August 19, 2025 • 56 mins
Welcome to The Weekly Top 3 — our look at the top 3 things on our mind here at Alaskans for Sustainable Budgets — for the week of August 18, 2025.
This week, our top 3 issues are these: 1) we explain why the EIA’s new oil price forecast suggests Alaska is on the precipice of slipping back into a steep, deficit-driven budgetary position for the remainder of FY26 and into FY27 (campaign year 2026) (2:16); 2) we explain why the growing problem with Social Security is likely to have a significant impact on Alaska (21:44); and 3) we explain how a recent proposal from the FNSB would only make the state’s K-12 funding issue even worse (41:88).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the weekly top threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of August 18th 2025.
The weekly top three is aregular segment on the Michael
Dukes Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:34):
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 610 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:57):
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the project's page onnational blog site mediumcom,
you can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
(01:18):
week, you can also follow andparticipate in the discussion
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
Twitter.
This week, our top three issuesare these First, the Energy
(01:39):
Information Administration's newoil price forecast suggests
Alaska is slipping back into adeficit-ridden fiscal outlook
throughout the remainder of FY26and on into FY27.
Second, we explain why thegrowing problem with Social
Security is likely to have asignificant impact on Alaska.
(02:02):
And third, we explain how arecent proposal from the
Fairbanks-North Star Boroughwould only make the state's K-12
funding issue even worse.
And now let's join Michael.
Speaker 2 (02:16):
All right, Brad.
Well, we've got a lot to covertoday, so I want to get right
down into the heart of it.
We're going to start off withthis week's topics, including
the tough what you call thetough election cycle, and that's
coming up because of what I'vebeen teasing the last few days,
which is the latest report fromthe EIA.
(02:39):
Tell me what this is, Brad, andwhy should I care?
Speaker 1 (02:42):
So the Energy Information Agency is a US
federal agency.
It, along with two other globalagencies, publish a global view
of the oil market once monthly.
Opec, the Organization forPetroleum Exporting Countries
does one.
(03:03):
They call it the Monthly OilMarket Report.
The IEA the InternationalEnergy Agency, does one and then
EIA does a third.
Iea, the International EnergyAgency and OPEC really do
broad-based supply-demandevaluations.
(03:27):
The short-term energy outlookfrom EIA really gets down into
the weeds and takes that globalpicture and narrows the focus
down into what the impact is onprice.
This month both OPEC and IEAtalked a lot about the
supply-demand picture.
Iea in particular said thesupply-demand picture with OPEC
(03:51):
Plus's recent announcement thatthey're going to lower the
production cuts that they put inplace all the way back in COVID
but continuing shortly after isgoing to lower the production
cuts, which will increase supply.
And IEA looked at that and saidboy, this is going to have a
big impact on supply-demandbalance because we don't see
(04:13):
demand growing at the same paceas what supply is going to grow
as OPEC lowers the productioncuts.
And IEA in fact ended itsanalysis by saying something's
got to give.
Eia came through, took that ortook its own analysis, which
came to the same place as IEA,that there's a big imbalance
(04:36):
between supply and demand.
Eia followed through on thatand said the thing that's going
to give is price and this iswhat EIA said in its opening
paragraph.
Significant growth in oilsupply will cause crude oil
prices to fall in the comingmonths.
In our forecast, the Brentcrude oil price falls from $71
(04:58):
per barrel in July to $58 in thefourth quarter of 25, and
fourth quarter EIA uses calendaryear quarters, so they're
talking about October throughDecember caused it to drop to
$58 in the fourth quarter and$49 per barrel in March and
(05:18):
April of 2026.
And then it goes through theextended impact of that through
the end of next year, which isthe usual period over which EIA
forecasts prices.
I took that in this week'slandmine column that was
(05:40):
published on Friday.
I took that and I took thatthrough to Alaska.
What does that mean for Alaskarevenues and what does that mean
for the Alaska budget?
And if you've got the revenueschart, michael, let's pop that.
Pop that up.
If anybody wants to look atthese in detail, they're in the
current Alaska Friday Alaskalandmine column that I do, and
(06:01):
this is this follows no, that'sthe, that's the flip up the
other one.
There we go.
So this follows through theprice forecasts on the left-hand
side from the fall 2024 oilprice forecast that the
governor's budget was based on,the governor's proposed budget
(06:22):
or FY26 was based on.
Follows it through to the springrevenue forecast from DOR and
then DOR published a secondspring forecast, if you'll
recall when the governor did thevetoes, and the governor
explained that the vetoes werenecessary because of the drop in
oil price and the drop inrevenues.
Follows it through to thatsecond DOR price forecast and
(06:48):
then follows it through to theEIA, the current EIA forecast,
and, as you can see, oil pricesdropped from $70 in the fall
forecast, on which thegovernor's budget was based, to
$68, on which the legislature'sFY26 budget was based, to $64
for FY26, on which thegovernor's vetoes was based, and
(07:12):
now we're at $56.25.
When you restate the EIAforecast on an Alaska fiscal
year basis and you can see thedrop in unrestricted general
fund revenues that are goingalong with that.
The governor's, the revised DORforecast that came out along
with the governor's vetoes wasdown 10% from the spring, which
(07:35):
was already down 3% from thefall.
The EIA forecast drops outanother 6% from that 10 percent
drop in the in the revised EORforecast for FY26.
Speaker 2 (07:51):
And in real dollars that means unrestricted general
funds, from when the governorfirst proposed the budget of 2.4
billion down to 1.9 billiondollars.
Speaker 1 (08:01):
Right over 400 million dollar drop.
Now let's go to this.
Let's go to the next chart.
This follows through, uh, towhat this means for the budget,
uh, and and the status of thebudget when.
When the legislature left, uh,they, they left.
They set the budget based uponthe spring forecast and after
(08:21):
the governor's vetoes that thegovernor did after the
legislature left, there was like$175 million surplus, actually
an excess.
What that actually is is anexcess PFD cut, but $175 million
surplus in the budget basedupon the spring forecast.
(08:42):
After the override budget basedupon the spring forecast, After
the override, the legislativeoverride of the K-12 bill, that
surplus was down to $130 million, again based upon the spring
forecast.
But then you look at the twosubsequent price forecasts out
there the DOR, the revised DORforecast that the governor on
(09:02):
which the governor based thevetoes, the revised EOR forecast
that the governor on which thegovernor based the vetoes, you,
you use that as the base andthat comes down to roughly a $90
million deficit in the budget.
This is what the EIA forecastmeans.
The EIA forecast jumps, dropsout another $140 million.
So we're now looking at apotential quarter billion dollar
(09:25):
, quarter billion dollar, $250million, to be precise, $234
million deficit in the FY26budget as a result of the
revised oil prices, if therevised oil prices that are in
the EIA forecast come throughfor FY26.
Speaker 2 (09:45):
Yeah, that's the budget.
And just for clarification forthe listeners, for folks who
can't see the chart, that's forthe budget that was just passed.
So that's the year.
We're going into almost aquarter billion dollar deficit
in the current year that we justpassed the budget for.
We're not talking about nextyear, we're talking about this
year.
Speaker 1 (10:02):
We're talking about the budget that just got passed,
that the legislature thoughtthey were leaving Juneau with a
surplus and now, if the priceforecasts come through now,
we're looking at a quarterbillion dollar deficit.
The reason I say that thisreally upends the 2026 campaign
(10:24):
is you look at, you thinkthrough the timing.
The campaign is really going toget going during spring next
year during the legislativesession.
Now that we've got a lot ofcandidates in here may start
earlier, but it's at least goingto start next spring and the
legislature is going to comeback into Juneau, the first of
the year, facing this hugedeficit that they're going to
have to deal with with.
(10:45):
First thing, I mean they'vealready set spending revenues.
Because of the way we do oilrevenues, revenues are going to
be bouncing around.
But if the EIA forecast is good, we're going to be looking at a
quarter billion dollar revenuewhen they come back into Juneau
and then the legislature, whenit comes into session next year,
we'll be starting to work onthe FY27 budget.
(11:07):
We'll work on the FY27 budgetand you look at what the price
forecast, the drop in the priceforecast for FY27 is and you can
see that's another $400 millionplus or minus that reduction in
revenues that the legislatureis going to be dealing with next
year another huge deficit year.
(11:29):
So the campaign the 2026campaign is going to be based is
, if these forecasts, if the EIAforecast is correct.
These campaigns are going to bebased in an environment in which
the legislature is having todeal with this huge deficit for
FY26 when they walk in the doorthrough supplementals or through
(11:50):
pulling more money out ofreserves that we don't have or
something, and then in FY27,they're going to be dealing with
an even deeper deficit thanthey thought they were going to
be dealing with when they didthe FY26 budget, which was
already, they claimed, a tightbudget.
So we're going to be dealing inan environment the 2026 campaign
(12:10):
is going to go off in anenvironment in which oil prices
are dropping and candidates aregoing to have to be talking
about what the fiscal plan is torespond to this environment in
which we've got rapidly dropping, deeply dropping oil prices,
and I think that's going toreshape the 2026 campaign in a
(12:30):
way that I'm not sure peoplehave thought through yet.
They're going to, instead oftalking about what new program
they can layer on, instead ofTom Begich being able to talk
about what additional programshe's going to bring.
They're going to have to betalking about how they're going
to deal with these huge deficitson the oil price as a result of
the oil price drop and whatplan they're going to have in
(12:54):
place when they take office fordealing with a significantly
reduced outlook from thestandpoint of oil prices.
Speaker 2 (13:04):
Because, again, just to be clear, we're talking about
, when they come back in January, almost a quarter billion
dollar in supplemental spending,because the price will be down,
and then an additional 1.4billion down if the EIA numbers
hold.
We're talking about one andthree quarters billion dollars,
(13:26):
1.75 billion dollars in deficit.
That's just based on thecurrent spending level, with no
additional spending, just theescalators that are built in and
everything else 1.75 billiondollars.
Speaker 1 (13:43):
Yep, and we've got.
I mean, I haven't looked at thelatest CBR number, but it's not
much.
It may be a little bit north oftwo.
It may be between two and threeCBR anymore is really the
accumulated PFD cuts that theydidn't, that they sort of saved
up for future use and so it'snot.
It's maybe between two and $3billion.
So it's not maybe between twoand three billion dollars.
(14:03):
So you know, you can easily seethat sort of being wiped out
between between these twodeficits and it's just, it's
going to be a significantlydifferent environment.
The 2026 campaign.
(14:27):
What EIA is telling us, if thisoil forecast holds, is it's
going to be a significantlydifferent environment out there
in 2026 than I think what peoplehave previously imagined a
significantly different fiscalenvironment for the state coming
forward.
