September 9, 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 8, 2025.
This week, our top 3 issues are these: 1) we discuss Sen. Robb Myers recent op-ed in the Alaska Landmine, which explains that the proposal to change the current two-account Permanent Fund system to a one-account system is really about protecting state revenues, not protecting the Permanent Fund (2:24); 2) we dive into the state’s new fiscal analysis of the Pikka oil field and what the numbers are telling us about SB 21 (19:21); and 3) we explain how, by not looking at the numbers, Must Read Alaska is missing the big story behind the performance of the Permanent Fund Corporation (39:14).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:07):
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the weekly top threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of September 8th 2025.
The weekly top three is aregular segment on the Michael
(00:28):
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 6.10 to 7 am for adiscussion between the two of us
about our three issues.
(00:49):
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site mediumcom.
You can find past episodes ofthe weekly top three also at the
(01:13):
same locations.
Keep in mind that, in additionto these podcasts during the
week, you can also follow andparticipate in the discussion
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
(01:33):
Twitter.
This week, our top three issuesare these First, we discussed
Senator Rob Meyer's recent op-ed, which explains that the
proposal to change the currenttwo-account permanent fund
system to a one-account systemis really about protecting state
revenues, not about protectingthe permanent fund.
(01:55):
Second, we dive into thestate's new analysis of the PICA
oil field and what the numbersare telling us about SB21.
It will be a surprise to some.
And third, we explain how, bynot looking at the numbers Must
Read Alaska is missing the bigstory behind the performance of
(02:18):
the Permanent Fund Corporation.
And now let's join Michael andnow let's join.
Speaker 2 (02:24):
Michael, let's get into it.
Brad, let's dive in and getstarted First things first.
Rob Myers is right on thePermanent Fund Corporation.
He's right on a lot of stuff,but on the Permanent Fund
Corporation especially.
This is a big issue.
Let's get into it.
Speaker 1 (02:43):
Yeah, I agree with you.
Rob Myers is right on almosteverything.
He wrote a in this particularcase.
He wrote a column that appearsin both Must Read.
I'm going to be interested inyour take on that after the
break or after the hour.
But he wrote a column thatappears most in Must Read and in
(03:06):
the Alaska Landmine, the titleof which is why we Shouldn't
Combine the Permanent FundAccounts.
This is a topic that we'vetalked about a lot on the show
over the course of the last fewweeks.
It is the proposal by some,including the Permanent Fund
Corporation, to consolidate thetwo accounts that are set up by
(03:32):
the Constitution for thePermanent Fund.
One is the corpus and thesecond is the Permanent Fund
earnings account, the accountinto which the earnings from the
fund are put.
The proposal by some is toconsolidate those two in a way
that would eliminate theprotections that the
(03:55):
Constitution creates for thepermanent fund.
The way that the Constitutioncurrently sets it up.
You can the legislature candraw from the earnings reserve
of the second account of thepermanent fund, but if it runs
out of the runs through theearnings reserve, it can't get
into the corpus.
The corpus is constitutionallyprotected the statute or the
(04:20):
provisions of the Constitutionsay the legislature cannot
appropriate from the permanentfund corpus, and so the
legislature has a hard stop onwhat it can do past the earnings
reserve.
It can't keep going.
What the proposal of mergingthose two accounts into the one
account system is is to open thedoor for the legislature to
(04:45):
continue to make withdrawalsfrom the permanent fund account,
the singular permanent fundaccount, even though it's
already, even though it's runthrough what it would have been
in the old earnings account.
It can continue to draw fromthe permanent fund what would
have been the old permanent fundcorpus.
Rob's point and I think it's anexcellent one is summarized in
(05:09):
this paragraph.
It says the point of combiningthe accounts is state spending.
The point of removing the floor, removing the protection,
highlights the real reason we'retrying to combine the accounts.
It's not about managing thehealth of the fund, it's about
(05:31):
managing the health of the spend.
And his point is that bysetting up a draw from the
permanent fund, the combinedpermanent fund account, you have
a steady stream of draws thatare coming from the permanent
fund.
So, even though you run throughwhat would have been in the old
permanent fund earnings account, you would have had to stop
(05:55):
With the one account system.
You just continue to draw fromthe permanent fund and you can
start draining into the corpus.
You can start pulling from thecorpus as a result of merging
the two accounts.
