October 1, 2025 • 55 mins
Welcome to The Weekly Top 3 — our look at the top 3 things on our mind here at Alaskans for Sustainable Budgets — for the week of September 29, 2025.
This week, our top 3 issues are these: 1) we discuss Alaska’s K-shaped economy and how it helps explain outmigration (2:06); 2) we explain the parts of the story that the Permanent Fund Corp’s claims about a “successful” FY25 ignore (18:11); and 3) we discuss why op-eds proposing new or continued spending should come with a fiscal note (38:23).
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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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_02 (00:10):
Hi, this is Brad Keithley, Managing Director of
Alaskans for SustainableBudgets.
Welcome to the Weekly Top Three.
The top three things on our mindhere at Alaskans for Sustainable
Budgets for the week ofSeptember 29th, 2025.
The Weekly Top Three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube live,
(00:33):
as well as via streaming audiofrom the show's website weekdays
from 6 to 8 a.m.
I join Michael weekly in thefirst hour of Tuesday show from
6.10 to 7 a.m.
for a discussion between the twoof us about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, YouTube,
(00:55):
SoundCloud, Spotify, andSubstack pages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site, medium.com.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that in addition tothese podcasts, during the week,
(01:16):
you can also follow andparticipate in the discussion
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
Twitter.
This week, our top three issuesare these.
First, we discuss Alaska'sK-shaped economy and how it
(01:40):
helps explain out migration.
Second, we explain the parts ofthe story that the permanent
fund corporations claims about asuccessful FY25 performance.
Ignore.
And third, we discuss why op-edsproposing new or continued
spending should come with afiscal note.
(02:03):
And now, let's join Michael.
SPEAKER_01 (02:06):
Let's get started.
Uh this week's topics include isnumber one, something called
Alaska's K-shaped economy.
What what are we what are wetalking about today?
The K-shaped economy.
I'm I'm curious.
SPEAKER_02 (02:21):
Well, there was an article in the ADN uh repeat of
an article from the WashingtonPost that I found uh interesting
and um and dived into uh alittle bit.
The headline of the article wasThe Wealthiest Are Boosting the
Economy as Consumer SpendingRises Again.
And this is really a story abouthow averages can be distorted.
(02:45):
Um what's going on?
What this article uh developsusing a lot of economic data and
and economic data I've heardfriends elsewhere in the country
discuss.
What's really going on is thetop 10%, the top 20% are
increasing uh consumer spending.
They're they're finding a uhthey're finding their their
(03:07):
wealth enables them to increaseconsumer spending and they're
spending it on various goods andvarious segments of the economy
that are tied to that segment ofthe income bracket uh are doing
uh are doing well.
But that's masking what's goingon with the other uh 80%.
Um and and with the other 80%,you're fine, you find when you
(03:30):
look at income data and you lookat spending data and other
similar data, you find thatthey're sort of barely breaking
even.
They're sort of they're sort ofhanging on, they're not boosting
consumer spending, they're not,their income data isn't or their
incomes aren't aren't boostingoverall income.
They're just sort of stayingstaying even.
And what economists describewhat's going on is a case-shaped
(03:55):
economy with the top incomebrackets going up, both in terms
of income and in terms ofconsumer spending.
And on an inflation-adjustedbasis, the bottom income
brackets sort of in a in a slowbut but steady, steady decline.
The result is that, and you cansee this in the in the income
(04:19):
data that we look at from theIRS about Alaska.
The result is the averages aregoing up.
Consumer spending overall isgoing up, but it's being driven,
and this is national, the that'sbeing driven by the top income
brackets that are driving it up,the top, the top leg um of the K
(04:39):
or the top arm of the K.
Um, it's being moderatedsignificantly.
I mean, if if all of the incomebrackets were doing the same,
uh, we'd have a super spikegoing on.
But it's being moderatedsignificantly by the by the sort
of steady decline, slow declinethat's going on uh with the
(05:00):
bottom arm of the K, uh thelower income brackets.
So my question was all right,this is a really good national
article.
Let me dig into Alaska data fora little bit and and see what I
can find with respect to Alaskadata.
And the Alaska data, Alaska, I Iknow it will come as no great
shock to anybody, but Alaskaisn't isn't the first thing that
(05:20):
that economists think of whenthey develop this sort of data.
So the data shocking.
The data isn't isn't isn't asfulsome, certainly, as what you
see at the national level, butthere's some.
And you can see the same thingagain by looking at the income
data, uh, both from the CensusBureau and from the IRS uh
(05:43):
income tax statistics, you cansee the same sort of rise going
on uh in um in in incomes in theupper arm of the of the K
bracket.
And you can see the sort of samesort of steady sort of
decline-ish going on in thelower arm, the middle and lower
income Alaska family uh bracket.
So I doubt I dove into that alittle bit more and said, okay,
(06:06):
so what's the what's really thecause of what's going on in the
middle and lower income bracket?
And there's a lot of things thatthat are are going on in there.
But one of the things is theslow and steady decline of the
PFD.
Alaska used to not look as muchK-ish as it looks now.
(06:28):
It used to, uh compared to thenational average, it used to be
much flatter um uh in terms ofboth arms.
Both arms used to be much lookcloser together than they are
now.
And a driver behind that was thePFD.
Uh, when you look at income dataon a household basis or on a
(06:50):
family basis as opposed on anindividual basis, uh, the PFD
was a not insignificant sourceof income to households in the
middle and lower incomebrackets.
As the PFD is we all know thePFD has declined.
I mean, not only not only interms of not only against
inflation, but just absolutelyit's a decline.
(07:12):
And as that income, as the PFDincome has declined, you find
Alaska forming a more and moresharp K.
Right.
SPEAKER_01 (07:22):
With uh with the upper income brackets.
You're talking about you'retalking about the difference
between$4,000 for a family offour and twelve thousand to
four, you know, to fourteenthousand dollars for a family of
four.
Yeah, that's a significant bump.
SPEAKER_02 (07:36):
Yeah, when when you're talking about middle and
lower income Alaska familieswhose whose income is not is not
huge to begin with.
So when you're taking that outas a percent of income, and so I
I extended this, I extended thisthinking a little bit further
and and sort of pondered whetherthat's the source of
outmigration.
We we have, or that's one of thebig contributors to
(07:57):
outmigration.
We have talked about this beforeon the show.
I've written columns about itbefore on the show, but I sort
of went back to that data andlooked at it again.
And and the data shows when youlook at when you look at the IRS
statistics, when you look at theCensus Bureau statistics, the
data shows that we're losing umuh families, working age
(08:20):
families, families below age 60,60 and below.
We're losing those families inthe middle and lower income
brackets.
We're actually increasingfamilies um uh in the upper
income brackets um uh in inAlaska.
So there's in migration in thesense that that that number the
number of families, number ofhouseholds are are is climbing.
(08:41):
There's in migration going on inthe uh in the upper income
brackets.
They don't need any additionalhelp.
They're they're doing fine,they're attracting more people
here.
But in the middle and lowerincome brackets, we're that's
where we're losing working-agefamilies.
And and so, as sort of the thenet of this is as you look at
(09:02):
what's going on in Alaska, whenyou think about it in the
context of a K-shaped economy,and as you look at what's going
on in Alaska, as we are, as ourarms, our K arms are getting
farther and farther apart, asthey're spreading, in part
driven by the decline in thePFD, PFD cuts, as they're
(09:23):
spreading like that, uh, you'reseeing more and more out guy out
migration among the lower thelower part of the lower part of
the arm.
They're finding betteropportunities or other
opportunities elsewhere uh inthe US.
Um and that's and that's I mean,we've we've made this point
before, but I think seeing itstarting from the national level
(09:45):
and seeing what's going on atthe national level and and going
through the economics.
And I for those interested, Iwould recommend this article.
It's in the September 26th,published September 26th, so a
few days ago, the wealthiest areboosted, the headline is the
wealthiest are boosting theeconomy as consumer spending
rises again.
As you think about, as you readabout that in the national
(10:07):
context, you can see Alaskabeing affected by the same thing
in terms of the in terms of theK, the K legs spreading farther
uh and farther apart.
And so the legislature, when thelegislature thinks about, I mean
the legislature, I don't knowwhat they think about half the
time, but when they think aboutthe PFD, when they think about
(10:28):
PFD cuts, they're thinkingabout, oh, we're gonna redirect
this money to do good, right?
We're gonna redirect it in thegovernment.
Well, they're not thinkingabout, I don't think.
There's no indication they'rethinking about who they're
directing it away from and whatthat causes in in that general
population.
Um, and and if they're couldtruly concerned about the Alaska
(10:49):
economy, that's something thatthat we ought to hear more about
when it comes to thosedecisions.
SPEAKER_01 (10:54):
Remember, we we've had that conversation in depth
ad nauseum on this show thatthey're they're not thinking
about the private economy.
The private economy is not, Imean, if it was an afterthought,
that would be an improvement.
It's not, they're not eventhinking about the private
economy.
As long as the government spendsand the government economy is
doing well, they are notthinking about what is the
(11:17):
effect of anything that they'redoing on the private economy.
There is no discussion becausethey get nothing from the
private economy in their minds.
Their full and whole source ofincome is the permanent fund and
the oil revenues and theroyalties, and that's all they
think about.
They do not think about what'sgoing on in the private economy
(11:38):
because it doesn't feed thecoffers.
So why should we care?
SPEAKER_02 (11:43):
But they're not thinking, Michael.
They're thinking, they're noteven thinking about set aside
private and government.
Good point, excellent point,important point, but they're not
even thinking about middle andlower income Alaska families.
They're they're they're thinkingabout select uh uh segments of
middle and lower income Alaskafamilies that they can that they
(12:05):
can help by redirecting thesefunds out of the bulk of middle
and lower income Alaska familiesinto this subset uh that they're
directing these governmentprograms to.
And certainly they're thinkingabout the government employees
and the constituencies theycreate and the advocates they
create by directing it intothese subsets.
But it's coming at the expenseof a of a spreading K economy in
(12:28):
Alaska and coming at the expenseof worsening the economic
position of middle and lowerincome Alaska families who then
in turn, I mean, it's not likethey don't have choices, then in
turn are the biggest segment areleading the out migration.
So it's right, we we don't, wedon't, we're not having somebody
(12:50):
sit in the let who's sitting inthe legislature who's thinking
through the impact of thesethings on on Alaska families or
on the Alaska economy.
SPEAKER_01 (12:59):
Again, not surprising if you watch their
behavior.
And uh and again, it it's itit's about control, and I think
you hit the nail on the headwhen you talk about
constituencies.
Because are they bolsteringtheir constituencies?
And is the constituencies reallythe lower income Alaskans, or is
it the people who are writingthe checks for their next
(13:22):
campaign?
Yeah, I mean, Brad, again, notshocking that uh that they are
not really thinking about that.
Uh, it's become such a bubble.
I mean, the whole thing hasbecome just such a bubble that
at this point anything outsideof that little bubble, what does
it matter?
As long as we create theprograms that we say we need to
(13:44):
create, we can feel good aboutourselves, pat ourselves on the
back at night that we we gavethe the poor, poor, pitiful
people the program that helpedthem.
Um, as long as that money'sthere and we can get re-elected
to come back, then what does itmatter?
SPEAKER_02 (13:59):
Yeah, the the thing that the thing that I think that
frustrates me the most aboutthose who you know who say
they're helping the poor.
They don't they don't focus on,or if they do, they just ignore
it.
They don't focus on who they'retaking the money from.
They we're we're funding we'refunding all these programs, all
(14:20):
this addition, all this spendingthat's going on for the various
programs.
We're funding it by taking itout by using PFD cuts, we're
funding it by taking it out ofthe pockets of middle and lower
income Alaska families,generally.
So we're we're we're robbingPeter.
I mean, we say we're concernedabout middle and lower income
Alaska families, right?
