3) we explain why we think, with one exception, a recent op-ed by Kevin McCabe makes a significant contribution toward understanding the K-12 issue (38:40).
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 July 28th 2025.
The weekly top three is aregular segment on the Michael
Dukes Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:34):
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 610 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,
(00:56):
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
(01:18):
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 explain how
a recent op-ed demonstrates whysome legislators seem not to
(01:45):
understand how Alaska's oiltaxes work.
Second, we explain why ShelleyHughes potentially has a
significant leg up on othercandidates on fiscal issues in
the coming governor's race.
And third, we explain why wethink, with one exception a
recent op-ed by Kevin McCabemakes a significant contribution
(02:09):
towards understanding the K-12issue.
And now let's join Michael.
Speaker 2 (02:15):
All right, brad.
Well, we've got some greattopics today.
Let's dive into it and getstarted.
We're going to start off withthe weekly top three, topic
number one.
It seems like some legislatorsjust don't seem to understand
how oil taxes work.
Again, you've been on thistopic for a while, but it just
(02:38):
still seems like nobody'slistening.
You keep using that word.
I don't think it means what youthink it means kind of thing.
Let's get started here on this.
Speaker 1 (02:48):
Well, maybe repetition will help.
That's why it keeps popping upoccasionally in the top three.
This segment was triggered byan op-ed that House Minority
Leader Mia Costello wrote inthis week's ADN, and I'm sure it
will appear in otherpublications.
(03:08):
I think I saw it in Must Readsomewhere along the way.
Also, the title of it is Alaskahas the Chance to Seize
Prosperity with the BigBeautiful Bill, and it talks
about various things that thefederal One Big Beautiful Act
accomplishes with respect toAlaska, particularly focusing on
(03:29):
opening up NPRA, additionalleasing in NPRA and in ANWR on
the North Slope and thepotential that brings for oil
development.
The thing that you know if I hada magic wand that I could get
all 60 legislators and thegovernor to understand is it is
(03:51):
good that we will haveadditional production.
That results in jobs.
That results in additionaldevelopment.
It lowers the cost of taps,because more volume through taps
lowers the per unit cost oftaps.
It opens up new potential fordiscovering additional fields up
(04:11):
on the slopes.
So that's all good, but thething that people are
overlooking is that it hurts thestate, hurts state revenues in
not only in the near term, butas we're discovering this decade
and seeing the impact that SB21is having in the current decade
(04:32):
, in the environment of thecurrent decade, not only in the
near term, but also in themedium term and perhaps in the
long term, depending upon howlong this goes on for.
And the reason it hurts it isbecause the reason it hurts
state revenues is because twofactors One, there is no state
royalty from federal lands.
(04:54):
Now I understand that as part ofthe One Big Beautiful Act,
representative Begich got aprovision that increases royalty
sharing from NPRA and increasesroyalty sharing from ANWR.
But the royalty sharing fromNPRA is still subject to the
local preference, that is, theroyalties.
Even though it's increased, theroyalties are still subject to
(05:18):
the federal law that requiresthat they be spent on the slope
with slope communities, localcommunities on the slope.
And so the fact that royaltieswill increase at some point and
it's something like seven yearsdown the line that this increase
kicks in, the fact thatroyalties increase doesn't help
state revenues.
Certainly in the near term,because it doesn't kick in for a
(05:38):
while or, depending upon howyou define it, the intermediate
term, because it still doesn'tkick in for seven years or so.
But even when it kicks in,those royalties are going to be
subject to the local preferencerule and so, at least from NPRA,
the state isn't going tobenefit from any federal
royalties.
(05:58):
We're going to continue to,from a royalty standpoint,
continue to have state royaltiesand, as the 10-year forecast
points out, those remain flat.
Those state royalties remainflat.
From a state standpoint, we'rereplacing the declining
production curve but we're notadding to it, and so over the
(06:20):
course of the 10-year period,that's in the current DOR
projection, state revenues fromstate royalties, revenue from
royalties, stays relatively flatover that period.
We don't get any from thefederal lands.
(06:50):
Spending that goes on and thedevelopment of new volumes
combine to result in a declinein production taxes.
We went over this last week butproduction taxes hit a low in
the late point of the projectionperiod.
Production taxes historicallybeen a billion or so plus or
minus.
Production tax has historicallybeen a billion or so plus or
minus.
They hit a low of $220 millionin the late part of the current
(07:14):
10-year forecast period.
They sort of bumped back up to$400 million the last couple of
years, but that's still lessthan half than what they were in
2024.
In 2024.
So this additional developmentthat everybody's excited about
legitimately so.
But this additional developmentthat everybody's excited about
(07:37):
isn't a prosperity for staterevenue standpoint.
It is, in fact, a hit to staterevenues.
Now the legislature can get outin front of that and can
readjust oil taxes.
I mean, we readjusted oil taxesin 2013 because they were
overtaking from producers andde-incentivizing,
disincentivizing incentive inthe state.
(07:58):
Now we've got a situation wherewe are undertaking from
producers and we're hurting thestate by doing that, so state
revenues by doing that, and sothe state legislature can get
out in front of that and makesome adjustments to the way that
SB21 works by making somechanges that amortize the impact
(08:21):
of additional investments overan extended period, make sure
that the state realizesadditional production tax
revenues as we have additionalproduction coming on.
But the legislature can do that, but the legislature hasn't yet
done that.
So the way SB21 is operating,it's reducing production tax
revenues over the projectionperiod.
It's reducing production taxrevenues over the projection
(08:44):
period.
Here's the key to that.
It's not like we're going to bereducing state spending
proportionately to thatreduction in revenues.
Not even the Republicans havecome up with proposals on how
you would reduce state spendingin the same fashion that
revenues are going down.
Revenues are going down.
(09:07):
So what we're doing by notaddressing production taxes, not
addressing that hit that comesfrom additional development, is
we're going to increase theburden on personal taxes.
We're going to continue to takeheavily from the PFD until
perhaps it's gone and then we'regoing to kick over into other
personal taxes.
So the legislature legislatorswho are saying yay, yay, obba,
opens things up, it's going tobe happy days, are here again.
(09:30):
They're not understanding.
I don't think they're notunderstanding what that influx
of investment, that influx ofspending dollars in the oil
industry, that influx of newvolumes which are subject to a
lower tax rate under SB 21,.
They're not understanding whatthat's going to do to state
(09:51):
revenues.
State revenues from productiontax don't even hold steady.
They go down because of the waythat those additional spending
is going to affect productiontaxes and the consequence of
that is increased.
(10:16):
I mean, what they're essentiallycheering for is increased
personal taxes, because that'swhat's going to have to happen
in order to fill the gap that'screated by the declining oil
taxes.
So I think legislators who aregetting out there and cheering
OBBA, I understand why they'redoing it.
I understand that the industrycertainly is encouraging them to
do it and the industry iscertainly saying, well, this
will be good.
We get additional leases inMPRA, we can develop step-outs
(10:37):
in MPRA, we can get additionalvolumes out of MPRA and I
understand what they're hearingfrom the producers in that
regard but they need tounderstand what's going on with
oil taxes.
They need to understand, inparticular, what's going on with
production taxes and they needto understand that all of this
additional development iscreating a situation in which
(11:01):
oil taxes, production taxes,will continue to decline, which
boomerangs back on the need foradditional personal taxes.
Speaker 2 (11:10):
You know, I think it's interesting in reading the
article, reading the opinionpiece.
I mean, in nowhere there doesshe talk about new revenues or
anything else.
This is.
It seems like all the talkaround this is very aspirational
, right.
I mean, oh, look at all thegreat things that are going to
come because of this and youpointed them out New building,
new growth, new job, employment,things like that but again,
(11:30):
it's not the cure-all.
I think a lot of them arelooking at it as if this will be
the cure-all.
This specific article doesn'ttalk about revenues, but we've
seen others that say look at allthe money that'll be flowing
(11:50):
into the state, when the answeris that there's not because of
all the reasons you justoutlined, and so I don't know
why they keep going back to thisand banging on that drum.
Specifically, I mean it's good,don't get me wrong, this is
good stuff, but it's not thesolution that they keep seeming
to point towards.
Speaker 1 (12:03):
Well, yeah, she doesn't talk about revenues, but
she doesn't talk about staterevenues.
But she also doesn't talk aboutthe adverse impact, the
negative impact on staterevenues.
I mean it's almost as if staterevenues sort of remain neutral
or yeah, it'll be good, becausegenerally good, but it's not.
I mean, the way SB21 was set upwas to restart investment in
(12:28):
Alaska, and people came up withvarious ideas.
One was to allow the immediatedeductibility of capital costs
instead of the amortization, theimmediate deductibility of
capital costs.
Another was what's called GVRgross value reduction, which is
to charge to have a lower taxrate on new production as
(12:51):
opposed to old production.
And so, as new productionreplaces old production, the
production tax goes down.
Assuming the volumes are equal,the production tax goes down
because you're replacing withnew volumes or replacing the old
production at lower tax rates,replacing the old production at
lower tax rates than the oldproduction had.
And then we've got the perbarrel credits, that sort of
kick in in the late part of theperiod and start impacting taxes
(13:15):
as well.
All of that was to getinvestment.
Okay, we attracted a bunch ofinvestment.
We're attracting.
With the opening of MPRA andthe potential opening of Anwar,
you're attracting moreinvestment.
Yay, that's good.
But the way that SB21 is set upis all of these three incentives
(13:36):
that various people threw outat various times that got
stacked in there.
The cumulative impact of thoseincentives is to drive revenues
from production tax down duringhigh investment periods, high
spending periods, and that was.
We saw some of that in the lastdecade, but it was.
It wasn't to the degree thatwe're seeing it in this decade.
(14:00):
And so what you have is asituation in which production
taxes are going up, orproduction volumes are going up
something like 40% overall, withthe kick in from the projected
kick in from the NPRA, volumesgoing up something like 40%, but
production taxes, revenues fromproduction taxes, going down
something like 55%, and thathole that's being created by the
(14:24):
production taxes going down isgoing to have to be filled from
someplace, and it's been filledover the last couple of years,
last few years, by PFD cuts.
Speaker 2 (14:33):
So your overall solution to this is a
refactoring of the tax of thisSB21 to account for some of this
.
Speaker 1 (14:40):
Yeah, we've got to go back into SB21 and fulfill its
promise.
The promise of SB21 was thestate would sort of bide its
time while some investment wasmade and then investment would
result in additional productionand that additional production
the assumption was theadditional production would
result in additional revenues tothe state.
(15:01):
But it's not happening.
The reason it's not happeningis in part because the
additional production is comingfrom federal lands where we get
no royalties, and the additionalproduction is coming with costs
that are driving downproduction taxes.
So we need to go back into SB21 and rejigger it to fulfill
the promise of as productionincreases.
(15:21):
Fulfill the promise of asproduction increases, revenues
to the state increase as well.
Speaker 2 (15:34):
Kim says Brad is a Debbie Downer this morning.
No, it's just the truth.
I mean, that's the thing youknow.
