August 12, 2025 • 54 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 August 11, 2025.
This week, our top 3 issues are these: 1) the Anchorage business community says they are concerned about the economy but at the same time they push the revenue option that has the “largest adverse impact” on it (2:15); 2) we explain why the next rounds of K-12 funding growth should come from increased local contribution (18:08); and 3) we explain why those pushing the “one account” approach to “protect” the Permanent Fund are, in fact, opening the door for raids on it (39:26).
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.
Mark as Played
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 three, the top three things on our
mind here at Alaskans forSustainable Budgets for the week
of August 11th 2025.
The weekly top three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:33):
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 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,
(00:57):
soundcloud, spotify and Substackpages, also on the Alaskans for
Sustainable Budgets website, aswell as the projects page on
national 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
(01:19):
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, the Anchorage
(01:39):
business community says they areconcerned about the economy,
but at the same time, they pushthe revenue option that has the
largest adverse impact on it.
Second, we explained why thenext rounds of K-12 funding
growth should come fromincreased local contribution
rather than from the state.
(02:00):
And third, we explained whythose pushing the one account
approach to protect thepermanent fund are in fact
opening the door for raids on it.
And now let's join Michael.
Speaker 2 (02:15):
So, brad, today we're going to dive into it.
We've got a lot of things tocover and we're going to start
off with this article in the ADN, talking about the survey of
businesses.
And I mean, I don't know howmuch money was spent on this
survey.
I just the more I look at someof these stories and I see
there's whole industries thatare basically out there to tell
(02:37):
the government to study for thegovernment, the businesses or
the.
There was one in Soldotna todaywhere they're studying the
light poles and they paid$90,otna today where they're
studying the light poles andthey paid $90,000 for them to go
study all the light poles tosee which ones need to be fixed
or not.
And I'm just, I'm just shakingmy head.
But this week's we're faced, uh, we've got a conundrum.
The Anchorage business set isfacing a conundrum and they just
(02:59):
don't know what to do.
Speaker 1 (03:07):
Brad, uh, give us the , give us the rundown here.
Well, this last week was theannual Anchorage Economic
Development Commissionpresentation in Anchorage where
they have done a survey.
The AEDC has done a survey ofthe Anchorage business community
, identified things that thebusiness community is concerned
about, identified the level ofconfidence the business
community has in the economy andthe issues they see out there
(03:28):
and the potential solutions theysee to the business and or they
see to the economic environment.
And this year's survey was notgreat.
The headline in the AnchorageNews, the daily news story, is
survey finds Anchorage businessconfidence fell amid Trump
tariffs and federal cuts.
The APRN has Anchorage businessreport.
(03:53):
Businesses report decliningconfidence in new survey.
Survey showed that morebusinesses were concerned about
the state of the economy andbelieve the economy.
The state of the Anchorageeconomy, and indeed the Alaska
economy, was headed on adownward trajectory than
(04:13):
believed it was on an upwardtrajectory.
It wasn't unanimous.
There were some who believedthat the economy was doing okay,
but the level of businessconfidence was on a downward
spiral.
From the standpoint of theAnchorage business community,
the thing that caught my eye wasone of the issues, a fairly
(04:37):
high issue, for the reason forthe lack of confidence was the
state of the.
The reason for the lack ofconfidence was the state of the,
the condition of the state'sfiscal situation and the, the
concerns that that the businesscommunity has about the state's
business or the state's fiscalsituation, and and that it's not
resolved and it and it remainsup in the air.
(04:58):
And and so the survey was notonly about their, their, their
concern about the state's fiscalsituation, but about potential
solutions.
And the thing that caught myeye was the disconnect between
the business community's concernabout the state of the economy
and their solutions to theeconomy, solutions to the
(05:23):
state's fiscal situation thatthey voted for in the survey.
The number one solution to thestate's fiscal situation, a high
level of concern about thestate's fiscal situation the
number one solution to thestate's fiscal situation was
reductions in the PFD, furtherreductions in the PFD.
(05:45):
We're already down to $1,000PFD.
We're already down to a 70% cutor something in the PFD, and
now the business community issaying, well, the solution to
the state's fiscal situation isto reduce it even further.
Second, behind that wasreduction of state spending.
(06:07):
Third, behind that was astatewide sales tax, then a
statewide income tax, and thenelimination of the PFD was at
the bottom but neverthelessstill got a significant share of
votes more than a marginalamount of votes supporting the
elimination of the PFD.
(06:27):
Here's the disconnect.
The disconnect is they'reconcerned about the economy.
They're concerned about theimpact, primarily the impact of
the tariffs raising costs andcuts in federal spending
reducing revenue in the localeconomy.
But a big part of the concernabout the economy is the state's
(06:48):
fiscal situation and theunresolved nature of the state's
fiscal situation.
Concerned about the economy,they're concerned about the
impact of all that on theeconomy.
Yet they are voting for asolution the reduction in the
PFD.
That of the alternatives, hasthe largest adverse impact on
the economy.
(07:08):
It's like there's thisfundamental economic disconnect
in the mind of the Anchoragebusiness community.
Any regressive tax, becausemiddle and lower income Alaska
families, middle and lowerincome families generally,
middle and lower income familiesgenerally have a higher
marginal propensity to spend.
That is the extra dollar theyget they will spend as opposed
(07:32):
to save or invest or sort oftake off the board, as occurs in
the higher income brackets.
So any extra dollar in middleand lower income brackets tends
to increase spending, tends toimprove the business, tends to
improve the business climate.
Pfd cuts are the most regressiveof all the options and have the
(07:54):
largest adverse impact onmiddle and income families, and
so they have the largest adverseimpact on the overall economy.
It's just that sort ofaxiomatic.
That's how economics works.
And so when you say that yoursolution to a bad business
(08:15):
climate a business climate whereyou're concerned about consumer
spending and you're concernedabout revenue in the community
and you're concerned aboutrevenue in the pockets of
consumers when you say that's aprimary concern, but you vote
for the solution that has thelargest adverse impact on the
(08:37):
economy, I don't know whatyou're trying to get at.
I mean, you're saying thesituation's bad and then you
vote for the solution that makesit even worse.
Speaker 2 (08:47):
Well, and this shows us, I think more than anything
else, how much of a dependencystate.
And in this case we're nottalking about the welfare side
of it, we're talking about thecorporate welfare.
They said they surveyed like172 businesses.
How many of those businessesare dependent on government
largesse at one point or another?
Government contracts, surveys,studies, maintenance, whatever
(09:11):
that's what it looks like.
To me it looks like this isthat self-licking ice cream cone
of businesses that haveattached themselves to
government and are so dependenton it.
They're not really talkingabout the private economy,
they're talking about the publiceconomy.
That's what this whole focusseems to be about, and as long
as the public economy does well,what it kind of ends up being.
Speaker 1 (09:36):
Yeah, I think that's a good observation and I think
that is a significant part of it.
I think the other part of it is, when you do a business survey
like this, you're doing a surveyof the executives or the owners
or the upper echelons of thebusiness community, and so what
you've got is what you'resurveying are people in the top
(09:57):
20%, or people in oil, or peopleat the top levels of other
industries who are saying, oh,the PFD doesn't mean much to me
and so let's, let's cut thatbecause it doesn't really impact
me.
I don't.
I don't think they understand.
(10:17):
I think they're surveyingpeople who don't understand the
impact of PFD cuts on middle andlower income Alaska families
because it doesn't affect them.
So they're saying, oh, cut thatbecause it really doesn't
affect me much, withoutunderstanding that it affects
the economy a whole lot.
Speaker 2 (10:34):
Right, no, I mean, and I think that's part of the
problem here is that, as theycontinue to look at it, this is
a very insular appears to me tobe a very insular group of
people because overall and theymentioned this consumer
confidence is rising steadilybut the business confidence in
(10:54):
Anchorage, specifically, wasdeclining, and I think part of
that again is because they'redependent on that government
spend, while the private economyand the consumer confidence and
inflation and all those otherindicators seem to be dropping,
and so consumers are excited,but the business climate is not
so much, especially when thosebusinesses have built an entire
(11:17):
business model aroundsubsidizing themselves from
government spend.
Speaker 1 (11:21):
Yeah, I think that's a good observation and the focus
on the decline in federalspending as a driver to the loss
of confidence is probably agood indicator of that.
That businesses have structuredthemselves to take advantage of
the federal spending and whenthey see that federal spending
(11:43):
declining they have a concernabout it.
Those businesses tend to alsobe concerned about state
spending and be tied to statespending and when they see a
decline in state spending oradverse impacts on state
spending, constraints on statespending, they tend to be
concerned about that.
But to say that the solution tothat is to utilize PFD cuts,
(12:09):
the highest ranked solution tothat is further PFD cuts from
$1,000.
Keep in mind we're already downto $1,000.
Keep in mind we've already cutPFD something like 70%.
When they say that the solutionto that is to further cut the
PFD, they're just I mean it'skabuki, I mean it's suicide
(12:31):
theater, right?
I mean they're increasing thelevel of the adverse impact on
business as a solution to theirconcerns about business.
Speaker 2 (12:43):
Yeah, it's kind of frustrating.
And I saw this chart I think itwas must read or somebody who
had this chart up originallywhere they were talking about
their different options.
You know reduction in statespending, statewide sales tax,
income tax, elimination of thePFD, reduction of the PFD.
And the largest take ofanything was that reduction of
the PFD followed closely byreduction of state spending.
(13:05):
But I just kind of feel likethat's an afterthought more than
it.
Now, nobody wants to eliminatethe PFD, right, that's the last
that has the lowest.
But I mean, when youfunctionally reduced it down to,
I mean we were at what 82, 83,17 was this year's take of the
PFD for the people.
You know, this year's take ofthe PFD for the people, you know
(13:28):
83% went to government and 17%went to the people.
I mean, how much lower can yougo at this point before it is
essentially eliminated?
Speaker 1 (13:33):
It was you know they're making it into a trivial
impact on the economy.
I mean, the PFD at full forcehas the potential to be a
positive impact on the economyand again because the marginal
propensity to spend is strongestin middle and lower income
families, I mean, if you have astrong PFD, you're going to have
(13:54):
a strong spending response tothat additional money coming
into those families and so totake that money when you cut it
back, you're turning the PFDinto a trivial share of family
income and you're turning itinto a trivial impact, uh, on
the economy.
Yeah, we don't want toeliminate it because, oh my gosh
(14:15):
, nobody wants to say we want toeliminate the PFD but we want
to trivialize it to the pointwhere it really doesn't have any
impact on the economy, at thesame time that our largest
concern is about the economyitself.
You know.
Speaker 2 (14:27):
Brad.