Legislators would say thatthat's the heart of the economy,
middle income families, 80% ofAlaska families fall into those
(14:43):
brackets.
That's the heart of the economy,that's who we're concerned
about, that's who we're thinkingabout.
They say that, and then theytake the money out of their
pockets, largely not out of thetop 20%, certainly not out of
the old companies, not out ofnon-residents, unlike any other
state in the nation.
Um, they take the money out ofthe pockets of those they say
(15:03):
they're looking at that that arethe heart of the Alaska economy,
and they're directing it tothese sub-segments.
And and so the sub-segments, andand you know, and you got to
create a bureaucracy to do thatredirection and to provide the
services.
So that subsegment looks likeit's okay.
And when you focus on thatsub-segment, you're going, hey,
they're doing great.
But then you don't, you don't goback and look, well, what did I
(15:25):
do to the to the to the broadersegment, the middle and lower
income Alaska families that Itook the money out of?
Oh, they're going down and downand down.
They're forming the lower leg ofthe K, and the K is spreading
wider and wider.
I mean, that's that's the that'sthe tragedy of this.
We're we're focusing, we'refocusing these dollars.
(15:45):
We're taking the dollars broadlyout of middle and lower income
Alaska families, we're focusingit on subsets, and then we're
judging the the success of it bylooking at the subsets, and we
don't look back at the peoplewhose pocket we took it out of,
and we don't look back at at howthey're doing.
And that's just uh it's it'sfrustrating.
SPEAKER_01 (16:08):
Well, and to use your analogy, I mean, we're
robbing Peter and Paul to payPaul, right?
Because middle income Alaskafamilies don't really get any
benefit from all the programsare created.
Lower income Alaskans aresupposed to be getting the
benefits, but you're robbing allthe money from them to pay for
those benefits, and you'rerobbing the middle class who
(16:29):
don't get anything, and sothey're the ones that are
feeling everybody's feeling thepinch on the lower end to
supposedly take care of thelowest income Alaskans.
But if you gave them$12,000 fora family of four or$15,000 for a
family of four versus three,four thousand dollars for a
family of four, they probablycould take them, they could
(16:50):
probably grab themselves up bytheir own bootstraps and do it
themselves.
Instead, you've createdbureaucracies and problems and
and more overhead, and you'vecut the middle uh the middle
income Alaskans out completelybecause they don't they don't
qualify to benefit from allthese programs.
SPEAKER_02 (17:06):
Yeah.
Yeah.
It's uh it's uh no other statedoes it this way.
Every other state, every otherstate gets a portion of its
revenue from non-residents.
Alaska doesn't.
No sales tax, no statewide salestax, no statewide income tax.
Alaska doesn't get a portion ofits revenue from non-residents.
But but we have one of thehighest, if not the highest,
(17:29):
non-resident segment of ourworkforce that's non-resident of
any state in the nation.
We're just letting them get offscot-free.
No other state does that.
No other state has as regressivea tax, or as regressive a
revenue system, if Randy's gonnaflake off on tax, as regressive
a revenue system as Alaska does.
(17:50):
Yeah.
No other state has that.
So we're we're making it worse.
SPEAKER_01 (17:56):
Yeah.
Frank has a good point.
We don't have time to exploreit, but he says legislatures
also say private small businessis the backbone of Alaska.
Not true.
The government spending is theonly thing keeping Alaska
failing.
Um I mean, I I can't say thathe's wrong at that point.
Okay.
Uh, we're continuing the weeklytop three, our deep dive into
(18:16):
Alaska's economy, politics, andmore.
Um, this uh number two uh today,we're gonna talk about the weak
defenses of the Permanent FundCorporation.
Oh, they have a weak defense.
Brad, what what do you meanhere?
Let's get with it.
SPEAKER_02 (18:35):
So Devin Mitchell, uh, who's the executive director
of the Permanent FundCorporation, has written this
column that is making its wayaround the around the state.
I've seen it thus far in theAlaska Landmine and Must Reed
and in the Frontier Tiersman,and I'm sure it will make its
way to the rest of the state'snewspapers, those that haven't
closed up, uh, will make it tothe rest of the state's uh
(18:59):
newspapers uh uh in in duecourse.
And and basically it's uh it's adefense of of how the permanent
fund is doing.
It he offers it as as positives.
This is how your permanent fundcorporation is performing.
But in the wake of the stuffthat we and others have been
saying, the analysis we andothers have been doing of the
(19:20):
permanent fund corporation, youcan sort of view it as his
defense, particularly when hepublished it in the landmine,
where where all of my columns onthe permanent fund corporation
have uh have been.
SPEAKER_01 (19:30):
I noticed that.
I was like, oh, I see.
Brad must have poked the bearsomewhere in there for them to
file it here.
SPEAKER_02 (19:36):
Well, it's the it's their annual, they've come to
their annual results, theirannual report.
And this is probably the letterthat goes at the front of the
annual report.
But I just thought it wascurious that the first place it
showed up was was in thelandmine.
But I want to look at this for amoment.
Do you have the chart that Isent?
Can you oh my gosh, you're juston the ball today.
(19:57):
I'm with it.
Uh, okay, so this chart, we'vetalked about it before, but it's
but it's time to talk about itagain in light of what uh what
of Devin Mitchell's column.
Devin Mitchell, Devin Mitchelldefends two things or promotes
two things that the permanentfund corporation is doing.
They they are producinglong-term performance, long-term
(20:20):
returns for for Alaskans.
They're growing the permanentfund.
And the other is they'regenerating revenue for the state
uh in terms of uh in terms of uhadditional POM POMV uh draws or
POMV draws.
This chart looks at uh sinceFY20 compares uh the performance
(20:43):
of the permanent fund, both interms of balance, in other
words, in terms of growth, whichis the red line at the top, and
in terms of POMV draws or POMVreturns, uh revenues for the
state, to put it in Devon'sterms, which are in the red
bars.
(21:04):
If you go back before FY20, ifyou go all the way back to uh FY
uh 12, which is when uh uh uhVanguard started their uh SP 500
uh ETF electronic uh tradedfund, if you go all the way
back, you would see that in 13of the 14 years, 13 of the 14
(21:30):
years, the Vanguard SP 500 ETF,the heart of uh Warren Buffett's
9010 investment approach, the 13out of 14 years, the uh Vanguard
would have exceeded the returnsgenerated by the Vanguard ETF
would have exceeded those of theuh of the permanent fund.
I just this chart just goes backto FY20 and looks at what the
(21:54):
effect would have been.
Essentially says, look, okay, soit would take a few years to
recognize this is what's goingon.
Let's say we let's say theyfinally got they finally
realized the permanent fundcorporation finally realized
what was going on and started inFY20 to make to shift the
investments to the to the WarrenBuffett approach.
If starting in FY20, the blueline, which is it is the returns
(22:20):
generated or the balances of thepermanent fund, what the
balances of the permanent fundwould have been had it been
invested in the Warren Buffettapproach, the the S P 500 uh
90%, and uh a debt uh ETF uhlong-term debt ETF uh 10%.
Had it been invested in that,the blue line shows what the
(22:42):
balances of the permanent fundwould have been.
The blue bars at the bottom showwhat the POMV draw would have
been uh had they adopted sinceFY20 if if they had adopted the
the Warren Buffett investmentapproach.
What you can see is that the redline essentially flatlines uh
(23:04):
between uh uh FY23, uh the lastdownturn in the market, and
FY26.
The last point on this is theend of month FY26, the most
recent for which the permanentfund corporation has published
data.
And you can see that the thatthe red line is just essentially
flat across that time.
No additional growth coming outof the permanent fund
(23:28):
corporation's uh investmentapproach.
But you see the blue line jumpsfrom about$80 billion in FY23 to
now$124 billion,$125 billion, ifit had been invested in the SP
$500.
So when when Devin says, oh,we've had great long-term
(23:49):
performance, we've had great uhgrowth in the in the permanent
fund.
No, you haven't.
What that what the growth you'vehad is between 76 and 81,$5
billion of growth overessentially four years.
In the meantime, if you'dinvested in the S P 500, if
you'd invested in the WarrenBuffett approach, it would have
(24:09):
grown from 80 billion up to 124billion.
He says, Devin says, we'regenerating revenue for the
state.
Okay, yes, there is a red barthere that shows you are
generating a POMV draw for thestate.
But look at what it would havebeen had you been had you
invested in the Warren Buffettapproach, had you taken the 9010
approach based upon the SP 500.
(24:33):
Instead of the 3.8 billion thateverybody celebrates, uh
everybody celebrates is comingout of the POMB um in FY26, it
would have been 4.49 billion.
It would have been$700 millionmore, nearly 20% more, uh, had
we invested in the in the WarrenBuffett approach just since
(24:54):
FY20.
If you go all the way back toFY12, which is where the SP 500
began, the numbers are huge.
They're astronomical.
The the differences areastronomical.
So what what what what Devin'strying to do is say, hey, look,
we got a red line and we got redbars.
Isn't that great?
Right.
We've got a balance and we'vegot pom v draws.
(25:18):
But that's that's not the story.
The story is what could it havebeen had you taken a different
investment approach, an approachthat in 13 of the last 14 years
produced higher returns than theinvestment approach uh you were
taking.
SPEAKER_01 (25:34):
That's and would have to be measured by and would
have cost nearly a billiondollars less, right?
Because there's 800, 900 millionin management fees for doing
this of the investment approachthat they're using versus just
plugging it into the Vanguardformula and leaving it and
setting it for getting it.
(25:55):
They, I mean, it would have beena billion dollars per year less
in investment costs.
SPEAKER_02 (26:00):
Yep, exactly right.
Exactly right.
And that billion dollars isbeing reflected in the red line.
The red line is a billiondollars per year less over the
last several years, a billiondollars per year less because of
the investment approach theywere taking, the costly
investment approach they weretaking.
You're exactly right.
The blue line is is very low,low cost.
(26:23):
I mean, that's why Warren BuckBuffett recommends it.
Because it's low cost.
You're not you're not losing abunch of your revenue, a bunch
of your income off to paying foruh paying for so-called experts.
SPEAKER_01 (26:36):
This is just another one of those.
I mean, this is gaslighting.
This is exactly what this is.
This is gaslighting.
Uh, okay.
We'll take our bad news here andwe're gonna spin it in the best
light possible and tell you thatyou're getting exactly what you
deserve.
This is, oh, look at what greatstuff we're doing.
Again, not looking at thealternative.
And uh, I mean, this is notabout somebody just said, when
(26:59):
is all this theory going to hitthe streets?
When is Brad going to run forgovernor?
I this is like this is nottheory.
You're looking at the rawnumbers to say, here's what the
comparisons are.
And yes, the SP, the the the theVanguard fund is more volatile,
but even in its own volatility,it still provides more funding
for the state in both the shortand the long run.
(27:22):
I mean, that that's that'scrazy.
SPEAKER_02 (27:24):
Yeah, what you get, I mean, the the the permanent
fund touts the fact that they'rethat their that their approach
isn't volatile.
Well, you look, look at FY23.
Their approach went down also.
It went from FY22, an FY22balance of 81.9 down to 76.34.
There, they have volatilityalso.
(27:46):
It's not as volatile as as the SP 500, but the volatility of the
S P 500 is biased upward.
I mean, yes, there are some downyears, but there are a lot more
up years, and the up years are alot bigger in terms of up than
than the than the the approachbeing taken by the permanent
fund corporation.
(28:06):
I think the real telling, whenpeople say volatility, the
statistic to me that that killsthat off is that 13 out of 13
out of the last 14 years, theBuffett approach, the 9010
approach has outperformed thepermanent fund corporation.
The permanent fund corporationsays, yes, but there was one
(28:27):
year, and it happens to be FY23.
So you can see on this chartthat one year that the S that
the Permanent Fund outperformedthe uh outperformed the SP 500.
The permanent fund will say,Yes, there was there was one
year that you know that weoutperformed the SP 500.
That's one year out of 14.