And so Rob's point is look whatthey're really trying to do,
what the proponents of that isreally trying to do is to
protect the spend, to protectthe revenue stream, to protect
(06:18):
government spending, instead ofprotecting the permanent fund,
because you're setting up asituation in which you can run
through the old earnings reserveaccount and continue on into
the permanent fund corpus in away you couldn't in the past.
The current system, the currenttwo account system, protects the
permanent fund corpus.
It protects the permanent fund.
(06:40):
What Rob's point is is themerging the two accounts
together protects the spend,protects the revenue stream from
the permanent fund and divertsand changes what you're really
trying to protect.
It's a huge point that it's ahugely significant change in
(07:02):
what you're doing with the oldpermanent fund.
It's no longer permanent.
I mean it can be drained downIf the spend is higher than the
earnings coming into the fund.
If you're taking more outthrough the draw than is coming
into the fund through earnings.
Permanent fund is no longerpermanent.
I mean it can be drained downas a consequence of the change.
(07:25):
So they still want to call itthe permanent fund, but it's no
longer that.
The other thing that reallybothers me about this
combination not only do we nolonger have a permanent fund and
not only have we changed thefocus to focus on protecting the
revenue, protecting the spend,as opposed to protecting the
(07:47):
fund.
The other thing that bothers meis we've changed hugely.
We're hugely changing theincentives around the permanent
fund.
So currently the incentive forthe permanent fund corporation
though they're not living up toit very well, we'll get into
that in the third segment.
But the incentive for thepermanent fund corporation is to
maximize earnings, is tooptimize earnings, make sure
(08:09):
that earnings are sufficient toat least to cover the draws from
the fund, to make sure thatearnings are strong, to build up
the fund, to produce additionalearnings to cover the needs
that the legislature creates bydrawing from the fund.
The old PFD system did the samething.
(08:30):
It focused on earnings becausepermanent fund dividends came
from earnings and so peoplefocused on earnings because
that's what was going to drivethe permanent fund dividend.
The entire incentive system andthe entire focus was on
earnings.
What happens when you merge thetwo funds together and you
(08:50):
start focusing on the draw?
Is the permanent fundcorporation really no longer has
its primary focus on earnings?
It can go on autopilot becausethe legislature is drawing 5%
from the permanent fundregardless of what the earnings
levels are, and so they're notfocused as much on earnings as
(09:12):
they have been in the past.
The public because and this isa problem with the way that
we've started to treat the PFDover the last few years as sort
of the leftover but the publicis no longer as focused on
earnings because earnings are nolonger driving the dividend.
Now the dividend is being setby the legislature out of the
(09:35):
draw on a sort of on an ad hocbasis.
So the focus comes off earnings, and that is a complete change
from what the fathers of thepermanent fund had in mind.
Speaker 2 (09:51):
They had in mind keeping the permanent fund
corporations focused on earnings, maximizing earnings every day
keeping the earnings going andkeeping the people engaged with
that, because obviously that'stheir stake in the game.
And now that it was taken outof the people's hands and I mean
it's a brilliant, it's a it's abrilliant observation, because
I hadn't even considered thatchanging the focus of the
(10:12):
permanent fund corporationitself, when they had to answer
to the people, for you know the,the size of the dividend, they
had to focus on those earnings,and now not so much.
Speaker 1 (10:21):
Well, and and and the change from the two account
system to the one account systemwill be to change, will be to
even lessen the legislature'sfocus on earnings.
I mean, under the currentsystem, under the two account
system, the legislature at leastkeeps a focus on earnings
because that's what drives theearnings reserve and that's what
(10:42):
drives what's available to themto use to help supplement
revenues for state spending.
If you merge the two accountstogether and you have just a 5%
draw, regardless of what theearnings are, then the
legislature doesn't get asconcerned about earnings anymore
because they're going to gettheir 5%, regardless out of the
(11:06):
combined accounts.
It changes the dynamic and itchanges the incentives and
incentives I mean we talk aboutincentives a lot on the program.
Incentives are hugely importantand so it changes the
incentives for the legislature,what they focus on.
They only focus on yeah, are wegoing to get our 5% or not?
And it changes the incentivesfor the permanent fund
(11:29):
corporation because nobody'slooking over their shoulder
anymore, focusing on earnings,they're just focusing on whether
that 5%, whether they've gotenough liquidity in the combined
permanent fund account to fundthat 5% in the combined
permanent fund account to fundthat 5%.
So I think there's.
It's a.
It's a huge problem.
It's a huge problem and I don'twant to.
I don't want to minimize thatproblem.