Look, I mean I can understandbeing excited about opening and
exploring ANWR and NPRA.
Those do bring some positives,but they also bring with them
some negatives, and it's not somuch that Mia in this article is
talking about.
You know how the state's goingto be rolling in dough or
anything is like that.
(15:55):
But again, by avoiding theproblem with it and
acknowledging that there is anissue, we're exacerbating it.
We're going to cause, you know,it'll be four years from now.
Somebody will say how come we'renot making all this money?
We're pumping all this oil, howcome we're not making all this
money?
And it's because nobody lookedat the downside of it and said
well, maybe something shouldchange.
Because again, historically, ifyou look at the who's, on whose
(16:19):
side the Republicans havealways been defensive of the oil
industries in that regard,which I mean I could see there
are the goose that lays thegolden egg in the state.
But sometimes you got.
I mean, if you're going to do Imean to continue the analogy if
you're going to do animalhusbandry, sometimes you have to
do things that are not pleasantfor the goose, you know, to
(16:42):
make sure that it stays warm andfat and dry and happy, and this
might be one of those timesright.
Speaker 1 (16:49):
Yeah, I think the thing that triggered me, michael
, on this was the title Alaskahas the chance to seize
prosperity.
Well, we're not going to seizeprosperity if the consequence of
this is we have to increaseindividual taxes, personal taxes
, in order to make up for theadditional hole that's being
(17:11):
created out of production taxdeclines.
That's going to be, rather thanseizing prosperity, it's going
to be seizing problems for thestate and problems for the
citizens of the state,particularly if we continue to
have a personal tax structure aswe do, with PFD cuts that take
money only from Alaskans, don'thave any sort of the
(17:33):
contribution coming fromnon-residents, so you're going
to have non-residents coming in.
I mean, just picture thisYou're going to have
non-residents coming in workingon the additional oil field
development, working on theadditional activities that are
going on, taking a significantshare of the benefits of that in
terms of jobs and in terms ofwages for non-residents.
(17:55):
They're not contributing to thesolution.
Under the current tax structure,the production taxes, which are
supposed to benefit Alaskans,are in decline because of the
way SB21 is operating throughthis period, and so Alaskans,
only Alaskans.
By using PFD cuts, onlyAlaskans are making up this hole
(18:16):
.
The non-residents are fat, dumband happy.
They get additional jobs, theytake their paychecks, they go
home, don't make anycontributions to the state
revenue and Alaskans are havingto make up the hole that's being
created by the decline inproduction taxes.
So I think that's notprosperity, that is additional
(18:36):
problems from a state fiscalstandpoint.
And so I think the thing.
Mia doesn't talk about revenuesto the state, but when she uses
the words seize prosperity, it'sonly prosperity for a few.
The way SB21 operates, for thestate as a whole and for the
citizens of the state who aregonna have to fill in this hole
(18:58):
being created by decliningproduction taxes, it's not
prosperity.
It is additional burden thatthis is going to create, and we
don't get royalty out of iteither.
So it's additional burdenthat's being created by the
additional development.
I'm not saying the additionaldevelopment is bad.
I'm not saying we ought not todo the additional development,
but we need to structure SB21,just like we did back in the
(19:22):
early 20-teens when we had aproblem with oil taxes.
It was driving investment awayfrom Alaska.
People were investing otherplaces instead of Alaska, just
as we did in the early 20-teens.
We need to recognize theproblem for what it is and come
in and develop the solution toit, and so Alaskans can share in
(19:43):
this prosperity in terms ofreducing the burden of personal
taxes.
Instead of increasing theburden of personal taxes,
reducing the burden of personaltaxes on Alaska families.
Speaker 2 (19:55):
And that's where the pushback is going to come.
The same legislators that aretouting the prosperity of it are
going to push back on any kindof change to SB21 because, again
, they fear killing the goldengoose.
Because that's the first thingthat the oil companies say is
well, we'll just take our batand ball and go somewhere else.
Speaker 1 (20:15):
No, it's different circumstances now in the
industry as a whole, differentcircumstances in Alaska than in
the early 20-teens.
We needed to to correct aces.
Aces have gone way the hell toofar right in in terms of taking
a share.
There is space and we've talkedabout on the show 500 to 600
million.
There is space in in what'sgoing on in the oil industry to
(20:36):
correct taxes without withoutdriving investment away.
But we need to take it, or elsethat burden of declining taxes
production taxes is going towhat's going on in the oil
industry to correct taxeswithout driving investment away.
But we need to take it, or elsethat burden of declining taxes
production taxes is going tofall back on Alaska.
Personal taxes.
Speaker 2 (20:49):
Number two, Brad, number two of the weekly top
three, and that is apparentlyShelly Hughes.
She's thrown her hat in thering.
She makes number seven of, Iguess, potentially nine is what
we're looking at right now.
You say Shelly Hughes has aready-made fiscal platform.
The question is, will she useit?
(21:11):
What do you mean?
Speaker 1 (21:13):
Okay.
So you and I often go back onthe show and discuss the 2021
Legislative Fiscal PolicyWorking Group recommendations
and sort of use those as atemplate for how we need to
address our fiscal situationSort of the all-in approach
right, a little bit of spendingcuts, some restructuring of the
(21:33):
PFD to go to POMV 50-50, somenew revenues, a constitutional
change in the spending cap to beeffective,
constitutionalization of the PFD.
There's a list of things in the2021 Legislative Fiscal Policy
Working Group recommendationsthat I thought were outstanding
(21:55):
and form the basis of trying toget our fiscal house in order.
It's not just the 2021 FiscalPolicy Working group.
You can find the same sort ofthread back in Governor
Dunleavy's fiscal year 2019, Ithink it was 2020, maybe it was
2020, 10-year forecast.
You can find the thread of thissort of all-in approach a
(22:18):
little bit from everything, alittle bit of oil taxes, a
little bit from everything toget the fiscal policy back in
shape.
Shelley Hughes has a perfectopportunity.
I mean, shelley's theme so farin her announcement has been she
can bring people together, shecan work out solutions, she's a
(22:39):
combiner, she's a consensusbuilder, she's a she's a a
policy maker in the sense of ofgetting every people and
everybody in the room andworking on it.
Shelly Hughes was a keycomponent of the fiscal policy
working group.
There were two from the fromthe Senate, two from each body
with with alternates.
(23:00):
The two from the Senate wereLyman Hoffman well, two from the
majority, two from the minority.
The two from the Senatemajority at the time were Lyman
Hoffman and Shelley Hughes.
Shelley was part of buildingthat consensus, that sort of
all-in approach, and I thinkthat gives her a leg up in the
(23:23):
campaign.
I think she can point to thefiscal policy working group as
an example of where she hasparticipated and where she was
helped.
She helped shape a consensusagenda, a consensus body of
recommendations to go forward onfiscal policy and I think she
can show that she.
I think she can use it todemonstrate that she has some
(23:46):
history with working on fiscalpolicy solutions and, as
governor Dunleavy never pickedthis up, but as governor she
would pick it up and she wouldpush it as an agenda for solving
the fiscal situation.
And I think during the campaignpeople are going to realize
that we need a solution to ourfiscal situation going forward,
(24:08):
that we need to get Alaska'sfiscal house in order,
particularly when you look atthe 10-year forecast and you
look at the deficits that don'tquit over the period and you
look at things like decliningproduction tax revenues and
increasing personal taxes as aresult of declining revenues
from other sources, and peoplelook at spending patterns and
(24:31):
see potential for spendingincreases and worry about having
an effective cap on that.
So I think this is a perfect,frankly fiscal platform for
Shelley and others.
I mean, I think othercandidates ought to adopt it as
well, but I think Shelley, as amember of the Fiscal Policy
Working Group, has the ability,has a leg up on being able to
(24:55):
use that as one of thecenterpieces of her campaign.
I was surprised, to be honest,in her announcement, that she
didn't use it in that way, to myunderstanding.
I read everything about herannouncement.
She didn't mention the fiscalpolicy working group at all.
She mentioned pieces of it.
One piece was using POMV 50-50,which essentially shares
(25:21):
inflation proofing between thetwo, between the PFD part and
the portion that goes togovernment.
She mentioned pieces of it butshe didn't mention as an example
of how she in the past hashelped bring things together or
as a set piece as a centerpieceof her fiscal policy.
(25:42):
I think it's sort of sittingthere and an opportunity for her
and hopefully she will use itbecause I think that has the
potential to drive thediscussion about fiscal policy
in the campaign.
Candidates who endorse it, whotalk about fiscal policy and
talk about that solution theall-in solution as a centerpiece
(26:03):
, I think, are positioned thenin the new, when elected to the
new legislature, are elected tobecome part of the group that
works that through thelegislature and gets it to the
governor.
And I think candidates ought tobe endorsing and supporting the
fiscal policy working grouprecommendations.
But I think Shelley has theopportunity not only to use it
(26:28):
to propel her campaign but alsoto use it to bring a discussion,
to bring a focused discussionaround fiscal policy and around
these solutions as part of theoverall, as part of everybody's
campaign, as part of the overallelection cycle, of everybody's
campaign, as part of the overallelection cycle.
So I encourage her to do it.
I encourage other candidates todo it as well.
But because she was part of it,because she was a member of the
(26:53):
working group, because shespent time and contributed
heavily to the recommendations,I think and spoke about them
highly afterwards, I think it'ssomething that she can take the
lead on that.
Frankly, there are no othercandidates currently in the
election cycle who can positionthemselves in the same way.
Speaker 2 (27:16):
Well, so far, from what I've seen, no other
candidates, including BernadetteWilson, who's been on the
program.
I asked her about the fiscalpolicy and you know there was no
, she didn't really have anyknowledge of it.
Shelley's got the intimateknowledge, she was part of it,
but none of the candidates arereally talking about the long
term fiscal concerns of thestate.
(27:37):
It again, much of it I've usedthe word little bit ago is very
aspirational, right, it's very.
You know, we're going tokumbaya, we're going to come
together, we're going to do this, we're going to do that, or,
even if it's more strident, likeWilson's comments, there's
really no, there doesn't seem tobe a long-term fiscal answer to
(27:59):
the problems that are facingthe state.
And again, as you look at the10-year forecast, you understand
very precarious position if wedon't do something now on that
10-year forecast.
Speaker 1 (28:10):
Yeah, I think we're going to come back to that.
I mean, the timing of this iswe'll hit the next legislative
session, we'll realize againthat oil prices are down and
we'll realize again that Alaskais in a difficult spot.
When you look at the 10-yearforecast that DOR is going to
publish next year, it's going tobe probably even worse.
As they factor in theadditional spending that's going
(28:32):
to go on in the oil industryand the impact that's going to
have, the follow-on impactthat's going to have on
production taxes, the 10-yearforecast next year is probably
even going to be worse.
I don't see the circumstancesunder which it's going to look
better than the most recent10-year forecast.
(28:53):
So I think next year'slegislative session is going to
help jail focus on fiscal policyagain.