The one that got me was thefinal paragraph in this story in
the ADN, where they'relamenting the federal Medicaid
cuts and you really start to seethe oversized impact that this
has in Alaska, especially withthe federal spending $9.5
(14:49):
billion spent annually on healthcare in Alaska, one third of
that coming from Medicaid andMedicare $3 billion spent in
this state.
And of course they're alreadylamenting the fact that some of
that stuff has been cut becausethen doctors may offer less
services.
And again you see there'sdependency, because when I talk
(15:14):
about dependency, most peoplethink about, you know, maybe
road construction or governmentcontracts or something like this
.
But there's a huge dependencysector in the medical industry
as well, where they aredependent on all that state and
federal spending to a hugeamount.
And it really is.
(15:36):
This is the problem that we'refacing and this is kind of the
theme of today.
How much have we grown sodependent on government?
We can't even envision it.
We can't even imagine that wecould live without that spending
.
Speaker 1 (15:49):
Yeah, I remember early on in the Dunleavy
administration, maybe in theroadshow he did after he was
elected governor, where he wasgoing to various groups and
talking about his vision forcutting spending and getting
state spending back undercontrol.
One of the groups he talked towas a group of doctors and the
surprising thing about that wasand he talked about cutting
(16:11):
Medicaid as part of the overallspending cuts, cutting the
state's tie to Medicaid or thestate's contribution to Medicaid
as part of the overall spendingcuts.
And one of the reallysurprising thing was the strong
pushback he got from the docs.
I mean the docs, basically, theposition basically was yeah,
yes, spending cuts, yes, that'show to get the state under
(16:33):
control, but don't cut Medicaid,don't cut the federal
government or don't cut thestate's contribution to Medicaid
or cut the Medicaid program.
And that was I mean, you seethat all over the place, right?
You see, that's what we saw in2019 with the pushback on the
spending cuts.
It was, yeah, spending cuts,yes, we got to do that, but
(16:56):
don't cut my program, don't cutmy library, don't cut my museum,
don't cut my reading program,don't cut this, don't cut that.
(17:18):
And with the docs, it was don'tcut Medicaid.
I mean the level of your pointabout dependency is a good one.
I mean the level of dependencyon point about PFDs to the point
where they prioritize cuttingthe thing that has the, or doing
the thing that has the largestadverse impact on the overall
economy.
Doing that in order to savedollars for their spending
(17:40):
programs, dollars that theydon't when we go back to the
business elite, dollars thatthey don't have to pay.
So hey, they don't count, right, we don't have to pay them, so
we don't have to be worriedabout it.
It's just everybody else whohas to suffer the cut.
Speaker 2 (17:53):
Yeah, brian says, because a healthy workforce will
produce more.
Will they really?
Or will they sit in their mom'sbasement smoking pot and
playing on Xbox?
I mean, that's really myquestion.
When it comes down to it,number two of the weekly top
three.
We said it was coming, wepredicted this.
(18:15):
We said you know they got theBSA increase this time around,
but that was just a nice start.
You could already see themlining up and they're saying the
quiet part out loud.
Not only are they going to wantto increase the BSA even more
now, of course, it's theinflation proofing and
(18:39):
everything else.
This comes from an opinionpiece in the Daily News.
Miner Brad was kind enough toshoot me a screenshot of it here
.
Education funding a victorytoday, but uncertainty tomorrow.
They're already selling thefear.
Speaker 1 (18:53):
Brad, yeah, the body wasn't even warm or the boats
weren't even cold, weren't eventhe body wasn't even cold or the
boats weren't even cold.
From the BSA increase of thelast session and the veto
override, the news minor.
The news minor.
The news minor is alreadypushing the next round.
(19:16):
A couple of paragraphs fromthat op-ed.
But let's be clear this is not.
They're talking about the $200.
Let's be clear this is not asustainable funding solution.
The year's extra oil revenuegave lawmakers a fiscal space to
act.
The cushion may not be therenext year and without a
long-term fix to Alaska'seducation funding formula, the
(19:39):
base student allocation, we'relikely to see the same education
funding tug of war again andagain.
This isn't an op-ed during thesession.
Speaker 2 (19:50):
This is an op-ed now this week that says we're not
there yet I want to interrupthere because it's very obvious
to me that apparently, whoever'swriting this op-ed for the
Newsminer, this is the editorialboard.
Apparently they don'tunderstand how this works
(20:10):
Because they said let's be clear, this is not a sustainable
funding solution.
This year's extra oil revenuegave lawmakers fiscal space to
act and that cushion may not bethere next year.
This is in perpetuity.
Do they not understand thatthat $700 increase, $180,
whatever million, almost $190million is locked in forever in
(20:32):
the future?
They're acting like this isgoing away tomorrow, do they I
mean, do they not understand?
Speaker 1 (20:38):
how this works.
Oh, michael, I think they dounderstand.
I think they're saying the $200isn't enough.
I think they're saying it needsto be more.
And this paragraph is where itgives it away.
What's needed is a durablefunding model that adjusts for
inflation and gives districts apredictable foundation.
That doesn't mean writing ablank check.
(20:59):
It means agreeing on what levelof education Alaska wants to
provide its children,determining what its costs and
continuing and committing to itwithout the annual hostage
negotiation.
So no, I think they fullyunderstand.
The $200 is in perpetuity.
I think they're just sayingthat's not enough and we need
(21:19):
more on top of that, includinginflation adjustments on top of
everything else, top of that,including inflation adjustments
on top of everything else.
So it's a.
As I said, the votes aren'teven cold, the body isn't even
cold and we're already on to thenext round.
(21:39):
The news minor has alreadytaken us on to the next round.
Here's a point I want to makeas we go into that round and if
you have that chart, let's flipit up I've been spending a lot
of time on looking at how Alaskaranks, not in terms of spending
, not in terms of per studentspending, or how we rank in the
(22:03):
nation on that.
I've been looking at how we fundour spending and I've been
doing that because, again, Igrew up in a situation in
Illinois where the burden offunding was substantially on the
local communities and so whenyou were talking about school
board or when you were talkingabout school funding, it was a
(22:27):
local discussion, because theschools are funded substantially
mostly locally, mostly locally,and so it was, if you want to
increase spending or if you wantto start a new program, or if
you want to do this or you wantto do that.
It was a very local discussion.
There was a lot of localpushback or local support in the
case of you know if there was aunanimity that we needed to
(22:50):
increase spending in this area,but it was a very local
discussion which had an impacton the local school board and
which had an impact on what wasgoing on in the schools, and
it's led to a substantial amountof consolidation.
When I look back at my oldschool district, my old school
district is no more because it'sbeen consolidated two or three
times since then into a muchlarger school district to
(23:14):
achieve economies of scale andachieve cost savings.
So there's been a push at thelocal level to consolidate
because of the financialsituation.
What we have in Alaska is theexact reverse of that.
What we have is the localitysaying, hey, we don't have to
pay for it, we don't have to paymuch for it, and so it's the
(23:34):
state's responsibility, andwe'll keep pushing the burden
more and more.
Have to pay for it, we don'thave to pay much for it, and so
it's the state's responsibility,and we'll keep pushing the
burden more and more of theburden on the state, and nobody
is taking.
I don't perceive that there's alot of responsibility being
taken at the local level to findcost savings, because it's
always we'll just go push to thestate, we'll just go ask the
state for more and more funding.
(23:56):
So I did a that's the key, bythe way that's the state.
Speaker 2 (23:57):
We'll just go ask the state for more and more funding
.
That's the key.
By the way, that's the key.
They don't ever have to lookfor efficiencies, because Uncle
Sugar will always be there tobail them out.
That's the problem.
Speaker 1 (24:08):
So you don't get a lot of talk about consolidation
at the local level.
You don't get a lot ofdiscussion about cost savings.
You get some, but you don't geta lot because it's always.
You get some but you don't geta lot because it's always well,
we'll just go ask the state formore money, more and more and
more money at the state level.
So I'm spending a lot of timelooking at how Alaska stacks up
(24:30):
compared to other states interms of the percent of funding
coming from local level versusstate level, versus federal
level.
And Alaska consistently.
I mean there's various surveysout there of spending.
They're not all, they don't allcome to the same number,
they're not all on the same baseyear.
The most recent analysis isn'tall on the same base year, so
(24:53):
they're sort of spread all overHekaback.
But I mean they do have aconsistent theme and I've taken
a few of the major ones here andput them in this chart that I'm
going to be using for a Fridaycolumn somewhere along the way
and you can see thatconsistently, alaska is ranking
(25:14):
very low in terms of the percentof school funding coming from
the local level.
The Census Bureau, the censusstudy, shows that Alaska the
most recent they have is forFY23, shows that Alaska is at
22.7 percent as opposed to theUS average is 44.7%.
(25:37):
Alaska is about half of thenational average funded by the
local level, the NCES study.
The most recent year is FY21.
Again, you can see Alaska is inthe 20% range low 20% range
against the US average in themid-40s range.
Again, alaska's about half.
(25:57):
The EDI study that's publishedin 2025, not clear what base
year it's based on, but againAlaska's at 20-some-odd percent
against the national average inthe 40s.
Numbers are varying but you cansee a theme here.
And then the last is the AlaskaDeed Study for FY24, the latest
(26:18):
year for which they've audited.
Again, alaska's in the localcontributions in the mid 20%.
So I think part of thediscussion we need to be having
maybe a big part, maybe thebiggest part of the discussion
we ought to be having in thisnext round of K-12 funding that
we're talking about isincreasing the burden on the
(26:44):
local communities, increasingthe incentive, to put it another
way, increasing the incentivefor the local communities to
start pushing back on spending,to start saying, look, wait, we
have to pay for a big chunk ofthis.
So let's find efficiencies,let's find priorities within our
(27:05):
communities to reduce spendingor to keep spending under
control.
As I say, in Illinois it's ledto the consolidation of a
significant number of schooldistricts across the state
because they have found thatthey can't afford.
You know, everybody wants tohave their own school Every town
and village wants to have theirown school but you find you
(27:25):
can't afford it and so you startlooking for other ways to have
schools that are affordable tothe community, and in Illinois
you know that's led to a lot ofconsolidation.
I think a key of this next roundof school funding is starting
to talk about an increase in thelevel of local contribution,
(27:48):
and I know that's going to leadto a lot of pushback, but that's
exactly what we want, right,it's exactly.
We want the local communitiesto start pushing back on
increased school spending andstart finding efficiencies in
the context of their communities, because they'll know best how
to do it Finding increasedefficiencies and increased ways
(28:10):
of controlling costs andachieving efficiencies in terms
of consolidation or other thingswithin their communities to
push back on spending increases.