(11:50):
It's a huge problem to changethe focus of the permanent fund
from focusing on the health ofthe permanent fund itself to
just the earning stream, but italso changes the incentives in a
way that I think is isultimately detrimental to both
Alaskans and to the legislatureand to everybody else.
We're no longer the permanentfund corporation isn't sitting
(12:13):
there every day, as it should beat least sitting there every
day saying how do we maximizeearnings?
They can go on autopilot andsay look, you're going to get
your 5% regardless.
It doesn't really matter whatour earnings are.
Speaker 2 (12:24):
Well, we can already see some of the arguments that
are stacking up and, in fact,some of the people I had.
Last time we had Rob on, I got amessage from Joshua Church, who
had written that opinion piecein the Newsminer, about how, oh,
you've got it all wrong.
This is needed because you knowstability and some other things,
and I think we're going to haveJoshua on to give his side of
(12:45):
the story.
But again, there seems to be alot of trust us, we know what
we're doing kind of thing goingon here.
And yet we've seen the trackrecord and basically mean that
(13:16):
they would have to turn it intoone fund right then, and there
just to be able to operategovernment.
So, no, I don't trust thepeople in the government that
they're going to do the rightthing, that the people in the
legislature are going to do theright thing and have and this
has always been my challenge,even between you and me when we
talk about taxes is I am notconfident that they will.
You know that they will havefiscal restraint when any kind
(13:41):
of new money gets dumped on them, because they're trying to
spend everything and then someanyway, right.
That's why there has to be somekind of spending limit or cap?
Speaker 1 (13:50):
Well, and we've talked about incentives there
also.
I mean, we've talked about whyit's important, about who you're
taxing, who you're raising therevenues from.
You want to raise revenues fromthe people who have the ability
to push back on spending andsay, look, we're not going to
provide you any more moneybecause you're spending too much
.
And the problem with using PFDas your revenue source is the
(14:10):
only people you're reallyhurting are middle and lower
income Alaska families who don'thave much political power.
Even though it's 80% of Alaskafamilies, they really don't have
a whole lot of political power.
So if you're going to tax, ifyou're going to have additional
revenues, you want to focus itto create an incentive on people
to push back on spending, thepeople who have the political
power to push back on spending.
(14:32):
Here you want to focus theincentives on earnings.
Keep the entire focus onearnings every day, day in and
day out and day out, and whatthis does, what merging into the
one account system is lessen.
That focus on earnings a lotbecause they're going to get 5%,
no matter what.
No matter what the earnings are.
You know, if the earnings are3%, they still get 5%.
(14:54):
If the earnings are 2%, theystill get 5%.
We want to keep the focus onearnings to make sure that the
permanent fund corporation ismaximizing earnings.
Speaker 2 (15:04):
Bruce Tangeman comments in the chat room and,
wow, he agrees with me.
Unfortunately, the PFD variablewill solve itself next year.
The PFD we get next month willbe the last PFD we receive.
The question will shift to ifthe POMV draw can cover the
budget next year.
I mean, I can already see thisis an argument that's going to
be set up.
(15:24):
But again, this is the argumentthat they've been trying to get
set up for the last four orfive years now and I agree with
Bruce.
I think this will be the lastPFD we see, because next year,
$2 billion deficit, potentiallymore, they could take all of the
PFD and they still don't have afraction of what they need to
cover the gap.
Speaker 1 (15:44):
Brad take all of the PFD and they still don't have a
fraction of what they need tocover the gap, brad.
Well, yeah, I mean I disagreewith Bruce on that.
I do think the PFD willcontinue.
I think the pushback on theelimination of the PFD would be
serious, but it won't be a lot.
I mean it'll be sort of a tokenPFD to say, yes, we still have
one.
As opposed to what the foundersof the permanent fund the 1981
(16:09):
provision on permanent funddividends intended.
It'll just be a percent of thattogether will I mean?
Eliminating the PFD andeliminating the basis for the
PFD on earnings has detractedfrom the incentives for Alaskans
(16:30):
to focus on earnings.
Merging the two accountstogether will detract from the
focus, eliminate the focus ofthe legislature on focusing on
earnings, and so it will just beon.
We will just be focused on theautomatic pilot of do we get our
5% draw?
Have they created enoughliquidity in the permanent fund
to get our 5% draw?
(16:51):
We really don't care about whatthey're earning.
Just give us our 5% draw andit'll be like a frog in boiling
water, right, I mean the 5%you're earning, 3%, you take out
5%.