Speaker 2 (14:35):
Before we go here, Brad, quickly, you know, if the
number holds, what's theprobability?
How close has EIA been in thepast?
I mean, what do we think here?
I mean, is this a 50-50proposition?
Is this a, you know, more than50% proposition that these
prices will actually happen theway that they are?
Speaker 1 (14:54):
Well, everything changes over time.
So it's based upon the supplydemand outlook that EIA and IEA
essentially share.
If demand grows at asignificantly higher rate than
what either EIA or IEA isforecasting, it'll soak up some
(15:14):
of that excess supply and itwill increase price.
Opec, for its part, in itsmonthly report, projected higher
demand growth than either IEAor EIA.
So that's one factor.
If somehow the world economystrengthens faster than forecast
.
The other is on the supply side, and the supply side what these
(15:38):
forecasts are based upon issome moderate decline or some
moderate decline in the pace ofgrowth.
There you go in non-OPECsupplies and sort of this huge
jump as a result of OPECreducing the production cuts on
the OPEC Plus side.
If either of those don't hold if, for example, the non-OPEC
(16:02):
supply drops quickly drops at afaster pace than projected in
response to price, or if OPEC,seeing the impact on price,
decides to sort of slow theproduction cuts that they're
pursuing, then that would reducesupply and increase price.
So it's based upon thesupply-demand outlook that the
(16:25):
agencies have right now None ofthem other than OPEC, but none
of them really foresee changesin that demand side picture.
They both do detailed analysisof the world economy and they
see that demand forecast holdingup the real variable is going
to be on the supply side.
That demand forecast holding upthe real variable is going to
be on the supply side.
(16:45):
And if OPEC decides not to pullthe string on all of these
production cuts or if there's abig price response on the
non-OPEC side in terms ofslowing supply growth, then the
supply side may fall short andthese prices may be a little bit
higher.
Speaker 2 (17:00):
This chart is going to be the chart to show all the
candidates at this point.
So this is what you'repotentially looking at.
What do you think?
How are you going to fix it?
What are you going to do?
That's going to be the big.
That's going to be the bigchart right there for folks to
remember and and and listen to.
For sure, brad Frank says 26campaigns will not have a
(17:25):
different environment.
It will tell voters what theywant to hear, and that's what
I'm afraid of, because, what youknow, what about the fiscal
plan?
What about?
I mean, yesterday we had, uh,we had, uh, we'll step on and I
asked about a fiscal plan and itkind of got shoveled under the
carpet.
I mean, there was just, youknow, kind of got shoveled under
(17:46):
the carpet.
I mean there was just, you know, the answer was elect better
people.
You know which?
Again, the people in the roomare the ones that we have to
work with.
I mean, yeah, we'd be nice toelect more fiscally responsible
adults, but that just doesn'tseem to be the answer at this
point.
Speaker 1 (18:01):
Yeah, I don't know.
I mean, the legislature isgoing to have to talk about
these deficits.
They're going to have to talkabout these deficits.
They're going to have to talkabout the fact that FY26
revenues are coming in way below.
Assuming the EIA projectionshold that FY26 revenues are
coming in way below that theyforecast.
They got this huge deficit thatthey're going to have to deal
with in FY26.
And if the legislature has totalk about that, then the news
(18:24):
media are going to be talkingabout it and that's going to set
the environment that thecandidates are going to be
talking in.
The legislature is also goingto have to talk about the FY27
budget and they're going to haveto talk about the fact that
revenues are coming in muchlower than previously projected
and they're going to have totalk about how they're going to
deal with that in the FY27budget than previously projected
.
And they're going to have totalk about how they're going to
deal with that in the FY27budget and the legislature is
(18:46):
going to have to deal with thator the news media is going to
pick up on that and have to talkabout that Also.
You've also got one interestingwild card in this Lyman
Hoffman's retiring and in hisretirement year, in his
retirement session, he seems tohave decided that he's just
going to, you know, tell thetruth.
And so you know he's beenhonest.
(19:11):
Even Will pointed that outyesterday in yesterday's
discussion with you.
And so Lyman, I think is goingto be co-chair of Senate Finance
, is going to be talking aboutthis perhaps more than he
otherwise might, more than if hewas campaigning for reelection.
So, yes, I mean candidates.
(19:32):
I mean Bernadette may continueto talk about full PFD and no
taxes and all that sort of stuff.
Yeah, they may continue to dothat.
But the credibility of themsaying that, in the face of
these deficits that thelegislature is going to be
having to deal with, both FY26and FY27, the credibility of
candidates you know often la-laland talking about you can do
(19:54):
all this stuff and you don'thave to worry about the fiscal
plan I think the credibility ofthose candidates is going to be
severely tested.
Speaker 2 (20:02):
Yeah, it's going to be problematic.
And now again, we've got 10 inthe field and uh, I mean we
don't know how many more we'llthrow their hat in the ring here
between now and and whenever.
Uh, but uh, so far I'm notseeing anybody that's jumping up
and, uh, putting you know,offering a, offering, a full
(20:23):
fiscal plan of any kind, or evena partial, really partial
fiscal plan.
At this point, um, it's a votefor me.
Chicken in every pot.
Um, and and and I, I just, Imean, I, I don't have a whole
lot of hope at this point.
Speaker 1 (20:39):
Yeah, and it's not like there isn't a plan out
there.
I mean the legislature's 2021fiscal policy working group plan
that Shelly was a part of.
Shelly Hughes was a part of God, you'd think she'd adopt it.
But that plan sitting therethat says a little bit of
everything, a little bit of allthe above a little bit of
spending cuts, a little bit ofnew revenues, a little bit of
(20:59):
PFD cuts down to POMV 50-50, alittle bit of this and a little
bit of oil revenues.
And that plan it sort ofspreads the burden in a way.
I talk a lot about rate designand revenue design and what you
want to do in revenue design andrate design.
You want to spread the burdenas much as you can to get the
(21:20):
divisor up and to have theimpact on anyone group low.
That plan spreads the burdenmore than almost any plan I've
seen.
So it's not like they don'thave a plan they can talk about.
There's one sitting there butno one seems to I mean not even
Shelly.
One of the authors of the planhas jumped up on it.
Speaker 2 (21:38):
Yeah, she didn't.
I gave her the softball askingher, you know she just didn't
want to, didn't want to dealwith it.
All the softball asking her,you know she just didn't want to
, didn't want to deal with it.
All right, welcome back.
We continue with Brad Keithley,alaskans for Sustainable
Budgets the weekly top three.
(21:59):
We're on to number two, whichis happy birthday to social
security and you're about to die.
Seven years is the latestnumber, seven years until the
benefits basically end if wedon't do something and this
affects Alaska as well Alaskahas a social security problem as
well, brad.
Speaker 1 (22:15):
So yeah, so social security is sort of the coming.
If oil prices are the issuethat's going to drive, I think,
the Alaska fiscal discussionover the next couple of years,
social Security is sort of theissue that's coming on the
federal scene.
That's going Security yourbenefits go from wherever they
(22:36):
are now down to zero.
What's going on is this Overthe years that the current
(22:58):
generation, or the currentelderly generation or the
current senior generation orwhatever however you want to
call them, over the years thatthe baby boom generation there
we go, over the years that thebaby boom generation was working
Social Security, built up a bigpot of money, a big reserve.
They weren't using all of thecurrent revenues.
(23:18):
I mean, like a pension plan,they weren't using all the
current revenues to pay benefits.
They were building up this bigreserve that was going to sit
there, earn money, and it did uh, and sort of sit there for when
baby boomers retired and thenit would, and then baby boomers
would uh, would benefit fromthat, would start draining it
down, like you do with anypension plan, for a variety of
(23:42):
reasons, including lowcontribution rates, lower
contribution rates than what anactuary would say.
Baby boomers ought to becontributing into Social
Security in order to build upenough of a reserve.
For a variety of reasons, thereserve isn't big enough to see
the baby boomers through or tosee social security through.
(24:03):
And so what?
What?
The what?
The projection is, all theseprojections about timing is when
the reserve is going to be gone.
And once the reserve is gone,all that's going to be available
for social security is what thecurrent generation, the current
working generation, iscontributing in to.
That's going to be turnedaround and be distributed in
(24:24):
benefits.
There's not going to be,there's not going to be any
buildup reserved by the currentworking generation.
Everything they're contributingin is going to be immediately
turned around and and sent toand sent to the currently
retired generation, and so thebenefit that's been built up
(24:45):
through this surplus is going todisappear.
When it does, the currentSocial Security retirement rates
, the current Social Securitybenefits that are set in law
will have to drop, because youwon't be able to pull't be able
to pull the reserve, pull on thereserve for the additional, the
additional money.
The drop's going to besignificant.
Committee for a ResponsibleFederal Budget does great work
(25:08):
on this and other federal issues, and they've done a recent
analysis of what the impact isof that drop when the reserve
depletes, what that drop's goingto be and for a medium-income
family.
These are national numbers butit's going to be generally
(25:29):
applicable to everybody.
For a medium-income singleworking person or single retired
person, the drop's going to beabout $14,000 a year.
Single retired person, the dropis going to be about $14,000 a
year.
For a married family or twothat are in retirement, a man
and a wife who are in retirementor a married couple that is in
retirement, the drop is going tobe about $18,000, $18,500 a
(25:54):
year.
So the drop is going to besignificant and again, that's
the impact of the reserve comingoff.
The thing about these numbersis they may go even lower
because all you're doing isyou're recycling what the
current working generation iscontributing into the plan.
If you continue to have acontraction in the current
working generation, as some areconcerned we're going to have
(26:16):
because of the drop-off inpopulation growth or the AI
revolution, that's going to dropemployment.
If you continue to have adecline in the employment, the
contribution to Social Securityis going to drop and that amount
(26:39):
that's coming over to theretirement group is going to
drop as well.
So these numbers are sort ofthe best projection of what it's
going to be like at thebeginning of the drop.
But the drop can be even moresignificant.
This comes through to Alaskabecause Alaska is projected to
(27:01):
have already has a significantretirement population.
Already roughly 15% of theAlaska population is retired,
living on Social Securitybenefits or in part living on
Social Security benefits.
But that's projected.
Alaska is projected to graysignificantly over the next 20
(27:22):
or so years, growing from 15% ofthe population up to 20% of the
population if the populationcontinues, if the Alaska
population continues to grow.
If you look at Department ofLabor's recent projections about
a population decline in Alaskaover the next 20 or 30 years,
(27:43):
then the percent of thepopulation that is retired grows
even higher because theprojection of decline is more
the working population, theworking age population, than it
is the retirement age population.
The retirement age populationsort of sticks here and it's the
working age population that isout migrating.