If we don't do that, if wedon't push more responsibility
and more costs down to thecommunities, I'm afraid we're
(28:33):
just the news miner's right,we're in for another repeating
rounds of pushing for increasedstate spending because people,
the local community, say hey,you know, let's have more.
It's the state's fault.
Speaker 2 (28:45):
We don't have more.
Part of that is a conundrum too, because we've accepted these
federal dollars, and part of thehook in the federal dollars is
that equity component, becausewe have some communities that
are already funding up to thatfederal cap.
Right, I mean, the KenaiPeninsula Borough was
essentially funding to the capthat they were allowed under
(29:07):
under federal law, and so we'rebeing held in amber on that
component.
And then this is a little bitof an apples to oranges
comparison because we've gothuge swaths of the state that
have no local contribution atall.
Right, there's no localcontribution, it's all being
funded by the state.
So the numbers are being kindof skewed by that as well.
(29:27):
But we're, you know, we've gotthose two problems locking us in
.
Speaker 1 (29:31):
I've looked at the.
I've looked at the secondproblem, I've got a thought on
the first problem too.
But I've looked at the secondproblem and yes, there are big
parts of the stategeographically that have a
limited amount of localcontribution.
The unincorporated borough hasa limited amount of local
contribution or no localcontribution.
(29:52):
Basically the feds aresupplying the local contribution
contribution.
Basically the feds aresupplying the local contribution
and that's an issue, but it'snot a big driver in that 22%.
If you look at Anchorage, forexample, Anchorage is in that
general area, is in the 20s.
It's a little bit higher thanthe average, than the Alaska
(30:12):
average, but it's still a lotlower than the national average.
Fairbanks a little higher thanthe Alaska average, but still a
lot lower than the nationalaverage.
And so we tend to overplay, Ithink, the impact, this
disparity within the state inaffecting these numbers.
I think, even if you look atthe big districts, they're not
(30:37):
up to the national average,they're not involving the
localities as much as we do on anational basis.
The first one, about dependenceon federal dollars and the
resulting disparity test we'rethe only state that's still
subject to the disparity test.
We're the only state that'sstill trying to apply the
federal dollars through thestate and count that as toward
(31:00):
the state share, which is whatkicks in the disparity test, and
I think it's appropriate tostart considering or to consider
whether that's something westill want to do, whether that's
something that's important.
It doesn't back out the federaldollars.
The federal dollars still go in.
They just don't count as partof the state's share Right.
(31:22):
And so I think that if we're,if we're focusing on getting the
contribution, getting theincentives at the local level up
and increasing the incentivesat the local level, the
incentives at the local level,increasing the involvement,
increasing the funding from thelocal level, it's time to
evaluate whether or not wereally still need to be
(31:42):
subjecting ourselves to thefederal disparity test.
Speaker 2 (31:45):
Well, because that was the call from the
legislature, right?
Oh, they are all about localcontrol.
That was the whole argument.
They are all about localcontrol.
If they're about local control,then up your contribution so
that you can control it and bedirectly involved in that from
now on.
That seems to be the answerhere.
Speaker 1 (32:05):
Yeah, they're all about local control.
But they're all about localcontrol of state spending, which
is sort of the worst of allworlds, because you get a body
committed to pushing forincreased state spending so they
can have more of it at thelocal level without them having
to raise it themselves.
Speaker 2 (32:24):
You know, Brad, that's what I've been saying is,
if a community wants to givemore, if a community wants to
make itself the showcase ofeducation, they could just fund
it as much as you want.
That should be part of it.
I didn't realize that it wasbecause of the way that they
accounted for it the federalmonies that was triggering that
(32:44):
I mean.
So we stopped that.
We just we should stop that ahundred percent for sure.
When you look at the numbersthat you just you threw up there
and I'll pull that, pull thatchart back up real quick but
when you look at it and you seelocalities are spending, you
know, are contributing 40percent to their community
(33:05):
schools and we're, we're doinghalf that in almost every survey
.
Our local communities are onlyproviding half of the same
amount.
If they were squawking and itwould mean that the local
community would be more engagedon that, because they'd be like
is this money being wasted or isit being spent?
Are we looking for the mostefficiencies this opinion piece
is so full of, just, you know,the BSA unchanged for years the
(33:31):
reality of running schools.
The result of that unholy unionis a cycle of short-term fixes
and long-term uncertainty.
I mean, how dare they shouldhave to.
You know they go on to talkabout how they're forced to
budget for worst case, and ofcourse they should budget for
worst case scenarios.
You don't budget on the bestcase scenario.
That's not how budgeting works.
(33:51):
You do the best that you can do.
You don't bet on the pie in thesky if come, and that's what
these guys seem to be doing.
Speaker 1 (33:58):
Yeah, and again, michael, I mean I can't stress
enough.
So you go to a school boardmeeting or you go to, you know,
you read about school boardmeetings.
You read, you know, in thelocal, the pen and pieces, the
local paper, about how you knowschool boards are reacting or
school officials are reacting tothe budget.
(34:19):
It's all, oh, the state needsto give us more.
I mean, the state needs to payus more.
We've created these lobbyingorganizations to go to the state
and say the state needs to payus more, the state needs to
increase their contribution, andit's not even in proportion,
right, the localities aren'teven talking about and we'll
(34:41):
pick up 20, whatever odd percentof it, which is sort of our
average pickup.
It's no, all the marginal moneyneeds to come from the state
level.
We need to be increasing thestate level, we need more money
and all needs to come from thestate.
And so we've turned theseschool organizations and the
localities into lobbyists forincreased state contributions
(35:04):
because they don't have anyresponsibility for it Funded by
state contributions.
Speaker 2 (35:08):
by the way, Lobbying arms funded by state dollars to
go get more state dollars.
Speaker 1 (35:13):
Yeah, and so you've got no sense of responsibility
at the local level to find costefficiencies, to find cost
containment.
I mean, they'll give mouthservice, lip service to it.
I read papers from all over thestate and school boards are
saying, oh, we'll constrainspending here or something.
But generally speaking, there'sno drive to find cost
(35:38):
efficiencies, there's no driveto create priorities in the
local community about what we'regoing to fund and what we're
not going to fund, what's goingto get more education funding.
It's like everything needs moreand we'll go to the state to
get everything more and we'llcomplain to the state if they
don't give us more.
And we'll complain about ourstate to get everything more and
we'll complain to the state ifthey don't give us more.
And we'll complain about ourstate officials if they don't
(35:59):
give us more.
That's what we've set up.
We've set up local lobbying formore money from the state.
I think it's time to.
If we're truly interested ingetting cost efficiencies, if
we're truly interested inprioritization, I think it's
time to not only give more powerto the localities in terms of
freeing them from the disparitytest, but I think it's also time
(36:23):
to give them more costresponsibility so that they feel
this increased spending at thelocal community and they feel
the constraint of no, I don'twant to do it that way.
I want to find other ways or Iwant other priorities.
We only have so much money atthe local level.
I want to find other prioritiesand other ways to constrain it.
Speaker 2 (36:45):
I think it's interesting that we can already
see that the verbiage for thebattle lines is being set up,
talking about things likepredictable funding.
You know that's the key thepredictable.
That's what they want.
They want this locked in sothat it's predictable.
And again, that's just.
You know, every dollar in thepublic coffers should fight
(37:07):
against every other dollar,right?
I mean, every program should beweighed and measured.
Everything should have to fightagainst every other option
that's out there, because that'sthe only way you keep things
efficient.
Otherwise, it just becomes, youknow this bloated program, and
that's what we're seeing rightnow.
Yes, every administrator, everyschool district, every school
(37:30):
board should budget for theworst case scenario, and then
everything else is.
You know, if it happens theother way, you know, know it's
planned for the worst, hope forthe best and all your surprises
will be happy ones.
That's what we need to be doing.
But we're not going to.
You know we're.
We're not going to, uh, uh, todeal with that.
And yeah, we've already talkedabout the disparity test.
(37:50):
Harold, welcome to the program.
Um, that's, that's part of theproblem as well, is this
disparity test.
But if we stop accounting forit in the way that we do, maybe
we can, I don't know, maybe wecan.
But again, brad, I think whatwe're talking about here is pie
in the sky, because I don'tthink there's the political will
.
Like I said, people can't evenenvision that being part of the
(38:11):
issue here.
Speaker 1 (38:13):
Maybe so, michael, maybe it is pie in the sky, but
I think if anybody feels that,if any community feels that they
may be pressured more, Justrudely interrupted Brad's final
thought on the last topic, onnumber two we were talking about
.
Speaker 2 (38:29):
I didn't think there was a political will to fix
things like the disparity test,et cetera, et cetera.
Brad, I'll give you the finalthought on that before we jump
into number three.
Speaker 1 (38:37):
Oh, I was going to simply say that I think any
discussion maybe there's not thepolitical will to increase
local contribution, but anydiscussion about that, about the
potential for increasing localcontribution and you can have
more money if it comes fromincreased local contribution I
think that will start puttingthe brakes on this push for more
(38:59):
and more and more, becauselocal communities will start
considering, well, I can'tafford more.
So, yeah, if I'm going to haveto pick up part of this more,
then I don't want more.
I want to have some constraintson spending at the local level.
Speaker 2 (39:15):
Well, it's an interesting thought and I'd love
to see some discussions on it.
Will it happen?
Probably not, but I'd love tosee more conversations around
that whole idea.
All right, let's move on tonumber three, which is a
discussion that we've beenhaving over the last eight, 10
months about the permanent fundand this push by the fund itself
.
People like Stedman and otherswho see it as a way to I mean, I
(39:40):
can't see it any other way toget their hands on the cookie
jar, to get their hands into thecorpus, and that is this
continual discussion on quoteunquote safeguarding the
permanent fund by combining theearnings and the corpus.
The latest is a piece out ofthe Fairbanks Daily News.
Minor Bart Lebon,constitutional scholar, comes
(40:01):
forward with a piece talkingabout it's time to safeguard the
permanent fund for good.
Brad.
Speaker 1 (40:08):
Well, lebon's op-ed is a pickup on a previous op-ed,
a community op-ed that wediscussed last week by Joshua
Church.
That was pushing the oneaccount, the proposal to merge
the two accounts and thepermanent fund into a single
account and to sort of recaptureor bring everybody up to speed.
(40:31):
We currently have two accounts,constitutionally created, two
accounts.
The corpus is constitutionallyprotected.
The corpus of the permanentfund principle of the permanent
fund is constitutionallyprotected.
The legislature can only spendfrom the earnings of the
permanent fund.
So if the permanent fund is notproducing enough earnings to
(40:53):
fund whatever the legislaturewants to use the earnings for,
enough earnings to fund whateverthe legislature wants to use
the earnings for, then thelegislature has to stop spending
because there isn't under theConstitution.