It'll start on this decline.
Permanent fund balance willstart on this decline, but it'll
be a little bit every year andso, like the frog in the boiling
(17:14):
water, you won't really noticeit for a while and by then it'll
be too late.
So we need to keep the focus onearnings and we've eliminated
that with respect to thepermanent fund dividend because
we're not basing the permanentfund dividend on earnings
anymore.
We at least need to keep thelegislature's focus on earnings
to generate the focus that youhave enough, that you're
(17:38):
generating enough in theearnings reserve account so that
we can support government.
If you eliminate that, if youeliminate the two-account system
, merge the two accounts so thatthere's no longer a concern
about whether or not we haveenough in the earnings.
We're earning enough to haveenough in the earnings reserve,
then the entire focus onearnings goes away and we just
(17:59):
start writing the chute downucefollows up with that.
Speaker 2 (18:05):
He says well, how will it be funded then?
Era overdraw, drain adia, drainpce.
We're running out of fundingsources.
I mean, yeah, I mean I thinkthat's the whole point here is
that we are running out offunding sources and they're
going to find a way.
Brad, you might be right, maybeit's a token pfd, but I I mean,
how do they justify that?
If they're, if they're still abillion dollars upside down?
(18:27):
Do they just say sorry,buttercup, that's how it works.
You know, there's not even a$300 PFD in your future.
Speaker 1 (18:39):
Yeah, I think they want to keep the illusion of a
PFD, even though it's not whatthe founders intended the
illusion of a PFD going.
Alaskans are getting a share ofthe commonly held resource
wealth.
I think they'll want to keepthe illusion of that going, but
(19:00):
they'll need to find otherfunding sources and hopefully
the focus is on finding fundingsources that generate the
incentives to push back onspending.
That's what we don't have.
We don't have that right now.
We don't have people pushingback on spending.
Speaker 2 (19:14):
Brian calls it the loot.
The permanent fund act.
Yeah, that's my favorite.
Right there, that's it.
Right there, some truth bombs.
We're continuing now.
The weekly top three continuesBrad, keithley, alaskans for
Sustainable Budgets.
We move on from the PermanentFund Corporation.
We'll be back to that.
We'll be back.
Brad's next topic PICA is notgoing to save us.
(19:38):
I mean, we keep hearing aboutthis.
We've had several politicianstalk about this on the program
recently that oh, there's allthis new oil and everything else
, but it just it's not as it's.
No, it's not going to.
It's not going to save you,brad, give us the, give us the
full rundown here.
Speaker 1 (19:56):
So there's been recently a lot of a lot of news
about, about Santos's PICAproject.
There was a headline in the ADNthis past week.
Alaska's biggest oil project indecades is set to begin
production ahead of schedule andthere's a lot of excitement
about the additional oil.
The implication of that I meanwhat most people are reading
(20:19):
into those headlines oh, morerevenues for the state.
The state will be saved.
We'll have the additional oilproduction to those headlines.
Oh, more revenues for the state.
The state will be saved.
The additional oil productionwill result in additional
revenues.
A big part of of the revenuesthat people associate with oil,
part of it comes from royalties,but a big part of the
(20:42):
additional revenues that peopleassociate with oil come from
production taxes.
Uh, and the and the receipt ofproduction taxes as a result of
of production, uh, of additionaloil.
That's how we've sort of set upuh state, uh state revenues uh,
a significant sum of it comesfrom from royalties, but, but
historically the mostsignificant sum of it comes from
(21:04):
royalties, but historically themost significant part of it has
come from production taxes.
Interestingly enough, at thesame time as all these headlines
were coming out from the pressand otherwise about, you know
PECA is going to start up earlyand there's all this production
coming on.
Dor released, department ofRevenue released a new report
(21:26):
focused on PICA and focused onthe revenues and in part focused
on the revenues that are goingto be generated from PICA.
And this report, the Augustreport, the August report on
PICA is fascinating in terms ofthe breakdown of what revenues
are actually going to come fromPICA and the timing of those
(21:50):
revenues.
The report on page eight, forthose who want to read it for
themselves, the report on pageeight dives into revenues and it
says and here's the keyprovisions of it Oil production
is going to begin in FY27.
And what the news reports nowreporting is oil production may
(22:13):
even begin at the tail end ofFY26.
But full oil production isgoing to begin in FY27.
And then the Department ofRevenue report goes on to say
production tax revenue begins inFY34.