So you have.
So the percentage of of Alaskansthat are retired in that
(28:07):
scenario grows even higher thanthe, than the 20%.
That's uh, that's projectedwith uh, with some moderate
population growth in Alaska, ifyou, if you start looking at 20%
of the population, facingsignificant cuts.
I mean I would say 18 to amedium income family, roughly
$20,000 in cuts to a retiredcouple is not going to be
(28:34):
immaterial to their economicwell-being.
And if you start looking atthat sort of cut to 20% of the
population, you're going to seea material amount of contraction
in the amount of money that'sin the economy, that's in the
consumer economy or it's in thesavings economy or the
(28:56):
investment economy or whateversegment of the economy you want
to look at.
You're going to see asignificant contraction of money
in the economy.
So it's a national problem thatsocial security is a national
problem, but it has significanteconomic implications for Alaska
if it's not solved at thenational level.
(29:16):
Through the level of cuts thatare going to hit Alaska, the
Alaska retired population as aconsequence, most people say, oh
, this problem will get solved,congress will do something.
And it's sort of again to pickup on a comment that Will made
yesterday, will said well, youknow, people kick the can, kick
(29:39):
the can, kick the can, kick thecan and it's the last guy who
ultimately has to face it andhas to take draconian steps to
make it work.
And it's getting worse andworse and worse.
I mean the current projectionout there or the current
discussion on the table abouthow we solve this is to increase
(30:00):
the retirement age.
So we reduce the populationthat's drawing on social
security, cut the benefits orcap the benefits to that
population that is retired sothat that limits the draw on
social security.
The draw on social securityincrease the tax essentially on
(30:22):
on the population that's working, to increase the revenue flow
into social security.
And that comes through twosteps.
One is to increase the taxitself, but also there's a cap
on on social security.
Who pays social security orwhat portion of your income you
pay social security on is betterput.
And so one of the steps underdiscussion is to increase the
(30:51):
cap on the wages that you paysocial security on to increase
the revenues on social security.
So there's a number of steps andthey're getting worse and worse
and worse.
The closer and closer we get,the less and less that's in the
reserve, the faster we'redraining the reserve or the
lower the reserve is as we goalong, the more draconian the
(31:12):
steps have to be.
Two things made it worse the onebig bill by reducing the level
of tax on social securitybenefits which cycled back into
the social security system.
The one big beautiful bill, byreducing the tax on social
security benefits, increases orreduces the time that we have
(31:37):
remaining before we hit the Xdate of draining the reserve.
And also the step that we tookearlier to essentially allow
double dipping by retirees whohad non-social security plans,
who had contributed tonon-social security plan, who'd
contributed to non-socialsecurity plans and had benefits
(31:59):
from from non-social securityplan plans but also had
contributed in some way tosocial security, the the, the
step we took which was praisedin alaska because we have a lot
of these people up here uh, thestep that allowed them to draw
on social security benefits inaddition to their non-social
security.
Uh, retirement also drained,also reduced the reserve and is
(32:21):
shortening the time frame withinwhich we have to deal with this
problem.
So the problem is there, thetime frame is getting closer,
the steps we have to takebecause we have the draining
reserve, the steps we have totake are increasingly dramatic
and that's the situation we face, and Alaska faces a consequence
(32:44):
of that because of thesignificant level of our
population which is in or willbe at the time this hits in
retirement.
Speaker 2 (32:57):
Yeah, I mean, if you're counting, if you're my
age and you're counting onsocial security benefits as some
kind of uh retirement orbailout, you're going to be
severely disappointed.
I think is what the uh?
What the answer is?
Because, again, as they'vedrained the reserve and there
used to be what 14, uh peoplecontributing for every one
recipient, and now it's down totwo, it's down to two people
(33:19):
contributing for every onerecipient and now it's down to
two, it's down to two peoplecontributing for every one
recipient, and that's obviouslynot sustained.
I mean, when they used tocriticize Nick Begich for saying
it was a Ponzi scheme, butthat's almost the very
definition of a Ponzi scheme.
When you got people paying into the people who are drawing
out and that number continues togo down, that's a huge problem
(33:39):
right there.
Speaker 1 (33:40):
Yeah, and, and although it's counterintuitive
to some people uh, uh, the, thelimitations on immigration, uh,
that we're adopting, uh, notonly in this administration, the
last administration as well,but the tightening on
immigration rules that we haveis increasing the problem.
Because because immigrants,even, even, even the, the
(34:03):
non-documented ones, even theillegal ones, when they work,
they contribute to socialsecurity, that that amount is
deducted from their paycheck?
They don't.
They don't.
It's not that they don't paytaxes, it's that it's that their
employers are with orwithdrawing the money.
So immigrants, when they work,are contributing to social
security and illegal immigrantscan't draw from Social Security,
(34:23):
so they're actually buildingthe fund.
As you're constricting theimmigrant population, you're
restricting the number ofworkers, and so it's having the
effect of increasing theproblems with social security as
well.
It's getting us down to thattwo workers for every one
retiree issue that you talkedabout.
Speaker 2 (34:48):
Well, this is going to get gruesome here in the next
few years.
And the question is do theyhave the risk?
But it's like Will saidyesterday, like you said, they
just keep kicking the can downthe road.
It's a game of musical chairsand everybody keeps leaving with
a chair and there's one guyleft standing and there's no
more damn chairs.
Is what's going on?
He's like, looking around, themusic stops and he's like there
is no chair, no tracer.
(35:09):
That's not what brad said.
Did brad keithley justencourage killing off granny and
grandpa over dollars?
How does he propose to reducethe number of elderly?
That's that.
That's not what I don't think.
That was the point he wasmaking.
But you know, you hear what youwant to hear.
That's that's what it is rightthere.
Um, brad, this is uh.
(35:30):
I mean, this is a, this is abig deal, because I think a lot
of people are um, you know, Ilike I'm eyes wide open about my
retirement.
I know that social securitywill probably not be there for
me, but many people are countingof it to um to be their
retirement plan.
Essentially, I paid into it mywhole life.
(35:51):
I should get out of it, butit's not.
That's not.
That's not what is?
That's not what's going tohappen, right.
Speaker 1 (35:58):
Yeah, and it's not Michael.
I mean, even even you know thepeople who are preparing for it,
like you, who say, well, I'mnot going to count on social
security, so I'm doing whatever.
Whatever it is I need to do toprepare myself when I get to
those years, prepare myself tobe there without Social Security
.
It's going to be less money inthe economy as a result of it.
I mean, we've got an increasingretirement age, we've got an
(36:24):
increasing share of thepopulation that's retirement age
.
Social Security is a mechanismby which we get money to that
segment of the economy and thatsegment of the population, and
that segment of the populationthen largely spends it and so it
generates activity in theeconomy.
(36:45):
If we're going to take that outin terms of reduction cuts, you
may be ready for it, the nextperson over may be ready for it,
the next 20 people may not beready for it, and that's its own
problem.
But even you, we're reducingthe amount of dollars that are
(37:05):
coming into that share of theeconomy.
Now the flip side is to solvethis problem.
We're going to have to makesome of that reduction anyway,
we're going to have to capbenefits in some fashion anyway,
and we're going to have toincrease taxes on the working
population, on the current, thenon-retired population, to fund
this, and that's going to takesome money out of the economy.
(37:29):
But the next the trade-off isbecause of the significant share
of retirees in Alaska.
The trade-off in Alaska isgoing to be that we're going to
be net losers if we don't solvethe social security problem, and
it'll be an even greater netloss if we have to cut benefits
(37:50):
deeply or if we, or if we hitthe, the X date and the benefits
suddenly plunge um, as as theyare projected to do, um, and we
have a segment of the populationthat's not ready for it.
So it's um, it's a, it's aserious issue that that people
keep kicking the can down theroad.
I mean, you could, you could.
You saw this 15 years ago, yousaw this 10 years ago.
(38:12):
I think we talked about it onthe show in the early 20-teens
as one of those issues that wasout there that needed to be
solved.
We haven't solved it.
It's now seven years, it'll besix years, five years, four
years, three years and suddenlyit'll be a frigging crisis that
we're facing and Alaska is goingto get hit with it.
So we need to encourage thefederal, our federal delegation
(38:36):
to deal with this issue in somefashion, so that it's not like
the sort of damocles hangingover the hanging over both the
retirement population and thestate's head.
Speaker 2 (38:46):
Well, we've known it's been a problem, as you said
, we've talked about it multipletimes.
I know we talked about it.
I think that, in fact, wasprobably close to 10 years ago,
my first conversation with MayaMcGinnis from, uh, the CFRB, uh,
where we talked about what wasgoing on with social security,
and at that point they weresaying that it would be empty by
(39:06):
the time by 36, which is the 10years from now, which is, you
know, my retirement age quoteunquote um, that and so, yeah,
that's.
We already knew that that wasgoing to be a problem.
Um, but there is, just like inthe Alaska, with a permanent
fund dividend and the size andscope of government, there is no
(39:27):
political will to fix whatwe're talking about here.
There's just no they, just youknow that, they, that it just
continues to decline and we'llall be oblivious to it up until
the point and then they'll beshocked, shocked.
I tell you that, uh, that thishas happened.
I mean, how come we didn't seethis sooner?
Speaker 1 (39:47):
kind of question mark , you know yeah, well, it's,
it's, it's coming, and and and.
For those in alaska who say,well, it's a national issue,
we're not going to worry aboutit here.
It has an impact on us here, um, and it's and it's an issue
that we ought to be encouragingour delegation and and and for
those who are involvednationally, at the national
(40:09):
level, federally to address,because it's not getting better.
Passage of time makes it worse.
I mean, you're correct.
A few years ago CRFB wasprojecting 2036.
Now it's 2032 or 2033.
Because of reducedcontributions and because of the
(40:30):
legislation that was passed,that's reduced, that's been a
bigger draw on or curtailedrevenues that are going into the
fund.
So it's coming.
It's coming quicker than peopleimagined and it's going to be
significant when it hits.
Speaker 2 (40:46):
Anthony's got the perfect retirement plan.
He says I'm just banking on thecollapse of society in the next
25 years as my retirement planis stockpiling ammunition and
fuel.
I figure bullets and fuel willbe the new currency once we hit
the Mad Max on ice status inAlaska.
Speaker 1 (41:04):
Let's hope not.
Speaker 2 (41:05):
We joke about it, but I mean you know, if you're
planning on, if you're countingon the government to help with
your retirement, you may want tocheck yourself before you wreck
yourself, because that's goingto be a tough thing right there.
All right, Brad, let's get onto number three of the weekly
top three, which is we're goingin the wrong direction, which is
(41:31):
a commentary on this piece inthe Newsminer which has got the
priorities of the FairbanksNorth Star Borough.