And then the question is who'spositioned themselves, or who
can position themselves to get aleg up on that during the
election cycle, and I think it'sgoing to be people who have
(29:13):
thought through the issues seethat the all-in solution
proposed by the Fiscal PolicyWorking Group has the best
chance of bringing everybodytogether in a legislative
session, because I mean, yourecall, the fiscal policy
working group had members ofboth bodies, had members of both
the majority and the minorityat the time had right-leaning
(29:38):
Republicans, had left-leaningDemocrats on the group and they
all came together in this set ofrecommendations.
So I think those who sort ofthink through this and think
about the circumstances that aregoing to apply next year in
terms of where the state's goingto be from a fiscal policy
standpoint, I think they'regoing to be having started in
(29:59):
the process of developing theirpositions around the fiscal
policy working group.
I think they're going to behaving started in the process of
developing their positionsaround the fiscal policy working
group.
I think they're going to havean advantage, and Shelley has an
advantage on top of everybodyelse in that regard.
Speaker 2 (30:11):
So this will be one of the main these.
This will be one of the majorquestions that you're asking
candidates, I'm assuming, whenyou're talking to candidates or
interviewing, or if they'reasking for money or whatever,
this will be one of the firstquestions I'm assuming that
you're going to ask of manycandidates on this front.
Speaker 1 (30:24):
Yeah, yeah, I think that's fair.
I think that's fair, I think Ithink yeah.
The answer is yes, I think Ithink this is a fair way of
assessing where candidates areon fiscal policy.
And and if they say no, I'm notsure I would endorse that.
Then the follow-up question isokay where do you differ from it
and why do you think that works?
(30:45):
Why do you think you can get?
You know, 21 plus 11 plus onefor that approach?
That doesn't you know?
Compromise, bring together in acomprehensive plan all of the
pieces, and I think acandidate's answer to that is
going to be telling as well.
So, yeah, that'll be at the topof the list in terms of asking
(31:10):
candidates positions on fiscalpolicy.
Speaker 2 (31:16):
Brad, paint me a picture If we don't pick this,
the fiscal policy working groupsplan, we're going to be back to
this.
We'll be back to the start.
You know it'll going to bestudying the study of what we've
studied before.
I mean, how many times do wehave to come up with the same
fiscal plan over and over andover again, or a different way
to slice the apple, so to speak?
(31:36):
This is something that's got tobe addressed in the state,
otherwise it's just again.
The detriment is no PFD nowpersonal taxes, yada, yada yada.
I mean it just keeps going onand on and on.
Speaker 1 (31:49):
Yeah, that is where we head.
And candidates who have notthought through the issue and
endorsed something like theall-in approach, I mean I won't
give them a whole lot of weightbecause I don't think they've
thought through where the stateis going, where the 10-year
forecast or any forecast tellsus where the state is going, I
(32:11):
don't think they're seriouscandidates in the sense of
fiscal policy.
And to me, I mean fiscal policyis sort of at the center of the
universe, right?
You don't solve K through 12.
You don't solve any of theother issues unless you have
fiscal policy put together andyou have a good sense of how
many revenues you have and whatcaps on spending you have and
how you're going to fit all thepieces together.
(32:31):
If you don't have a good senseof that, I don't think you solve
any of the other problems outthere.
So candidates who haven'tthought through this or you know
, who are knee jerking one wayor the other without paying
attention to the various factorsthat the working group
recommendations have, I don'tthink they're serious candidates
(32:52):
and I certainly won't.
I certainly won't give them awhole lot of support if I don't
think they're serious on theissue.
Speaker 2 (32:59):
This has been the challenge with the fiscal policy
working group is that everybodycame together and kumbaya and
finally made a decision and maderecommendations, yet not a
single one of thoserecommendations have crossed the
finish line.
You know, ben Carpenter Godlove him did his best to try and
drag some of this stuff kickingand screaming across the finish
(33:20):
line and he just couldn't getit done there.
Just there was just nopolitical will to do any of that
, and that's the that's the mostdisheartening part.
Speaker 1 (33:28):
Yeah, I think I think where Ben suffered was from
from getting everything dividedup.
So so he had the sales taxproposal, but it sort of stood
out there by itself.
It wasn't a piece of theoverall solution, it was sort of
its own proposal out there.
(33:49):
And then there were thespending cap.
That sort of stood by itself.
And another thing stood by.
The constitutionalization ofthe PFD stood by itself.
All pieces of the fiscal policyworking group, but you didn't
see it as a comprehensive whole,and I think this is one thing
they said.
Um, the FPWG, the fiscal policyworking group, believes the
(34:12):
legislature must pass acomprehensive solution.
Fpwg members do not supportaddressing only one or two
issues to the exclusion ofothers.
The FPWG believes addressingthese solutions as a comp, these
issues as a comprehensivesolution, solves not only a
fiscal challenge but a politicalchallenge as well, the
(34:34):
political challenge being thatyou're going to have everybody
you know everybody's going tooppose some piece of it.
But if they see it as acomprehensive solution that's
going to solve all of it,they're going to be more
inclined to compromise on whatthey see as the most important
piece because they see itgetting handled as part of the,
as part of the overallcomprehensive solution.
(34:54):
And I think where ben sufferedwas a the governor didn't back
him up, uh, which uh, which is aproblem in and of itself, but b
it was all in these, in thesevarious pieces, and I think, I
think, to really be successful,a you're going to need the
governor to be behind it, agovernor to be behind it, so
that governor to be behind it.
So that's why I think Shelleyhas a leg up in this regard with
(35:17):
respect to the campaign.
But B it's going to have to bepart of a package, that it's
going to be a bill that willhave various components to it,
but a bill that you can thenmodel and you can talk about as
having a solution.
I mean Trump saw the same thing.
I mean that's why we had andyou can, you know, talk about as
having a solution.
I mean Trump saw the same thing.
I mean that's why we had theone big, beautiful bill, right,
because he saw that there werevarious pieces out there.
(35:41):
Or Mike Johnson, or whoever youknow pushed for one bill, saw
that there were various piecesout there that would get wound
up around the axle if they weregoing.
They were going if they were,if you were trying to push those
separately.
So, as part of thereconciliation, as part of a
reconciliation package, justbring it all together and and
(36:01):
and push it as a whole.
That's, that's a pattern that Ithink you know we ought to be
seeing with respect to solving afiscal problem that was one of
the challenges here is that itwas it's all.
Speaker 2 (36:13):
the problem was the single subject rule.
Right now, my argument to thatwould be this is all fiscal
policy.
This is all a single subject.
The whole single subject islong-term fiscal planning.
I mean, I, you know, but the,the lawyers and the bean
counters in there said no, no,no, you can't do it, you have to
do it individually.
In there said no, no, no, youcan't do it, you have to do it
(36:34):
individually.
Those eight or nine points thatthey talk about in their fiscal
plan, which include cuts, whichinclude new oil taxes, which
included new, you know, proposedsales tax, which included, you
know, constitutionalizing thePFD and the spending cap, all
those eight points that they allfinally agreed on.
It was all a big, one, big,beautiful plan and then they had
(36:55):
.
Speaker 1 (36:55):
then he had to break it up because again they kept
coming back to him saying it's asingle subject rule and that's
that's where it got him yeah, I,I think I've read the eastman
decision, the, the decision lastweek in which the supreme court
uh upheld, upheld an appeal byDavid Eastman, supreme Court or
(37:16):
Superior Court, anyway, one ofthe courts upheld a challenge by
David Eastman that the combinedpackage done at the end of the
2024 legislature wasunconstitutional because it
didn't adopt the single subjectrule.
And I've read that and I thinkthat a package that you just
(37:37):
described, particularly ifpushed by the governor,
particularly if outlined by thegovernor and by a governor and
outlined as a comprehensivesolution, a needed comprehensive
solution, I think that wouldpass the single subject rule.
I mean, it's sort of how youdefine the bill, it's sort of
how you define the approach thatthe Supreme Court seems to rely
(38:00):
on.
And if you're pickinglegislation that's supposed to
do different things, have sortof different motivations behind
them and stack them together,that violates the single subject
rule.
But I think if you have apackage of legislation, while
broad, nevertheless, is focusedon the single subject of solving
the state's fiscal situation, Ithink that would pass the
(38:23):
single subject rule.
Part of Ben's problem was thegovernor never got on board, so
he didn't define it as a as asthat single subject and Ben
really wasn't able to define itas a single subject, so I can
see where people picked it apart, but I think there's a solution
to that.
Speaker 2 (38:41):
We're continuing.
Now the weekly top three.
It's the final of the weeklytop three and Brad postulates
that there is quite possibly theperfect opinion piece, the
perfect op-ed, he says.
He says, Brad, what do you mean?
There's perhaps the perfectop-ed out there.
(39:03):
You may have found it.
It's the unicorn in the wild.
What are you talking about?
Speaker 1 (39:07):
Well, almost almost the perfect piece.
I've got one nit to pick withit, but this is an opinion piece
that Kevin McCabe wrote.
I don't always agree with KevinMcCabe's writings, but this one
I thought was particularly goodon K-12 funding.
It says Alaska's constitutiondoes not mandate education
(39:27):
funding and it's good from thisstandpoint and I would encourage
people who haven't read it, whowant to better understand the
K-12 debate, to read it.
It's good in that it startswith a constitutional provision.
I mean, most of the argumentsaround K-12 is oh, the
constitution requires that we dothis or that or the other thing
(39:49):
with respect to K through 12.
And Kevin, the opinion piece,patiently sets out what the
constitutional provision says,which says nothing about funding
.
And then he goes to the Moorecase, which is a 2011 decision
by Judge Gleason, which was onthe state court.
I think that talks about whatthis constitutional provision
(40:15):
means.
And Kevin goes through andarticulates what the Moore case
said, and here's what he saysthat decision outlined four
components rational standards,effective assessments, adequate
funding and oversight.
But here's the key pointKevin's words the court did not
(40:37):
say that funding alone satisfiesthe constitutional obligation.
It said that funding must bepaired with strong oversight and
accountability the fourcomponents.
That is the part often left outof the conversation, says Kevin
, and that's right.
I mean, that's what the Mooredecision says, and it's
(41:02):
important to understand thecontext around the adequate
funding component, which is thatit doesn't stand alone.
There are four components, andwhen the governor or legislator
say, look, we support funding,but it's in the context of
making sure that we haverational standards, effective
assessments and oversight, thatthey're articulating the funding
(41:23):
in the context of what theMoore decision says they have to
do that it's not just throwmore and more and more money out
there.
It is put it in the context ofthese four components, and so I
think the op-ed does a great jobof articulating what the K-12
(41:44):
debate is really about andarticulating where the two sides
differ.
One side is focused primarily,almost exclusively, on funding,
that is, we have to have moremoney, we have to throw more
money at the schools, we have tofill the hole that they say
they have, while the other sidehesitatingly says they agree to
(42:11):
more money, but in the contextof adequate standards, oversight
and the other the othercomponents of the of the more
decision, and the side that'ssaying that funding is in the
context of these othercomponents has a lot more merit
to it than the side that justsays more money, more money,
more money, more money, moremoney to it, than the side that
just says more money, more money, more money, more money, more
(42:32):
money.