So we're going to have firstoil in 27, but production tax
(22:37):
revenue isn't going to begin in34.
You know, back when we did SB21,the claim of the proponents of
SB21 and the hope and theexpectation of the proponents of
SB21 was look as oil production, we're going to generate
additional oil production and asoil production goes up,
(22:58):
alaskans are going to share inthe benefits of that oil
production, right alongside theproducers, and so it's in
Alaskans' interest to change thetax structure to have oil
revenues, to have oil productiongo up, so oil revenues to the
state will go up with it.
That happened plus or minusthrough the 20-teens, but as
(23:20):
we've gotten into the 2020sthere's been this big division
between what that expectationthat is, oil production climbs
so well, oil revenues betweenthe expectation of that and the
reality of that.
And the PICA analysis sort ofbrings that home.
It says oil production beginsin 2027.
(23:40):
Production taxes don't evenbegin to have an impact until
2034, seven years later, andeven then production taxes
aren't at full force.
In FY2039, the remaining carryforward annual losses are
insufficient to bring productiontax to the minimum tax floor
(24:02):
and from FY24 onwards, nocarried forward annual losses
remain.
What that's really saying islook, production taxes do begin
in 2034, but they're not at fullforce because you still have a
bunch of credits that arelowering the production taxes,
not just the credits that mostpeople have talked about in the
(24:26):
last decade, which are tied toprice, tied to oil price.
These are credits that arehelping to significantly reduce
oil tax production taxresponsibility.
So we have production startingin FY27.
We don't have the productiontax even begin until FY34, and
(24:47):
it doesn't kick into full forceuntil FY39 and FY40.
What's happened during that timeperiod, during the initial
stages of PICA?
Production is building up, itplateaus for a few years and
then it starts coming down.
By the time the productiontaxes kick into full force, the
(25:09):
production is on significantdecline and so Alaska only
starts collecting fullproduction taxes in 2039 and
2040, only starts collectingfull production taxes once
production is in significantdecline.
So what we're seeing here is inthe PICA analysis I think
(25:34):
really brings home what's goingon with SB 21 in the current
decade.
We've had a division betweenthe expectation that as
production climbs, alaskans willbenefit along with producers.
We've had a division betweenthat expectation and the reality
which, as production increases,producers are benefiting,
(25:57):
federal government's actuallybenefiting through federal
corporate income taxes, butAlaska isn't benefiting until
much later on and untilproduction started in decline.
I think it captures thebrokenness or the way in which
SB21 has become broken in thecurrent decade in a very
(26:18):
significant way.
Speaker 2 (26:20):
But we keep hearing the I'm sorry, I don't, I'm not
trying not to laugh here, but wekeep hearing the politicians
saying this is the answer.
I mean, look, we're going to.
I mean they're all pointing toPICA and all these new fields
and the reserves and all thesenew projects and they're going
to save us.
But again, if, even ifproduction starts next year,
(26:40):
it'll be what?
10 years and nine years beforewe really see the full uh, the
full uh revenue from how do wesurvive the next 10 years at
$1.7 billion per year averageshortfall to make it, you know,
to make it to that point.
I mean that's, that's thequestion.
I think you're right to make itto that point.
I mean that's the question.
(27:01):
I think you're right.
This is obviously showingexactly where our problems are
in this SB21.
I mean, shouldn't we be openingup the?
I mean this is always whathappens right with Alaskan tax
schemes, whether it was theoriginal or ELF or ACES or SB21.
We have all these aspirationalgoals that it's all going to
work out and then we're like,ooh, it's not working as
(27:24):
intended and we have to comeback.
A lot of times we drag our feeton doing it because, well, we
don't want the oil companies tobe uncertain into what that's
going on, but it always ends uphurting somebody.
Uh, you know, usually us, uhthe state instead of the oil
companies.
But I mean, even when it wasELF they drug their feet on this
(27:44):
kind of thing.
I mean we've got to addressthis.
We can't just keep going on aslike it'll correct itself.
That's not how it works.
Speaker 1 (27:53):
What the politicians are doing is they're
capitalizing on the impressionthat was created back at the
time SB 21 was passed that it'sa shared effort.
It's a shared effort in termsof all these oil tax credits are
going to be in there toincentivize investment, but once
that investment starts payingoff in terms of increased
(28:16):
production, there's going to bea shared benefit.
So it's okay to make thesechanges in oil taxes because
we're investing.