(28:47):
Well, and and in the meantime,in those other 13 years, the SP
has built up a huge balancecompared to where the permanent
fund corporation is.
SPEAKER_01 (28:56):
But even in the year that they beat the SP, as far as
the drop was not as dramatic.
If we had been in the SP 500, westill would have received almost
200 million dollars more inrevenue from the POMB draw.
I mean, this is you know, it'sright here in front of you in
black and white.
You can look at the numbers forthis five-year period or for the
(29:18):
15 or for the 15 years all told.
I mean, again, it would havebeen every year, again, and
without that billion dollars ayear, 800 million dollars a year
in fees to do it.
SPEAKER_02 (29:31):
Yeah, it's so the permanent fund corporation.
Uh gaslighting is probably theright the perfect term to this.
I really hadn't thought of itbefore.
But the permanent fundcorporations say, Here, look at
look at what we've done for you.
We haven't lost any moneybecause we've we're not
volatile, but we haven't madeany money.
But but the rest of the story iswe haven't made any money, we
(29:53):
haven't built up the fund in thesame way that investing in the
Warren Buffett approach.
And this isn't This isn't theBrad Keithley approach.
This isn't this isn't some flyby night approach.
This is Ward Buffett saying thisis the right investment
approach, the 90-10 investmentapproach.
You know, people say you don'thave diversity in a 90-10.
Well, you've got the entire SP500.
(30:15):
Corporations doing well,corporations doing bad.
You've got that entire mixyou're hedging against
volatility by using that entiremix.
And in 13 out of 14 years, it'sproduced a higher return, a
better return, better values foruh for those who invest that way
as opposed to what the what thepermanent fund corporation is
(30:36):
doing.
SPEAKER_01 (30:36):
And I don't mean to get stuck on this fees thing,
but isn't Wyoming, this is whatWyoming is doing, right?
They plug their, they have afund.
It's not like the permanentfund, you know, but they have a
big fund that they use and theytag to the SP 500 Vanguard fund
and they pay one guy$250,000 ayear to manage everything.
Uh, and uh they've seen greaterrates of return and more stable,
(30:59):
you know, again, following theblue line than we have spending
$800 plus million dollars ayear.
SPEAKER_02 (31:06):
Yeah, yeah.
And and and that$800 million isreally so the permanent fund
board members who don't knowwhat they're doing, by the way.
The permanent fund board, we'vealready, I mean, they've
established that.
Heck, the chairman Jason Brunnysays, I don't know what I'm
doing.
I I wish we had uh uh otherpeople back who didn't know what
they were doing.
I mean, that it that$800 millionis to give the the board members
(31:30):
cover.
Oh, well, you know, we didn'tmake these decisions, we relied
on this and we paid a lot forthis investment advice.
Um, and so it must be right, andand it's not our fault.
It's the it's the if there is afault, it's the fault of the
investors uh or a fault of allthe advisors that uh that we
hired.
It's it's a CYA.
But what you get, I mean, theother investment approach is to
(31:52):
follow Warren Buffett.
And who's been better at thisover time than uh than Warren
Buffett?
So I it it's it's it is it isfrustrating, it is gaslighting.
When you read Devin's article,he he talks about none of this.
It's all it's all the red line.
Isn't the red line great?
Red line didn't go down, isn'tthat great?
(32:13):
The red line produced the redbars, which is which is revenue.
Isn't that great?
Yeah, but it could have beenmuch, much, much, much higher.
SPEAKER_01 (32:22):
Yeah, because all the blue bars are all higher.
That's the thing.
I mean, nobody they didn't hedidn't talk about the blue bars.
Let's not talk about that.
Let's just look at how prettythe red bars are.
But the blue bars are higherevery freaking time, even in the
downturns, the blue bars arehigher.
Um, it's uh it's astonishing.
(32:43):
Chris makes a valid point.
Um, and yes, it would require awhole uh a whole uh kind of
redirection.
He said they'd have to sell alot of real estate in order to
invest the money that you'retalking about.
Well, again, that's what I thinkBrad is pointing out is that
this is a whole differentapproach to what they've been
trying to do.
That's not generating therevenue.
Yes, you'd have to take a wholedifferent type of approach to
(33:06):
make that work.
Uh, Brad, am I wrong?
Am I re misreading what you'resaying here?
SPEAKER_02 (33:11):
That's exactly right.
That's exactly right.
And what you would be investingin is the S ⁇ P 500, and you'd
be investing in some companiesthat are that are heavily in
real estate.
You'd be you'd be indirectlyinvesting in real estate through
through companies that that areheavily, heavily invested in
real estate.
You wouldn't be out of it, you'djust be doing it indirectly, and
(33:32):
you'd be relying on themanagement of those companies to
perform.
And over time, you've seen thatperformance outstrips the
performance of the permanentfund corporation who's investing
directly in real estate.
So, yes, you would take youwould take your money out of the
direct investment in realestate, but you would still be
invested in a proportionateamount in real estate through
(33:54):
your through the investment inthe uh in the SP 500.
Some people sometimes make thatpoint, the point that Chris says
and says, well, the red lineisn't really what the red line
is.
The red line, you're you're notcapturing all the appreciation
that's gone on with real estateor with their other private
investments.
And the red line's reallysomething else.
(34:15):
Well, the permanent fundcorporation re-eval revalues on
an ongoing basis, revalues itsinvestments to reflect fair
market value.
And basically what you'rearguing is well, they're not
really capturing fair marketvalue.
The red line isn't really whatthe red, the the actual
investment base isn't what thered line is, the fair market
(34:36):
value would be would be higher.
Well, that means that thepermanent fund corporation isn't
doing their job in in valuingthe fair market value of their
assets.
But setting aside that, youwould still be invested.
You'd be invested inpharmaceuticals, you'd be
invested in real estate, you'dbe invested in oil and gas,
you'd be invested in all of thethings that people want you to
(34:59):
invest in, that people think youshould be invested in, but you'd
be invested in it through the SP 500 as opposed to directly
investing in it.
And we're seeing the differencein results, the difference
between the red line and theblue line of investing through
the S P 500 as opposed toinvesting directly.
SPEAKER_01 (35:17):
Kyle just said the red line is smoke and mirrors.
Well, if that's the case, ifthat's the case, then the
permanent fund corporation hasfailed.
If it's smoke and mirrors, thatthey're the ones that are
providing this valuation, Kyle.
So are they doing a good job?
He says this is where theargument falls apart.
The red line is smoke andmirror.
(35:38):
This is the numbers that they'redelivering.
How does that I mean I just youknow, uh, I I just don't
understand that how thisargument goes.
I don't understand.
SPEAKER_02 (35:50):
To the extent that they're smoke and mirrors,
they're smoking mirrors on thehigh side.
Nobody is going to, nobody, noinvestment firm is going to say
that, oh, our investments areworse than what they than what
than what they're performing.
To the extent there's a bias inhere, the bias is on the high
side.
So if they're smoking mirrors,they're smoke and mirrors on the
(36:14):
high side.
The blue line is real.
The blue line is real SPreturns.
The blue line is real investmentreturns by investing in the
Vanguard uh SP 500 ETF.
Those are real numbers.
The red line, to the extentthey're smoke and mirrors, to
the extent they're they'remade-up numbers, that's the high
(36:34):
side.
If he's saying they're smoke andmirrors, the real numbers are
lower than that.
Because the because theincentives and the investment
bias is always to upscale yourinvestment value as opposed to
low scale it.
SPEAKER_01 (36:47):
And Kyle says, I know you don't understand
because we're too stupid tounderstand.
Kyle apparently has all thesolutions out there.
Kyle's got it, got Kyle's got itall.
He can't explain how it's wrong.
He just knows in its heart thatwe're wrong because we're
fighting the we're fighting themachine.
That's what it's all aboutthere.
Um, going back to Chris'scomment where we'd have to sell
(37:09):
a lot of real estate.
Uh, Brad created the red line.
No, those red lines came fromthe PFD and and from Devin
Mitchell that came from thething, right?
I mean, this is not Brad'snumbers.
These are numbers that Brad tookfrom Devin Mitchell's commentary
and from the the reporting ofthe permanent fund corporation.
SPEAKER_02 (37:26):
So those are from the annual reports, those are
from their monthly to the extentthey're monthly.
Those are from their monthlyreports.
The blue line is from is fromsimply looking at the value of
Vanguard's SP 500 ETF, lookingat the value of that over
periods.
Yeah.
Um, so I'm I've created none ofthese numbers.
(37:47):
I have calculated the numbersfrom existing numbers from
published numbers, auditednumbers.
Uh, I'm not I'm not creatingthese numbers.
No, that's okay.
SPEAKER_01 (37:58):
Kyle knows better.
Uh, I just every time I go backto Chris's comments and I see,
you know, you'd have to sell alot of real estate in order.
And yeah, that's being likepeople saying, Can't believe
we'd have to sell our horses andbuggies to buy these newfangled
cars and do all that.
You know, if it's not working,then and and there's a better
way to do it.
Yeah, you're gonna have tochange the way you do things.
(38:18):
That's that's how it works.
Um, you know, it's it is what itis.
The weekly top three continues.
Uh, we're getting back into ithere.
Number three of the weekly topthree, uh, and uh the the this
is Brad's new point.
All op-eds should be required tocome with a fiscal note.
(38:39):
We've got an op-ed and we thinkit's all well and great, but
boy, it should really berequired to have a fiscal note
with it.
Brad, what are you talkingabout?
SPEAKER_02 (38:46):
Well, I read I read a bunch of op-eds, I read a
bunch of op-eds every week, andand I read a bunch of op-eds
this past week, and and thecumulative effect by the time I
got to the last one, they wereall about we should spend on
this, we should spend on that,we should be doing this, we
should be doing that.
The cumulative effect of of allthose at the end was, yeah, but
how much would they cost?
(39:07):
And what's the re what's theexpected return?
We don't have the state is outof money, folks.
I mean, the state doesn't have,I mean, because in part because
we're not generating the revenuethat we should be out of our
existing assets, but the statedoesn't have any money laying
around spare that it ought to bethat it should be investing in
(39:28):
these things.
Yet we get these articles thatsay, oh, you need to invest more
in K through 12, you need toinvest more in this, you need to
invest more than that.
And and at the end of it, Isaid, well, what we ought to
have, what we ought what oughtto be required, is that the the
end paragraph of every one ofthese articles after they've
made the case for why do weought to spend on this, the the
(39:51):
end paragraph ought to be afiscal note that says, this is
how much it costs, this is thelong-term cost, this is this is
the return that we'reanticipating we're going to
generate out of this.
This is why it makes financialsense.
And and with that baseline, withthat sort of fiscal note for
every one of the op-eds, wecould start making judgments
(40:13):
about whether whether, you know,A, we have enough money uh to
spend on these things, and B,what the relative returns of
spending on one thing is to theother.
The thing that started me downthis road was a an article by or
an op-ed by Kelly Lessons, uh,Anchorage School Board, Kelly
Lessons, that that says,opinion, riding the cyclone of
(40:36):
Alaska school funding.
And basically it was we ought tobe spending more, we're going
up, we're going down.
We aren't really going down, butwe're going up uh in uh we're
not going up enough in uh inAlaska school spending, and we
ought to be spending more.
Fine.
How much is it gonna what areyou what are you arguing for in
terms of cost?
What's the return that youanticipate out of that?
(41:00):
And and let's make a judgmentabout whether it's worthwhile to
do that.
All of these articles go, mything's important, got to spend
on that.
Uh, doesn't matter what anythingelse is, doesn't matter we don't
have the revenues, none of thesearticles talk about revenues.
Doesn't matter that we don'thave the revenues, we've just
got to be spending on thisbecause it's a good thing to
spend money on.
If we had fiscal notes, startingwith this one, it would be it
(41:25):
would be useful in trying tofigure out what where and how we
ought to be investing our money.