And I think Kevin's piece doesa great job of explaining why
that is and setting that up.
Here's my one pick at it.
Even the Republicans now saythat, yes, we would agree to
more money.
No-transcript that includedadditional components around
(43:22):
assessments and around.
The governor's latest thing ishe wants students to be able to
move from one school district toanother around things like that
that they would agree to moremoney.
In the context of that, my nitis this where the heck is the
money supposed to come from?
I mean, even if the Republicansare saying they would agree to
(43:43):
more money if conditioned on allof these other things, and the
Democrats are certainly sayingmore money, where is this
supposed to come from?
What's the solution on therevenue side or on the fiscal
side that frees up theseadditional funds?
Because we don't have them?
I mean, the only place you'regonna get them is through even
(44:06):
deeper PFD.
The only place you're gonna getthem right now is through even
deeper PFD cuts by spending moremoney, especially in the
context of declining productiontax revenues.
So where's this money supposedto come from?
And I think every, every, everydiscussion about the K through
12 issue, every discussion,needs to discuss the fiscal
(44:30):
aspects.
How are we supposed to come upwith this additional money?
How are we supposed to?
How does this fit in thecontext of an overall fiscal
plan?
I'm not.
I mean, kevin will likely saylook, the ADN has a limit of 650
words and I just didn't get itin there.
I'm not asking for a wholeparagraph.
I'm not asking for, I'm noteven asking for more than a
(44:51):
sentence.
But we need to keep all of thisin the context the K-12 issue
and the other issues in thecontext of we don't have
additional money unless we takeit out of the pocket of middle
and lower income Alaska familiesthrough additional PFD cuts.
We just don't have it and so weneed to.
(45:36):
Every time we talk about asolution to K-12 that involves
additional spending and even theRepublicans are talking about
it now every time we talk aboutK-12 resolution that involves
additional spending we need toresolve the fiscal policy issues
also to come up with theadditional money in a balanced
way to go to K-12 spending.
So my perfect op-ed on thisissue would be what Kevin had
about starting with theconstitution and going through
the Moore decision, but alsothen adding a discussion of the
fiscal aspects of it, and andthat we need to resolve the
(45:58):
fiscal situation at the sametime as part of getting K
through 12 resolved.
Or else we're just making thefiscal situation and the burden
on middle and lower incomeAlaska families the very ones
that we say we're trying to helpwith with K through 12, we're
making the burden on fiscal onmiddle and lower income Alaska
families the very ones that wesay we're trying to help with
K-12, we're making the burden onmiddle and lower income Alaska
families even worse because wearen't solving the money issue
(46:18):
at the same time.
Speaker 2 (46:20):
Well, and that's always been the challenge is
again the answer for the oneside is just more money, no
matter what.
More, more money.
And Kevin is rightly pointingout that the Constitution says
we provide public education.
But it was the Moore decisionthat said we had to fund it.
But again they keep droppingthese other two components the
accountability, the oversight,that kind of stuff.
(46:42):
But the biggest question that,again, I come back to every time
they scream Moore, is wheredoes it come from?
That's the thing, you know.
It seems like that doesn'tmatter to them.
Anybody you discuss with itdoesn't matter.
Wherever it has to come from,whoever has to be hurt, wherever
it has to go.
And again, it's not a solution.
(47:04):
Kevin is at least saying theseare the four things that the
Moore decision said.
We need to use all these inconjunction.
Now, where does the money comefrom?
It's obviously a bigger anddeeper subject, but something
that most people don't want totouch on.
We talked about that earlier.
Speaker 1 (47:21):
It is a bigger and deeper subject, but to me it's
the key subject.
I mean, all we're doing, if wesolve K 12 by taking additional
PFD cuts, which is right now,what we would have to do all
we're doing is making anotherproblem worse Without solving
the overall fiscal issue.
(47:43):
By giving more money to Peterout of Paul's pocket, we're just
making the problems with Paulworse.
So I understand that.
You know sort of like a singlesubject, bill right, you got to
stick on the subject.
You got to solve what's infront of you.
But one of the pieces ofsolving what's in front of you
(48:05):
about K through 12 is the fiscalissue of where the heck this
additional money is supposed tocome from.
Because we're not talking aboutit.
We're not talking about it justthis one year.
The governor's line item vetomakes it a one-year issue.
But the legislation passed it'spermanent.
I mean it goes on the books andsets up a higher BSA on a
(48:27):
permanent basis.
So, yes, we resolved the $200this year.
However, that plays out in thebudget, but it shows up next
year, the year after that, theyear after that and the year
after that and the year afterthat.
It's not a one-year problem, itis a multi-year problem and so
if we're going to to solve this,you've got to solve on a
(48:51):
long-term basis.
You've got to solve the fiscalsituation on a long-term basis,
or else it just keeps popping upas another problem next year
and another problem the yearafter that, and another problem
the year after that.
Speaker 2 (49:01):
I mean you're right.
The fiscal policy is thecornerstone of any plan, for
anything that we're talkingabout.
Anything that has to be built,it has to be built on a sound
fiscal plan.
And the problem is there's nopolitical will to put a fiscal
plan in place because somebody'sox is going to get gored
(49:22):
somewhere along the lines onthis deal.
Speaker 1 (49:25):
Yeah, and that's why.
To go back to the secondsegment, that's why I think
Shelley's got a leg up in thecampaign by saying I've been
there, I've dealt with thisissue.
It didn't get done under thelast governor, under the current
governor.
He didn't get behind it, hedidn't endorse a comprehensive
solution.
I'm running on it.
(49:45):
I've been there, I've been inthe middle of this, I've seen
all of the sides of it, I'veseen how to get to a solution
and that's what I'm running on.
And I think candidates for thelegislature and I think
candidates for well, othercandidates for governor ought to
be doing it as well.
But Shelly's position becauseshe was on that working group
Shelly's position, I think, toreally make a great push on it.
Speaker 2 (50:09):
And I hope she does.
Speaker 1 (50:09):
I mean, it may be that she thinks that I mean part
of it is revenues, right, andit may be that she thinks, well,
I can't talk about revenuesbecause that's going to take
away from, you know, the basethat I need to support me to get
into the top four and that sortof stuff.
And that'd be sad becausebecause then we, then you know,
the candidate that ought to betalking about the most, about
(50:32):
the working grouprecommendations wouldn't because
she's been taken off by one ofthese sub-issues.
So I hope other candidates talkabout it as well.
Shelley does.
But I think this is the key tosolving the fiscal policy issues
that we're facing.
I think the fiscal policy issueswe're facing are the key to
(50:53):
solving the issues that we'refacing.
I think the fiscal policyissues we're facing are the key
to solving the other issueswe're facing.
I mean people say we don'tbuild enough, we don't have
enough infrastructure, we don'thave the money for it.
People say we don't fund K-12enough, we don't have the money
for it, and you can just go ondown the list.
And until we get fiscal policyset and resolved and the issues
(51:13):
around it sort of tightened up,I don't think we're going to
solve any of these other thingsPeople are just going to keep
arguing about.
You know, we don't have enoughmoney for this, or we don't have
enough money for that, or weought to be doing this, or we
ought to be doing that.
All of that involves money, anduntil we have that straightened
out, it's just going tocontinue to go in a circle.
Speaker 2 (51:32):
Do you think that candidates are avoiding the
issue of the fiscal thingbecause they simply think that
the public doesn't want to hearabout it?
Is it too hard an issue?
I mean what do you think?
What's the reason why a lot ofthese fiscal topics don't get
touched?
Do you think?
Speaker 1 (51:51):
Oh, I think, and I would certainly be interested on
what candidates themselvesthink, but I think it's because
they're trying to appeal tosubsections of the electorate as
their base to get into the topfour and they are wary of
endorsing something or sayingsomething that their base is
(52:16):
going to go off on and and andattack them on.
I mean Ben Carpenter, let'slook.
Let's look at Ben.
Ben endorsed sales taxes andJesse, jesse Bjorkman beat him
over the head with it down inthe Kenai Senate race, beat him
over the head with it down inthe Kenai Senate race and Ben
(52:40):
lost that primary, lost thatrace because of the way in which
Keel used, or Dorkman used, thesales tax issue.
So I think candidates are waryof their opponents or of their
base picking out one issue fromthe comprehensive solution and
say, well, if you endorse thecomprehensive solution, you must
endorse this, and if youendorse this, that's wrong,
because now you're endorsingrevenues, you're endorsing taxes
(53:01):
and I don't want to tax her inthe governor's office.
So the candidates have to beprepared to say it's one
component.
Look what you're getting.
You're getting a constitutionalPFD, you're getting a spending
cap, you're getting.
You know, and go on downthrough the list of the other
pieces that offset the impact ofthe one piece of revenues, and
(53:27):
I think candidates need to beprepared to do that.
But I think they're concernedthat a part of their base that
they feel they need are going topick out that one issue and
beat them over the head with ahead with that one issue.
I mean I mean that thathappened to the, the
representative up in up inMassey that we were talking
(53:47):
about last week.
I mean she endorsed SenatorYuntz resolution on, or proposed
revenues on, the digital tax,the proposed revenues coming
from the digital tax.
She endorsed that and herdistrict starts beating her
district Republican committeestarts beating on her.
I mean that that is one pieceof a comprehensive solution but
(54:09):
they pick out that piece andstart beating on her about it
and that's just wrong.
I mean that's why I gave her$2,000, because that's just
wrong.
To get to a solution, we've gotto have a comprehensive
solution that has multiplepieces and we need to support
candidates to talk about thosemultiple pieces as opposed to
people who want to pick one ofthem and beat them over the head
(54:30):
about it.
Speaker 2 (54:31):
Again, as far as legislatively, I mean, the
single subject rule is reallywhat kind of submarine this
whole deal.
And again, my argument is thisis all about a fiscal policy.
I don't know why that argumentcan't be made that these are all
part and pieces.
I mean the constitutionalprovision has to be standalone
because it's a separate bill.
(54:51):
I mean that's required to be aseparate bill, but everything
else could be in onecomprehensive package, as you
know, like an omnibus type billthat deals with fiscal policy,
because every one of thosecomponents is dealing with
fiscal policy.
So I don't know if it is thebureaucracy that's pushing back
on this, whether you know ledgelegal or who I don't know, but
(55:14):
it to me it's like this is all,this part, this is all part of a
whole here and you can't justpick each one out.
And in fact they in their own,in their own report, and they
talk about this.
You can't take this one pieceat a time.
It has to be a holisticapproach.
That was their belief and theystarted out with that and they
(55:35):
ended with that.
It must pass a comprehensivesolution is what they say, and
that's part of the problem.
All right, brad, we got to go.
Thanks so much for coming onboard.
It's good to talk with you, myfriend.
Speaker 1 (55:49):
Thanks for being part of it today, michael as always,
thanks for having me talk withyou, my friend.
Thanks for being part of ittoday.
Michael, as always, thanks forhaving me.
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
(56:09):
during the week on Facebook andTwitter.