All of us are investing in thefuture, the producers are
investing in the future andAlaskans are investing in the
future through taking areduction in oil taxes in order
to spur this investment.
(28:37):
Because at the end of it, atthe end of the rainbow, there's
going to be this shared benefit.
As production increases,alaskans will increase or
revenues will increase as well.
And politicians are stillplaying on that.
Jim Jansen, in an op-ed about ayear ago on the ADN still
played on that Said oh well,just hang on.
(28:59):
When production comes, whenproduction increases, alaskans
are going to benefit alongsidethe industry.
Well, that's not happening.
That's not the way SB21 isplaying out with all of the
various provisions in it.
It's playing out so thatthere's a division that's
occurring.
As production starts, producersare getting the benefit of the
(29:19):
increased production while thestate is waiting.
For, you know, let's get thesetimeline rights.
First oil begins in FY27.
Let's just focus on whatDepartment of Revenue said.
First oil begins in FY27.
Production tax revenue doesn'tbegin until FY34, eight years
later, begin until FY34, eightyears later, and it's not even
(29:45):
and production tax doesn't kickin fully until FY2040, which is
what, 13, 14 years after thedate of first oil, when we're
already in production decline.
So what's happened is thereality of what Alaskans were
sold on is different than whatAlaskans were sold on, than the
(30:06):
projection of what Alaskans weresold on.
Shared sacrifice, sharedbenefit, it turned out.
It's shared sacrifice, stillsacrifice for Alaskans for 14
years, a decade and a half afterfirst oil.
And that's just not what SB21was sold on.
(30:27):
It's not the expectation thatwas there when SB21 was driven.
And PICA this analysis ofwhat's going on in the PICA
field is just an absolutedemonstration of where that's
failing.
Speaker 2 (30:39):
What do you think the chances are that they actually
address this, though.
I mean, we've already seen thepushback on any kind of
suggestion that maybe we shouldbe looking at.
I mean, we saw when the FiscalPolicy Working Group came out
and said well, one of the thingsthat they recommended was a
revision to the oil taxes.
And they're like whoa, whoa,whoa, whoa, wait a second, we
can't do that.
So we got the Democrats and thebig government Republicans on
(31:01):
the one side, you know, pushingall this government spend.
But even the fiscalconservatives on the other side
are saying well, we can't lookat oil taxes, that would be
dangerous.
I mean, again, we're supposedto be looking at these things.
If they're not working asintended, we need to fix them.
Speaker 1 (31:20):
Yeah, well, it depends on whether politicians
are pushing for the source ofrevenue that has the weakest
resistance, right, and so it'sinitially been the PFD, as we
got.
Well, it was initially thesavings accounts, the SBR and
the CBR.
Those were those were supposedto be there for, you know, for
(31:43):
pulling down when we have badtimes.
So they had the, the, the forceof least resistance.
So politicians went for them.
And then politicians went forthe PFD because it only affects
middle and lower income Alaskafamilies, um, and so we'll come
up with all theserationalizations while we're
taking it, but the focus is onmiddle and lower income alaska
families, not the, not the oneswho donate to us and not the
(32:05):
ones who, uh, who have the theloudest uh voice, uh, in the
press and in the and in thecommunities.
So so they, they take from them.
Now what we're really seeing Imean this merges the first, the
first segment, with the secondsegment now what we we're really
seeing is oh yeah, we're goingto need more revenue, so let's
merge the two accounts in thepermanent fund together so that
(32:26):
we can continue the permanentfund draw, regardless of what
actual earnings are, regardlessof the permanent fund
corporation's performance.
That'll be that's sort of a youknow, and we'll doctor it up in
nice pictures and nicerationalizations for why we're
doing it, but the real intent isto get at the permanent fund
corpus, start draining thepermanent fund corpus if they
(32:49):
need it.
That's the point of leastresistance.
So we're just going to continueto find what the source of
least resistance is as we go.
The oil companies put up a lotof resistance.
They fund a lot of the oilcompanies put up a lot of
resistance.
They fund a lot of campaigns,they put up a lot of resistance,
and so you know they may betoward the end, but in terms of
(33:09):
delivering on what Alaskans werepromised back in 2013 with SB21
, we're failing.
We're failing to do what thepromise was in SB21 of shared
sacrifice, shared benefit.
It's turned out to be sharedsacrifice and then Alaskans
sacrifice some more as the oilcompanies start to benefit.
Speaker 2 (33:33):
Bruce said.