Another one, this was by TomBegage, he's running for
governor, former state senator,now running for governor, Tom
Begage.
Alaska's energy security mustcome first.
And it's an article about how weneed to invest in all these
renewables and we need to haveadditional support for the
(41:47):
renewables, support uh being thebuzzword for additional
government uh uh credits, taxcredits, or and or or
investments of some of one sortor another in these these
projects to provide a laAlaska's energy security.
Okay, how much are you talkingabout, Tom?
What what is the cost?
What's the investment return onthat?
(42:08):
What's the what's the thebetterment that we get out of
those compared to what thebaseline is?
It's not like it's not likeAlaska is gonna run out of
energy.
We're gonna have to import somein terms of LNG, um uh in order
to provide uh support to theAlaska consumption side since
(42:29):
it's heavily gas weighted.
Uh, we're gonna have to importsome.
But it's not like we're lots,it's not like we're running the
risk of running out of energy.
Begage just wants it to be adifferent type of energy and
wants and and is trying tofashion an argument about how
that is important for Alaska'suh energy security.
(42:50):
But but no numbers, nocalculation of what the cost is,
no calculation of where therevenues are going to come from,
no discussion of what the ofwhat the long-term return on
that is.
Just it's important to haveenergy security, and so you need
to spend on these things.
This isn't this isn't just aDemocrat thing, though.
I mean, lessons I think is aDemocrat.
(43:11):
Beggage certainly is a Democrat.
This isn't just a Democratthing.
Here's we the next one that Iran across was one by George
Rauscher.
Uh and the headline is Alaskaneeds more power, not less.
And he's talking about the coalplant uh back up in the uh back
up in Susitna uh that is uh thatsome have proposed and some are
(43:33):
uh trying to support uh thatneeds infrastructure, needs
support to make it work,government support to make it
work.
Uh, but uh but Rouscher'stalking about how important that
is and how that would providemore power and how we could have
more power if we just startedlooking at these other
investments we could make inthese other projects we could
develop.
(43:53):
Again, no numbers, no costnumbers, no no where's the no
analysis of where's the revenuesupposed to come from, um, and
no analysis of what the what thelong-term fiscal impact is.
It's just uh the the the thecumul the cumulative effect of
(44:14):
all this was we got a lot ofop-eds, and we're gonna have a
lot more op-eds as we get intothe governor's race and we get
into the legislative races.
We're gonna have a lot of op-edsabout you need to spend on this,
you need to spend on that, youneed to spend on the other
thing.
And oh, look at Alaska needsmore power, Alaska needs energy
security, Alaska needs to getoff the roller coaster on K
(44:34):
through 12 spending.
But how do we pay for it?
SPEAKER_01 (44:37):
But how do we pay?
Where's the fiscal note?
SPEAKER_02 (44:39):
How do we what's that cost?
Exactly right.
And that's the and that's thethe sense I came away from.
All of these Alaskans wouldactually benefit from from
having a fiscal note at thebottom of all of these articles,
all of these op-eds about, youknow, where how how are we supp
what what are the economics uhuh of these projects?
(45:02):
In the absence of a fiscal note,I think that people should read
these with a grain of salt andsay, okay, yeah, yeah, okay.
You want to spend on that,great.
You want to spend on that, youwant to spend on a new coal
plant, you want to spend onthis, you want to spend on on
another thing.
All that's great, but let mefigure out what the costs are,
or let me ask somebody what thecosts are and see if they make
(45:25):
economic sense.
We have a lot of pie in the skygoing on.
Uh we've always had a lot of piein the sky going on, but we have
a lot of pie in the sky going onin this state right now.
The LNG line's another one ofthose.
We have a lot of pie in the skygoing on, but nobody is
grounded, none of these aregrounded in in basic economics.
(45:45):
And and to the extent we get offon an emotional, an emotional
drive and we go down one ofthese tracks like K through 12
or or you know, building a roadout to a coal plant or all of
that sort of stuff, to theextent we get off on these on
these tracks, that explains alot of why we're in the fiscal
situation that we're in.
We're spending a lot.
(46:05):
We aren't looking at thefundamental economics behind
them.
SPEAKER_01 (46:09):
Yeah.
No, I mean, this is uh this isagain, we see this all the time,
especially around electionseason, where everybody has
every plan to put a chicken inevery pot and do all this other
kind of stuff, but they nevertell you how it's going to be
paid for, where the money'sgoing to come from, or what the
actual I mean, it's the longtrail all over again, right?
(46:29):
It's gonna generate millions ofdollars and show your work.
Show me the numbers.
What do you what do you mean?
How much is it gonna cost andwhat is the return going to be?
It's aspirational.
Everything is aspirational atthat point.
Oh, if we just build more, andif I hear one more Republican
especially say, well, we justneed more resource development,
that'll get us through the next10 years.
(46:51):
I mean, it'll take 10 years toget the resource development off
the ground.
How do we survive between nowand then?
That's the question I keepasking.
SPEAKER_02 (46:58):
Oh, and and and as we discussed last week, and as
we've discussed, you know,fairly often, and as we as I've
got in the I think in lastweek's uh Alaska landmine
column, resource development'scosting us money.
I mean, you when you look at thecredits um and the deductions
that the oil companies are totake, our as as production's
(47:20):
going up, which everybody says,oh great, see resource
development.
Production's going up.
As production's going up,revenues from from the
production tax, from the fromfrom the tax on oil, is going
down.
It's not not even staying, it'snot even going up a little bit,
yeah.
It's not even staying, it'sgoing down.
SPEAKER_01 (47:40):
I know.
SPEAKER_02 (47:41):
Development's costing us much.
SPEAKER_01 (47:43):
I I like your idea.
There should be a fiscal noteattached to each more each one.
Yep.
You gotta have a fiscal noteattached to each one.
It's true though, right?
I mean, we got all these greatideas.
Okay, great.
How's it?
How are we gonna pay for it?
How's it gonna happen?
How's it gonna oh you don't havethat answer?
Okay, great.
That's that's uh that's great.
Oh, we need more money for theschools?
(48:04):
Okay, great.
How's that gonna get paid?
Oh, you don't have an answer forthat?
Okay, great.
You know, uh it it's it's it'sastonishing.
SPEAKER_02 (48:12):
Yeah, you know, you you you made a statement back in
the back in the segment, Ithink, is is very insightful.
Show your work.
Show your work.
A lot of a lot of these op-edswouldn't pass fifth grade, you
know, the fifth grade mathteachers requirement that you
show your work when you turn inyour test.
Show your work on how your onhow your math works.
(48:33):
Show how you got to the answerthat you got to.
Um, I remember law school examswere like that.
Show how you how you reach theconclusion you did.
We don't do that.
We don't do that.
I mean, these op-eds, all theseop-eds, George Roushers
included, are just let's jump tothe end, the end game.
Oh, we have a coal plant, orlet's, or Tom Begage, oh, we
(48:55):
have all these renewables, orKelly Lessons, oh, we have this
great K through 12.
This jump to the end withoutshowing their work about how we
pay for it, what it's gonnacost, how we pay for that cost,
and what the what the return uhon uh on that investment on that
investment is.
And right, and and they're notthey're not, we're not even
(49:16):
passing the fifth grade test,yeah.
Of of these uh of theseproposals.
SPEAKER_01 (49:21):
Well, it is tis political season, Brad.
Expect tons more of this, right?
There'd be a chicken in everypot and a moose on every table,
and let me show you how I'mgonna do it.
No, I won't show you how I'mgonna do it.
I'm just gonna promise that, andwe'll figure it out on the other
end.
That's how it's gonna be becauseit's a good thing.
It's a good thing.
Alaska energy security is a goodthing.
Don't worry about how we getthere, it's a good thing.
(49:43):
I think a one million dollardeposit in my account would be a
good thing.
I think that would be a greatthing.
So tell me how that works.
Tell me how that works, right?
I I mean this is that's wherewe're at.
I how can you how can you figurethat out?
Uh, you know, or back to youknow, the red line and the blue
line.
They're pretty easy to go pullthat information out.
There's your work.
(50:03):
I mean, show me show me how it'swrong.
Oh, you can't.
Okay.
That's all I that's all I wantedto know.
Um it's it's just one of thosethings, right?
It's one of those things, myfriend.
SPEAKER_02 (50:15):
Well, it's um, you're right.
We're gonna have a lot more ofthese come up in in the in the
campaign season, and I'm gonnabe complaining about a lot more
of them, I'm sure, as we gothrough.
But for but for listeners andand readers, think about that.
Think about what the fiscal notewould be on this proposal, and
think about why they aren'tgiving you the fiscal note.
(50:37):
Think about why they aren'ttelling you what the economics
are, think about why they aren'ttelling you what the cost is,
what the what the opportunitycosts of of what we otherwise
could be investing in, or or orwhat the impact is on lower and
middle income Alaska families ifwe're taking the money out out
through PFD cuts.
Think about that.
SPEAKER_01 (50:54):
It's the the worst part is that when I ask somebody
how do we get out of the fiscalsituation we're in, their answer
is, well, resource development.
We need to develop the research.
Okay, well, I mean, first off,how do you pay for that resource
development?
What's the cost going to be tothe state?
And again, forget about thetimeline because they're not
(51:15):
even thinking about thetimeline.
The timeline is five to tenyears.
I mean, five years at a minimum,10 years, you know, probably
more than likely.
But again, it's it's like theyit's not a real, it's not a real
answer.
It's not a real answer.
SPEAKER_02 (51:29):
Yeah, particularly when you look at oil, and
particularly the when you lookat what the impact is on uh on
production taxes.
I mean, we've gone through, I'vegone through all the periods
now.
I've gone through the currentperiod, the next 10 years, and
the and the and the futurebeyond that, using DOR data uh
from Willow, Pika and Willow,and you can look at what the out
(51:50):
what the out years look like.
25 year span.
And all of those years,production taxes go down.
Production taxes don't comeback.
And so people who say, oh, well,we gotta do the next 10 years,
don't worry about that.
The 10 years beyond that will beokay.
No, we're not.
They don't come back, they keepgoing down.
(52:10):
And so it's and so when peopletalk about resource development,
oil development, yeah, theyhaven't either A, they haven't
done the numbers, or B, they'rejust lying.
SPEAKER_01 (52:19):
Yeah, again, aspirational.
And yeah, you're right, Harold.
That's exactly right.
We're still chasing a pipedream, millions being wasted on
a gas.
We were just talking about that.
Where's the numbers?
Where's the fiscal note on that?
How much effort, energy, andwishing are we wasting on yet
another program that's gonna gonowhere?
Um, you know, it's it's it allsounds great on paper until the
(52:44):
rubber hits the road, right?
That's just that's where it is.
It just it all is desperation.
Brad, what else are you uhlooking at this next week?
Here, we got about two minuteshere.
SPEAKER_02 (52:55):
Well, I did a piece uh a few weeks ago on um K
through 12 and focused on whyit's important to start when we
look at increases in K through12 revenues, start focusing on
local governments.
Um Alaska lags the nationalaverage hugely in terms of the
(53:16):
percentage of revenue for Kthrough 12 coming from local
governments.
And the and the result and theresult of that is local
governments really don't carethat much about constraining
K-12 spending.
They're they're mostly advocatesof additional K-12 spending
because they don't have to paymuch for it.
If you push, like the otherstates do, if you push more
(53:36):
responsibility for raising themoney to pay for K through 12
spending on local governments,they would be more responsible
in terms of constraining thatspending and spending it more
wisely.
So I'm gonna do another uhanother piece on that this
coming Friday.
SPEAKER_01 (53:52):
Well, I I I'm interested to see where we go
from here, where where it allends up at.
And we'll be watching that forsure as we go through.
Brad, thank you so much forcoming on board.
As always, it's good to talkwith you.
Appreciate you being part of theshow today.
Michael, as always, thanks forhaving me.