This has been Brad Keithley,managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
Thank you.
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 July 28th 2025.
The weekly top three is aregular segment on the Michael
Dukes Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:34):
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 610 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,
(00:56):
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
(01:18):
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 explain how
a recent op-ed demonstrates whysome legislators seem not to
(01:45):
understand how Alaska's oiltaxes work.
Second, we explain why ShelleyHughes potentially has a
significant leg up on othercandidates on fiscal issues in
the coming governor's race.
And third, we explain why wethink, with one exception a
recent op-ed by Kevin McCabemakes a significant contribution
(02:09):
towards understanding the K-12issue.
And now let's join Michael.
Speaker 2 (02:15):
All right, brad.
Well, we've got some greattopics today.
Let's dive into it and getstarted.
We're going to start off withthe weekly top three, topic
number one.
It seems like some legislatorsjust don't seem to understand
how oil taxes work.
Again, you've been on thistopic for a while, but it just
(02:38):
still seems like nobody'slistening.
You keep using that word.
I don't think it means what youthink it means kind of thing.
Let's get started here on this.
Speaker 1 (02:48):
Well, maybe repetition will help.
That's why it keeps popping upoccasionally in the top three.
This segment was triggered byan op-ed that House Minority
Leader Mia Costello wrote inthis week's ADN, and I'm sure it
will appear in otherpublications.
(03:08):
I think I saw it in Must Readsomewhere along the way.
Also, the title of it is Alaskahas the Chance to Seize
Prosperity with the BigBeautiful Bill, and it talks
about various things that thefederal One Big Beautiful Act
accomplishes with respect toAlaska, particularly focusing on
(03:29):
opening up NPRA, additionalleasing in NPRA and in ANWR on
the North Slope and thepotential that brings for oil
development.
The thing that you know if I hada magic wand that I could get
all 60 legislators and thegovernor to understand is it is
(03:51):
good that we will haveadditional production.
That results in jobs.
That results in additionaldevelopment.
It lowers the cost of taps,because more volume through taps
lowers the per unit cost oftaps.
It opens up new potential fordiscovering additional fields up
(04:11):
on the slopes.
So that's all good, but thething that people are
overlooking is that it hurts thestate, hurts state revenues in
not only in the near term, butas we're discovering this decade
and seeing the impact that SB21is having in the current decade
(04:32):
, in the environment of thecurrent decade, not only in the
near term, but also in themedium term and perhaps in the
long term, depending upon howlong this goes on for.
And the reason it hurts it isbecause the reason it hurts
state revenues is because twofactors One, there is no state
royalty from federal lands.
(04:54):
Now I understand that as part ofthe One Big Beautiful Act,
representative Begich got aprovision that increases royalty
sharing from NPRA and increasesroyalty sharing from ANWR.
But the royalty sharing fromNPRA is still subject to the
local preference, that is, theroyalties.
Even though it's increased, theroyalties are still subject to
(05:18):
the federal law that requiresthat they be spent on the slope
with slope communities, localcommunities on the slope.
And so the fact that royaltieswill increase at some point and
it's something like seven yearsdown the line that this increase
kicks in, the fact thatroyalties increase doesn't help
state revenues.
Certainly in the near term,because it doesn't kick in for a
(05:38):
while or, depending upon howyou define it, the intermediate
term, because it still doesn'tkick in for seven years or so.
But even when it kicks in,those royalties are going to be
subject to the local preferencerule and so, at least from NPRA,
the state isn't going tobenefit from any federal
royalties.
(05:58):
We're going to continue to,from a royalty standpoint,
continue to have state royaltiesand, as the 10-year forecast
points out, those remain flat.
Those state royalties remainflat.
From a state standpoint, we'rereplacing the declining
production curve but we're notadding to it, and so over the
(06:20):
course of the 10-year period,that's in the current DOR
projection, state revenues fromstate royalties, revenue from
royalties, stays relatively flatover that period.
We don't get any from thefederal lands.
(06:50):
Spending that goes on and thedevelopment of new volumes
combine to result in a declinein production taxes.
We went over this last week butproduction taxes hit a low in
the late point of the projectionperiod.
Production taxes historicallybeen a billion or so plus or
minus.
Production tax has historicallybeen a billion or so plus or
minus.
They hit a low of $220 millionin the late part of the current
(07:14):
10-year forecast period.
They sort of bumped back up to$400 million the last couple of
years, but that's still lessthan half than what they were in
2024.
In 2024.
So this additional developmentthat everybody's excited about
legitimately so.
But this additional developmentthat everybody's excited about
(07:37):
isn't a prosperity for staterevenue standpoint.
It is, in fact, a hit to staterevenues.
Now the legislature can get outin front of that and can
readjust oil taxes.
I mean, we readjusted oil taxesin 2013 because they were
overtaking from producers andde-incentivizing,
disincentivizing incentive inthe state.
(07:58):
Now we've got a situation wherewe are undertaking from
producers and we're hurting thestate by doing that, so state
revenues by doing that, and sothe state legislature can get
out in front of that and makesome adjustments to the way that
SB21 works by making somechanges that amortize the impact
(08:21):
of additional investments overan extended period, make sure
that the state realizesadditional production tax
revenues as we have additionalproduction coming on.
But the legislature can do that, but the legislature hasn't yet
done that.
So the way SB21 is operating,it's reducing production tax
revenues over the projectionperiod.
It's reducing production taxrevenues over the projection
(08:44):
period.
Here's the key to that.
It's not like we're going to bereducing state spending
proportionately to thatreduction in revenues.
Not even the Republicans havecome up with proposals on how
you would reduce state spendingin the same fashion that
revenues are going down.
Revenues are going down.
(09:07):
So what we're doing by notaddressing production taxes, not
addressing that hit that comesfrom additional development, is
we're going to increase theburden on personal taxes.
We're going to continue to takeheavily from the PFD until
perhaps it's gone and then we'regoing to kick over into other
personal taxes.
So the legislature legislatorswho are saying yay, yay, obba,
opens things up, it's going tobe happy days, are here again.
(09:30):
They're not understanding.
I don't think they're notunderstanding what that influx
of investment, that influx ofspending dollars in the oil
industry, that influx of newvolumes which are subject to a
lower tax rate under SB 21,.
They're not understanding whatthat's going to do to state
(09:51):
revenues.
State revenues from productiontax don't even hold steady.
They go down because of the waythat those additional spending
is going to affect productiontaxes and the consequence of
that is increased.
(10:16):
I mean, what they're essentiallycheering for is increased
personal taxes, because that'swhat's going to have to happen
in order to fill the gap that'screated by the declining oil
taxes.
So I think legislators who aregetting out there and cheering
OBBA, I understand why they'redoing it.
I understand that the industrycertainly is encouraging them to
do it and the industry iscertainly saying, well, this
will be good.
We get additional leases inMPRA, we can develop step-outs
(10:37):
in MPRA, we can get additionalvolumes out of MPRA and I
understand what they're hearingfrom the producers in that
regard but they need tounderstand what's going on with
oil taxes.
They need to understand, inparticular, what's going on with
production taxes and they needto understand that all of this
additional development iscreating a situation in which
(11:01):
oil taxes, production taxes,will continue to decline, which
boomerangs back on the need foradditional personal taxes.
Speaker 2 (11:10):
You know, I think it's interesting in reading the
article, reading the opinionpiece.
I mean, in nowhere there doesshe talk about new revenues or
anything else.
This is.
It seems like all the talkaround this is very aspirational
, right.
I mean, oh, look at all thegreat things that are going to
come because of this and youpointed them out New building,
new growth, new job, employment,things like that but again,
(11:30):
it's not the cure-all.
I think a lot of them arelooking at it as if this will be
the cure-all.
This specific article doesn'ttalk about revenues, but we've
seen others that say look at allthe money that'll be flowing
(11:50):
into the state, when the answeris that there's not because of
all the reasons you justoutlined, and so I don't know
why they keep going back to thisand banging on that drum.
Specifically, I mean it's good,don't get me wrong, this is
good stuff, but it's not thesolution that they keep seeming
to point towards.
Speaker 1 (12:03):
Well, yeah, she doesn't talk about revenues, but
she doesn't talk about staterevenues.
But she also doesn't talk aboutthe adverse impact, the
negative impact on staterevenues.
I mean it's almost as if staterevenues sort of remain neutral
or yeah, it'll be good, becausegenerally good, but it's not.
I mean, the way SB21 was set upwas to restart investment in
(12:28):
Alaska, and people came up withvarious ideas.
One was to allow the immediatedeductibility of capital costs
instead of the amortization, theimmediate deductibility of
capital costs.
Another was what's called GVRgross value reduction, which is
to charge to have a lower taxrate on new production as
(12:51):
opposed to old production.
And so, as new productionreplaces old production, the
production tax goes down.
Assuming the volumes are equal,the production tax goes down
because you're replacing withnew volumes or replacing the old
production at lower tax rates,replacing the old production at
lower tax rates than the oldproduction had.
And then we've got the perbarrel credits, that sort of
kick in in the late part of theperiod and start impacting taxes
(13:15):
as well.
All of that was to getinvestment.
Okay, we attracted a bunch ofinvestment.
We're attracting.
With the opening of MPRA andthe potential opening of Anwar,
you're attracting moreinvestment.
Yay, that's good.
But the way that SB21 is set upis all of these three incentives
(13:36):
that various people threw outat various times that got
stacked in there.
The cumulative impact of thoseincentives is to drive revenues
from production tax down duringhigh investment periods, high
spending periods, and that was.
We saw some of that in the lastdecade, but it was.
It wasn't to the degree thatwe're seeing it in this decade.
(14:00):
And so what you have is asituation in which production
taxes are going up, orproduction volumes are going up
something like 40% overall, withthe kick in from the projected
kick in from the NPRA, volumesgoing up something like 40%, but
production taxes, revenues fromproduction taxes, going down
something like 55%, and thathole that's being created by the
(14:24):
production taxes going down isgoing to have to be filled from
someplace, and it's been filledover the last couple of years,
last few years, by PFD cuts.
Speaker 2 (14:33):
So your overall solution to this is a
refactoring of the tax of thisSB21 to account for some of this
.
Speaker 1 (14:40):
Yeah, we've got to go back into SB21 and fulfill its
promise.
The promise of SB21 was thestate would sort of bide its
time while some investment wasmade and then investment would
result in additional productionand that additional production
the assumption was theadditional production would
result in additional revenues tothe state.
(15:01):
But it's not happening.
The reason it's not happeningis in part because the
additional production is comingfrom federal lands where we get
no royalties, and the additionalproduction is coming with costs
that are driving downproduction taxes.
So we need to go back into SB21 and rejigger it to fulfill
the promise of as productionincreases.
(15:21):
Fulfill the promise of asproduction increases, revenues
to the state increase as well.
Speaker 2 (15:34):
Kim says Brad is a Debbie Downer this morning.
No, it's just the truth.
I mean, that's the thing youknow.
Look, I mean I can understandbeing excited about opening and
exploring ANWR and NPRA.