They laid out their legislativepriorities.
This is what they want to thelegislature to focus on.
We start off with the longtrail.
I mean, this is the all right,hit me, hit me with.
(41:52):
I just I was, my eyes wererolling so hard as I read this
article all right.
Speaker 1 (41:59):
So so we've been doing I've been doing k-12
segments, um, k-12 fundingsegments, the last few shows and
and it's a it's an area thatthe state increasingly is
focusing on.
I mean, that's the big battlewe just went through on
education funding is part ofthat.
(42:19):
We've got a task force that'skicking off the latter part of
this month.
The governor's got proposals.
I mean there's all sorts ofthings out there on K-12 funding
and I think it's going to be anissue that we see come up in
the next legislative session.
Now it's going to come up nowin the context of declining oil
revenues and that's going to beinteresting to see how we deal
(42:41):
with that issue in the contextof declining oil revenues.
Funding that I'm spending a lotof time on and will ultimately
get to a column on maybe thisweek, maybe subsequent week.
But one of the aspects of K-12funding that I find very
interesting is the contributionlevels between the state and the
(43:05):
localities in terms of fundingK-12.
We have a combined fundingsystem in this state Most states
do where the state contributessome, the localities contribute
some and the federal governmentsort of sprinkles a little bit
of federal money, or at leasthistorically, has sprinkled a
little bit of money since the60s.
It's sprinkled a little bit ofmoney into the mix as well and I
(43:28):
talked a couple of weeks agoabout how Alaska is really an
anomaly almost an anomaly in thestates, because most of the
remaining 90% in averagethroughout the US, 45% of it
(43:56):
comes from the state level and45 comes from the local level
and that sort of equivalencyhelps drive cost control because
the local school boards aremaking decisions about how to
spend money, are makingdecisions about how to spend
money because the localitieshave such a significant share of
(44:16):
the costs.
People locally focus on costcontainment, cost constraint at
the school board level and thathas the ability or that has the
effect of driving costcontainment in some states.
Because of that high localcontent.
Alaska is a anomaly because wehave about 10%.
Let's take the 10% federalcontributions a little bit more
(44:38):
in Alaska, but just think of the10%.
Of the 90% remaining, about 20%comes, 25% comes from the
localities.
The remainder 65% to 70% iscoming from the state.
So the contribution level bythe state is a lot higher in
(44:58):
Alaska than nationally and Ithink, as we've discussed on the
show before, I think one of thepieces of the solution to our K
through 12 issue is to increasethe local share of funding, to
increase the concentration atthe local level on cost control
and on finding efficiencies thatexist in the K through 12
(45:23):
system.
I think we've lost that, asI've explained on previous shows
.
I think we've lost that becausewe have too much at the state
level and the localities say, ah, we contribute a little bit,
but the state picks up most ofthat and when we have increased,
when we need increased funding,we'll just look to the state to
pick up that.
So there's not a match betweencost responsibility and cost
contribution going on in Alaskaand I think that's part of the
(45:46):
problem.
So I've talked a lot aboutincreasing the local share.
I was reading through therecommendations of the Fairbanks
North Star Borough, the advicethey were going to give their
legislators, and this paragraph.
These paragraphs just stuck outto me.
(46:07):
The Fairbanks North SarabaralAssembly involves the state
fully funding education to meetbasic needs and eliminating the
requirement for localcontributions.
Municipalities with educationpowers are required to provide a
minimum contribution based upontotal assessed taxable value of
property, which is subtractedfrom the amount that the state
(46:29):
allocates to school districts.
Hopkins, Greer Hopkins proposedan amendment moved by an
assembly member to include alegislative request that the
state not reduce educationfunding as communities grow.
Hopkins argued that reducedfunding places the burden on
local taxpayer shoulders.
It urges the legislature, therequest urges the legislature,
(46:52):
to change the way the state'sbasic need formula is written to
reduce local contribution, ifnot eliminate it entirely.
That's going to add I mean,let's think through the
consequences that's going to addto the state's problem.
Because if you reduce localcontribution and you say that
the school districts need thesame amount, what that's doing
(47:13):
is pushing more money, moreobligation, to the state,
forcing the state's contributionlevel to grow even higher, not
because of increased funding,just because the local
contribution level is beingreduced.
I think that goes in the wrongdirection and it starts moving
us to a position where thesituation gets worse because
(47:36):
localities think well, thestate's going to pick up the
burden, the state's going topick up the spending.
So what do we care?
We don't need to findefficiencies, we don't need to
find funding sources, we don'tneed to think about cost
constraints.
It's all the state's burden.
Let the state deal with it andthat's just.
It was shocking to me to seethe Fairbanks, North Slope
Borough or the North StarBorough, making that
recommendation.
Speaker 2 (47:57):
Yeah, and again you went over the details of this
last week and my question wasagain the fair, the equity
portion of it and you said thathas to do with the way the
money's accounted for as far asthe federal equity.
When they say you know that'swhy you have a cap on
contributions in the state,local contributions.
Speaker 1 (48:16):
You have a cap on local contributions because in
part because of the federaldisparity test.
The federal disparity test isthat for the federal money to
get the federal money in the waythe state's using it, you can't
have more than a 20% disparitybetween the lowest funded system
(48:39):
and the highest funded systemin the state.
But there are ways to fix thatin a way that the federal money
still comes in, just doesn'tcount toward the state, and to
eliminate the disparity test andmove forward on that basis.
Speaker 2 (48:56):
In fact, that was the chart that you had last week.
There was that chart that hadthe contributions with the
averages.
Where is that right here?
There it is.
This is the chart with theaverage contribution.
Speaker 1 (49:15):
That's impressive.
You can call that up.
Yeah, it's great.
Speaker 2 (49:19):
But you look at the average, the US average for
state and local, according tothe various sources, and you can
see it right there that thelocal contribution is in the
mid-40s, almost to the low, tomid 40s in every way, and in
Alaska it's basically 20, 20, 22, 23, right in there.
So yeah, it's a big deal.
(49:42):
Now would we have to change theway that we account for the
federal dollars?
Yes, to make it work.
But you know the idea that theyare somehow saying what we need
to do is eliminate the localcontributions entirely.
You know what that's code for,right, brad?
That's code for what we'dreally like to do is we'd like
(50:03):
to spend that money on somethingelse.
They're not going to stop.
They're not going to refundthat back to the taxpayer.
If that happened to go along,what they would do is they would
take that money that they werecontributing to the schools and
they would then spend that onsome other program in the
borough.
Speaker 1 (50:19):
Yeah, but at the state level.
I mean, what's what's?
Greer was a staterepresentative at one time.
David Guttenberg was a staterepresentative at one time.
I mean, just think about whatyou're doing at the state level.
We're already straining at thevery edge of what we can.
Well, we're beyond the edge.
When you look at the EIAnumbers, we're beyond the edge
(50:41):
in terms of what the state canfund.
We're beyond the edge in termsof the state's funding power,
based upon the state's currentfiscal situation, fiscal
formulas.
We're beyond the edge of whatthe state can fund.
And if, all of a sudden, we doaway with local contribution,
which is in the 20s it should behigher, but at least it's in
(51:01):
the 20s If you do away withlocal contribution, all of a
sudden all that shifts to thestate and so you have that
additional burden on the state,even before you start the
conversation about the stateneeding to provide even more,
and the state just doesn't havethe capacity.
So we're dealing.
I mean, one way to look at thismight be oh well, they're
(51:24):
trying to set up K-12 spendingcuts, because if you reduce the
local contribution, the statedoesn't have the capacity to
contribute more.
Then you end up with less forthe school system because the
local contribution has suddenlywalked away from it.
I doubt that's what Greer hasin mind, but you're setting up a
(51:45):
situation in which the statecan't handle this.
The state already can't handleit and you're setting up a
situation in which the statecan't handle it and and you've
just screwed up the incentives.
The incentives, the ability tocontrol spending, is at the
local level.
The ability to to findconsolidation, the ability to
find efficiencies, the abilityto to find places to cut
(52:07):
spending, is at the local level,because that's where the
money's being spent.
That's.
Those are.
Those are the people deciding,deciding where to spend it.
And if, all of a sudden, theydon't have any, they don't have
any funding obligations, thenthen you know they don't have
any constraints.
They saw us all, the state'sresponsibility.
Speaker 2 (52:24):
Sky's the limit.
Yep, sky's the limit.
I did have to and I and Ididn't mean I, just I had to
chuckle because we started witha long trail.
That was the first thing thatthey said on the whole
discussion was that we need thelong trail, and you know.
And then they went on toeducational components and
everything else.
It is.
It's, I think it again.
(52:46):
Nobody's checking thetemperature of the room, right,
or maybe they are.
Maybe that's where Fairbanks isat these days, maybe it's the
dependency state is alive andwell in the Fairbanks area.
All right, brad, we got abouttwo minutes here.
Give me your thoughts here.
As the election season startsto shape up, what do you think
(53:08):
we're going to be seeing?
What are you going to bewatching here for the?
Speaker 1 (53:13):
upcoming election.
I'm going to be watchingwhether candidates are realistic
Candidates are facing theeconomic situation, the fiscal
situation the state's facing,whether the candidates
acknowledge that there's apotential huge downside coming
on the oil side, oil revenueside, and how to deal with that,
and what their comments are andwhat their positions are with
(53:36):
respect to fiscal plan.
And I think that's to me that'sgoing to be the big issue for
2026.
I mean, we're going to havedeficits, big deficits that
legislature is going to have todeal with for FY26.
It's going to be a lot lessrevenue for FY27.
And I think candidates aregoing to need to respond to that
(53:58):
.
If they don't, I don't thinkthey're realistic candidates.
I think they're out in la-laland someplace and not
realistically dealing with theissues that the state is
confronting.
So that to me is a big issue.
And the EIA forecast, the EIAprice projections, just bring
(54:20):
that into very sharp forecast,sharp understanding, because you
can see what that does torevenue.
You can see what that does tostate revenue almost immediately
.
Speaker 2 (54:33):
Yeah, no, I mean, we're going to have to deal with
this.
It's just that you know we'regoing to have to deal with this
and everybody wants to just kindof ignore the monster in the
room and say it's all going tobe fine.
I don't know what you'retalking about.
Speaker 1 (54:47):
And you got people like Will Stapp yesterday who
said, oh well, we're going tohave increased production.
Yes, that increased productionis driving down revenue.
We've talked about that onprevious shows.
Speaker 2 (54:59):
He said but Brad, wait, 10 years, it'll be fine.
10 years, it'll be fine.
How do we get through those 10years?
Nobody has a clue.