SPEAKER_02 (54:14):
Well, that's a wrap for another week's edition of
the weekly top three fromAlaskans for Sustainable
Budgets.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
SoundCloud, Spotify, andSubstack pages, and keep track
of us during the week onFacebook and Twitter.
This has been Brad Keithly,Managing Director of Alaskans
(54:35):
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 SustainableBudgets.
Welcome to the Weekly Top Three.
The top three things on our mindhere at Alaskans for Sustainable
Budgets for the week ofSeptember 29th, 2025.
The Weekly Top Three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube live,
(00:33):
as well as via streaming audiofrom the show's website weekdays
from 6 to 8 a.m.
I join Michael weekly in thefirst hour of Tuesday show from
6.10 to 7 a.m.
for a discussion between the twoof us about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, YouTube,
(00:55):
SoundCloud, Spotify, andSubstack pages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site, medium.com.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that in addition tothese podcasts, during the week,
(01:16):
you can also follow andparticipate in the discussion
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
Twitter.
This week, our top three issuesare these.
First, we discuss Alaska'sK-shaped economy and how it
(01:40):
helps explain out migration.
Second, we explain the parts ofthe story that the permanent
fund corporations claims about asuccessful FY25 performance.
Ignore.
And third, we discuss why op-edsproposing new or continued
spending should come with afiscal note.
(02:03):
And now, let's join Michael.
SPEAKER_01 (02:06):
Let's get started.
Uh this week's topics include isnumber one, something called
Alaska's K-shaped economy.
What what are we what are wetalking about today?
The K-shaped economy.
I'm I'm curious.
SPEAKER_02 (02:21):
Well, there was an article in the ADN uh repeat of
an article from the WashingtonPost that I found uh interesting
and um and dived into uh alittle bit.
The headline of the article wasThe Wealthiest Are Boosting the
Economy as Consumer SpendingRises Again.
And this is really a story abouthow averages can be distorted.
(02:45):
Um what's going on?
What this article uh developsusing a lot of economic data and
and economic data I've heardfriends elsewhere in the country
discuss.
What's really going on is thetop 10%, the top 20% are
increasing uh consumer spending.
They're they're finding a uhthey're finding their their
(03:07):
wealth enables them to increaseconsumer spending and they're
spending it on various goods andvarious segments of the economy
that are tied to that segment ofthe income bracket uh are doing
uh are doing well.
But that's masking what's goingon with the other uh 80%.
Um and and with the other 80%,you're fine, you find when you
(03:30):
look at income data and you lookat spending data and other
similar data, you find thatthey're sort of barely breaking
even.
They're sort of they're sort ofhanging on, they're not boosting
consumer spending, they're not,their income data isn't or their
incomes aren't aren't boostingoverall income.
They're just sort of stayingstaying even.
And what economists describewhat's going on is a case-shaped
(03:55):
economy with the top incomebrackets going up, both in terms
of income and in terms ofconsumer spending.
And on an inflation-adjustedbasis, the bottom income
brackets sort of in a in a slowbut but steady, steady decline.
The result is that, and you cansee this in the in the income
(04:19):
data that we look at from theIRS about Alaska.
The result is the averages aregoing up.
Consumer spending overall isgoing up, but it's being driven,
and this is national, the that'sbeing driven by the top income
brackets that are driving it up,the top, the top leg um of the K
(04:39):
or the top arm of the K.
Um, it's being moderatedsignificantly.
I mean, if if all of the incomebrackets were doing the same,
uh, we'd have a super spikegoing on.
But it's being moderatedsignificantly by the by the sort
of steady decline, slow declinethat's going on uh with the
(05:00):
bottom arm of the K, uh thelower income brackets.
So my question was all right,this is a really good national
article.
Let me dig into Alaska data fora little bit and and see what I
can find with respect to Alaskadata.
And the Alaska data, Alaska, I Iknow it will come as no great
shock to anybody, but Alaskaisn't isn't the first thing that
(05:20):
that economists think of whenthey develop this sort of data.
So the data shocking.
The data isn't isn't isn't asfulsome, certainly, as what you
see at the national level, butthere's some.
And you can see the same thingagain by looking at the income
data, uh, both from the CensusBureau and from the IRS uh
(05:43):
income tax statistics, you cansee the same sort of rise going
on uh in um in in incomes in theupper arm of the of the K
bracket.
And you can see the sort of samesort of steady sort of
decline-ish going on in thelower arm, the middle and lower
income Alaska family uh bracket.
So I doubt I dove into that alittle bit more and said, okay,
(06:06):
so what's the what's really thecause of what's going on in the
middle and lower income bracket?
And there's a lot of things thatthat are are going on in there.
But one of the things is theslow and steady decline of the
PFD.
Alaska used to not look as muchK-ish as it looks now.
(06:28):
It used to, uh compared to thenational average, it used to be
much flatter um uh in terms ofboth arms.
Both arms used to be much lookcloser together than they are
now.
And a driver behind that was thePFD.
Uh, when you look at income dataon a household basis or on a
(06:50):
family basis as opposed on anindividual basis, uh, the PFD
was a not insignificant sourceof income to households in the
middle and lower incomebrackets.
As the PFD is we all know thePFD has declined.
I mean, not only not only interms of not only against
inflation, but just absolutelyit's a decline.
(07:12):
And as that income, as the PFDincome has declined, you find
Alaska forming a more and moresharp K.
Right.
SPEAKER_01 (07:22):
With uh with the upper income brackets.
You're talking about you'retalking about the difference
between$4,000 for a family offour and twelve thousand to
four, you know, to fourteenthousand dollars for a family of
four.
Yeah, that's a significant bump.
SPEAKER_02 (07:36):
Yeah, when when you're talking about middle and
lower income Alaska familieswhose whose income is not is not
huge to begin with.
So when you're taking that outas a percent of income, and so I
I extended this, I extended thisthinking a little bit further
and and sort of pondered whetherthat's the source of
outmigration.
We we have, or that's one of thebig contributors to
(07:57):
outmigration.
We have talked about this beforeon the show.
I've written columns about itbefore on the show, but I sort
of went back to that data andlooked at it again.
And and the data shows when youlook at when you look at the IRS
statistics, when you look at theCensus Bureau statistics, the
data shows that we're losing umuh families, working age
(08:20):
families, families below age 60,60 and below.
We're losing those families inthe middle and lower income
brackets.
We're actually increasingfamilies um uh in the upper
income brackets um uh in inAlaska.
So there's in migration in thesense that that that number the
number of families, number ofhouseholds are are is climbing.
(08:41):
There's in migration going on inthe uh in the upper income
brackets.
They don't need any additionalhelp.
They're they're doing fine,they're attracting more people
here.
But in the middle and lowerincome brackets, we're that's
where we're losing working-agefamilies.
And and so, as sort of the thenet of this is as you look at
(09:02):
what's going on in Alaska, whenyou think about it in the
context of a K-shaped economy,and as you look at what's going
on in Alaska, as we are, as ourarms, our K arms are getting
farther and farther apart, asthey're spreading, in part
driven by the decline in thePFD, PFD cuts, as they're
(09:23):
spreading like that, uh, you'reseeing more and more out guy out
migration among the lower thelower part of the lower part of
the arm.
They're finding betteropportunities or other
opportunities elsewhere uh inthe US.
Um and that's and that's I mean,we've we've made this point
before, but I think seeing itstarting from the national level
(09:45):
and seeing what's going on atthe national level and and going
through the economics.
And I for those interested, Iwould recommend this article.
It's in the September 26th,published September 26th, so a
few days ago, the wealthiest areboosted, the headline is the
wealthiest are boosting theeconomy as consumer spending
rises again.
As you think about, as you readabout that in the national
(10:07):
context, you can see Alaskabeing affected by the same thing
in terms of the in terms of theK, the K legs spreading farther
uh and farther apart.
And so the legislature, when thelegislature thinks about, I mean
the legislature, I don't knowwhat they think about half the
time, but when they think aboutthe PFD, when they think about
(10:28):
PFD cuts, they're thinkingabout, oh, we're gonna redirect
this money to do good, right?
We're gonna redirect it in thegovernment.
Well, they're not thinkingabout, I don't think.
There's no indication they'rethinking about who they're
directing it away from and whatthat causes in in that general
population.
Um, and and if they're couldtruly concerned about the Alaska
(10:49):
economy, that's something thatthat we ought to hear more about
when it comes to thosedecisions.
SPEAKER_01 (10:54):
Remember, we we've had that conversation in depth
ad nauseum on this show thatthey're they're not thinking
about the private economy.
The private economy is not, Imean, if it was an afterthought,
that would be an improvement.
It's not, they're not eventhinking about the private
economy.
As long as the government spendsand the government economy is
doing well, they are notthinking about what is the
(11:17):
effect of anything that they'redoing on the private economy.
There is no discussion becausethey get nothing from the
private economy in their minds.
Their full and whole source ofincome is the permanent fund and
the oil revenues and theroyalties, and that's all they
think about.
They do not think about what'sgoing on in the private economy
(11:38):
because it doesn't feed thecoffers.
So why should we care?
SPEAKER_02 (11:43):
But they're not thinking, Michael.
They're thinking, they're noteven thinking about set aside
private and government.
Good point, excellent point,important point, but they're not
even thinking about middle andlower income Alaska families.
They're they're they're thinkingabout select uh uh segments of
middle and lower income Alaskafamilies that they can that they
(12:05):
can help by redirecting thesefunds out of the bulk of middle
and lower income Alaska familiesinto this subset uh that they're
directing these governmentprograms to.
And certainly they're thinkingabout the government employees
and the constituencies theycreate and the advocates they
create by directing it intothese subsets.
But it's coming at the expenseof a of a spreading K economy in
(12:28):
Alaska and coming at the expenseof worsening the economic
position of middle and lowerincome Alaska families who then
in turn, I mean, it's not likethey don't have choices, then in
turn are the biggest segment areleading the out migration.
So it's right, we we don't, wedon't, we're not having somebody
(12:50):
sit in the let who's sitting inthe legislature who's thinking
through the impact of thesethings on on Alaska families or
on the Alaska economy.
SPEAKER_01 (12:59):
Again, not surprising if you watch their
behavior.
And uh and again, it it's itit's about control, and I think
you hit the nail on the headwhen you talk about
constituencies.
Because are they bolsteringtheir constituencies?
And is the constituencies reallythe lower income Alaskans, or is
it the people who are writingthe checks for their next
(13:22):
campaign?
Yeah, I mean, Brad, again, notshocking that uh that they are
not really thinking about that.
Uh, it's become such a bubble.
I mean, the whole thing hasbecome just such a bubble that
at this point anything outsideof that little bubble, what does
it matter?
As long as we create theprograms that we say we need to
(13:44):
create, we can feel good aboutourselves, pat ourselves on the
back at night that we we gavethe the poor, poor, pitiful
people the program that helpedthem.
Um, as long as that money'sthere and we can get re-elected
to come back, then what does itmatter?
SPEAKER_02 (13:59):
Yeah, the the thing that the thing that I think that
frustrates me the most aboutthose who you know who say
they're helping the poor.
They don't they don't focus on,or if they do, they just ignore
it.
They don't focus on who they'retaking the money from.
They we're we're funding we'refunding all these programs, all
(14:20):
this addition, all this spendingthat's going on for the various
programs.
We're funding it by taking itout by using PFD cuts, we're
funding it by taking it out ofthe pockets of middle and lower
income Alaska families,generally.
So we're we're we're robbingPeter.
I mean, we say we're concernedabout middle and lower income
Alaska families, right?
Legislators would say thatthat's the heart of the economy,
middle income families, 80% ofAlaska families fall into those
(14:43):
brackets.
That's the heart of the economy,that's who we're concerned
about, that's who we're thinkingabout.
They say that, and then theytake the money out of their
pockets, largely not out of thetop 20%, certainly not out of
the old companies, not out ofnon-residents, unlike any other
state in the nation.