They can only spend from theearnings.
So you only get to spend asmuch as the permanent fund earns
.
What the proposal for the oneaccount system is is to merge
(41:15):
the earnings reserve into thepermanent fund corpus, create a
single account, and theproponents say that's good
because then you havepredictability.
You can set the draw at 5% ayear or whatever number you pick
.
You can set the draw at 5% ayear and you will have a
consistent stream of earnings,consistent stream of revenues,
(41:38):
rather coming out of thepermanent fund at 5% of whatever
the balance of the permanentfund.
Is the problem with that?
It doesn't increase theprotection of the permanent fund
.
It decreases the protection ofthe permanent fund Because if
you don't have earningssufficient to fund the 5%, you
can still under the proposedconstitutional amendment they
(42:01):
can still take the 5% every year.
They can start eating into thecorpus, what's previously been
considered the corpus starteating into the corpus to fund
the 5%.
They take away, they eliminatethe constitutional protection of
having the two account systemand you can only spend from the
second account, from theearnings account.
(42:21):
They take away that protectionof the corpus and open up the
corpus, open a back door intothe corpus for withdrawals.
During years in which therehasn't been the permanent fund
hasn't earned 5% and that's nottheoretical.
If you look back over the lastfive or six or seven years, in
(42:43):
the majority of those years thepermanent fund corporation
hasn't earned a real rate ofreturn of 5% sufficient to fund
the draw.
So it isn't just speculation,it isn't just theoretical that
there might be this problem.
We've seen that problem occurwhere the permanent fund doesn't
(43:03):
earn the level that thelegislature now wants to
withdraw.
So the headline that it's timeto safeguard the permanent fund
for good by Bart LeBond is false.
I mean, it's exactly thereverse.
What the one account systemdoes is undo the safeguards that
(43:25):
are currently there, currentlyin the Constitution, protecting
the permanent fund corpus.
What's really going on is thisand Bart LeBond is not my
favorite legislator, so you knowI I immediately went to this
article, immediately went tothis op-ed when I saw he he
authored it.
What's going on is this is thisis sort of the continuation of
(43:49):
the people and LeBond was in thelegislature when they started
doing this.
This is the continuation.
This is the continuation of thepeople who said oh, we need to
continue spending, so we'regoing to start tapping into our
savings accounts, first thestatutory budget reserve till
they drain that.
Then the constitutional budgetreserve, which you know, at one
time had $12 billion in it untilthey drained that.
(44:10):
And then you know we're goingto continue spending.
So we'll start draining down.
We'll start cutting thepermanent fund dividend because
that's not important.
You know, that's not really.
Bartle Bond is a former banker,is a top 20 percenter.
That's not really important.
We'll start draining down thepermanent fund dividend.
This is the next step to givethemselves a back door into the
(44:34):
permanent fund so that theycontinue spending.
They can continue spending eventhough they don't have the
money.
They didn't have the money whenthey drained the SBR.
They didn't have the money whenthey drained the CBR, but they
continued spending.
They didn't have the money sothey started draining the PFD,
started cutting the PFD so theycould continue spending.
This is the next step to open aback door into the permanent
(44:56):
fund corpus so they can continuethe revenue draw even if the
permanent fund is not earningenough to fund their spending.
Going to a one-account systemis the exact opposite of being
conservative.
It's the exact opposite ofconstraining revenues so you
(45:18):
constrain spending.
It's opening the back door toincrease revenues and increase
spending.
Speaker 2 (45:24):
And what kills me is that his one of his comments in
here.
During my four years in stateoffice, a number of budget
amendments were proposed on theHouse floor to overdraw the ERA
beyond an amount allowed bycurrent law.
All these attempts failed.
But the only way to keep thisfrom ever happening is to
combine the funds into a singlefund endowment.
Nothing's going to protect themfrom proposing you know you
(45:48):
can't protect people fromproposing to overdraw the fund.
That's the thing.
And even if it was set at 4.5%,which is what they're saying
now, that's what they oh, we'lljust drop it to 4.5.
It'll be fine, it's a largerbatch.
It doesn't matter If it's notearning 5%.
You're continually eating intothe seed corn, eating into the
(46:10):
seed corn, it.
You know?
That is none of this.
It's all nonsense.
None of that is going toprevent people from attempting
to overdraw the fund.
The only thing that stopped theoverdraw was the votes on the
floor.
But again, this is the solution.
No, it's not.
Speaker 1 (46:22):
Even if, even if you overdraw the fund, I mean I'm
let's, let's, let's take theirnightmare scenario that they can
overdraw the ERA.
Even if they do that, theydrain it.
And then the Constitution saysyou stop their proposal.
Their one-account proposal saysyou can continue as long as you
limit the draws to 5%.
Speaker 2 (46:43):
Right, as long as the money's in the main account,
you can draw as much as you want, up to 5% in perpetuity, and
again all you're doing is eatingthe seed corn.
You're strangling the goldengoose and that's where we're at.
Yeah, I mean, that statementjust kind of floored me, brad.
Oh, we saw a number ofamendments to propose that we're
going to overdraw the earningsreserve.
(47:06):
These attempts failed, but theonly way to keep this forever
happening is to combine the twofunds.
No, because they'll keep doingit.
There is no appetite to reduceor constrain spending, so
they're going to keep doing it.
And if you put the two fundstogether, what that means is
they'll just draw, they'll justeat into the funds.
Speaker 1 (47:27):
Yep, yep, I mean there isn't the reason I don't
get concerned about this ERAoverdraw issue because there's
an absolute stop.
If you drain it, you're done.
There's no more money there.
There's no more money to drainout of there, you're done.
(47:49):
The permanent fund corpus isprotected.
Maybe then people will startlooking at ways of increasing
the returns on the permanentfund as opposed to the mediocre
returns that we've had over thelast several years.
But you're done, the permanentfund corpus is protected.
What Bart's suggesting is you'renot done.
(48:11):
Even if you're not earning 5%,even if you're not replenishing
the amount that you're drawingevery year, you get to keep
going.
There's no stopping point.
I did a projection at one pointwhen this first became an issue
.
I did a column on this andprojected if you, if you just
drained, if the permanent fundkept kept earning about 4% and
(48:36):
real rate of return and you keptdrawing a 5%, how many years
would the permanent fund last?
And it's not really a bignumber.
I mean you can drain thatsucker fairly quick by by
overdrawing the permanent, overoverdrawing earnings because it
compounds, right, it compoundsyou, you.
Speaker 2 (48:54):
You got into the earning power.
So every year the earning poweris less and pretty soon it
starts to accelerate and all ofa sudden it's gone.
You know, jeremy bynum repjeremy bynum's in the room.
He said well, we could justmove the additional dollars from
the era to the corpus problemsolved in one way, except for
then there'd just be more of aclamor to combine the funds
because there is no politicalwill in the legislature.
(49:17):
Jeremy, you should know this.
There's no political will toreduce the size and scope of
government, so they're going tolook for more money.
So if you do that and they stopclamoring to combine the funds
which I think that would justadd more pressure to well, then
they'd just eliminate the PFDand then they'd institute some
form of tax because there is nopolitical will to constrain the
(49:37):
scope of government.
Brad.
Speaker 1 (49:40):
No, if you want to move the ERA in, if you want to
move the funds currently in theERA into the corpus, you're
slitting your own throat becausethere the current
constitutional provision therewon't be any money in the
earnings reserve to use to payPFDs, there won't be any money
in the earnings reserve to useto supplement the budget.
(50:01):
Legislature's already drainedout the savings account.
So you're just sort of done andI doubt that even Jeremy would
vote for that.
But the point is this the pointis, if you want to protect the
permanent fund corpus, thepermanent fund corpus, the way
(50:23):
to protect the permanent fundcorpus is to leave the current
constitutional provision ineffect, because that protects
the permanent fund corpus.
To leave the currentconstitutional provision in
effect because that protects thepermanent fund corpus.
It puts a hard stop on furtherdrainage.
If you drain the earningsreserve account, if you want to
have access into the permanentfund corpus, then what you do is
(50:45):
you do a one account system sothat when you set the draw, the
draw is without regard towhatever the earnings are and
you can continue to draw atwhatever pace you want, whatever
pace is set by law.
You can continue to draw thateven if your earnings don't
match what you're drawing outdon't match what you're drawing
(51:09):
out.
So the way to protect thepermanent fund is the permanent
fund corpus, which is what thecurrent constitution protects
and what everybody says theywant to protect.
The way to protect the permanentfund corpus is to keep the
current constitutional provisionin effect, because it puts a
hard stop at the end of theearnings reserve account.
(51:30):
If you don't want to protect thepermanent fund corpus, then
yeah, go ahead and do the oneaccount system and set the draw
rate at something that iswithout regard to whatever the
permanent fund is earning at anygiven point in time, and you
can just drain that sucker onout.
It's the exact reverse.
What Bart LeBond and others whoadvocate the one account system
(51:51):
are doing is they're saying wereally want to have a steady
draw from the permanent fundwithout regard to earnings.
We've seen the last few yearsthat the permanent fund
corporation hasn't beenachieving 5%, and so we've seen
the earnings reserve drained.
So we really want to have a wayof accessing the permanent fund
corpus, but we don't want tosay that because we know people
(52:14):
will rebel against that.
So let's back into someargument that we can use that
justifies going to a one accountsystem and they backed into
this, made up argument aboutdraining the earnings reserve
account and Well, not big money.
Speaker 2 (52:30):
This is a self-inflicted wound too, right,
I mean, because Bartle Burt,stedman and company and
everything else, they movedeight billion dollars over the
last 10 years into the corpusfrom the earnings reserve.
That money was sitting there inthe earnings reserve and they
could have had access to it, butthey did this intentionally to
kind of foster this environmentof, oh, now we're out of money,
(52:51):
we have to have, we have to tapinto the corpus.
It's, I mean, this is, and ofcourse this all it goes back to
the predication also that thepermanent fund is not earning
what it should.
So I mean, you know, it's a,it's a, it's a hot hot mess.
Speaker 1 (53:11):
It's a hot mess.
All right, brian.
The earnings reserve should.
The permanent fund should beearning more, and so we would
have less of this problem aboutthe earnings reserve being
drained because we would havemore earnings and we would have
more in the earnings reserve.
That's sort of a separate issue, though this issue is really
about protecting the corpus, andif you really want to protect
the corpus, the current twoaccount system does that,
(53:33):
because it creates the hard stopat the end of earnings.
That's it, you're done.
What Bart and others want to dois they want to create a
backdoor into the permanent fund.