But don't worry, in 10 yearsit'll be fine, fine, just fine,
all right, brad.
Well, thank you so much.
We appreciate you coming onboard and we look forward to
talking to you again next week.
Speaker 1 (55:20):
Michael, as always, 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.
This has been Brad Keithley,managing Director of Alaskans
(55:43):
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the weekly top threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of August 18th 2025.
The weekly top three is aregular segment on the Michael
Dukes Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:34):
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 610 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:57):
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the project's page onnational blog site mediumcom,
you can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
(01:18):
week, you can also follow andparticipate in the discussion
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
Twitter.
This week, our top three issuesare these First, the Energy
(01:39):
Information Administration's newoil price forecast suggests
Alaska is slipping back into adeficit-ridden fiscal outlook
throughout the remainder of FY26and on into FY27.
Second, we explain why thegrowing problem with Social
Security is likely to have asignificant impact on Alaska.
(02:02):
And third, we explain how arecent proposal from the
Fairbanks-North Star Boroughwould only make the state's K-12
funding issue even worse.
And now let's join Michael.
Speaker 2 (02:16):
All right, Brad.
Well, we've got a lot to covertoday, so I want to get right
down into the heart of it.
We're going to start off withthis week's topics, including
the tough what you call thetough election cycle, and that's
coming up because of what I'vebeen teasing the last few days,
which is the latest report fromthe EIA.
(02:39):
Tell me what this is, Brad, andwhy should I care?
Speaker 1 (02:42):
So the Energy Information Agency is a US
federal agency.
It, along with two other globalagencies, publish a global view
of the oil market once monthly.
Opec, the Organization forPetroleum Exporting Countries
does one.
(03:03):
They call it the Monthly OilMarket Report.
The IEA the InternationalEnergy Agency, does one and then
EIA does a third.
Iea, the International EnergyAgency and OPEC really do
broad-based supply-demandevaluations.
(03:27):
The short-term energy outlookfrom EIA really gets down into
the weeds and takes that globalpicture and narrows the focus
down into what the impact is onprice.
This month both OPEC and IEAtalked a lot about the
supply-demand picture.
Iea in particular said thesupply-demand picture with OPEC
(03:51):
Plus's recent announcement thatthey're going to lower the
production cuts that they put inplace all the way back in COVID
but continuing shortly after isgoing to lower the production
cuts, which will increase supply.
And IEA looked at that and saidboy, this is going to have a
big impact on supply-demandbalance because we don't see
(04:13):
demand growing at the same paceas what supply is going to grow
as OPEC lowers the productioncuts.
And IEA in fact ended itsanalysis by saying something's
got to give.
Eia came through, took that ortook its own analysis, which
came to the same place as IEA,that there's a big imbalance
(04:36):
between supply and demand.
Eia followed through on thatand said the thing that's going
to give is price and this iswhat EIA said in its opening
paragraph.
Significant growth in oilsupply will cause crude oil
prices to fall in the comingmonths.
In our forecast, the Brentcrude oil price falls from $71
(04:58):
per barrel in July to $58 in thefourth quarter of 25, and
fourth quarter EIA uses calendaryear quarters, so they're
talking about October throughDecember caused it to drop to
$58 in the fourth quarter and$49 per barrel in March and
(05:18):
April of 2026.
And then it goes through theextended impact of that through
the end of next year, which isthe usual period over which EIA
forecasts prices.
I took that in this week'slandmine column that was
(05:40):
published on Friday.
I took that and I took thatthrough to Alaska.
What does that mean for Alaskarevenues and what does that mean
for the Alaska budget?
And if you've got the revenueschart, michael, let's pop that.
Pop that up.
If anybody wants to look atthese in detail, they're in the
current Alaska Friday Alaskalandmine column that I do, and
(06:01):
this is this follows no, that'sthe, that's the flip up the
other one.
There we go.
So this follows through theprice forecasts on the left-hand
side from the fall 2024 oilprice forecast that the
governor's budget was based on,the governor's proposed budget
(06:22):
or FY26 was based on.
Follows it through to the springrevenue forecast from DOR and
then DOR published a secondspring forecast, if you'll
recall when the governor did thevetoes, and the governor
explained that the vetoes werenecessary because of the drop in
oil price and the drop inrevenues.
Follows it through to thatsecond DOR price forecast and
(06:48):
then follows it through to theEIA, the current EIA forecast,
and, as you can see, oil pricesdropped from $70 in the fall
forecast, on which thegovernor's budget was based, to
$68, on which the legislature'sFY26 budget was based, to $64
for FY26, on which thegovernor's vetoes was based, and
(07:12):
now we're at $56.25.
When you restate the EIAforecast on an Alaska fiscal
year basis and you can see thedrop in unrestricted general
fund revenues that are goingalong with that.
The governor's, the revised DORforecast that came out along
with the governor's vetoes wasdown 10% from the spring, which
(07:35):
was already down 3% from thefall.
The EIA forecast drops outanother 6% from that 10 percent
drop in the in the revised EORforecast for FY26.
Speaker 2 (07:51):
And in real dollars that means unrestricted general
funds, from when the governorfirst proposed the budget of 2.4
billion down to 1.9 billiondollars.
Speaker 1 (08:01):
Right over 400 million dollar drop.
Now let's go to this.
Let's go to the next chart.
This follows through, uh, towhat this means for the budget,
uh, and and the status of thebudget when.
When the legislature left, uh,they, they left.
They set the budget based uponthe spring forecast and after
(08:21):
the governor's vetoes that thegovernor did after the
legislature left, there was like$175 million surplus, actually
an excess.
What that actually is is anexcess PFD cut, but $175 million
surplus in the budget basedupon the spring forecast.
(08:42):
After the override budget basedupon the spring forecast, After
the override, the legislativeoverride of the K-12 bill, that
surplus was down to $130 million, again based upon the spring
forecast.
But then you look at the twosubsequent price forecasts out
there the DOR, the revised DORforecast that the governor on
(09:02):
which the governor based thevetoes, the revised EOR forecast
that the governor on which thegovernor based the vetoes, you,
you use that as the base andthat comes down to roughly a $90
million deficit in the budget.
This is what the EIA forecastmeans.
The EIA forecast jumps, dropsout another $140 million.
So we're now looking at apotential quarter billion dollar
(09:25):
, quarter billion dollar, $250million, to be precise, $234
million deficit in the FY26budget as a result of the
revised oil prices, if therevised oil prices that are in
the EIA forecast come throughfor FY26.
Speaker 2 (09:45):
Yeah, that's the budget.
And just for clarification forthe listeners, for folks who
can't see the chart, that's forthe budget that was just passed.
So that's the year.
We're going into almost aquarter billion dollar deficit
in the current year that we justpassed the budget for.
We're not talking about nextyear, we're talking about this
year.
Speaker 1 (10:02):
We're talking about the budget that just got passed,
that the legislature thoughtthey were leaving Juneau with a
surplus and now, if the priceforecasts come through now,
we're looking at a quarterbillion dollar deficit.
The reason I say that thisreally upends the 2026 campaign
(10:24):
is you look at, you thinkthrough the timing.
The campaign is really going toget going during spring next
year during the legislativesession.
Now that we've got a lot ofcandidates in here may start
earlier, but it's at least goingto start next spring and the
legislature is going to comeback into Juneau, the first of
the year, facing this hugedeficit that they're going to
have to deal with with.
(10:45):
First thing, I mean they'vealready set spending revenues.
Because of the way we do oilrevenues, revenues are going to
be bouncing around.
But if the EIA forecast is good, we're going to be looking at a
quarter billion dollar revenuewhen they come back into Juneau
and then the legislature, whenit comes into session next year,
we'll be starting to work onthe FY27 budget.
(11:07):
We'll work on the FY27 budgetand you look at what the price
forecast, the drop in the priceforecast for FY27 is and you can
see that's another $400 millionplus or minus that reduction in
revenues that the legislatureis going to be dealing with next
year another huge deficit year.
(11:29):
So the campaign the 2026campaign is going to be based is
, if these forecasts, if the EIAforecast is correct.
These campaigns are going to bebased in an environment in which
the legislature is having todeal with this huge deficit for
FY26 when they walk in the doorthrough supplementals or through
(11:50):
pulling more money out ofreserves that we don't have or
something, and then in FY27,they're going to be dealing with
an even deeper deficit thanthey thought they were going to
be dealing with when they didthe FY26 budget, which was
already, they claimed, a tightbudget.
So we're going to be dealing inan environment the 2026 campaign
(12:10):
is going to go off in anenvironment in which oil prices
are dropping and candidates aregoing to have to be talking
about what the fiscal plan is torespond to this environment in
which we've got rapidly dropping, deeply dropping oil prices,
and I think that's going toreshape the 2026 campaign in a
(12:30):
way that I'm not sure peoplehave thought through yet.
They're going to, instead oftalking about what new program
they can layer on, instead ofTom Begich being able to talk
about what additional programshe's going to bring.
They're going to have to betalking about how they're going
to deal with these huge deficitson the oil price as a result of
the oil price drop and whatplan they're going to have in
(12:54):
place when they take office fordealing with a significantly
reduced outlook from thestandpoint of oil prices.
Speaker 2 (13:04):
Because, again, just to be clear, we're talking about
, when they come back in January, almost a quarter billion
dollar in supplemental spending,because the price will be down,
and then an additional 1.4billion down if the EIA numbers
hold.
We're talking about one andthree quarters billion dollars,
(13:26):
1.75 billion dollars in deficit.
That's just based on thecurrent spending level, with no
additional spending, just theescalators that are built in and
everything else 1.75 billiondollars.
Speaker 1 (13:43):
Yep, and we've got.
I mean, I haven't looked at thelatest CBR number, but it's not
much.
It may be a little bit north oftwo.
It may be between two and threeCBR anymore is really the
accumulated PFD cuts that theydidn't, that they sort of saved
up for future use and so it'snot.
It's maybe between two and $3billion.
So it's not maybe between twoand three billion dollars.
(14:03):
So you know, you can easily seethat sort of being wiped out
between between these twodeficits and it's just, it's
going to be a significantlydifferent environment.
The 2026 campaign.
(14:27):
What EIA is telling us, if thisoil forecast holds, is it's
going to be a significantlydifferent environment out there
in 2026 than I think what peoplehave previously imagined a
significantly different fiscalenvironment for the state coming
forward.
Speaker 2 (14:35):
Before we go here, Brad, quickly, you know, if the
number holds, what's theprobability?
How close has EIA been in thepast?
I mean, what do we think here?
I mean, is this a 50-50proposition?
Is this a, you know, more than50% proposition that these
prices will actually happen theway that they are?