Um, they take the money out ofthe pockets of those they say
(15:03):
they're looking at that that arethe heart of the Alaska economy,
and they're directing it tothese sub-segments.
And and so the sub-segments, andand you know, and you got to
create a bureaucracy to do thatredirection and to provide the
services.
So that subsegment looks likeit's okay.
And when you focus on thatsub-segment, you're going, hey,
they're doing great.
But then you don't, you don't goback and look, well, what did I
(15:25):
do to the to the to the broadersegment, the middle and lower
income Alaska families that Itook the money out of?
Oh, they're going down and downand down.
They're forming the lower leg ofthe K, and the K is spreading
wider and wider.
I mean, that's that's the that'sthe tragedy of this.
We're we're focusing, we'refocusing these dollars.
(15:45):
We're taking the dollars broadlyout of middle and lower income
Alaska families, we're focusingit on subsets, and then we're
judging the the success of it bylooking at the subsets, and we
don't look back at the peoplewhose pocket we took it out of,
and we don't look back at at howthey're doing.
And that's just uh it's it'sfrustrating.
SPEAKER_01 (16:08):
Well, and to use your analogy, I mean, we're
robbing Peter and Paul to payPaul, right?
Because middle income Alaskafamilies don't really get any
benefit from all the programsare created.
Lower income Alaskans aresupposed to be getting the
benefits, but you're robbing allthe money from them to pay for
those benefits, and you'rerobbing the middle class who
(16:29):
don't get anything, and sothey're the ones that are
feeling everybody's feeling thepinch on the lower end to
supposedly take care of thelowest income Alaskans.
But if you gave them$12,000 fora family of four or$15,000 for a
family of four versus three,four thousand dollars for a
family of four, they probablycould take them, they could
(16:50):
probably grab themselves up bytheir own bootstraps and do it
themselves.
Instead, you've createdbureaucracies and problems and
and more overhead, and you'vecut the middle uh the middle
income Alaskans out completelybecause they don't they don't
qualify to benefit from allthese programs.
SPEAKER_02 (17:06):
Yeah.
Yeah.
It's uh it's uh no other statedoes it this way.
Every other state, every otherstate gets a portion of its
revenue from non-residents.
Alaska doesn't.
No sales tax, no statewide salestax, no statewide income tax.
Alaska doesn't get a portion ofits revenue from non-residents.
But but we have one of thehighest, if not the highest,
(17:29):
non-resident segment of ourworkforce that's non-resident of
any state in the nation.
We're just letting them get offscot-free.
No other state does that.
No other state has as regressivea tax, or as regressive a
revenue system, if Randy's gonnaflake off on tax, as regressive
a revenue system as Alaska does.
(17:50):
Yeah.
No other state has that.
So we're we're making it worse.
SPEAKER_01 (17:56):
Yeah.
Frank has a good point.
We don't have time to exploreit, but he says legislatures
also say private small businessis the backbone of Alaska.
Not true.
The government spending is theonly thing keeping Alaska
failing.
Um I mean, I I can't say thathe's wrong at that point.
Okay.
Uh, we're continuing the weeklytop three, our deep dive into
(18:16):
Alaska's economy, politics, andmore.
Um, this uh number two uh today,we're gonna talk about the weak
defenses of the Permanent FundCorporation.
Oh, they have a weak defense.
Brad, what what do you meanhere?
Let's get with it.
SPEAKER_02 (18:35):
So Devin Mitchell, uh, who's the executive director
of the Permanent FundCorporation, has written this
column that is making its wayaround the around the state.
I've seen it thus far in theAlaska Landmine and Must Reed
and in the Frontier Tiersman,and I'm sure it will make its
way to the rest of the state'snewspapers, those that haven't
closed up, uh, will make it tothe rest of the state's uh
(18:59):
newspapers uh uh in in duecourse.
And and basically it's uh it's adefense of of how the permanent
fund is doing.
It he offers it as as positives.
This is how your permanent fundcorporation is performing.
But in the wake of the stuffthat we and others have been
saying, the analysis we andothers have been doing of the
(19:20):
permanent fund corporation, youcan sort of view it as his
defense, particularly when hepublished it in the landmine,
where where all of my columns onthe permanent fund corporation
have uh have been.
SPEAKER_01 (19:30):
I noticed that.
I was like, oh, I see.
Brad must have poked the bearsomewhere in there for them to
file it here.
SPEAKER_02 (19:36):
Well, it's the it's their annual, they've come to
their annual results, theirannual report.
And this is probably the letterthat goes at the front of the
annual report.
But I just thought it wascurious that the first place it
showed up was was in thelandmine.
But I want to look at this for amoment.
Do you have the chart that Isent?
Can you oh my gosh, you're juston the ball today.
(19:57):
I'm with it.
Uh, okay, so this chart, we'vetalked about it before, but it's
but it's time to talk about itagain in light of what uh what
of Devin Mitchell's column.
Devin Mitchell, Devin Mitchelldefends two things or promotes
two things that the permanentfund corporation is doing.
They they are producinglong-term performance, long-term
(20:20):
returns for for Alaskans.
They're growing the permanentfund.
And the other is they'regenerating revenue for the state
uh in terms of uh in terms of uhadditional POM POMV uh draws or
POMV draws.
This chart looks at uh sinceFY20 compares uh the performance
(20:43):
of the permanent fund, both interms of balance, in other
words, in terms of growth, whichis the red line at the top, and
in terms of POMV draws or POMVreturns, uh revenues for the
state, to put it in Devon'sterms, which are in the red
bars.
(21:04):
If you go back before FY20, ifyou go all the way back to uh FY
uh 12, which is when uh uh uhVanguard started their uh SP 500
uh ETF electronic uh tradedfund, if you go all the way
back, you would see that in 13of the 14 years, 13 of the 14
(21:30):
years, the Vanguard SP 500 ETF,the heart of uh Warren Buffett's
9010 investment approach, the 13out of 14 years, the uh Vanguard
would have exceeded the returnsgenerated by the Vanguard ETF
would have exceeded those of theuh of the permanent fund.
I just this chart just goes backto FY20 and looks at what the
(21:54):
effect would have been.
Essentially says, look, okay, soit would take a few years to
recognize this is what's goingon.
Let's say we let's say theyfinally got they finally
realized the permanent fundcorporation finally realized
what was going on and started inFY20 to make to shift the
investments to the to the WarrenBuffett approach.
If starting in FY20, the blueline, which is it is the returns
(22:20):
generated or the balances of thepermanent fund, what the
balances of the permanent fundwould have been had it been
invested in the Warren Buffettapproach, the the S P 500 uh
90%, and uh a debt uh ETF uhlong-term debt ETF uh 10%.
Had it been invested in that,the blue line shows what the
(22:42):
balances of the permanent fundwould have been.
The blue bars at the bottom showwhat the POMV draw would have
been uh had they adopted sinceFY20 if if they had adopted the
the Warren Buffett investmentapproach.
What you can see is that the redline essentially flatlines uh
(23:04):
between uh uh FY23, uh the lastdownturn in the market, and
FY26.
The last point on this is theend of month FY26, the most
recent for which the permanentfund corporation has published
data.
And you can see that the thatthe red line is just essentially
flat across that time.
No additional growth coming outof the permanent fund
(23:28):
corporation's uh investmentapproach.
But you see the blue line jumpsfrom about$80 billion in FY23 to
now$124 billion,$125 billion, ifit had been invested in the SP
$500.
So when when Devin says, oh,we've had great long-term
(23:49):
performance, we've had great uhgrowth in the in the permanent
fund.
No, you haven't.
What that what the growth you'vehad is between 76 and 81,$5
billion of growth overessentially four years.
In the meantime, if you'dinvested in the S P 500, if
you'd invested in the WarrenBuffett approach, it would have
(24:09):
grown from 80 billion up to 124billion.
He says, Devin says, we'regenerating revenue for the
state.
Okay, yes, there is a red barthere that shows you are
generating a POMV draw for thestate.
But look at what it would havebeen had you been had you
invested in the Warren Buffettapproach, had you taken the 9010
approach based upon the SP 500.
(24:33):
Instead of the 3.8 billion thateverybody celebrates, uh
everybody celebrates is comingout of the POMB um in FY26, it
would have been 4.49 billion.
It would have been$700 millionmore, nearly 20% more, uh, had
we invested in the in the WarrenBuffett approach just since
(24:54):
FY20.
If you go all the way back toFY12, which is where the SP 500
began, the numbers are huge.
They're astronomical.
The the differences areastronomical.
So what what what what Devin'strying to do is say, hey, look,
we got a red line and we got redbars.
Isn't that great?
Right.
We've got a balance and we'vegot pom v draws.
(25:18):
But that's that's not the story.
The story is what could it havebeen had you taken a different
investment approach, an approachthat in 13 of the last 14 years
produced higher returns than theinvestment approach uh you were
taking.
SPEAKER_01 (25:34):
That's and would have to be measured by and would
have cost nearly a billiondollars less, right?
Because there's 800, 900 millionin management fees for doing
this of the investment approachthat they're using versus just
plugging it into the Vanguardformula and leaving it and
setting it for getting it.
(25:55):
They, I mean, it would have beena billion dollars per year less
in investment costs.
SPEAKER_02 (26:00):
Yep, exactly right.
Exactly right.
And that billion dollars isbeing reflected in the red line.
The red line is a billiondollars per year less over the
last several years, a billiondollars per year less because of
the investment approach theywere taking, the costly
investment approach they weretaking.
You're exactly right.
The blue line is is very low,low cost.
(26:23):
I mean, that's why Warren BuckBuffett recommends it.
Because it's low cost.
You're not you're not losing abunch of your revenue, a bunch
of your income off to paying foruh paying for so-called experts.
SPEAKER_01 (26:36):
This is just another one of those.
I mean, this is gaslighting.
This is exactly what this is.
This is gaslighting.
Uh, okay.
We'll take our bad news here andwe're gonna spin it in the best
light possible and tell you thatyou're getting exactly what you
deserve.
This is, oh, look at what greatstuff we're doing.
Again, not looking at thealternative.
And uh, I mean, this is notabout somebody just said, when
(26:59):
is all this theory going to hitthe streets?
When is Brad going to run forgovernor?
I this is like this is nottheory.
You're looking at the rawnumbers to say, here's what the
comparisons are.
And yes, the SP, the the the theVanguard fund is more volatile,
but even in its own volatility,it still provides more funding
for the state in both the shortand the long run.
(27:22):
I mean, that that's that'scrazy.
SPEAKER_02 (27:24):
Yeah, what you get, I mean, the the the permanent
fund touts the fact that they'rethat their that their approach
isn't volatile.
Well, you look, look at FY23.
Their approach went down also.
It went from FY22, an FY22balance of 81.9 down to 76.34.
There, they have volatilityalso.
(27:46):
It's not as volatile as as the SP 500, but the volatility of the
S P 500 is biased upward.
I mean, yes, there are some downyears, but there are a lot more
up years, and the up years are alot bigger in terms of up than
than the than the the approachbeing taken by the permanent
fund corporation.
(28:06):
I think the real telling, whenpeople say volatility, the
statistic to me that that killsthat off is that 13 out of 13
out of the last 14 years, theBuffett approach, the 9010
approach has outperformed thepermanent fund corporation.
The permanent fund corporationsays, yes, but there was one
(28:27):
year, and it happens to be FY23.
So you can see on this chartthat one year that the S that
the Permanent Fund outperformedthe uh outperformed the SP 500.
The permanent fund will say,Yes, there was there was one
year that you know that weoutperformed the SP 500.
That's one year out of 14.
(28:47):
Well, and and in the meantime,in those other 13 years, the SP
has built up a huge balancecompared to where the permanent
fund corporation is.
SPEAKER_01 (28:56):
But even in the year that they beat the SP, as far as
the drop was not as dramatic.
If we had been in the SP 500, westill would have received almost
200 million dollars more inrevenue from the POMB draw.