Speaker 2 (53:44):
All right, brad.
Thank you so much.
We appreciate you coming onboard.
Speaker 1 (53:48):
Michael Lewis, thanks for having 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
during the week on Facebook andTwitter.
(54:09):
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 three, the top three things on our
mind here at Alaskans forSustainable Budgets for the week
of August 11th 2025.
The weekly top three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:33):
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 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,
(00:57):
soundcloud, spotify and Substackpages, also on the Alaskans for
Sustainable Budgets website, aswell as the projects page on
national 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
(01:19):
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, the Anchorage
(01:39):
business community says they areconcerned about the economy,
but at the same time, they pushthe revenue option that has the
largest adverse impact on it.
Second, we explained why thenext rounds of K-12 funding
growth should come fromincreased local contribution
rather than from the state.
(02:00):
And third, we explained whythose pushing the one account
approach to protect thepermanent fund are in fact
opening the door for raids on it.
And now let's join Michael.
Speaker 2 (02:15):
So, brad, today we're going to dive into it.
We've got a lot of things tocover and we're going to start
off with this article in the ADN, talking about the survey of
businesses.
And I mean, I don't know howmuch money was spent on this
survey.
I just the more I look at someof these stories and I see
there's whole industries thatare basically out there to tell
(02:37):
the government to study for thegovernment, the businesses or
the.
There was one in Soldotna todaywhere they're studying the
light poles and they paid$90,otna today where they're
studying the light poles andthey paid $90,000 for them to go
study all the light poles tosee which ones need to be fixed
or not.
And I'm just, I'm just shakingmy head.
But this week's we're faced, uh, we've got a conundrum.
The Anchorage business set isfacing a conundrum and they just
(02:59):
don't know what to do.
Speaker 1 (03:07):
Brad, uh, give us the , give us the rundown here.
Well, this last week was theannual Anchorage Economic
Development Commissionpresentation in Anchorage where
they have done a survey.
The AEDC has done a survey ofthe Anchorage business community
, identified things that thebusiness community is concerned
about, identified the level ofconfidence the business
community has in the economy andthe issues they see out there
(03:28):
and the potential solutions theysee to the business and or they
see to the economic environment.
And this year's survey was notgreat.
The headline in the AnchorageNews, the daily news story, is
survey finds Anchorage businessconfidence fell amid Trump
tariffs and federal cuts.
The APRN has Anchorage businessreport.
(03:53):
Businesses report decliningconfidence in new survey.
Survey showed that morebusinesses were concerned about
the state of the economy andbelieve the economy.
The state of the Anchorageeconomy, and indeed the Alaska
economy, was headed on adownward trajectory than
(04:13):
believed it was on an upwardtrajectory.
It wasn't unanimous.
There were some who believedthat the economy was doing okay,
but the level of businessconfidence was on a downward
spiral.
From the standpoint of theAnchorage business community,
the thing that caught my eye wasone of the issues, a fairly
(04:37):
high issue, for the reason forthe lack of confidence was the
state of the.
The reason for the lack ofconfidence was the state of the,
the condition of the state'sfiscal situation and the, the
concerns that that the businesscommunity has about the state's
business or the state's fiscalsituation, and and that it's not
resolved and it and it remainsup in the air.
(04:58):
And and so the survey was notonly about their, their, their
concern about the state's fiscalsituation, but about potential
solutions.
And the thing that caught myeye was the disconnect between
the business community's concernabout the state of the economy
and their solutions to theeconomy, solutions to the
(05:23):
state's fiscal situation thatthey voted for in the survey.
The number one solution to thestate's fiscal situation, a high
level of concern about thestate's fiscal situation the
number one solution to thestate's fiscal situation was
reductions in the PFD, furtherreductions in the PFD.
(05:45):
We're already down to $1,000PFD.
We're already down to a 70% cutor something in the PFD, and
now the business community issaying, well, the solution to
the state's fiscal situation isto reduce it even further.
Second, behind that wasreduction of state spending.
(06:07):
Third, behind that was astatewide sales tax, then a
statewide income tax, and thenelimination of the PFD was at
the bottom but neverthelessstill got a significant share of
votes more than a marginalamount of votes supporting the
elimination of the PFD.
(06:27):
Here's the disconnect.
The disconnect is they'reconcerned about the economy.
They're concerned about theimpact, primarily the impact of
the tariffs raising costs andcuts in federal spending
reducing revenue in the localeconomy.
But a big part of the concernabout the economy is the state's
(06:48):
fiscal situation and theunresolved nature of the state's
fiscal situation.
Concerned about the economy,they're concerned about the
impact of all that on theeconomy.
Yet they are voting for asolution the reduction in the
PFD.
That of the alternatives, hasthe largest adverse impact on
the economy.
(07:08):
It's like there's thisfundamental economic disconnect
in the mind of the Anchoragebusiness community.
Any regressive tax, becausemiddle and lower income Alaska
families, middle and lowerincome families generally,
middle and lower income familiesgenerally have a higher
marginal propensity to spend.
That is the extra dollar theyget they will spend as opposed
(07:32):
to save or invest or sort oftake off the board, as occurs in
the higher income brackets.
So any extra dollar in middleand lower income brackets tends
to increase spending, tends toimprove the business, tends to
improve the business climate.
Pfd cuts are the most regressiveof all the options and have the
(07:54):
largest adverse impact onmiddle and income families, and
so they have the largest adverseimpact on the overall economy.
It's just that sort ofaxiomatic.
That's how economics works.
And so when you say that yoursolution to a bad business
(08:15):
climate a business climate whereyou're concerned about consumer
spending and you're concernedabout revenue in the community
and you're concerned aboutrevenue in the pockets of
consumers when you say that's aprimary concern, but you vote
for the solution that has thelargest adverse impact on the
(08:37):
economy, I don't know whatyou're trying to get at.
I mean, you're saying thesituation's bad and then you
vote for the solution that makesit even worse.
Speaker 2 (08:47):
Well, and this shows us, I think more than anything
else, how much of a dependencystate.
And in this case we're nottalking about the welfare side
of it, we're talking about thecorporate welfare.
They said they surveyed like172 businesses.
How many of those businessesare dependent on government
largesse at one point or another?
Government contracts, surveys,studies, maintenance, whatever
(09:11):
that's what it looks like.
To me it looks like this isthat self-licking ice cream cone
of businesses that haveattached themselves to
government and are so dependenton it.
They're not really talkingabout the private economy,
they're talking about the publiceconomy.
That's what this whole focusseems to be about, and as long
as the public economy does well,what it kind of ends up being.
Speaker 1 (09:36):
Yeah, I think that's a good observation and I think
that is a significant part of it.
I think the other part of it is, when you do a business survey
like this, you're doing a surveyof the executives or the owners
or the upper echelons of thebusiness community, and so what
you've got is what you'resurveying are people in the top
(09:57):
20%, or people in oil, or peopleat the top levels of other
industries who are saying, oh,the PFD doesn't mean much to me
and so let's, let's cut thatbecause it doesn't really impact
me.
I don't.
I don't think they understand.
(10:17):
I think they're surveyingpeople who don't understand the
impact of PFD cuts on middle andlower income Alaska families
because it doesn't affect them.
So they're saying, oh, cut thatbecause it really doesn't
affect me much, withoutunderstanding that it affects
the economy a whole lot.
Speaker 2 (10:34):
Right, no, I mean, and I think that's part of the
problem here is that, as theycontinue to look at it, this is
a very insular appears to me tobe a very insular group of
people because overall and theymentioned this consumer
confidence is rising steadilybut the business confidence in
(10:54):
Anchorage, specifically, wasdeclining, and I think part of
that again is because they'redependent on that government
spend, while the private economyand the consumer confidence and
inflation and all those otherindicators seem to be dropping,
and so consumers are excited,but the business climate is not
so much, especially when thosebusinesses have built an entire
(11:17):
business model aroundsubsidizing themselves from
government spend.
Speaker 1 (11:21):
Yeah, I think that's a good observation and the focus
on the decline in federalspending as a driver to the loss
of confidence is probably agood indicator of that.
That businesses have structuredthemselves to take advantage of
the federal spending and whenthey see that federal spending
(11:43):
declining they have a concernabout it.
Those businesses tend to alsobe concerned about state
spending and be tied to statespending and when they see a
decline in state spending oradverse impacts on state
spending, constraints on statespending, they tend to be
concerned about that.
But to say that the solution tothat is to utilize PFD cuts,
(12:09):
the highest ranked solution tothat is further PFD cuts from
$1,000.
Keep in mind we're already downto $1,000.
Keep in mind we've already cutPFD something like 70%.
When they say that the solutionto that is to further cut the
PFD, they're just I mean it'skabuki, I mean it's suicide
(12:31):
theater, right?
I mean they're increasing thelevel of the adverse impact on
business as a solution to theirconcerns about business.
Speaker 2 (12:43):
Yeah, it's kind of frustrating.
And I saw this chart I think itwas must read or somebody who
had this chart up originallywhere they were talking about
their different options.
You know reduction in statespending, statewide sales tax,
income tax, elimination of thePFD, reduction of the PFD.
And the largest take ofanything was that reduction of
the PFD followed closely byreduction of state spending.
(13:05):
But I just kind of feel likethat's an afterthought more than
it.
Now, nobody wants to eliminatethe PFD, right, that's the last
that has the lowest.
But I mean, when youfunctionally reduced it down to,
I mean we were at what 82, 83,17 was this year's take of the
PFD for the people.
You know, this year's take ofthe PFD for the people, you know
(13:28):
83% went to government and 17%went to the people.
I mean, how much lower can yougo at this point before it is
essentially eliminated?
Speaker 1 (13:33):
It was you know they're making it into a trivial
impact on the economy.
I mean, the PFD at full forcehas the potential to be a
positive impact on the economyand again because the marginal
propensity to spend is strongestin middle and lower income
families, I mean, if you have astrong PFD, you're going to have
(13:54):
a strong spending response tothat additional money coming
into those families and so totake that money when you cut it
back, you're turning the PFDinto a trivial share of family
income and you're turning itinto a trivial impact, uh, on
the economy.
Yeah, we don't want toeliminate it because, oh my gosh
(14:15):
, nobody wants to say we want toeliminate the PFD but we want
to trivialize it to the pointwhere it really doesn't have any
impact on the economy, at thesame time that our largest
concern is about the economyitself.
You know.
Speaker 2 (14:27):
Brad.
The one that got me was thefinal paragraph in this story in
the ADN, where they'relamenting the federal Medicaid
cuts and you really start to seethe oversized impact that this
has in Alaska, especially withthe federal spending $9.5
(14:49):
billion spent annually on healthcare in Alaska, one third of
that coming from Medicaid andMedicare $3 billion spent in
this state.