Those do bring some positives,but they also bring with them
some negatives, and it's not somuch that Mia in this article is
talking about.
You know how the state's goingto be rolling in dough or
anything is like that.
(15:55):
But again, by avoiding theproblem with it and
acknowledging that there is anissue, we're exacerbating it.
We're going to cause, you know,it'll be four years from now.
Somebody will say how come we'renot making all this money?
We're pumping all this oil, howcome we're not making all this
money?
And it's because nobody lookedat the downside of it and said
well, maybe something shouldchange.
Because again, historically, ifyou look at the who's, on whose
(16:19):
side the Republicans havealways been defensive of the oil
industries in that regard,which I mean I could see there
are the goose that lays thegolden egg in the state.
But sometimes you got.
I mean, if you're going to do Imean to continue the analogy if
you're going to do animalhusbandry, sometimes you have to
do things that are not pleasantfor the goose, you know, to
(16:42):
make sure that it stays warm andfat and dry and happy, and this
might be one of those timesright.
Speaker 1 (16:49):
Yeah, I think the thing that triggered me, michael
, on this was the title Alaskahas the chance to seize
prosperity.
Well, we're not going to seizeprosperity if the consequence of
this is we have to increaseindividual taxes, personal taxes
, in order to make up for theadditional hole that's being
(17:11):
created out of production taxdeclines.
That's going to be, rather thanseizing prosperity, it's going
to be seizing problems for thestate and problems for the
citizens of the state,particularly if we continue to
have a personal tax structure aswe do, with PFD cuts that take
money only from Alaskans, don'thave any sort of the
(17:33):
contribution coming fromnon-residents, so you're going
to have non-residents coming in.
I mean, just picture thisYou're going to have
non-residents coming in workingon the additional oil field
development, working on theadditional activities that are
going on, taking a significantshare of the benefits of that in
terms of jobs and in terms ofwages for non-residents.
(17:55):
They're not contributing to thesolution.
Under the current tax structure,the production taxes, which are
supposed to benefit Alaskans,are in decline because of the
way SB21 is operating throughthis period, and so Alaskans,
only Alaskans.
By using PFD cuts, onlyAlaskans are making up this hole
(18:16):
.
The non-residents are fat, dumband happy.
They get additional jobs, theytake their paychecks, they go
home, don't make anycontributions to the state
revenue and Alaskans are havingto make up the hole that's being
created by the decline inproduction taxes.
So I think that's notprosperity, that is additional
(18:36):
problems from a state fiscalstandpoint.
And so I think the thing.
Mia doesn't talk about revenuesto the state, but when she uses
the words seize prosperity, it'sonly prosperity for a few.
The way SB21 operates, for thestate as a whole and for the
citizens of the state who aregonna have to fill in this hole
(18:58):
being created by decliningproduction taxes, it's not
prosperity.
It is additional burden thatthis is going to create, and we
don't get royalty out of iteither.
So it's additional burdenthat's being created by the
additional development.
I'm not saying the additionaldevelopment is bad.
I'm not saying we ought not todo the additional development,
but we need to structure SB21,just like we did back in the
(19:22):
early 20-teens when we had aproblem with oil taxes.
It was driving investment awayfrom Alaska.
People were investing otherplaces instead of Alaska, just
as we did in the early 20-teens.
We need to recognize theproblem for what it is and come
in and develop the solution toit, and so Alaskans can share in
(19:43):
this prosperity in terms ofreducing the burden of personal
taxes.
Instead of increasing theburden of personal taxes,
reducing the burden of personaltaxes on Alaska families.
Speaker 2 (19:55):
And that's where the pushback is going to come.
The same legislators that aretouting the prosperity of it are
going to push back on any kindof change to SB21 because, again
, they fear killing the goldengoose.
Because that's the first thingthat the oil companies say is
well, we'll just take our batand ball and go somewhere else.
Speaker 1 (20:15):
No, it's different circumstances now in the
industry as a whole, differentcircumstances in Alaska than in
the early 20-teens.
We needed to to correct aces.
Aces have gone way the hell toofar right in in terms of taking
a share.
There is space and we've talkedabout on the show 500 to 600
million.
There is space in in what'sgoing on in the oil industry to
(20:36):
correct taxes without withoutdriving investment away.
But we need to take it, or elsethat burden of declining taxes
production taxes is going towhat's going on in the oil
industry to correct taxeswithout driving investment away.
But we need to take it, or elsethat burden of declining taxes
production taxes is going tofall back on Alaska.
Personal taxes.
Speaker 2 (20:49):
Number two, Brad, number two of the weekly top
three, and that is apparentlyShelly Hughes.
She's thrown her hat in thering.
She makes number seven of, Iguess, potentially nine is what
we're looking at right now.
You say Shelly Hughes has aready-made fiscal platform.
The question is, will she useit?
(21:11):
What do you mean?
Speaker 1 (21:13):
Okay.
So you and I often go back onthe show and discuss the 2021
Legislative Fiscal PolicyWorking Group recommendations
and sort of use those as atemplate for how we need to
address our fiscal situationSort of the all-in approach
right, a little bit of spendingcuts, some restructuring of the
(21:33):
PFD to go to POMV 50-50, somenew revenues, a constitutional
change in the spending cap to beeffective,
constitutionalization of the PFD.
There's a list of things in the2021 Legislative Fiscal Policy
Working Group recommendationsthat I thought were outstanding
(21:55):
and form the basis of trying toget our fiscal house in order.
It's not just the 2021 FiscalPolicy Working group.
You can find the same sort ofthread back in Governor
Dunleavy's fiscal year 2019, Ithink it was 2020, maybe it was
2020, 10-year forecast.
You can find the thread of thissort of all-in approach a
(22:18):
little bit from everything, alittle bit of oil taxes, a
little bit from everything toget the fiscal policy back in
shape.
Shelley Hughes has a perfectopportunity.
I mean, shelley's theme so farin her announcement has been she
can bring people together, shecan work out solutions, she's a
(22:39):
combiner, she's a consensusbuilder, she's a she's a a
policy maker in the sense of ofgetting every people and
everybody in the room andworking on it.
Shelly Hughes was a keycomponent of the fiscal policy
working group.
There were two from the fromthe Senate, two from each body
with with alternates.
(23:00):
The two from the Senate wereLyman Hoffman well, two from the
majority, two from the minority.
The two from the Senatemajority at the time were Lyman
Hoffman and Shelley Hughes.
Shelley was part of buildingthat consensus, that sort of
all-in approach, and I thinkthat gives her a leg up in the
(23:23):
campaign.
I think she can point to thefiscal policy working group as
an example of where she hasparticipated and where she was
helped.
She helped shape a consensusagenda, a consensus body of
recommendations to go forward onfiscal policy and I think she
can show that she.
I think she can use it todemonstrate that she has some
(23:46):
history with working on fiscalpolicy solutions and, as
governor Dunleavy never pickedthis up, but as governor she
would pick it up and she wouldpush it as an agenda for solving
the fiscal situation.
And I think during the campaignpeople are going to realize
that we need a solution to ourfiscal situation going forward,
(24:08):
that we need to get Alaska'sfiscal house in order,
particularly when you look atthe 10-year forecast and you
look at the deficits that don'tquit over the period and you
look at things like decliningproduction tax revenues and
increasing personal taxes as aresult of declining revenues
from other sources, and peoplelook at spending patterns and
(24:31):
see potential for spendingincreases and worry about having
an effective cap on that.
So I think this is a perfect,frankly fiscal platform for
Shelley and others.
I mean, I think othercandidates ought to adopt it as
well, but I think Shelley, as amember of the Fiscal Policy
Working Group, has the ability,has a leg up on being able to
(24:55):
use that as one of thecenterpieces of her campaign.
I was surprised, to be honest,in her announcement, that she
didn't use it in that way, to myunderstanding.
I read everything about herannouncement.
She didn't mention the fiscalpolicy working group at all.
She mentioned pieces of it.
One piece was using POMV 50-50,which essentially shares
(25:21):
inflation proofing between thetwo, between the PFD part and
the portion that goes togovernment.
She mentioned pieces of it butshe didn't mention as an example
of how she in the past hashelped bring things together or
as a set piece as a centerpieceof her fiscal policy.
(25:42):
I think it's sort of sittingthere and an opportunity for her
and hopefully she will use itbecause I think that has the
potential to drive thediscussion about fiscal policy
in the campaign.
Candidates who endorse it, whotalk about fiscal policy and
talk about that solution theall-in solution as a centerpiece
(26:03):
, I think, are positioned thenin the new, when elected to the
new legislature, are elected tobecome part of the group that
works that through thelegislature and gets it to the
governor.
And I think candidates ought tobe endorsing and supporting the
fiscal policy working grouprecommendations.
But I think Shelley has theopportunity not only to use it
(26:28):
to propel her campaign but alsoto use it to bring a discussion,
to bring a focused discussionaround fiscal policy and around
these solutions as part of theoverall, as part of everybody's
campaign, as part of the overallelection cycle, of everybody's
campaign, as part of the overallelection cycle.
So I encourage her to do it.
I encourage other candidates todo it as well.
But because she was part of it,because she was a member of the
(26:53):
working group, because shespent time and contributed
heavily to the recommendations,I think and spoke about them
highly afterwards, I think it'ssomething that she can take the
lead on that.
Frankly, there are no othercandidates currently in the
election cycle who can positionthemselves in the same way.
Speaker 2 (27:16):
Well, so far, from what I've seen, no other
candidates, including BernadetteWilson, who's been on the
program.
I asked her about the fiscalpolicy and you know there was no
, she didn't really have anyknowledge of it.
Shelley's got the intimateknowledge, she was part of it,
but none of the candidates arereally talking about the long
term fiscal concerns of thestate.
(27:37):
It again, much of it I've usedthe word little bit ago is very
aspirational, right, it's very.
You know, we're going tokumbaya, we're going to come
together, we're going to do this, we're going to do that, or,
even if it's more strident, likeWilson's comments, there's
really no, there doesn't seem tobe a long-term fiscal answer to
(27:59):
the problems that are facingthe state.
And again, as you look at the10-year forecast, you understand
very precarious position if wedon't do something now on that
10-year forecast.
Speaker 1 (28:10):
Yeah, I think we're going to come back to that.
I mean, the timing of this iswe'll hit the next legislative
session, we'll realize againthat oil prices are down and
we'll realize again that Alaskais in a difficult spot.
When you look at the 10-yearforecast that DOR is going to
publish next year, it's going tobe probably even worse.
As they factor in theadditional spending that's going
(28:32):
to go on in the oil industryand the impact that's going to
have, the follow-on impactthat's going to have on
production taxes, the 10-yearforecast next year is probably
even going to be worse.
I don't see the circumstancesunder which it's going to look
better than the most recent10-year forecast.
(28:53):
So I think next year'slegislative session is going to
help jail focus on fiscal policyagain.