Speaker 1 (14:54):
Well, everything changes over time.
So it's based upon the supplydemand outlook that EIA and IEA
essentially share.
If demand grows at asignificantly higher rate than
what either EIA or IEA isforecasting, it'll soak up some
(15:14):
of that excess supply and itwill increase price.
Opec, for its part, in itsmonthly report, projected higher
demand growth than either IEAor EIA.
So that's one factor.
If somehow the world economystrengthens faster than forecast
.
The other is on the supply side, and the supply side what these
(15:38):
forecasts are based upon issome moderate decline or some
moderate decline in the pace ofgrowth.
There you go in non-OPECsupplies and sort of this huge
jump as a result of OPECreducing the production cuts on
the OPEC Plus side.
If either of those don't hold if, for example, the non-OPEC
(16:02):
supply drops quickly drops at afaster pace than projected in
response to price, or if OPEC,seeing the impact on price,
decides to sort of slow theproduction cuts that they're
pursuing, then that would reducesupply and increase price.
So it's based upon thesupply-demand outlook that the
(16:25):
agencies have right now None ofthem other than OPEC, but none
of them really foresee changesin that demand side picture.
They both do detailed analysisof the world economy and they
see that demand forecast holdingup the real variable is going
to be on the supply side.
That demand forecast holding upthe real variable is going to
be on the supply side.
(16:45):
And if OPEC decides not to pullthe string on all of these
production cuts or if there's abig price response on the
non-OPEC side in terms ofslowing supply growth, then the
supply side may fall short andthese prices may be a little bit
higher.
Speaker 2 (17:00):
This chart is going to be the chart to show all the
candidates at this point.
So this is what you'repotentially looking at.
What do you think?
How are you going to fix it?
What are you going to do?
That's going to be the big.
That's going to be the bigchart right there for folks to
remember and and and listen to.
For sure, brad Frank says 26campaigns will not have a
(17:25):
different environment.
It will tell voters what theywant to hear, and that's what
I'm afraid of, because, what youknow, what about the fiscal
plan?
What about?
I mean, yesterday we had, uh,we had, uh, we'll step on and I
asked about a fiscal plan and itkind of got shoveled under the
carpet.
I mean, there was just, youknow, kind of got shoveled under
(17:46):
the carpet.
I mean there was just, you know, the answer was elect better
people.
You know which?
Again, the people in the roomare the ones that we have to
work with.
I mean, yeah, we'd be nice toelect more fiscally responsible
adults, but that just doesn'tseem to be the answer at this
point.
Speaker 1 (18:01):
Yeah, I don't know.
I mean, the legislature isgoing to have to talk about
these deficits.
They're going to have to talkabout these deficits.
They're going to have to talkabout the fact that FY26
revenues are coming in way below.
Assuming the EIA projectionshold that FY26 revenues are
coming in way below that theyforecast.
They got this huge deficit thatthey're going to have to deal
with in FY26.
And if the legislature has totalk about that, then the news
(18:24):
media are going to be talkingabout it and that's going to set
the environment that thecandidates are going to be
talking in.
The legislature is also goingto have to talk about the FY27
budget and they're going to haveto talk about the fact that
revenues are coming in muchlower than previously projected
and they're going to have totalk about how they're going to
deal with that in the FY27budget than previously projected
.
And they're going to have totalk about how they're going to
deal with that in the FY27budget and the legislature is
(18:46):
going to have to deal with thator the news media is going to
pick up on that and have to talkabout that Also.
You've also got one interestingwild card in this Lyman
Hoffman's retiring and in hisretirement year, in his
retirement session, he seems tohave decided that he's just
going to, you know, tell thetruth.
And so you know he's beenhonest.
(19:11):
Even Will pointed that outyesterday in yesterday's
discussion with you.
And so Lyman, I think is goingto be co-chair of Senate Finance
, is going to be talking aboutthis perhaps more than he
otherwise might, more than if hewas campaigning for reelection.
So, yes, I mean candidates.
(19:32):
I mean Bernadette may continueto talk about full PFD and no
taxes and all that sort of stuff.
Yeah, they may continue to dothat.
But the credibility of themsaying that, in the face of
these deficits that thelegislature is going to be
having to deal with, both FY26and FY27, the credibility of
candidates you know often la-laland talking about you can do
(19:54):
all this stuff and you don'thave to worry about the fiscal
plan I think the credibility ofthose candidates is going to be
severely tested.
Speaker 2 (20:02):
Yeah, it's going to be problematic.
And now again, we've got 10 inthe field and uh, I mean we
don't know how many more we'llthrow their hat in the ring here
between now and and whenever.
Uh, but uh, so far I'm notseeing anybody that's jumping up
and, uh, putting you know,offering a, offering, a full
(20:23):
fiscal plan of any kind, or evena partial, really partial
fiscal plan.
At this point, um, it's a votefor me.
Chicken in every pot.
Um, and and and I, I just, Imean, I, I don't have a whole
lot of hope at this point.
Speaker 1 (20:39):
Yeah, and it's not like there isn't a plan out
there.
I mean the legislature's 2021fiscal policy working group plan
that Shelly was a part of.
Shelly Hughes was a part of God, you'd think she'd adopt it.
But that plan sitting therethat says a little bit of
everything, a little bit of allthe above a little bit of
spending cuts, a little bit ofnew revenues, a little bit of
(20:59):
PFD cuts down to POMV 50-50, alittle bit of this and a little
bit of oil revenues.
And that plan it sort ofspreads the burden in a way.
I talk a lot about rate designand revenue design and what you
want to do in revenue design andrate design.
You want to spread the burdenas much as you can to get the
(21:20):
divisor up and to have theimpact on anyone group low.
That plan spreads the burdenmore than almost any plan I've
seen.
So it's not like they don'thave a plan they can talk about.
There's one sitting there butno one seems to I mean not even
Shelly.
One of the authors of the planhas jumped up on it.
Speaker 2 (21:38):
Yeah, she didn't.
I gave her the softball askingher, you know she just didn't
want to, didn't want to dealwith it.
All the softball asking her,you know she just didn't want to
, didn't want to deal with it.
All right, welcome back.
We continue with Brad Keithley,alaskans for Sustainable
Budgets the weekly top three.
(21:59):
We're on to number two, whichis happy birthday to social
security and you're about to die.
Seven years is the latestnumber, seven years until the
benefits basically end if wedon't do something and this
affects Alaska as well Alaskahas a social security problem as
well, brad.
Speaker 1 (22:15):
So yeah, so social security is sort of the coming.
If oil prices are the issuethat's going to drive, I think,
the Alaska fiscal discussionover the next couple of years,
social Security is sort of theissue that's coming on the
federal scene.
That's going Security yourbenefits go from wherever they
(22:36):
are now down to zero.
What's going on is this Overthe years that the current
(22:58):
generation, or the currentelderly generation or the
current senior generation orwhatever however you want to
call them, over the years thatthe baby boom generation there
we go, over the years that thebaby boom generation was working
Social Security, built up a bigpot of money, a big reserve.
They weren't using all of thecurrent revenues.
(23:18):
I mean, like a pension plan,they weren't using all the
current revenues to pay benefits.
They were building up this bigreserve that was going to sit
there, earn money, and it did uh, and sort of sit there for when
baby boomers retired and thenit would, and then baby boomers
would uh, would benefit fromthat, would start draining it
down, like you do with anypension plan, for a variety of
(23:42):
reasons, including lowcontribution rates, lower
contribution rates than what anactuary would say.
Baby boomers ought to becontributing into Social
Security in order to build upenough of a reserve.
For a variety of reasons, thereserve isn't big enough to see
the baby boomers through or tosee social security through.
(24:03):
And so what?
What?
The what?
The projection is, all theseprojections about timing is when
the reserve is going to be gone.
And once the reserve is gone,all that's going to be available
for social security is what thecurrent generation, the current
working generation, iscontributing in to.
That's going to be turnedaround and be distributed in
(24:24):
benefits.
There's not going to be,there's not going to be any
buildup reserved by the currentworking generation.
Everything they're contributingin is going to be immediately
turned around and and sent toand sent to the currently
retired generation, and so thebenefit that's been built up
(24:45):
through this surplus is going todisappear.
When it does, the currentSocial Security retirement rates
, the current Social Securitybenefits that are set in law
will have to drop, because youwon't be able to pull't be able
to pull the reserve, pull on thereserve for the additional, the
additional money.
The drop's going to besignificant.
Committee for a ResponsibleFederal Budget does great work
(25:08):
on this and other federal issues, and they've done a recent
analysis of what the impact isof that drop when the reserve
depletes, what that drop's goingto be and for a medium-income
family.
These are national numbers butit's going to be generally
(25:29):
applicable to everybody.
For a medium-income singleworking person or single retired
person, the drop's going to beabout $14,000 a year.
Single retired person, the dropis going to be about $14,000 a
year.
For a married family or twothat are in retirement, a man
and a wife who are in retirementor a married couple that is in
retirement, the drop is going tobe about $18,000, $18,500 a
(25:54):
year.
So the drop is going to besignificant and again, that's
the impact of the reserve comingoff.
The thing about these numbersis they may go even lower
because all you're doing isyou're recycling what the
current working generation iscontributing into the plan.
If you continue to have acontraction in the current
working generation, as some areconcerned we're going to have
(26:16):
because of the drop-off inpopulation growth or the AI
revolution, that's going to dropemployment.
If you continue to have adecline in the employment, the
contribution to Social Securityis going to drop and that amount
(26:39):
that's coming over to theretirement group is going to
drop as well.
So these numbers are sort ofthe best projection of what it's
going to be like at thebeginning of the drop.
But the drop can be even moresignificant.
This comes through to Alaskabecause Alaska is projected to
(27:01):
have already has a significantretirement population.
Already roughly 15% of theAlaska population is retired,
living on Social Securitybenefits or in part living on
Social Security benefits.
But that's projected.
Alaska is projected to graysignificantly over the next 20
(27:22):
or so years, growing from 15% ofthe population up to 20% of the
population if the populationcontinues, if the Alaska
population continues to grow.
If you look at Department ofLabor's recent projections about
a population decline in Alaskaover the next 20 or 30 years,
(27:43):
then the percent of thepopulation that is retired grows
even higher because theprojection of decline is more
the working population, theworking age population, than it
is the retirement age population.
The retirement age populationsort of sticks here and it's the
working age population that isout migrating.
So you have.
So the percentage of of Alaskansthat are retired in that
(28:07):
scenario grows even higher thanthe, than the 20%.
That's uh, that's projectedwith uh, with some moderate
population growth in Alaska, ifyou, if you start looking at 20%
of the population, facingsignificant cuts.