I recall Bert I'm assuming he'ssaying Bert Steadman I recall
Bert saying you got to open upthe books and look under the
hood every 10 years or so tomake sure things are working as
hoped.
The last tax change was MAPA in2014,.
11 years ago, I mean SB21 wasalso in that era.
But yeah, I mean that should bewhat it is.
(33:53):
You need to look under the hoodevery 10 years or so to make
sure things are working as hoped.
And obviously they're not.
Obviously, if they're going toput production on and you're not
going to see any revenues tillreally nine years later, that's
obviously not working asintended.
Well, I guess, unless youintended to give away the farm
for Alaskans, brad, right?
I mean that's kind of whatwe're looking at now.
Speaker 1 (34:17):
Yeah, just to make it clear, SB21 and MAPA are the
same thing.
Oh, make Alaska.
Speaker 2 (34:22):
More.
Speaker 1 (34:22):
Alaska Production Act or something like that.
All right, it's what those MAPAit tends to be, what those in
the Parnell administration callit.
Sb 21 tends to be whateverybody else, what everybody
else calls it, but yes, I meanit is the producers.
The producers made this, madean excellent point in the late
(34:46):
2000s and the early 20-teens,when we saw investment going
like everywhere else but Alaska,because we had Aces at the time
, and Aces was an overreach, andso we saw investments start
back into the oil industry in abig way in 2008, 2009, 2010,
2011,.
Alaska wasn't getting any of it,and so, and so the the the
(35:09):
battle cry of of producers atthe time was look, we need to
re-examine what we did then,just, you know, eight years ago,
uh, in 2006,.
We need to re-examine what wedid uh in, uh, uh with, with
Aces, and reset the playingfield so that we have this
(35:29):
shared position.
We have a shared sacrifice withthe goal of getting additional
production, and then we have ashared benefit coming out of
that additional production.
And so, yes, I mean Bert'sright, we need to look at these
things every so often.
Producers aren't shy aboutsaying that we need to look at
it when they're on the downsideof the break.
(35:52):
Consumers.
Alaskans should not be shyabout saying that it's time to
reopen it when they're on thedownside of the break.
Speaker 2 (36:00):
But here's a typical response from a lot of those
folks.
This is Teresa, attacking therenewable resource major
industry in the state makes zerosense.
Who's attacking?
We're not attacking.
We're saying you're the owner,teresa, you own it and you're
not getting paid on it for nineyears after the production
starts.
That's not working as intended.
(36:20):
Are you attacking when you'resaying you need to get your fair
share?
I mean, that's the problem.
But see, this is going to bethe reaction from a lot of folks
on the right.
Is that, oh, we're attacking amajor industry?
No, we're not.
We're trying to make sure thatthe limited resource that we get
the maximum yield for theresource that we own.
(36:41):
That's what the Constitutionsays maximum yield for the
resource that we own.
Speaker 1 (36:45):
That's what the Constitution says.
We're trying to fulfill thearguments of 2013 and 2014,.
Shared sacrifice, sharedbenefit.
That's what we're trying to do.
We're not attacking theindustry.
We're not saying, hey,overreach, give us, like ACES
did, give us the bulk of it.
You make the investment, butgive us the bulk of the benefit.
That's not what anybody'strying to do here.
(37:06):
It's not what we're trying todo.
What you're trying to do is say, look, let's fulfill the
commitment, let's fulfill thearguments of 2013 and 2014 of
shared sacrifice, shared benefit.
It's time for the shared benefitto kick in, but it's not
kicking in.
For the shared benefit to kickin, but it's not kicking in.
(37:27):
A disproportionate amount ofthe benefit is going to the
producers as opposed to beingshared with the state, the
resource owner.
That's what the objective wasof 2013 and 2014.
So it's not.
This is not let's go back toACEs, where we grab all the
benefit and leave none to theproducers.
This is look, let's achieve thearguments of 2013 and 2014.
(37:51):
Let's go in and share thebenefits, going forward in a
timely manner.
Let's not push the state'sbenefits as the current law is
doing.
Let's not push the state'sbenefits 13 and 14 years out.
Let's make sure we achieve themat the same time as the
producers is achieving them.
Speaker 2 (38:11):
Teresa clarifies that she said renewable resource.
She was talking about thefishing industry.
Okay, but again, it was aperfect example of what you're
going to hear from some of theRepublicans is that we're
attacking the major industryresource out there.
And then Frank says he againquotes the next thing you're
going to hear do you want stateservices or do you want a PFD?