And then the question is who'spositioned themselves, or who
can position themselves to get aleg up on that during the
election cycle, and I think it'sgoing to be people who have
(29:13):
thought through the issues seethat the all-in solution
proposed by the Fiscal PolicyWorking Group has the best
chance of bringing everybodytogether in a legislative
session, because I mean, yourecall, the fiscal policy
working group had members ofboth bodies, had members of both
the majority and the minorityat the time had right-leaning
(29:38):
Republicans, had left-leaningDemocrats on the group and they
all came together in this set ofrecommendations.
So I think those who sort ofthink through this and think
about the circumstances that aregoing to apply next year in
terms of where the state's goingto be from a fiscal policy
standpoint, I think they'regoing to be having started in
(29:59):
the process of developing theirpositions around the fiscal
policy working group.
I think they're going to behaving started in the process of
developing their positionsaround the fiscal policy working
group.
I think they're going to havean advantage, and Shelley has an
advantage on top of everybodyelse in that regard.
Speaker 2 (30:11):
So this will be one of the main these.
This will be one of the majorquestions that you're asking
candidates, I'm assuming, whenyou're talking to candidates or
interviewing, or if they'reasking for money or whatever,
this will be one of the firstquestions I'm assuming that
you're going to ask of manycandidates on this front.
Speaker 1 (30:24):
Yeah, yeah, I think that's fair.
I think that's fair, I think Ithink yeah.
The answer is yes, I think Ithink this is a fair way of
assessing where candidates areon fiscal policy.
And and if they say no, I'm notsure I would endorse that.
Then the follow-up question isokay where do you differ from it
and why do you think that works?
(30:45):
Why do you think you can get?
You know, 21 plus 11 plus onefor that approach?
That doesn't you know?
Compromise, bring together in acomprehensive plan all of the
pieces, and I think acandidate's answer to that is
going to be telling as well.
So, yeah, that'll be at the topof the list in terms of asking
(31:10):
candidates positions on fiscalpolicy.
Speaker 2 (31:16):
Brad, paint me a picture If we don't pick this,
the fiscal policy working groupsplan, we're going to be back to
this.
We'll be back to the start.
You know it'll going to bestudying the study of what we've
studied before.
I mean, how many times do wehave to come up with the same
fiscal plan over and over andover again, or a different way
to slice the apple, so to speak?
(31:36):
This is something that's got tobe addressed in the state,
otherwise it's just again.
The detriment is no PFD nowpersonal taxes, yada, yada yada.
I mean it just keeps going onand on and on.
Speaker 1 (31:49):
Yeah, that is where we head.
And candidates who have notthought through the issue and
endorsed something like theall-in approach, I mean I won't
give them a whole lot of weightbecause I don't think they've
thought through where the stateis going, where the 10-year
forecast or any forecast tellsus where the state is going, I
(32:11):
don't think they're seriouscandidates in the sense of
fiscal policy.
And to me, I mean fiscal policyis sort of at the center of the
universe, right?
You don't solve K through 12.
You don't solve any of theother issues unless you have
fiscal policy put together andyou have a good sense of how
many revenues you have and whatcaps on spending you have and
how you're going to fit all thepieces together.
(32:31):
If you don't have a good senseof that, I don't think you solve
any of the other problems outthere.
So candidates who haven'tthought through this or you know
, who are knee jerking one wayor the other without paying
attention to the various factorsthat the working group
recommendations have, I don'tthink they're serious candidates
(32:52):
and I certainly won't.
I certainly won't give them awhole lot of support if I don't
think they're serious on theissue.
Speaker 2 (32:59):
This has been the challenge with the fiscal policy
working group is that everybodycame together and kumbaya and
finally made a decision and maderecommendations, yet not a
single one of thoserecommendations have crossed the
finish line.
You know, ben Carpenter Godlove him did his best to try and
drag some of this stuff kickingand screaming across the finish
(33:20):
line and he just couldn't getit done there.
Just there was just nopolitical will to do any of that
, and that's the that's the mostdisheartening part.
Speaker 1 (33:28):
Yeah, I think I think where Ben suffered was from
from getting everything dividedup.
So so he had the sales taxproposal, but it sort of stood
out there by itself.
It wasn't a piece of theoverall solution, it was sort of
its own proposal out there.
(33:49):
And then there were thespending cap.
That sort of stood by itself.
And another thing stood by.
The constitutionalization ofthe PFD stood by itself.
All pieces of the fiscal policyworking group, but you didn't
see it as a comprehensive whole,and I think this is one thing
they said.
Um, the FPWG, the fiscal policyworking group, believes the
(34:12):
legislature must pass acomprehensive solution.
Fpwg members do not supportaddressing only one or two
issues to the exclusion ofothers.
The FPWG believes addressingthese solutions as a comp, these
issues as a comprehensivesolution, solves not only a
fiscal challenge but a politicalchallenge as well, the
(34:34):
political challenge being thatyou're going to have everybody
you know everybody's going tooppose some piece of it.
But if they see it as acomprehensive solution that's
going to solve all of it,they're going to be more
inclined to compromise on whatthey see as the most important
piece because they see itgetting handled as part of the,
as part of the overallcomprehensive solution.
(34:54):
And I think where ben sufferedwas a the governor didn't back
him up, uh, which uh, which is aproblem in and of itself, but b
it was all in these, in thesevarious pieces, and I think, I
think, to really be successful,a you're going to need the
governor to be behind it, agovernor to be behind it, so
that governor to be behind it.
So that's why I think Shelleyhas a leg up in this regard with
(35:17):
respect to the campaign.
But B it's going to have to bepart of a package, that it's
going to be a bill that willhave various components to it,
but a bill that you can thenmodel and you can talk about as
having a solution.
I mean Trump saw the same thing.
I mean that's why we had andyou can, you know, talk about as
having a solution.
I mean Trump saw the same thing.
I mean that's why we had theone big, beautiful bill, right,
because he saw that there werevarious pieces out there.
(35:41):
Or Mike Johnson, or whoever youknow pushed for one bill, saw
that there were various piecesout there that would get wound
up around the axle if they weregoing.
They were going if they were,if you were trying to push those
separately.
So, as part of thereconciliation, as part of a
reconciliation package, justbring it all together and and
(36:01):
and push it as a whole.
That's, that's a pattern that Ithink you know we ought to be
seeing with respect to solving afiscal problem that was one of
the challenges here is that itwas it's all.
Speaker 2 (36:13):
the problem was the single subject rule.
Right now, my argument to thatwould be this is all fiscal
policy.
This is all a single subject.
The whole single subject islong-term fiscal planning.
I mean, I, you know, but the,the lawyers and the bean
counters in there said no, no,no, you can't do it, you have to
do it individually.
In there said no, no, no, youcan't do it, you have to do it
(36:34):
individually.
Those eight or nine points thatthey talk about in their fiscal
plan, which include cuts, whichinclude new oil taxes, which
included new, you know, proposedsales tax, which included, you
know, constitutionalizing thePFD and the spending cap, all
those eight points that they allfinally agreed on.
It was all a big, one, big,beautiful plan and then they had
(36:55):
.
Speaker 1 (36:55):
then he had to break it up because again they kept
coming back to him saying it's asingle subject rule and that's
that's where it got him yeah, I,I think I've read the eastman
decision, the, the decision lastweek in which the supreme court
uh upheld, upheld an appeal byDavid Eastman, supreme Court or
(37:16):
Superior Court, anyway, one ofthe courts upheld a challenge by
David Eastman that the combinedpackage done at the end of the
2024 legislature wasunconstitutional because it
didn't adopt the single subjectrule.
And I've read that and I thinkthat a package that you just
(37:37):
described, particularly ifpushed by the governor,
particularly if outlined by thegovernor and by a governor and
outlined as a comprehensivesolution, a needed comprehensive
solution, I think that wouldpass the single subject rule.
I mean, it's sort of how youdefine the bill, it's sort of
how you define the approach thatthe Supreme Court seems to rely
(38:00):
on.
And if you're pickinglegislation that's supposed to
do different things, have sortof different motivations behind
them and stack them together,that violates the single subject
rule.
But I think if you have apackage of legislation, while
broad, nevertheless, is focusedon the single subject of solving
the state's fiscal situation, Ithink that would pass the
(38:23):
single subject rule.
Part of Ben's problem was thegovernor never got on board, so
he didn't define it as a as asthat single subject and Ben
really wasn't able to define itas a single subject, so I can
see where people picked it apart, but I think there's a solution
to that.
Speaker 2 (38:41):
We're continuing.
Now the weekly top three.
It's the final of the weeklytop three and Brad postulates
that there is quite possibly theperfect opinion piece, the
perfect op-ed, he says.
He says, Brad, what do you mean?
There's perhaps the perfectop-ed out there.
(39:03):
You may have found it.
It's the unicorn in the wild.
What are you talking about?
Speaker 1 (39:07):
Well, almost almost the perfect piece.
I've got one nit to pick withit, but this is an opinion piece
that Kevin McCabe wrote.
I don't always agree with KevinMcCabe's writings, but this one
I thought was particularly goodon K-12 funding.
It says Alaska's constitutiondoes not mandate education
(39:27):
funding and it's good from thisstandpoint and I would encourage
people who haven't read it, whowant to better understand the
K-12 debate, to read it.
It's good in that it startswith a constitutional provision.
I mean, most of the argumentsaround K-12 is oh, the
constitution requires that we dothis or that or the other thing
(39:49):
with respect to K through 12.
And Kevin, the opinion piece,patiently sets out what the
constitutional provision says,which says nothing about funding
.
And then he goes to the Moorecase, which is a 2011 decision
by Judge Gleason, which was onthe state court.
I think that talks about whatthis constitutional provision
(40:15):
means.
And Kevin goes through andarticulates what the Moore case
said, and here's what he saysthat decision outlined four
components rational standards,effective assessments, adequate
funding and oversight.
But here's the key pointKevin's words the court did not
(40:37):
say that funding alone satisfiesthe constitutional obligation.
It said that funding must bepaired with strong oversight and
accountability the fourcomponents.
That is the part often left outof the conversation, says Kevin
, and that's right.
I mean, that's what the Mooredecision says, and it's
(41:02):
important to understand thecontext around the adequate
funding component, which is thatit doesn't stand alone.
There are four components, andwhen the governor or legislator
say, look, we support funding,but it's in the context of
making sure that we haverational standards, effective
assessments and oversight, thatthey're articulating the funding
(41:23):
in the context of what theMoore decision says they have to
do that it's not just throwmore and more and more money out
there.
It is put it in the context ofthese four components, and so I
think the op-ed does a great jobof articulating what the K-12
(41:44):
debate is really about andarticulating where the two sides
differ.
One side is focused primarily,almost exclusively, on funding,
that is, we have to have moremoney, we have to throw more
money at the schools, we have tofill the hole that they say
they have, while the other sidehesitatingly says they agree to
(42:11):
more money, but in the contextof adequate standards, oversight
and the other the othercomponents of the of the more
decision, and the side that'ssaying that funding is in the
context of these othercomponents has a lot more merit
to it than the side that justsays more money, more money,
more money, more money, moremoney to it, than the side that
just says more money, more money, more money, more money, more
(42:32):
money.