And of course they're alreadylamenting the fact that some of
that stuff has been cut becausethen doctors may offer less
services.
And again you see there'sdependency, because when I talk
(15:14):
about dependency, most peoplethink about, you know, maybe
road construction or governmentcontracts or something like this
.
But there's a huge dependencysector in the medical industry
as well, where they aredependent on all that state and
federal spending to a hugeamount.
And it really is.
(15:36):
This is the problem that we'refacing and this is kind of the
theme of today.
How much have we grown sodependent on government?
We can't even envision it.
We can't even imagine that wecould live without that spending
.
Speaker 1 (15:49):
Yeah, I remember early on in the Dunleavy
administration, maybe in theroadshow he did after he was
elected governor, where he wasgoing to various groups and
talking about his vision forcutting spending and getting
state spending back undercontrol.
One of the groups he talked towas a group of doctors and the
surprising thing about that wasand he talked about cutting
(16:11):
Medicaid as part of the overallspending cuts, cutting the
state's tie to Medicaid or thestate's contribution to Medicaid
as part of the overall spendingcuts.
And one of the reallysurprising thing was the strong
pushback he got from the docs.
I mean the docs, basically, theposition basically was yeah,
yes, spending cuts, yes, that'show to get the state under
(16:33):
control, but don't cut Medicaid,don't cut the federal
government or don't cut thestate's contribution to Medicaid
or cut the Medicaid program.
And that was I mean, you seethat all over the place, right?
You see, that's what we saw in2019 with the pushback on the
spending cuts.
It was, yeah, spending cuts,yes, we got to do that, but
(16:56):
don't cut my program, don't cutmy library, don't cut my museum,
don't cut my reading program,don't cut this, don't cut that.
(17:18):
And with the docs, it was don'tcut Medicaid.
I mean the level of your pointabout dependency is a good one.
I mean the level of dependencyon point about PFDs to the point
where they prioritize cuttingthe thing that has the, or doing
the thing that has the largestadverse impact on the overall
economy.
Doing that in order to savedollars for their spending
(17:40):
programs, dollars that theydon't when we go back to the
business elite, dollars thatthey don't have to pay.
So hey, they don't count, right, we don't have to pay them, so
we don't have to be worriedabout it.
It's just everybody else whohas to suffer the cut.
Speaker 2 (17:53):
Yeah, brian says, because a healthy workforce will
produce more.
Will they really?
Or will they sit in their mom'sbasement smoking pot and
playing on Xbox?
I mean, that's really myquestion.
When it comes down to it,number two of the weekly top
three.
We said it was coming, wepredicted this.
(18:15):
We said you know they got theBSA increase this time around,
but that was just a nice start.
You could already see themlining up and they're saying the
quiet part out loud.
Not only are they going to wantto increase the BSA even more
now, of course, it's theinflation proofing and
(18:39):
everything else.
This comes from an opinionpiece in the Daily News.
Miner Brad was kind enough toshoot me a screenshot of it here
.
Education funding a victorytoday, but uncertainty tomorrow.
They're already selling thefear.
Speaker 1 (18:53):
Brad, yeah, the body wasn't even warm or the boats
weren't even cold, weren't eventhe body wasn't even cold or the
boats weren't even cold.
From the BSA increase of thelast session and the veto
override, the news minor.
The news minor.
The news minor is alreadypushing the next round.
(19:16):
A couple of paragraphs fromthat op-ed.
But let's be clear this is not.
They're talking about the $200.
Let's be clear this is not asustainable funding solution.
The year's extra oil revenuegave lawmakers a fiscal space to
act.
The cushion may not be therenext year and without a
long-term fix to Alaska'seducation funding formula, the
(19:39):
base student allocation, we'relikely to see the same education
funding tug of war again andagain.
This isn't an op-ed during thesession.
Speaker 2 (19:50):
This is an op-ed now this week that says we're not
there yet I want to interrupthere because it's very obvious
to me that apparently, whoever'swriting this op-ed for the
Newsminer, this is the editorialboard.
Apparently they don'tunderstand how this works
(20:10):
Because they said let's be clear, this is not a sustainable
funding solution.
This year's extra oil revenuegave lawmakers fiscal space to
act and that cushion may not bethere next year.
This is in perpetuity.
Do they not understand thatthat $700 increase, $180,
whatever million, almost $190million is locked in forever in
(20:32):
the future?
They're acting like this isgoing away tomorrow, do they I
mean, do they not understand?
Speaker 1 (20:38):
how this works.
Oh, michael, I think they dounderstand.
I think they're saying the $200isn't enough.
I think they're saying it needsto be more.
And this paragraph is where itgives it away.
What's needed is a durablefunding model that adjusts for
inflation and gives districts apredictable foundation.
That doesn't mean writing ablank check.
(20:59):
It means agreeing on what levelof education Alaska wants to
provide its children,determining what its costs and
continuing and committing to itwithout the annual hostage
negotiation.
So no, I think they fullyunderstand.
The $200 is in perpetuity.
I think they're just sayingthat's not enough and we need
(21:19):
more on top of that, includinginflation adjustments on top of
everything else, top of that,including inflation adjustments
on top of everything else.
So it's a.
As I said, the votes aren'teven cold, the body isn't even
cold and we're already on to thenext round.
(21:39):
The news minor has alreadytaken us on to the next round.
Here's a point I want to makeas we go into that round and if
you have that chart, let's flipit up I've been spending a lot
of time on looking at how Alaskaranks, not in terms of spending
, not in terms of per studentspending, or how we rank in the
(22:03):
nation on that.
I've been looking at how we fundour spending and I've been
doing that because, again, Igrew up in a situation in
Illinois where the burden offunding was substantially on the
local communities and so whenyou were talking about school
board or when you were talkingabout school funding, it was a
(22:27):
local discussion, because theschools are funded substantially
mostly locally, mostly locally,and so it was, if you want to
increase spending or if you wantto start a new program, or if
you want to do this or you wantto do that.
It was a very local discussion.
There was a lot of localpushback or local support in the
case of you know if there was aunanimity that we needed to
(22:50):
increase spending in this area,but it was a very local
discussion which had an impacton the local school board and
which had an impact on what wasgoing on in the schools, and
it's led to a substantial amountof consolidation.
When I look back at my oldschool district, my old school
district is no more because it'sbeen consolidated two or three
times since then into a muchlarger school district to
(23:14):
achieve economies of scale andachieve cost savings.
So there's been a push at thelocal level to consolidate
because of the financialsituation.
What we have in Alaska is theexact reverse of that.
What we have is the localitysaying, hey, we don't have to
pay for it, we don't have to paymuch for it, and so it's the
(23:34):
state's responsibility, andwe'll keep pushing the burden
more and more.
Have to pay for it, we don'thave to pay much for it, and so
it's the state's responsibility,and we'll keep pushing the
burden more and more of theburden on the state, and nobody
is taking.
I don't perceive that there's alot of responsibility being
taken at the local level to findcost savings, because it's
always we'll just go push to thestate, we'll just go ask the
state for more and more funding.
(23:56):
So I did a that's the key, bythe way that's the state.
Speaker 2 (23:57):
We'll just go ask the state for more and more funding
.
That's the key.
By the way, that's the key.
They don't ever have to lookfor efficiencies, because Uncle
Sugar will always be there tobail them out.
That's the problem.
Speaker 1 (24:08):
So you don't get a lot of talk about consolidation
at the local level.
You don't get a lot ofdiscussion about cost savings.
You get some, but you don't geta lot because it's always.
You get some but you don't geta lot because it's always well,
we'll just go ask the state formore money, more and more and
more money at the state level.
So I'm spending a lot of timelooking at how Alaska stacks up
(24:30):
compared to other states interms of the percent of funding
coming from local level versusstate level, versus federal
level.
And Alaska consistently.
I mean there's various surveysout there of spending.
They're not all, they don't allcome to the same number,
they're not all on the same baseyear.
The most recent analysis isn'tall on the same base year, so
(24:53):
they're sort of spread all overHekaback.
But I mean they do have aconsistent theme and I've taken
a few of the major ones here andput them in this chart that I'm
going to be using for a Fridaycolumn somewhere along the way
and you can see thatconsistently, alaska is ranking
(25:14):
very low in terms of the percentof school funding coming from
the local level.
The Census Bureau, the censusstudy, shows that Alaska the
most recent they have is forFY23, shows that Alaska is at
22.7 percent as opposed to theUS average is 44.7%.
(25:37):
Alaska is about half of thenational average funded by the
local level, the NCES study.
The most recent year is FY21.
Again, you can see Alaska is inthe 20% range low 20% range
against the US average in themid-40s range.
Again, alaska's about half.
(25:57):
The EDI study that's publishedin 2025, not clear what base
year it's based on, but againAlaska's at 20-some-odd percent
against the national average inthe 40s.
Numbers are varying but you cansee a theme here.
And then the last is the AlaskaDeed Study for FY24, the latest
(26:18):
year for which they've audited.
Again, alaska's in the localcontributions in the mid 20%.
So I think part of thediscussion we need to be having
maybe a big part, maybe thebiggest part of the discussion
we ought to be having in thisnext round of K-12 funding that
we're talking about isincreasing the burden on the
(26:44):
local communities, increasingthe incentive, to put it another
way, increasing the incentivefor the local communities to
start pushing back on spending,to start saying, look, wait, we
have to pay for a big chunk ofthis.
So let's find efficiencies,let's find priorities within our
(27:05):
communities to reduce spendingor to keep spending under
control.
As I say, in Illinois it's ledto the consolidation of a
significant number of schooldistricts across the state
because they have found thatthey can't afford.
You know, everybody wants tohave their own school Every town
and village wants to have theirown school but you find you
(27:25):
can't afford it and so you startlooking for other ways to have
schools that are affordable tothe community, and in Illinois
you know that's led to a lot ofconsolidation.
I think a key of this next roundof school funding is starting
to talk about an increase in thelevel of local contribution,
(27:48):
and I know that's going to leadto a lot of pushback, but that's
exactly what we want, right,it's exactly.
We want the local communitiesto start pushing back on
increased school spending andstart finding efficiencies in
the context of their communities, because they'll know best how
to do it Finding increasedefficiencies and increased ways
(28:10):
of controlling costs andachieving efficiencies in terms
of consolidation or other thingswithin their communities to
push back on spending increases.
If we don't do that, if wedon't push more responsibility
and more costs down to thecommunities, I'm afraid we're
(28:33):
just the news miner's right,we're in for another repeating
rounds of pushing for increasedstate spending because people,
the local community, say hey,you know, let's have more.