I mean I would say 18 to amedium income family, roughly
$20,000 in cuts to a retiredcouple is not going to be
(28:34):
immaterial to their economicwell-being.
And if you start looking atthat sort of cut to 20% of the
population, you're going to seea material amount of contraction
in the amount of money that'sin the economy, that's in the
consumer economy or it's in thesavings economy or the
(28:56):
investment economy or whateversegment of the economy you want
to look at.
You're going to see asignificant contraction of money
in the economy.
So it's a national problem thatsocial security is a national
problem, but it has significanteconomic implications for Alaska
if it's not solved at thenational level.
(29:16):
Through the level of cuts thatare going to hit Alaska, the
Alaska retired population as aconsequence, most people say, oh
, this problem will get solved,congress will do something.
And it's sort of again to pickup on a comment that Will made
yesterday, will said well, youknow, people kick the can, kick
(29:39):
the can, kick the can, kick thecan and it's the last guy who
ultimately has to face it andhas to take draconian steps to
make it work.
And it's getting worse andworse and worse.
I mean the current projectionout there or the current
discussion on the table abouthow we solve this is to increase
(30:00):
the retirement age.
So we reduce the populationthat's drawing on social
security, cut the benefits orcap the benefits to that
population that is retired sothat that limits the draw on
social security.
The draw on social securityincrease the tax essentially on
(30:22):
on the population that's working, to increase the revenue flow
into social security.
And that comes through twosteps.
One is to increase the taxitself, but also there's a cap
on on social security.
Who pays social security orwhat portion of your income you
pay social security on is betterput.
And so one of the steps underdiscussion is to increase the
(30:51):
cap on the wages that you paysocial security on to increase
the revenues on social security.
So there's a number of steps andthey're getting worse and worse
and worse.
The closer and closer we get,the less and less that's in the
reserve, the faster we'redraining the reserve or the
lower the reserve is as we goalong, the more draconian the
(31:12):
steps have to be.
Two things made it worse the onebig bill by reducing the level
of tax on social securitybenefits which cycled back into
the social security system.
The one big beautiful bill, byreducing the tax on social
security benefits, increases orreduces the time that we have
(31:37):
remaining before we hit the Xdate of draining the reserve.
And also the step that we tookearlier to essentially allow
double dipping by retirees whohad non-social security plans,
who had contributed tonon-social security plan, who'd
contributed to non-socialsecurity plans and had benefits
(31:59):
from from non-social securityplan plans but also had
contributed in some way tosocial security, the the, the
step we took which was praisedin alaska because we have a lot
of these people up here uh, thestep that allowed them to draw
on social security benefits inaddition to their non-social
security.
Uh, retirement also drained,also reduced the reserve and is
(32:21):
shortening the time frame withinwhich we have to deal with this
problem.
So the problem is there, thetime frame is getting closer,
the steps we have to takebecause we have the draining
reserve, the steps we have totake are increasingly dramatic
and that's the situation we face, and Alaska faces a consequence
(32:44):
of that because of thesignificant level of our
population which is in or willbe at the time this hits in
retirement.
Speaker 2 (32:57):
Yeah, I mean, if you're counting, if you're my
age and you're counting onsocial security benefits as some
kind of uh retirement orbailout, you're going to be
severely disappointed.
I think is what the uh?
What the answer is?
Because, again, as they'vedrained the reserve and there
used to be what 14, uh peoplecontributing for every one
recipient, and now it's down totwo, it's down to two people
(33:19):
contributing for every onerecipient and now it's down to
two, it's down to two peoplecontributing for every one
recipient, and that's obviouslynot sustained.
I mean, when they used tocriticize Nick Begich for saying
it was a Ponzi scheme, butthat's almost the very
definition of a Ponzi scheme.
When you got people paying into the people who are drawing
out and that number continues togo down, that's a huge problem
(33:39):
right there.
Speaker 1 (33:40):
Yeah, and, and although it's counterintuitive
to some people uh, uh, the, thelimitations on immigration, uh,
that we're adopting, uh, notonly in this administration, the
last administration as well,but the tightening on
immigration rules that we haveis increasing the problem.
Because because immigrants,even, even, even the, the
(34:03):
non-documented ones, even theillegal ones, when they work,
they contribute to socialsecurity, that that amount is
deducted from their paycheck?
They don't.
They don't.
It's not that they don't paytaxes, it's that it's that their
employers are with orwithdrawing the money.
So immigrants, when they work,are contributing to social
security and illegal immigrantscan't draw from Social Security,
(34:23):
so they're actually buildingthe fund.
As you're constricting theimmigrant population, you're
restricting the number ofworkers, and so it's having the
effect of increasing theproblems with social security as
well.
It's getting us down to thattwo workers for every one
retiree issue that you talkedabout.
Speaker 2 (34:48):
Well, this is going to get gruesome here in the next
few years.
And the question is do theyhave the risk?
But it's like Will saidyesterday, like you said, they
just keep kicking the can downthe road.
It's a game of musical chairsand everybody keeps leaving with
a chair and there's one guyleft standing and there's no
more damn chairs.
Is what's going on?
He's like, looking around, themusic stops and he's like there
is no chair, no tracer.
(35:09):
That's not what brad said.
Did brad keithley justencourage killing off granny and
grandpa over dollars?
How does he propose to reducethe number of elderly?
That's that.
That's not what I don't think.
That was the point he wasmaking.
But you know, you hear what youwant to hear.
That's that's what it is rightthere.
Um, brad, this is uh.
(35:30):
I mean, this is a, this is abig deal, because I think a lot
of people are um, you know, Ilike I'm eyes wide open about my
retirement.
I know that social securitywill probably not be there for
me, but many people are countingof it to um to be their
retirement plan.
Essentially, I paid into it mywhole life.
(35:51):
I should get out of it, butit's not.
That's not.
That's not what is?
That's not what's going tohappen, right.
Speaker 1 (35:58):
Yeah, and it's not Michael.
I mean, even even you know thepeople who are preparing for it,
like you, who say, well, I'mnot going to count on social
security, so I'm doing whatever.
Whatever it is I need to do toprepare myself when I get to
those years, prepare myself tobe there without Social Security
.
It's going to be less money inthe economy as a result of it.
I mean, we've got an increasingretirement age, we've got an
(36:24):
increasing share of thepopulation that's retirement age
.
Social Security is a mechanismby which we get money to that
segment of the economy and thatsegment of the population, and
that segment of the populationthen largely spends it and so it
generates activity in theeconomy.
(36:45):
If we're going to take that outin terms of reduction cuts, you
may be ready for it, the nextperson over may be ready for it,
the next 20 people may not beready for it, and that's its own
problem.
But even you, we're reducingthe amount of dollars that are
(37:05):
coming into that share of theeconomy.
Now the flip side is to solvethis problem.
We're going to have to makesome of that reduction anyway,
we're going to have to capbenefits in some fashion anyway,
and we're going to have toincrease taxes on the working
population, on the current, thenon-retired population, to fund
this, and that's going to takesome money out of the economy.
(37:29):
But the next the trade-off isbecause of the significant share
of retirees in Alaska.
The trade-off in Alaska isgoing to be that we're going to
be net losers if we don't solvethe social security problem, and
it'll be an even greater netloss if we have to cut benefits
(37:50):
deeply or if we, or if we hitthe, the X date and the benefits
suddenly plunge um, as as theyare projected to do, um, and we
have a segment of the populationthat's not ready for it.
So it's um, it's a, it's aserious issue that that people
keep kicking the can down theroad.
I mean, you could, you could.
You saw this 15 years ago, yousaw this 10 years ago.
(38:12):
I think we talked about it onthe show in the early 20-teens
as one of those issues that wasout there that needed to be
solved.
We haven't solved it.
It's now seven years, it'll besix years, five years, four
years, three years and suddenlyit'll be a frigging crisis that
we're facing and Alaska is goingto get hit with it.
So we need to encourage thefederal, our federal delegation
(38:36):
to deal with this issue in somefashion, so that it's not like
the sort of damocles hangingover the hanging over both the
retirement population and thestate's head.
Speaker 2 (38:46):
Well, we've known it's been a problem, as you said
, we've talked about it multipletimes.
I know we talked about it.
I think that, in fact, wasprobably close to 10 years ago,
my first conversation with MayaMcGinnis from, uh, the CFRB, uh,
where we talked about what wasgoing on with social security,
and at that point they weresaying that it would be empty by
(39:06):
the time by 36, which is the 10years from now, which is, you
know, my retirement age quoteunquote um, that and so, yeah,
that's.
We already knew that that wasgoing to be a problem.
Um, but there is, just like inthe Alaska, with a permanent
fund dividend and the size andscope of government, there is no
(39:27):
political will to fix whatwe're talking about here.
There's just no they, just youknow that, they, that it just
continues to decline and we'llall be oblivious to it up until
the point and then they'll beshocked, shocked.
I tell you that, uh, that thishas happened.
I mean, how come we didn't seethis sooner?
Speaker 1 (39:47):
kind of question mark , you know yeah, well, it's,
it's, it's coming, and and and.
For those in alaska who say,well, it's a national issue,
we're not going to worry aboutit here.
It has an impact on us here, um, and it's and it's an issue
that we ought to be encouragingour delegation and and and for
those who are involvednationally, at the national
(40:09):
level, federally to address,because it's not getting better.
Passage of time makes it worse.
I mean, you're correct.
A few years ago CRFB wasprojecting 2036.
Now it's 2032 or 2033.
Because of reducedcontributions and because of the
(40:30):
legislation that was passed,that's reduced, that's been a
bigger draw on or curtailedrevenues that are going into the
fund.
So it's coming.
It's coming quicker than peopleimagined and it's going to be
significant when it hits.
Speaker 2 (40:46):
Anthony's got the perfect retirement plan.
He says I'm just banking on thecollapse of society in the next
25 years as my retirement planis stockpiling ammunition and
fuel.
I figure bullets and fuel willbe the new currency once we hit
the Mad Max on ice status inAlaska.
Speaker 1 (41:04):
Let's hope not.
Speaker 2 (41:05):
We joke about it, but I mean you know, if you're
planning on, if you're countingon the government to help with
your retirement, you may want tocheck yourself before you wreck
yourself, because that's goingto be a tough thing right there.
All right, Brad, let's get onto number three of the weekly
top three, which is we're goingin the wrong direction, which is
(41:31):
a commentary on this piece inthe Newsminer which has got the
priorities of the FairbanksNorth Star Borough.
They laid out their legislativepriorities.
This is what they want to thelegislature to focus on.
We start off with the longtrail.
I mean, this is the all right,hit me, hit me with.
(41:52):
I just I was, my eyes wererolling so hard as I read this
article all right.