And I think Kevin's piece doesa great job of explaining why
that is and setting that up.
Here's my one pick at it.
Even the Republicans now saythat, yes, we would agree to
more money.
No-transcript that includedadditional components around
(43:22):
assessments and around.
The governor's latest thing ishe wants students to be able to
move from one school district toanother around things like that
that they would agree to moremoney.
In the context of that, my nitis this where the heck is the
money supposed to come from?
I mean, even if the Republicansare saying they would agree to
(43:43):
more money if conditioned on allof these other things, and the
Democrats are certainly sayingmore money, where is this
supposed to come from?
What's the solution on therevenue side or on the fiscal
side that frees up theseadditional funds?
Because we don't have them?
I mean, the only place you'regonna get them is through even
(44:06):
deeper PFD.
The only place you're gonna getthem right now is through even
deeper PFD cuts by spending moremoney, especially in the
context of declining productiontax revenues.
So where's this money supposedto come from?
And I think every, every, everydiscussion about the K through
12 issue, every discussion,needs to discuss the fiscal
(44:30):
aspects.
How are we supposed to come upwith this additional money?
How are we supposed to?
How does this fit in thecontext of an overall fiscal
plan?
I'm not.
I mean, kevin will likely saylook, the ADN has a limit of 650
words and I just didn't get itin there.
I'm not asking for a wholeparagraph.
I'm not asking for, I'm noteven asking for more than a
(44:51):
sentence.
But we need to keep all of thisin the context the K-12 issue
and the other issues in thecontext of we don't have
additional money unless we takeit out of the pocket of middle
and lower income Alaska familiesthrough additional PFD cuts.
We just don't have it and so weneed to.
(45:36):
Every time we talk about asolution to K-12 that involves
additional spending and even theRepublicans are talking about
it now every time we talk aboutK-12 resolution that involves
additional spending we need toresolve the fiscal policy issues
also to come up with theadditional money in a balanced
way to go to K-12 spending.
So my perfect op-ed on thisissue would be what Kevin had
about starting with theconstitution and going through
the Moore decision, but alsothen adding a discussion of the
fiscal aspects of it, and andthat we need to resolve the
(45:58):
fiscal situation at the sametime as part of getting K
through 12 resolved.
Or else we're just making thefiscal situation and the burden
on middle and lower incomeAlaska families the very ones
that we say we're trying to helpwith with K through 12, we're
making the burden on fiscal onmiddle and lower income Alaska
families the very ones that wesay we're trying to help with
K-12, we're making the burden onmiddle and lower income Alaska
families even worse because wearen't solving the money issue
(46:18):
at the same time.
Speaker 2 (46:20):
Well, and that's always been the challenge is
again the answer for the oneside is just more money, no
matter what.
More, more money.
And Kevin is rightly pointingout that the Constitution says
we provide public education.
But it was the Moore decisionthat said we had to fund it.
But again they keep droppingthese other two components the
accountability, the oversight,that kind of stuff.
(46:42):
But the biggest question that,again, I come back to every time
they scream Moore, is wheredoes it come from?
That's the thing, you know.
It seems like that doesn'tmatter to them.
Anybody you discuss with itdoesn't matter.
Wherever it has to come from,whoever has to be hurt, wherever
it has to go.
And again, it's not a solution.
(47:04):
Kevin is at least saying theseare the four things that the
Moore decision said.
We need to use all these inconjunction.
Now, where does the money comefrom?
It's obviously a bigger anddeeper subject, but something
that most people don't want totouch on.
We talked about that earlier.
Speaker 1 (47:21):
It is a bigger and deeper subject, but to me it's
the key subject.
I mean, all we're doing, if wesolve K 12 by taking additional
PFD cuts, which is right now,what we would have to do all
we're doing is making anotherproblem worse Without solving
the overall fiscal issue.
(47:43):
By giving more money to Peterout of Paul's pocket, we're just
making the problems with Paulworse.
So I understand that.
You know sort of like a singlesubject, bill right, you got to
stick on the subject.
You got to solve what's infront of you.
But one of the pieces ofsolving what's in front of you
(48:05):
about K through 12 is the fiscalissue of where the heck this
additional money is supposed tocome from.
Because we're not talking aboutit.
We're not talking about it justthis one year.
The governor's line item vetomakes it a one-year issue.
But the legislation passed it'spermanent.
I mean it goes on the books andsets up a higher BSA on a
(48:27):
permanent basis.
So, yes, we resolved the $200this year.
However, that plays out in thebudget, but it shows up next
year, the year after that, theyear after that and the year
after that and the year afterthat.
It's not a one-year problem, itis a multi-year problem and so
if we're going to to solve this,you've got to solve on a
(48:51):
long-term basis.
You've got to solve the fiscalsituation on a long-term basis,
or else it just keeps popping upas another problem next year
and another problem the yearafter that, and another problem
the year after that.
Speaker 2 (49:01):
I mean you're right.
The fiscal policy is thecornerstone of any plan, for
anything that we're talkingabout.
Anything that has to be built,it has to be built on a sound
fiscal plan.
And the problem is there's nopolitical will to put a fiscal
plan in place because somebody'sox is going to get gored
(49:22):
somewhere along the lines onthis deal.
Speaker 1 (49:25):
Yeah, and that's why.
To go back to the secondsegment, that's why I think
Shelley's got a leg up in thecampaign by saying I've been
there, I've dealt with thisissue.
It didn't get done under thelast governor, under the current
governor.
He didn't get behind it, hedidn't endorse a comprehensive
solution.
I'm running on it.
(49:45):
I've been there, I've been inthe middle of this, I've seen
all of the sides of it, I'veseen how to get to a solution
and that's what I'm running on.
And I think candidates for thelegislature and I think
candidates for well, othercandidates for governor ought to
be doing it as well.
But Shelly's position becauseshe was on that working group
Shelly's position, I think, toreally make a great push on it.
Speaker 2 (50:09):
And I hope she does.
Speaker 1 (50:09):
I mean, it may be that she thinks that I mean part
of it is revenues, right, andit may be that she thinks, well,
I can't talk about revenuesbecause that's going to take
away from, you know, the basethat I need to support me to get
into the top four and that sortof stuff.
And that'd be sad becausebecause then we, then you know,
the candidate that ought to betalking about the most, about
(50:32):
the working grouprecommendations wouldn't because
she's been taken off by one ofthese sub-issues.
So I hope other candidates talkabout it as well.
Shelley does.
But I think this is the key tosolving the fiscal policy issues
that we're facing.
I think the fiscal policy issueswe're facing are the key to
(50:53):
solving the issues that we'refacing.
I think the fiscal policyissues we're facing are the key
to solving the other issueswe're facing.
I mean people say we don'tbuild enough, we don't have
enough infrastructure, we don'thave the money for it.
People say we don't fund K-12enough, we don't have the money
for it, and you can just go ondown the list.
And until we get fiscal policyset and resolved and the issues
(51:13):
around it sort of tightened up,I don't think we're going to
solve any of these other thingsPeople are just going to keep
arguing about.
You know, we don't have enoughmoney for this, or we don't have
enough money for that, or weought to be doing this, or we
ought to be doing that.
All of that involves money, anduntil we have that straightened
out, it's just going tocontinue to go in a circle.
Speaker 2 (51:32):
Do you think that candidates are avoiding the
issue of the fiscal thingbecause they simply think that
the public doesn't want to hearabout it?
Is it too hard an issue?
I mean what do you think?
What's the reason why a lot ofthese fiscal topics don't get
touched?
Do you think?
Speaker 1 (51:51):
Oh, I think, and I would certainly be interested on
what candidates themselvesthink, but I think it's because
they're trying to appeal tosubsections of the electorate as
their base to get into the topfour and they are wary of
endorsing something or sayingsomething that their base is
(52:16):
going to go off on and and andattack them on.
I mean Ben Carpenter, let'slook.
Let's look at Ben.
Ben endorsed sales taxes andJesse, jesse Bjorkman beat him
over the head with it down inthe Kenai Senate race, beat him
over the head with it down inthe Kenai Senate race and Ben
(52:40):
lost that primary, lost thatrace because of the way in which
Keel used, or Dorkman used, thesales tax issue.
So I think candidates are waryof their opponents or of their
base picking out one issue fromthe comprehensive solution and
say, well, if you endorse thecomprehensive solution, you must
endorse this, and if youendorse this, that's wrong,
because now you're endorsingrevenues, you're endorsing taxes
(53:01):
and I don't want to tax her inthe governor's office.
So the candidates have to beprepared to say it's one
component.
Look what you're getting.
You're getting a constitutionalPFD, you're getting a spending
cap, you're getting.
You know, and go on downthrough the list of the other
pieces that offset the impact ofthe one piece of revenues, and
(53:27):
I think candidates need to beprepared to do that.
But I think they're concernedthat a part of their base that
they feel they need are going topick out that one issue and
beat them over the head with ahead with that one issue.
I mean I mean that thathappened to the, the
representative up in up inMassey that we were talking
(53:47):
about last week.
I mean she endorsed SenatorYuntz resolution on, or proposed
revenues on, the digital tax,the proposed revenues coming
from the digital tax.
She endorsed that and herdistrict starts beating her
district Republican committeestarts beating on her.
I mean that that is one pieceof a comprehensive solution but
(54:09):
they pick out that piece andstart beating on her about it
and that's just wrong.
I mean that's why I gave her$2,000, because that's just
wrong.
To get to a solution, we've gotto have a comprehensive
solution that has multiplepieces and we need to support
candidates to talk about thosemultiple pieces as opposed to
people who want to pick one ofthem and beat them over the head
(54:30):
about it.
Speaker 2 (54:31):
Again, as far as legislatively, I mean, the
single subject rule is reallywhat kind of submarine this
whole deal.
And again, my argument is thisis all about a fiscal policy.
I don't know why that argumentcan't be made that these are all
part and pieces.
I mean the constitutionalprovision has to be standalone
because it's a separate bill.
(54:51):
I mean that's required to be aseparate bill, but everything
else could be in onecomprehensive package, as you
know, like an omnibus type billthat deals with fiscal policy,
because every one of thosecomponents is dealing with
fiscal policy.
So I don't know if it is thebureaucracy that's pushing back
on this, whether you know ledgelegal or who I don't know, but
(55:14):
it to me it's like this is all,this part, this is all part of a
whole here and you can't justpick each one out.
And in fact they in their own,in their own report, and they
talk about this.
You can't take this one pieceat a time.
It has to be a holisticapproach.
That was their belief and theystarted out with that and they
(55:35):
ended with that.
It must pass a comprehensivesolution is what they say, and
that's part of the problem.
All right, brad, we got to go.
Thanks so much for coming onboard.
It's good to talk with you, myfriend.
Speaker 1 (55:49):
Thanks for being part of it today, michael as always,
thanks for having me talk withyou, my friend.
Thanks for being part of ittoday.
Michael, as always, thanks forhaving me.
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
(56:09):
during the week on Facebook andTwitter.
This has been Brad Keithley,managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
Thank you.
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