I mean, this is you know, it'sright here in front of you in
black and white.
You can look at the numbers forthis five-year period or for the
(29:18):
15 or for the 15 years all told.
I mean, again, it would havebeen every year, again, and
without that billion dollars ayear, 800 million dollars a year
in fees to do it.
SPEAKER_02 (29:31):
Yeah, it's so the permanent fund corporation.
Uh gaslighting is probably theright the perfect term to this.
I really hadn't thought of itbefore.
But the permanent fundcorporations say, Here, look at
look at what we've done for you.
We haven't lost any moneybecause we've we're not
volatile, but we haven't madeany money.
But but the rest of the story iswe haven't made any money, we
(29:53):
haven't built up the fund in thesame way that investing in the
Warren Buffett approach.
And this isn't This isn't theBrad Keithley approach.
This isn't this isn't some flyby night approach.
This is Ward Buffett saying thisis the right investment
approach, the 90-10 investmentapproach.
You know, people say you don'thave diversity in a 90-10.
Well, you've got the entire SP500.
(30:15):
Corporations doing well,corporations doing bad.
You've got that entire mixyou're hedging against
volatility by using that entiremix.
And in 13 out of 14 years, it'sproduced a higher return, a
better return, better values foruh for those who invest that way
as opposed to what the what thepermanent fund corporation is
(30:36):
doing.
SPEAKER_01 (30:36):
And I don't mean to get stuck on this fees thing,
but isn't Wyoming, this is whatWyoming is doing, right?
They plug their, they have afund.
It's not like the permanentfund, you know, but they have a
big fund that they use and theytag to the SP 500 Vanguard fund
and they pay one guy$250,000 ayear to manage everything.
Uh, and uh they've seen greaterrates of return and more stable,
(30:59):
you know, again, following theblue line than we have spending
$800 plus million dollars ayear.
SPEAKER_02 (31:06):
Yeah, yeah.
And and and that$800 million isreally so the permanent fund
board members who don't knowwhat they're doing, by the way.
The permanent fund board, we'vealready, I mean, they've
established that.
Heck, the chairman Jason Brunnysays, I don't know what I'm
doing.
I I wish we had uh uh otherpeople back who didn't know what
they were doing.
I mean, that it that$800 millionis to give the the board members
(31:30):
cover.
Oh, well, you know, we didn'tmake these decisions, we relied
on this and we paid a lot forthis investment advice.
Um, and so it must be right, andand it's not our fault.
It's the it's the if there is afault, it's the fault of the
investors uh or a fault of allthe advisors that uh that we
hired.
It's it's a CYA.
But what you get, I mean, theother investment approach is to
(31:52):
follow Warren Buffett.
And who's been better at thisover time than uh than Warren
Buffett?
So I it it's it's it is it isfrustrating, it is gaslighting.
When you read Devin's article,he he talks about none of this.
It's all it's all the red line.
Isn't the red line great?
Red line didn't go down, isn'tthat great?
(32:13):
The red line produced the redbars, which is which is revenue.
Isn't that great?
Yeah, but it could have beenmuch, much, much, much higher.
SPEAKER_01 (32:22):
Yeah, because all the blue bars are all higher.
That's the thing.
I mean, nobody they didn't hedidn't talk about the blue bars.
Let's not talk about that.
Let's just look at how prettythe red bars are.
But the blue bars are higherevery freaking time, even in the
downturns, the blue bars arehigher.
Um, it's uh it's astonishing.
(32:43):
Chris makes a valid point.
Um, and yes, it would require awhole uh a whole uh kind of
redirection.
He said they'd have to sell alot of real estate in order to
invest the money that you'retalking about.
Well, again, that's what I thinkBrad is pointing out is that
this is a whole differentapproach to what they've been
trying to do.
That's not generating therevenue.
Yes, you'd have to take a wholedifferent type of approach to
(33:06):
make that work.
Uh, Brad, am I wrong?
Am I re misreading what you'resaying here?
SPEAKER_02 (33:11):
That's exactly right.
That's exactly right.
And what you would be investingin is the S ⁇ P 500, and you'd
be investing in some companiesthat are that are heavily in
real estate.
You'd be you'd be indirectlyinvesting in real estate through
through companies that that areheavily, heavily invested in
real estate.
You wouldn't be out of it, you'djust be doing it indirectly, and
(33:32):
you'd be relying on themanagement of those companies to
perform.
And over time, you've seen thatperformance outstrips the
performance of the permanentfund corporation who's investing
directly in real estate.
So, yes, you would take youwould take your money out of the
direct investment in realestate, but you would still be
invested in a proportionateamount in real estate through
(33:54):
your through the investment inthe uh in the SP 500.
Some people sometimes make thatpoint, the point that Chris says
and says, well, the red lineisn't really what the red line
is.
The red line, you're you're notcapturing all the appreciation
that's gone on with real estateor with their other private
investments.
And the red line's reallysomething else.
(34:15):
Well, the permanent fundcorporation re-eval revalues on
an ongoing basis, revalues itsinvestments to reflect fair
market value.
And basically what you'rearguing is well, they're not
really capturing fair marketvalue.
The red line isn't really whatthe red, the the actual
investment base isn't what thered line is, the fair market
(34:36):
value would be would be higher.
Well, that means that thepermanent fund corporation isn't
doing their job in in valuingthe fair market value of their
assets.
But setting aside that, youwould still be invested.
You'd be invested inpharmaceuticals, you'd be
invested in real estate, you'dbe invested in oil and gas,
you'd be invested in all of thethings that people want you to
(34:59):
invest in, that people think youshould be invested in, but you'd
be invested in it through the SP 500 as opposed to directly
investing in it.
And we're seeing the differencein results, the difference
between the red line and theblue line of investing through
the S P 500 as opposed toinvesting directly.
SPEAKER_01 (35:17):
Kyle just said the red line is smoke and mirrors.
Well, if that's the case, ifthat's the case, then the
permanent fund corporation hasfailed.
If it's smoke and mirrors, thatthey're the ones that are
providing this valuation, Kyle.
So are they doing a good job?
He says this is where theargument falls apart.
The red line is smoke andmirror.
(35:38):
This is the numbers that they'redelivering.
How does that I mean I just youknow, uh, I I just don't
understand that how thisargument goes.
I don't understand.
SPEAKER_02 (35:50):
To the extent that they're smoke and mirrors,
they're smoking mirrors on thehigh side.
Nobody is going to, nobody, noinvestment firm is going to say
that, oh, our investments areworse than what they than what
than what they're performing.
To the extent there's a bias inhere, the bias is on the high
side.
So if they're smoking mirrors,they're smoke and mirrors on the
(36:14):
high side.
The blue line is real.
The blue line is real SPreturns.
The blue line is real investmentreturns by investing in the
Vanguard uh SP 500 ETF.
Those are real numbers.
The red line, to the extentthey're smoke and mirrors, to
the extent they're they'remade-up numbers, that's the high
(36:34):
side.
If he's saying they're smoke andmirrors, the real numbers are
lower than that.
Because the because theincentives and the investment
bias is always to upscale yourinvestment value as opposed to
low scale it.
SPEAKER_01 (36:47):
And Kyle says, I know you don't understand
because we're too stupid tounderstand.
Kyle apparently has all thesolutions out there.
Kyle's got it, got Kyle's got itall.
He can't explain how it's wrong.
He just knows in its heart thatwe're wrong because we're
fighting the we're fighting themachine.
That's what it's all aboutthere.
Um, going back to Chris'scomment where we'd have to sell
(37:09):
a lot of real estate.
Uh, Brad created the red line.
No, those red lines came fromthe PFD and and from Devin
Mitchell that came from thething, right?
I mean, this is not Brad'snumbers.
These are numbers that Brad tookfrom Devin Mitchell's commentary
and from the the reporting ofthe permanent fund corporation.
SPEAKER_02 (37:26):
So those are from the annual reports, those are
from their monthly to the extentthey're monthly.
Those are from their monthlyreports.
The blue line is from is fromsimply looking at the value of
Vanguard's SP 500 ETF, lookingat the value of that over
periods.
Yeah.
Um, so I'm I've created none ofthese numbers.
(37:47):
I have calculated the numbersfrom existing numbers from
published numbers, auditednumbers.
Uh, I'm not I'm not creatingthese numbers.
No, that's okay.
SPEAKER_01 (37:58):
Kyle knows better.
Uh, I just every time I go backto Chris's comments and I see,
you know, you'd have to sell alot of real estate in order.
And yeah, that's being likepeople saying, Can't believe
we'd have to sell our horses andbuggies to buy these newfangled
cars and do all that.
You know, if it's not working,then and and there's a better
way to do it.
Yeah, you're gonna have tochange the way you do things.
(38:18):
That's that's how it works.
Um, you know, it's it is what itis.
The weekly top three continues.
Uh, we're getting back into ithere.
Number three of the weekly topthree, uh, and uh the the this
is Brad's new point.
All op-eds should be required tocome with a fiscal note.
(38:39):
We've got an op-ed and we thinkit's all well and great, but
boy, it should really berequired to have a fiscal note
with it.
Brad, what are you talkingabout?
SPEAKER_02 (38:46):
Well, I read I read a bunch of op-eds, I read a
bunch of op-eds every week, andand I read a bunch of op-eds
this past week, and and thecumulative effect by the time I
got to the last one, they wereall about we should spend on
this, we should spend on that,we should be doing this, we
should be doing that.
The cumulative effect of of allthose at the end was, yeah, but
how much would they cost?
(39:07):
And what's the re what's theexpected return?
We don't have the state is outof money, folks.
I mean, the state doesn't have,I mean, because in part because
we're not generating the revenuethat we should be out of our
existing assets, but the statedoesn't have any money laying
around spare that it ought to bethat it should be investing in
(39:28):
these things.
Yet we get these articles thatsay, oh, you need to invest more
in K through 12, you need toinvest more in this, you need to
invest more than that.
And and at the end of it, Isaid, well, what we ought to
have, what we ought what oughtto be required, is that the the
end paragraph of every one ofthese articles after they've
made the case for why do weought to spend on this, the the
(39:51):
end paragraph ought to be afiscal note that says, this is
how much it costs, this is thelong-term cost, this is this is
the return that we'reanticipating we're going to
generate out of this.
This is why it makes financialsense.
And and with that baseline, withthat sort of fiscal note for
every one of the op-eds, wecould start making judgments
(40:13):
about whether whether, you know,A, we have enough money uh to
spend on these things, and B,what the relative returns of
spending on one thing is to theother.
The thing that started me downthis road was a an article by or
an op-ed by Kelly Lessons, uh,Anchorage School Board, Kelly
Lessons, that that says,opinion, riding the cyclone of
(40:36):
Alaska school funding.
And basically it was we ought tobe spending more, we're going
up, we're going down.
We aren't really going down, butwe're going up uh in uh we're
not going up enough in uh inAlaska school spending, and we
ought to be spending more.
Fine.
How much is it gonna what areyou what are you arguing for in
terms of cost?
What's the return that youanticipate out of that?
(41:00):
And and let's make a judgmentabout whether it's worthwhile to
do that.
All of these articles go, mything's important, got to spend
on that.
Uh, doesn't matter what anythingelse is, doesn't matter we don't
have the revenues, none of thesearticles talk about revenues.
Doesn't matter that we don'thave the revenues, we've just
got to be spending on thisbecause it's a good thing to
spend money on.
If we had fiscal notes, startingwith this one, it would be it
(41:25):
would be useful in trying tofigure out what where and how we
ought to be investing our money.
Another one, this was by TomBegage, he's running for
governor, former state senator,now running for governor, Tom
Begage.
Alaska's energy security mustcome first.
And it's an article about how weneed to invest in all these
renewables and we need to haveadditional support for the
(41:47):
renewables, support uh being thebuzzword for additional
government uh uh credits, taxcredits, or and or or
investments of some of one sortor another in these these
projects to provide a laAlaska's energy security.