It's the state's fault.
Speaker 2 (28:45):
We don't have more.
Part of that is a conundrum too, because we've accepted these
federal dollars, and part of thehook in the federal dollars is
that equity component, becausewe have some communities that
are already funding up to thatfederal cap.
Right, I mean, the KenaiPeninsula Borough was
essentially funding to the capthat they were allowed under
(29:07):
under federal law, and so we'rebeing held in amber on that
component.
And then this is a little bitof an apples to oranges
comparison because we've gothuge swaths of the state that
have no local contribution atall.
Right, there's no localcontribution, it's all being
funded by the state.
So the numbers are being kindof skewed by that as well.
(29:27):
But we're, you know, we've gotthose two problems locking us in
.
Speaker 1 (29:31):
I've looked at the.
I've looked at the secondproblem, I've got a thought on
the first problem too.
But I've looked at the secondproblem and yes, there are big
parts of the stategeographically that have a
limited amount of localcontribution.
The unincorporated borough hasa limited amount of local
contribution or no localcontribution.
(29:52):
Basically the feds aresupplying the local contribution
contribution.
Basically the feds aresupplying the local contribution
and that's an issue, but it'snot a big driver in that 22%.
If you look at Anchorage, forexample, Anchorage is in that
general area, is in the 20s.
It's a little bit higher thanthe average, than the Alaska
(30:12):
average, but it's still a lotlower than the national average.
Fairbanks a little higher thanthe Alaska average, but still a
lot lower than the nationalaverage.
And so we tend to overplay, Ithink, the impact, this
disparity within the state inaffecting these numbers.
I think, even if you look atthe big districts, they're not
(30:37):
up to the national average,they're not involving the
localities as much as we do on anational basis.
The first one, about dependenceon federal dollars and the
resulting disparity test we'rethe only state that's still
subject to the disparity test.
We're the only state that'sstill trying to apply the
federal dollars through thestate and count that as toward
(31:00):
the state share, which is whatkicks in the disparity test, and
I think it's appropriate tostart considering or to consider
whether that's something westill want to do, whether that's
something that's important.
It doesn't back out the federaldollars.
The federal dollars still go in.
They just don't count as partof the state's share Right.
(31:22):
And so I think that if we're,if we're focusing on getting the
contribution, getting theincentives at the local level up
and increasing the incentivesat the local level, the
incentives at the local level,increasing the involvement,
increasing the funding from thelocal level, it's time to
evaluate whether or not wereally still need to be
(31:42):
subjecting ourselves to thefederal disparity test.
Speaker 2 (31:45):
Well, because that was the call from the
legislature, right?
Oh, they are all about localcontrol.
That was the whole argument.
They are all about localcontrol.
If they're about local control,then up your contribution so
that you can control it and bedirectly involved in that from
now on.
That seems to be the answerhere.
Speaker 1 (32:05):
Yeah, they're all about local control.
But they're all about localcontrol of state spending, which
is sort of the worst of allworlds, because you get a body
committed to pushing forincreased state spending so they
can have more of it at thelocal level without them having
to raise it themselves.
Speaker 2 (32:24):
You know, Brad, that's what I've been saying is,
if a community wants to givemore, if a community wants to
make itself the showcase ofeducation, they could just fund
it as much as you want.
That should be part of it.
I didn't realize that it wasbecause of the way that they
accounted for it the federalmonies that was triggering that
(32:44):
I mean.
So we stopped that.
We just we should stop that ahundred percent for sure.
When you look at the numbersthat you just you threw up there
and I'll pull that, pull thatchart back up real quick but
when you look at it and you seelocalities are spending, you
know, are contributing 40percent to their community
(33:05):
schools and we're, we're doinghalf that in almost every survey
.
Our local communities are onlyproviding half of the same
amount.
If they were squawking and itwould mean that the local
community would be more engagedon that, because they'd be like
is this money being wasted or isit being spent?
Are we looking for the mostefficiencies this opinion piece
is so full of, just, you know,the BSA unchanged for years the
(33:31):
reality of running schools.
The result of that unholy unionis a cycle of short-term fixes
and long-term uncertainty.
I mean, how dare they shouldhave to.
You know they go on to talkabout how they're forced to
budget for worst case, and ofcourse they should budget for
worst case scenarios.
You don't budget on the bestcase scenario.
That's not how budgeting works.
(33:51):
You do the best that you can do.
You don't bet on the pie in thesky if come, and that's what
these guys seem to be doing.
Speaker 1 (33:58):
Yeah, and again, michael, I mean I can't stress
enough.
So you go to a school boardmeeting or you go to, you know,
you read about school boardmeetings.
You read, you know, in thelocal, the pen and pieces, the
local paper, about how you knowschool boards are reacting or
school officials are reacting tothe budget.
(34:19):
It's all, oh, the state needsto give us more.
I mean, the state needs to payus more.
We've created these lobbyingorganizations to go to the state
and say the state needs to payus more, the state needs to
increase their contribution, andit's not even in proportion,
right, the localities aren'teven talking about and we'll
(34:41):
pick up 20, whatever odd percentof it, which is sort of our
average pickup.
It's no, all the marginal moneyneeds to come from the state
level.
We need to be increasing thestate level, we need more money
and all needs to come from thestate.
And so we've turned theseschool organizations and the
localities into lobbyists forincreased state contributions
(35:04):
because they don't have anyresponsibility for it Funded by
state contributions.
Speaker 2 (35:08):
by the way, Lobbying arms funded by state dollars to
go get more state dollars.
Speaker 1 (35:13):
Yeah, and so you've got no sense of responsibility
at the local level to find costefficiencies, to find cost
containment.
I mean, they'll give mouthservice, lip service to it.
I read papers from all over thestate and school boards are
saying, oh, we'll constrainspending here or something.
But generally speaking, there'sno drive to find cost
(35:38):
efficiencies, there's no driveto create priorities in the
local community about what we'regoing to fund and what we're
not going to fund, what's goingto get more education funding.
It's like everything needs moreand we'll go to the state to
get everything more and we'llcomplain to the state if they
don't give us more.
And we'll complain about ourstate to get everything more and
we'll complain to the state ifthey don't give us more.
And we'll complain about ourstate officials if they don't
(35:59):
give us more.
That's what we've set up.
We've set up local lobbying formore money from the state.
I think it's time to.
If we're truly interested ingetting cost efficiencies, if
we're truly interested inprioritization, I think it's
time to not only give more powerto the localities in terms of
freeing them from the disparitytest, but I think it's also time
(36:23):
to give them more costresponsibility so that they feel
this increased spending at thelocal community and they feel
the constraint of no, I don'twant to do it that way.
I want to find other ways or Iwant other priorities.
We only have so much money atthe local level.
I want to find other prioritiesand other ways to constrain it.
Speaker 2 (36:45):
I think it's interesting that we can already
see that the verbiage for thebattle lines is being set up,
talking about things likepredictable funding.
You know that's the key thepredictable.
That's what they want.
They want this locked in sothat it's predictable.
And again, that's just.
You know, every dollar in thepublic coffers should fight
(37:07):
against every other dollar,right?
I mean, every program should beweighed and measured.
Everything should have to fightagainst every other option
that's out there, because that'sthe only way you keep things
efficient.
Otherwise, it just becomes, youknow this bloated program, and
that's what we're seeing rightnow.
Yes, every administrator, everyschool district, every school
(37:30):
board should budget for theworst case scenario, and then
everything else is.
You know, if it happens theother way, you know, know it's
planned for the worst, hope forthe best and all your surprises
will be happy ones.
That's what we need to be doing.
But we're not going to.
You know we're.
We're not going to, uh, uh, todeal with that.
And yeah, we've already talkedabout the disparity test.
(37:50):
Harold, welcome to the program.
Um, that's, that's part of theproblem as well, is this
disparity test.
But if we stop accounting forit in the way that we do, maybe
we can, I don't know, maybe wecan.
But again, brad, I think whatwe're talking about here is pie
in the sky, because I don'tthink there's the political will
.
Like I said, people can't evenenvision that being part of the
(38:11):
issue here.
Speaker 1 (38:13):
Maybe so, michael, maybe it is pie in the sky, but
I think if anybody feels that,if any community feels that they
may be pressured more, Justrudely interrupted Brad's final
thought on the last topic, onnumber two we were talking about
.
Speaker 2 (38:29):
I didn't think there was a political will to fix
things like the disparity test,et cetera, et cetera.
Brad, I'll give you the finalthought on that before we jump
into number three.
Speaker 1 (38:37):
Oh, I was going to simply say that I think any
discussion maybe there's not thepolitical will to increase
local contribution, but anydiscussion about that, about the
potential for increasing localcontribution and you can have
more money if it comes fromincreased local contribution I
think that will start puttingthe brakes on this push for more
(38:59):
and more and more, becauselocal communities will start
considering, well, I can'tafford more.
So, yeah, if I'm going to haveto pick up part of this more,
then I don't want more.
I want to have some constraintson spending at the local level.
Speaker 2 (39:15):
Well, it's an interesting thought and I'd love
to see some discussions on it.
Will it happen?
Probably not, but I'd love tosee more conversations around
that whole idea.
All right, let's move on tonumber three, which is a
discussion that we've beenhaving over the last eight, 10
months about the permanent fundand this push by the fund itself
.
People like Stedman and otherswho see it as a way to I mean, I
(39:40):
can't see it any other way toget their hands on the cookie
jar, to get their hands into thecorpus, and that is this
continual discussion on quoteunquote safeguarding the
permanent fund by combining theearnings and the corpus.
The latest is a piece out ofthe Fairbanks Daily News.
Minor Bart Lebon,constitutional scholar, comes
(40:01):
forward with a piece talkingabout it's time to safeguard the
permanent fund for good.
Brad.
Speaker 1 (40:08):
Well, lebon's op-ed is a pickup on a previous op-ed,
a community op-ed that wediscussed last week by Joshua
Church.
That was pushing the oneaccount, the proposal to merge
the two accounts and thepermanent fund into a single
account and to sort of recaptureor bring everybody up to speed.
(40:31):
We currently have two accounts,constitutionally created, two
accounts.
The corpus is constitutionallyprotected.
The corpus of the permanentfund principle of the permanent
fund is constitutionallyprotected.
The legislature can only spendfrom the earnings of the
permanent fund.
So if the permanent fund is notproducing enough earnings to
(40:53):
fund whatever the legislaturewants to use the earnings for,
enough earnings to fund whateverthe legislature wants to use
the earnings for, then thelegislature has to stop spending
because there isn't under theConstitution.
They can only spend from theearnings.
So you only get to spend asmuch as the permanent fund earns
.