Speaker 1 (41:59):
So so we've been doing I've been doing k-12
segments, um, k-12 fundingsegments, the last few shows and
and it's a it's an area thatthe state increasingly is
focusing on.
I mean, that's the big battlewe just went through on
education funding is part ofthat.
(42:19):
We've got a task force that'skicking off the latter part of
this month.
The governor's got proposals.
I mean there's all sorts ofthings out there on K-12 funding
and I think it's going to be anissue that we see come up in
the next legislative session.
Now it's going to come up nowin the context of declining oil
revenues and that's going to beinteresting to see how we deal
(42:41):
with that issue in the contextof declining oil revenues.
Funding that I'm spending a lotof time on and will ultimately
get to a column on maybe thisweek, maybe subsequent week.
But one of the aspects of K-12funding that I find very
interesting is the contributionlevels between the state and the
(43:05):
localities in terms of fundingK-12.
We have a combined fundingsystem in this state Most states
do where the state contributessome, the localities contribute
some and the federal governmentsort of sprinkles a little bit
of federal money, or at leasthistorically, has sprinkled a
little bit of money since the60s.
It's sprinkled a little bit ofmoney into the mix as well and I
(43:28):
talked a couple of weeks agoabout how Alaska is really an
anomaly almost an anomaly in thestates, because most of the
remaining 90% in averagethroughout the US, 45% of it
(43:56):
comes from the state level and45 comes from the local level
and that sort of equivalencyhelps drive cost control because
the local school boards aremaking decisions about how to
spend money, are makingdecisions about how to spend
money because the localitieshave such a significant share of
(44:16):
the costs.
People locally focus on costcontainment, cost constraint at
the school board level and thathas the ability or that has the
effect of driving costcontainment in some states.
Because of that high localcontent.
Alaska is a anomaly because wehave about 10%.
Let's take the 10% federalcontributions a little bit more
(44:38):
in Alaska, but just think of the10%.
Of the 90% remaining, about 20%comes, 25% comes from the
localities.
The remainder 65% to 70% iscoming from the state.
So the contribution level bythe state is a lot higher in
(44:58):
Alaska than nationally and Ithink, as we've discussed on the
show before, I think one of thepieces of the solution to our K
through 12 issue is to increasethe local share of funding, to
increase the concentration atthe local level on cost control
and on finding efficiencies thatexist in the K through 12
(45:23):
system.
I think we've lost that, asI've explained on previous shows
.
I think we've lost that becausewe have too much at the state
level and the localities say, ah, we contribute a little bit,
but the state picks up most ofthat and when we have increased,
when we need increased funding,we'll just look to the state to
pick up that.
So there's not a match betweencost responsibility and cost
contribution going on in Alaskaand I think that's part of the
(45:46):
problem.
So I've talked a lot aboutincreasing the local share.
I was reading through therecommendations of the Fairbanks
North Star Borough, the advicethey were going to give their
legislators, and this paragraph.
These paragraphs just stuck outto me.
(46:07):
The Fairbanks North SarabaralAssembly involves the state
fully funding education to meetbasic needs and eliminating the
requirement for localcontributions.
Municipalities with educationpowers are required to provide a
minimum contribution based upontotal assessed taxable value of
property, which is subtractedfrom the amount that the state
(46:29):
allocates to school districts.
Hopkins, Greer Hopkins proposedan amendment moved by an
assembly member to include alegislative request that the
state not reduce educationfunding as communities grow.
Hopkins argued that reducedfunding places the burden on
local taxpayer shoulders.
It urges the legislature, therequest urges the legislature,
(46:52):
to change the way the state'sbasic need formula is written to
reduce local contribution, ifnot eliminate it entirely.
That's going to add I mean,let's think through the
consequences that's going to addto the state's problem.
Because if you reduce localcontribution and you say that
the school districts need thesame amount, what that's doing
(47:13):
is pushing more money, moreobligation, to the state,
forcing the state's contributionlevel to grow even higher, not
because of increased funding,just because the local
contribution level is beingreduced.
I think that goes in the wrongdirection and it starts moving
us to a position where thesituation gets worse because
(47:36):
localities think well, thestate's going to pick up the
burden, the state's going topick up the spending.
So what do we care?
We don't need to findefficiencies, we don't need to
find funding sources, we don'tneed to think about cost
constraints.
It's all the state's burden.
Let the state deal with it andthat's just.
It was shocking to me to seethe Fairbanks, North Slope
Borough or the North StarBorough, making that
recommendation.
Speaker 2 (47:57):
Yeah, and again you went over the details of this
last week and my question wasagain the fair, the equity
portion of it and you said thathas to do with the way the
money's accounted for as far asthe federal equity.
When they say you know that'swhy you have a cap on
contributions in the state,local contributions.
Speaker 1 (48:16):
You have a cap on local contributions because in
part because of the federaldisparity test.
The federal disparity test isthat for the federal money to
get the federal money in the waythe state's using it, you can't
have more than a 20% disparitybetween the lowest funded system
(48:39):
and the highest funded systemin the state.
But there are ways to fix thatin a way that the federal money
still comes in, just doesn'tcount toward the state, and to
eliminate the disparity test andmove forward on that basis.
Speaker 2 (48:56):
In fact, that was the chart that you had last week.
There was that chart that hadthe contributions with the
averages.
Where is that right here?
There it is.
This is the chart with theaverage contribution.
Speaker 1 (49:15):
That's impressive.
You can call that up.
Yeah, it's great.
Speaker 2 (49:19):
But you look at the average, the US average for
state and local, according tothe various sources, and you can
see it right there that thelocal contribution is in the
mid-40s, almost to the low, tomid 40s in every way, and in
Alaska it's basically 20, 20, 22, 23, right in there.
So yeah, it's a big deal.
(49:42):
Now would we have to change theway that we account for the
federal dollars?
Yes, to make it work.
But you know the idea that theyare somehow saying what we need
to do is eliminate the localcontributions entirely.
You know what that's code for,right, brad?
That's code for what we'dreally like to do is we'd like
(50:03):
to spend that money on somethingelse.
They're not going to stop.
They're not going to refundthat back to the taxpayer.
If that happened to go along,what they would do is they would
take that money that they werecontributing to the schools and
they would then spend that onsome other program in the
borough.
Speaker 1 (50:19):
Yeah, but at the state level.
I mean, what's what's?
Greer was a staterepresentative at one time.
David Guttenberg was a staterepresentative at one time.
I mean, just think about whatyou're doing at the state level.
We're already straining at thevery edge of what we can.
Well, we're beyond the edge.
When you look at the EIAnumbers, we're beyond the edge
(50:41):
in terms of what the state canfund.
We're beyond the edge in termsof the state's funding power,
based upon the state's currentfiscal situation, fiscal
formulas.
We're beyond the edge of whatthe state can fund.
And if, all of a sudden, we doaway with local contribution,
which is in the 20s it should behigher, but at least it's in
(51:01):
the 20s If you do away withlocal contribution, all of a
sudden all that shifts to thestate and so you have that
additional burden on the state,even before you start the
conversation about the stateneeding to provide even more,
and the state just doesn't havethe capacity.
So we're dealing.
I mean, one way to look at thismight be oh well, they're
(51:24):
trying to set up K-12 spendingcuts, because if you reduce the
local contribution, the statedoesn't have the capacity to
contribute more.
Then you end up with less forthe school system because the
local contribution has suddenlywalked away from it.
I doubt that's what Greer hasin mind, but you're setting up a
(51:45):
situation in which the statecan't handle this.
The state already can't handleit and you're setting up a
situation in which the statecan't handle it and and you've
just screwed up the incentives.
The incentives, the ability tocontrol spending, is at the
local level.
The ability to to findconsolidation, the ability to
find efficiencies, the abilityto to find places to cut
(52:07):
spending, is at the local level,because that's where the
money's being spent.
That's.
Those are.
Those are the people deciding,deciding where to spend it.
And if, all of a sudden, theydon't have any, they don't have
any funding obligations, thenthen you know they don't have
any constraints.
They saw us all, the state'sresponsibility.
Speaker 2 (52:24):
Sky's the limit.
Yep, sky's the limit.
I did have to and I and Ididn't mean I, just I had to
chuckle because we started witha long trail.
That was the first thing thatthey said on the whole
discussion was that we need thelong trail, and you know.
And then they went on toeducational components and
everything else.
It is.
It's, I think it again.
(52:46):
Nobody's checking thetemperature of the room, right,
or maybe they are.
Maybe that's where Fairbanks isat these days, maybe it's the
dependency state is alive andwell in the Fairbanks area.
All right, brad, we got abouttwo minutes here.
Give me your thoughts here.
As the election season startsto shape up, what do you think
(53:08):
we're going to be seeing?
What are you going to bewatching here for the?
Speaker 1 (53:13):
upcoming election.
I'm going to be watchingwhether candidates are realistic
Candidates are facing theeconomic situation, the fiscal
situation the state's facing,whether the candidates
acknowledge that there's apotential huge downside coming
on the oil side, oil revenueside, and how to deal with that,
and what their comments are andwhat their positions are with
(53:36):
respect to fiscal plan.
And I think that's to me that'sgoing to be the big issue for
2026.
I mean, we're going to havedeficits, big deficits that
legislature is going to have todeal with for FY26.
It's going to be a lot lessrevenue for FY27.
And I think candidates aregoing to need to respond to that
(53:58):
.
If they don't, I don't thinkthey're realistic candidates.
I think they're out in la-laland someplace and not
realistically dealing with theissues that the state is
confronting.
So that to me is a big issue.
And the EIA forecast, the EIAprice projections, just bring
(54:20):
that into very sharp forecast,sharp understanding, because you
can see what that does torevenue.
You can see what that does tostate revenue almost immediately
.
Speaker 2 (54:33):
Yeah, no, I mean, we're going to have to deal with
this.
It's just that you know we'regoing to have to deal with this
and everybody wants to just kindof ignore the monster in the
room and say it's all going tobe fine.
I don't know what you'retalking about.
Speaker 1 (54:47):
And you got people like Will Stapp yesterday who
said, oh well, we're going tohave increased production.
Yes, that increased productionis driving down revenue.
We've talked about that onprevious shows.
Speaker 2 (54:59):
He said but Brad, wait, 10 years, it'll be fine.
10 years, it'll be fine.
How do we get through those 10years?
Nobody has a clue.
But don't worry, in 10 yearsit'll be fine, fine, just fine,
all right, brad.
Well, thank you so much.
We appreciate you coming onboard and we look forward to
talking to you again next week.
Speaker 1 (55:20):
Michael, as always, 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.
This has been Brad Keithley,managing Director of Alaskans
(55:43):
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
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