Okay, how much are you talkingabout, Tom?
What what is the cost?
What's the investment return onthat?
(42:08):
What's the what's the thebetterment that we get out of
those compared to what thebaseline is?
It's not like it's not likeAlaska is gonna run out of
energy.
We're gonna have to import somein terms of LNG, um uh in order
to provide uh support to theAlaska consumption side since
(42:29):
it's heavily gas weighted.
Uh, we're gonna have to importsome.
But it's not like we're lots,it's not like we're running the
risk of running out of energy.
Begage just wants it to be adifferent type of energy and
wants and and is trying tofashion an argument about how
that is important for Alaska'suh energy security.
(42:50):
But but no numbers, nocalculation of what the cost is,
no calculation of where therevenues are going to come from,
no discussion of what the ofwhat the long-term return on
that is.
Just it's important to haveenergy security, and so you need
to spend on these things.
This isn't this isn't just aDemocrat thing, though.
I mean, lessons I think is aDemocrat.
(43:11):
Beggage certainly is a Democrat.
This isn't just a Democratthing.
Here's we the next one that Iran across was one by George
Rauscher.
Uh and the headline is Alaskaneeds more power, not less.
And he's talking about the coalplant uh back up in the uh back
up in Susitna uh that is uh thatsome have proposed and some are
(43:33):
uh trying to support uh thatneeds infrastructure, needs
support to make it work,government support to make it
work.
Uh, but uh but Rouscher'stalking about how important that
is and how that would providemore power and how we could have
more power if we just startedlooking at these other
investments we could make inthese other projects we could
develop.
(43:53):
Again, no numbers, no costnumbers, no no where's the no
analysis of where's the revenuesupposed to come from, um, and
no analysis of what the what thelong-term fiscal impact is.
It's just uh the the the thecumul the cumulative effect of
(44:14):
all this was we got a lot ofop-eds, and we're gonna have a
lot more op-eds as we get intothe governor's race and we get
into the legislative races.
We're gonna have a lot of op-edsabout you need to spend on this,
you need to spend on that, youneed to spend on the other
thing.
And oh, look at Alaska needsmore power, Alaska needs energy
security, Alaska needs to getoff the roller coaster on K
(44:34):
through 12 spending.
But how do we pay for it?
SPEAKER_01 (44:37):
But how do we pay?
Where's the fiscal note?
SPEAKER_02 (44:39):
How do we what's that cost?
Exactly right.
And that's the and that's thethe sense I came away from.
All of these Alaskans wouldactually benefit from from
having a fiscal note at thebottom of all of these articles,
all of these op-eds about, youknow, where how how are we supp
what what are the economics uhuh of these projects?
(45:02):
In the absence of a fiscal note,I think that people should read
these with a grain of salt andsay, okay, yeah, yeah, okay.
You want to spend on that,great.
You want to spend on that, youwant to spend on a new coal
plant, you want to spend onthis, you want to spend on on
another thing.
All that's great, but let mefigure out what the costs are,
or let me ask somebody what thecosts are and see if they make
(45:25):
economic sense.
We have a lot of pie in the skygoing on.
Uh we've always had a lot of piein the sky going on, but we have
a lot of pie in the sky going onin this state right now.
The LNG line's another one ofthose.
We have a lot of pie in the skygoing on, but nobody is
grounded, none of these aregrounded in in basic economics.
(45:45):
And and to the extent we get offon an emotional, an emotional
drive and we go down one ofthese tracks like K through 12
or or you know, building a roadout to a coal plant or all of
that sort of stuff, to theextent we get off on these on
these tracks, that explains alot of why we're in the fiscal
situation that we're in.
We're spending a lot.
(46:05):
We aren't looking at thefundamental economics behind
them.
SPEAKER_01 (46:09):
Yeah.
No, I mean, this is uh this isagain, we see this all the time,
especially around electionseason, where everybody has
every plan to put a chicken inevery pot and do all this other
kind of stuff, but they nevertell you how it's going to be
paid for, where the money'sgoing to come from, or what the
actual I mean, it's the longtrail all over again, right?
(46:29):
It's gonna generate millions ofdollars and show your work.
Show me the numbers.
What do you what do you mean?
How much is it gonna cost andwhat is the return going to be?
It's aspirational.
Everything is aspirational atthat point.
Oh, if we just build more, andif I hear one more Republican
especially say, well, we justneed more resource development,
that'll get us through the next10 years.
(46:51):
I mean, it'll take 10 years toget the resource development off
the ground.
How do we survive between nowand then?
That's the question I keepasking.
SPEAKER_02 (46:58):
Oh, and and and as we discussed last week, and as
we've discussed, you know,fairly often, and as we as I've
got in the I think in lastweek's uh Alaska landmine
column, resource development'scosting us money.
I mean, you when you look at thecredits um and the deductions
that the oil companies are totake, our as as production's
(47:20):
going up, which everybody says,oh great, see resource
development.
Production's going up.
As production's going up,revenues from from the
production tax, from the fromfrom the tax on oil, is going
down.
It's not not even staying, it'snot even going up a little bit,
yeah.
It's not even staying, it'sgoing down.
SPEAKER_01 (47:40):
I know.
SPEAKER_02 (47:41):
Development's costing us much.
SPEAKER_01 (47:43):
I I like your idea.
There should be a fiscal noteattached to each more each one.
Yep.
You gotta have a fiscal noteattached to each one.
It's true though, right?
I mean, we got all these greatideas.
Okay, great.
How's it?
How are we gonna pay for it?
How's it gonna happen?
How's it gonna oh you don't havethat answer?
Okay, great.
That's that's uh that's great.
Oh, we need more money for theschools?
(48:04):
Okay, great.
How's that gonna get paid?
Oh, you don't have an answer forthat?
Okay, great.
You know, uh it it's it's it'sastonishing.
SPEAKER_02 (48:12):
Yeah, you know, you you you made a statement back in
the back in the segment, Ithink, is is very insightful.
Show your work.
Show your work.
A lot of a lot of these op-edswouldn't pass fifth grade, you
know, the fifth grade mathteachers requirement that you
show your work when you turn inyour test.
Show your work on how your onhow your math works.
(48:33):
Show how you got to the answerthat you got to.
Um, I remember law school examswere like that.
Show how you how you reach theconclusion you did.
We don't do that.
We don't do that.
I mean, these op-eds, all theseop-eds, George Roushers
included, are just let's jump tothe end, the end game.
Oh, we have a coal plant, orlet's, or Tom Begage, oh, we
(48:55):
have all these renewables, orKelly Lessons, oh, we have this
great K through 12.
This jump to the end withoutshowing their work about how we
pay for it, what it's gonnacost, how we pay for that cost,
and what the what the return uhon uh on that investment on that
investment is.
And right, and and they're notthey're not, we're not even
(49:16):
passing the fifth grade test,yeah.
Of of these uh of theseproposals.
SPEAKER_01 (49:21):
Well, it is tis political season, Brad.
Expect tons more of this, right?
There'd be a chicken in everypot and a moose on every table,
and let me show you how I'mgonna do it.
No, I won't show you how I'mgonna do it.
I'm just gonna promise that, andwe'll figure it out on the other
end.
That's how it's gonna be becauseit's a good thing.
It's a good thing.
Alaska energy security is a goodthing.
Don't worry about how we getthere, it's a good thing.
(49:43):
I think a one million dollardeposit in my account would be a
good thing.
I think that would be a greatthing.
So tell me how that works.
Tell me how that works, right?
I I mean this is that's wherewe're at.
I how can you how can you figurethat out?
Uh, you know, or back to youknow, the red line and the blue
line.
They're pretty easy to go pullthat information out.
There's your work.
(50:03):
I mean, show me show me how it'swrong.
Oh, you can't.
Okay.
That's all I that's all I wantedto know.
Um it's it's just one of thosethings, right?
It's one of those things, myfriend.
SPEAKER_02 (50:15):
Well, it's um, you're right.
We're gonna have a lot more ofthese come up in in the in the
campaign season, and I'm gonnabe complaining about a lot more
of them, I'm sure, as we gothrough.
But for but for listeners andand readers, think about that.
Think about what the fiscal notewould be on this proposal, and
think about why they aren'tgiving you the fiscal note.
(50:37):
Think about why they aren'ttelling you what the economics
are, think about why they aren'ttelling you what the cost is,
what the what the opportunitycosts of of what we otherwise
could be investing in, or or orwhat the impact is on lower and
middle income Alaska families ifwe're taking the money out out
through PFD cuts.
Think about that.
SPEAKER_01 (50:54):
It's the the worst part is that when I ask somebody
how do we get out of the fiscalsituation we're in, their answer
is, well, resource development.
We need to develop the research.
Okay, well, I mean, first off,how do you pay for that resource
development?
What's the cost going to be tothe state?
And again, forget about thetimeline because they're not
(51:15):
even thinking about thetimeline.
The timeline is five to tenyears.
I mean, five years at a minimum,10 years, you know, probably
more than likely.
But again, it's it's like theyit's not a real, it's not a real
answer.
It's not a real answer.
SPEAKER_02 (51:29):
Yeah, particularly when you look at oil, and
particularly the when you lookat what the impact is on uh on
production taxes.
I mean, we've gone through, I'vegone through all the periods
now.
I've gone through the currentperiod, the next 10 years, and
the and the and the futurebeyond that, using DOR data uh
from Willow, Pika and Willow,and you can look at what the out
(51:50):
what the out years look like.
25 year span.
And all of those years,production taxes go down.
Production taxes don't comeback.
And so people who say, oh, well,we gotta do the next 10 years,
don't worry about that.
The 10 years beyond that will beokay.
No, we're not.
They don't come back, they keepgoing down.
(52:10):
And so it's and so when peopletalk about resource development,
oil development, yeah, theyhaven't either A, they haven't
done the numbers, or B, they'rejust lying.
SPEAKER_01 (52:19):
Yeah, again, aspirational.
And yeah, you're right, Harold.
That's exactly right.
We're still chasing a pipedream, millions being wasted on
a gas.
We were just talking about that.
Where's the numbers?
Where's the fiscal note on that?
How much effort, energy, andwishing are we wasting on yet
another program that's gonna gonowhere?
Um, you know, it's it's it allsounds great on paper until the
(52:44):
rubber hits the road, right?
That's just that's where it is.
It just it all is desperation.
Brad, what else are you uhlooking at this next week?
Here, we got about two minuteshere.
SPEAKER_02 (52:55):
Well, I did a piece uh a few weeks ago on um K
through 12 and focused on whyit's important to start when we
look at increases in K through12 revenues, start focusing on
local governments.
Um Alaska lags the nationalaverage hugely in terms of the
(53:16):
percentage of revenue for Kthrough 12 coming from local
governments.
And the and the result and theresult of that is local
governments really don't carethat much about constraining
K-12 spending.
They're they're mostly advocatesof additional K-12 spending
because they don't have to paymuch for it.
If you push, like the otherstates do, if you push more
(53:36):
responsibility for raising themoney to pay for K through 12
spending on local governments,they would be more responsible
in terms of constraining thatspending and spending it more
wisely.
So I'm gonna do another uhanother piece on that this
coming Friday.
SPEAKER_01 (53:52):
Well, I I I'm interested to see where we go
from here, where where it allends up at.
And we'll be watching that forsure as we go through.
Brad, thank you so much forcoming on board.
As always, it's good to talkwith you.
Appreciate you being part of theshow today.
Michael, as always, thanks forhaving me.
SPEAKER_02 (54:14):
Well, that's a wrap for another week's edition of
the weekly top three fromAlaskans for Sustainable
Budgets.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
SoundCloud, Spotify, andSubstack pages, and keep track
of us during the week onFacebook and Twitter.
This has been Brad Keithly,Managing Director of Alaskans
(54:35):
for Sustainable Budgets.
We look forward to you joiningus again next week on the weekly
top three.
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Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.