What the proposal for the oneaccount system is is to merge
(41:15):
the earnings reserve into thepermanent fund corpus, create a
single account, and theproponents say that's good
because then you havepredictability.
You can set the draw at 5% ayear or whatever number you pick
.
You can set the draw at 5% ayear and you will have a
consistent stream of earnings,consistent stream of revenues,
(41:38):
rather coming out of thepermanent fund at 5% of whatever
the balance of the permanentfund.
Is the problem with that?
It doesn't increase theprotection of the permanent fund
.
It decreases the protection ofthe permanent fund Because if
you don't have earningssufficient to fund the 5%, you
can still under the proposedconstitutional amendment they
(42:01):
can still take the 5% every year.
They can start eating into thecorpus, what's previously been
considered the corpus starteating into the corpus to fund
the 5%.
They take away, they eliminatethe constitutional protection of
having the two account systemand you can only spend from the
second account, from theearnings account.
(42:21):
They take away that protectionof the corpus and open up the
corpus, open a back door intothe corpus for withdrawals.
During years in which therehasn't been the permanent fund
hasn't earned 5% and that's nottheoretical.
If you look back over the lastfive or six or seven years, in
(42:43):
the majority of those years thepermanent fund corporation
hasn't earned a real rate ofreturn of 5% sufficient to fund
the draw.
So it isn't just speculation,it isn't just theoretical that
there might be this problem.
We've seen that problem occurwhere the permanent fund doesn't
(43:03):
earn the level that thelegislature now wants to
withdraw.
So the headline that it's timeto safeguard the permanent fund
for good by Bart LeBond is false.
I mean, it's exactly thereverse.
What the one account systemdoes is undo the safeguards that
(43:25):
are currently there, currentlyin the Constitution, protecting
the permanent fund corpus.
What's really going on is thisand Bart LeBond is not my
favorite legislator, so you knowI I immediately went to this
article, immediately went tothis op-ed when I saw he he
authored it.
What's going on is this is thisis sort of the continuation of
(43:49):
the people and LeBond was in thelegislature when they started
doing this.
This is the continuation.
This is the continuation of thepeople who said oh, we need to
continue spending, so we'regoing to start tapping into our
savings accounts, first thestatutory budget reserve till
they drain that.
Then the constitutional budgetreserve, which you know, at one
time had $12 billion in it untilthey drained that.
(44:10):
And then you know we're goingto continue spending.
So we'll start draining down.
We'll start cutting thepermanent fund dividend because
that's not important.
You know, that's not really.
Bartle Bond is a former banker,is a top 20 percenter.
That's not really important.
We'll start draining down thepermanent fund dividend.
This is the next step to givethemselves a back door into the
(44:34):
permanent fund so that theycontinue spending.
They can continue spending eventhough they don't have the
money.
They didn't have the money whenthey drained the SBR.
They didn't have the money whenthey drained the CBR, but they
continued spending.
They didn't have the money sothey started draining the PFD,
started cutting the PFD so theycould continue spending.
This is the next step to open aback door into the permanent
(44:56):
fund corpus so they can continuethe revenue draw even if the
permanent fund is not earningenough to fund their spending.
Going to a one-account systemis the exact opposite of being
conservative.
It's the exact opposite ofconstraining revenues so you
(45:18):
constrain spending.
It's opening the back door toincrease revenues and increase
spending.
Speaker 2 (45:24):
And what kills me is that his one of his comments in
here.
During my four years in stateoffice, a number of budget
amendments were proposed on theHouse floor to overdraw the ERA
beyond an amount allowed bycurrent law.
All these attempts failed.
But the only way to keep thisfrom ever happening is to
combine the funds into a singlefund endowment.
Nothing's going to protect themfrom proposing you know you
(45:48):
can't protect people fromproposing to overdraw the fund.
That's the thing.
And even if it was set at 4.5%,which is what they're saying
now, that's what they oh, we'lljust drop it to 4.5.
It'll be fine, it's a largerbatch.
It doesn't matter If it's notearning 5%.
You're continually eating intothe seed corn, eating into the
(46:10):
seed corn, it.
You know?
That is none of this.
It's all nonsense.
None of that is going toprevent people from attempting
to overdraw the fund.
The only thing that stopped theoverdraw was the votes on the
floor.
But again, this is the solution.
No, it's not.
Speaker 1 (46:22):
Even if, even if you overdraw the fund, I mean I'm
let's, let's, let's take theirnightmare scenario that they can
overdraw the ERA.
Even if they do that, theydrain it.
And then the Constitution saysyou stop their proposal.
Their one-account proposal saysyou can continue as long as you
limit the draws to 5%.
Speaker 2 (46:43):
Right, as long as the money's in the main account,
you can draw as much as you want, up to 5% in perpetuity, and
again all you're doing is eatingthe seed corn.
You're strangling the goldengoose and that's where we're at.
Yeah, I mean, that statementjust kind of floored me, brad.
Oh, we saw a number ofamendments to propose that we're
going to overdraw the earningsreserve.
(47:06):
These attempts failed, but theonly way to keep this forever
happening is to combine the twofunds.
No, because they'll keep doingit.
There is no appetite to reduceor constrain spending, so
they're going to keep doing it.
And if you put the two fundstogether, what that means is
they'll just draw, they'll justeat into the funds.
Speaker 1 (47:27):
Yep, yep, I mean there isn't the reason I don't
get concerned about this ERAoverdraw issue because there's
an absolute stop.
If you drain it, you're done.
There's no more money there.
There's no more money to drainout of there, you're done.
(47:49):
The permanent fund corpus isprotected.
Maybe then people will startlooking at ways of increasing
the returns on the permanentfund as opposed to the mediocre
returns that we've had over thelast several years.
But you're done, the permanentfund corpus is protected.
What Bart's suggesting is you'renot done.
(48:11):
Even if you're not earning 5%,even if you're not replenishing
the amount that you're drawingevery year, you get to keep
going.
There's no stopping point.
I did a projection at one pointwhen this first became an issue
.
I did a column on this andprojected if you, if you just
drained, if the permanent fundkept kept earning about 4% and
(48:36):
real rate of return and you keptdrawing a 5%, how many years
would the permanent fund last?
And it's not really a bignumber.
I mean you can drain thatsucker fairly quick by by
overdrawing the permanent, overoverdrawing earnings because it
compounds, right, it compoundsyou, you.
Speaker 2 (48:54):
You got into the earning power.
So every year the earning poweris less and pretty soon it
starts to accelerate and all ofa sudden it's gone.
You know, jeremy bynum repjeremy bynum's in the room.
He said well, we could justmove the additional dollars from
the era to the corpus problemsolved in one way, except for
then there'd just be more of aclamor to combine the funds
because there is no politicalwill in the legislature.
(49:17):
Jeremy, you should know this.
There's no political will toreduce the size and scope of
government, so they're going tolook for more money.
So if you do that and they stopclamoring to combine the funds
which I think that would justadd more pressure to well, then
they'd just eliminate the PFDand then they'd institute some
form of tax because there is nopolitical will to constrain the
(49:37):
scope of government.
Brad.
Speaker 1 (49:40):
No, if you want to move the ERA in, if you want to
move the funds currently in theERA into the corpus, you're
slitting your own throat becausethere the current
constitutional provision therewon't be any money in the
earnings reserve to use to payPFDs, there won't be any money
in the earnings reserve to useto supplement the budget.
(50:01):
Legislature's already drainedout the savings account.
So you're just sort of done andI doubt that even Jeremy would
vote for that.
But the point is this the pointis, if you want to protect the
permanent fund corpus, thepermanent fund corpus, the way
(50:23):
to protect the permanent fundcorpus is to leave the current
constitutional provision ineffect, because that protects
the permanent fund corpus.
To leave the currentconstitutional provision in
effect because that protects thepermanent fund corpus.
It puts a hard stop on furtherdrainage.
If you drain the earningsreserve account, if you want to
have access into the permanentfund corpus, then what you do is
(50:45):
you do a one account system sothat when you set the draw, the
draw is without regard towhatever the earnings are and
you can continue to draw atwhatever pace you want, whatever
pace is set by law.
You can continue to draw thateven if your earnings don't
match what you're drawing outdon't match what you're drawing
(51:09):
out.
So the way to protect thepermanent fund is the permanent
fund corpus, which is what thecurrent constitution protects
and what everybody says theywant to protect.
The way to protect the permanentfund corpus is to keep the
current constitutional provisionin effect, because it puts a
hard stop at the end of theearnings reserve account.
(51:30):
If you don't want to protect thepermanent fund corpus, then
yeah, go ahead and do the oneaccount system and set the draw
rate at something that iswithout regard to whatever the
permanent fund is earning at anygiven point in time, and you
can just drain that sucker onout.
It's the exact reverse.
What Bart LeBond and others whoadvocate the one account system
(51:51):
are doing is they're saying wereally want to have a steady
draw from the permanent fundwithout regard to earnings.
We've seen the last few yearsthat the permanent fund
corporation hasn't beenachieving 5%, and so we've seen
the earnings reserve drained.
So we really want to have a wayof accessing the permanent fund
corpus, but we don't want tosay that because we know people
(52:14):
will rebel against that.
So let's back into someargument that we can use that
justifies going to a one accountsystem and they backed into
this, made up argument aboutdraining the earnings reserve
account and Well, not big money.
Speaker 2 (52:30):
This is a self-inflicted wound too, right,
I mean, because Bartle Burt,stedman and company and
everything else, they movedeight billion dollars over the
last 10 years into the corpusfrom the earnings reserve.
That money was sitting there inthe earnings reserve and they
could have had access to it, butthey did this intentionally to
kind of foster this environmentof, oh, now we're out of money,
(52:51):
we have to have, we have to tapinto the corpus.
It's, I mean, this is, and ofcourse this all it goes back to
the predication also that thepermanent fund is not earning
what it should.
So I mean, you know, it's a,it's a, it's a hot hot mess.
Speaker 1 (53:11):
It's a hot mess.
All right, brian.
The earnings reserve should.
The permanent fund should beearning more, and so we would
have less of this problem aboutthe earnings reserve being
drained because we would havemore earnings and we would have
more in the earnings reserve.
That's sort of a separate issue, though this issue is really
about protecting the corpus, andif you really want to protect
the corpus, the current twoaccount system does that,
(53:33):
because it creates the hard stopat the end of earnings.
That's it, you're done.
What Bart and others want to dois they want to create a
backdoor into the permanent fund.
Speaker 2 (53:44):
All right, brad.
Thank you so much.
We appreciate you coming onboard.
Speaker 1 (53:48):
Michael Lewis, thanks for having 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
during the week on Facebook andTwitter.
(54:09):
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,
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.