(38:33):
Quote, unquote.
I mean that's going to be thenext argument, right?
I mean, isn't that what we'veheard so far?
Do you want a PFD or do youwant taxes?
But now it'll be.
Do you want state services ordo you want a PFD?
I mean these are the same kindof ridiculous arguments we've
heard time and again.
30 seconds, brad.
Speaker 1 (38:50):
We're talking about two entirely different things.
We're talking about gettingAlaska's fair share of the
revenue.
We can argue about where itgoes later on, but the
constitutional obligation is toget Alaska's fair share of the
revenue.
And what's happening 10 yearson from the passage of an act
that said shared benefits,shared resource?
What's happening 10 years on iswe're not getting the shared
(39:13):
benefit.
Speaker 2 (39:14):
We're continuing now.
Brad Keithley, alaskans forSustainable Budgets and the
Weekly Top Three.
We're going to continue here.
We're moving back over to thePermanent Fund Corporation three
.
We're going to continue here.
We're moving back over to thePermanent Fund Corporation, not
now on the it's like this is anever-ending story, man but not
on the combining of it, but onthe performance of it, which
Brad touched on as well in thatfirst part.
(39:34):
He references back to themust-read article that came out
here just a couple of days agosaying that the Permanent Fund
hit records.
But even as they did that,we're seeing smaller dividends.
And although she does make,suzanne Downing makes a comment
that you know this move to tryand consolidate the fund could
(39:56):
be dangerous.
They are showing that they hitrecords at $85 billion, brad.
Speaker 1 (40:02):
Yeah, here's the problem with Must Read, and it's
sort of the same problem thatwe just talked about with the
ADN, when they were saying, oh,PICA, additional production,
great thing.
Without looking at theunderlying revenues, without
looking at what's happening fromthe revenue split side, Must
Read is sort of becoming themouthpiece for the Permanent
(40:25):
Fund Corporation.
Look at us we achieved a recordlevel in terms of the value of
the Permanent Fund.
We've hit $85 billion.
But Must Read is not lookinginto the Permanent Fund
Corporation's performance andwhether the $85 billion should
(40:45):
be a lot more.
As we've made the point onprevious shows it should be.
We could be in the $120 billionrange now if we had invested
differently than the permanentfund corporation's been
investing.
So, just like the focus on theADN is, look into the revenue
(41:07):
split.
Don't just buy off on theargument oil production is going
up, so we're all going to behappy.
Don't just buy off on that.
Look into the revenue split.
The same thing with respect toMust Read and the other news
sources that say, oh, thepermanent fund hit a record
level.
Look into the details and seewhether there's something not as
(41:33):
rosy going on.
And that's certainly the casewith the permanent fund
corporation.
We've talked about this on theshow recently a number of times.
We'll talk about it again, butwhen you look at the Permanent
Fund Corporation's performance,they haven't matched.
Not only have they not matchedearnings, not only have they not
(41:56):
provided sufficient earnings,generated sufficient earnings to
cover the POMV draw that thelegislature has been making, but
they haven't even matched theperformance that they would
achieve if they, instead ofspending a billion dollars on
management fees, they insteadput the permanent fund
(42:17):
corporation investment or thepermanent fund investment on
passive investments and achievethe returns of their passive
investment.
Speaker 2 (42:27):
Let me rewrite the headline for you.
Instead of Alaska PermanentFund hits $85 billion record.
Even as Alaskans see smallerdividends, it should have been
Alaska Permanent Fund hitsrecords $85 billion, but it
could have been oh so much moreright.
Speaker 1 (42:42):
I mean that really should be the headline but it
could have been oh so much moreright.
I mean that really should bethe headline.
Yeah, it should be.
I mean it should be.
And what we're not doing, whatAlaskans aren't doing, what the
Alaskan news media isn't doing,is digging in.
Just like we're not digginginto the revenue side on oil
revenues, they're not digginginto the side, they're not
(43:05):
digging into the to the side,they're not digging into the
permanent fund corporation andlooking at it and looking at the
permanent fund corporationsperformance.
It's not, it's not that it'sdifficult to do.
The permanent fund corporationitself monthly publishes its
investments, investment results,and it compares its own
investment results against threebenchmarks that it's created.
(43:25):
So you know, you would thinkthey would have created them to
show the Permanent FundCorporation in a positive light.
But the Permanent FundCorporation's over the last
three years, each of the lastthree years, the Permanent Fund
Corporation's performance hasbeen less, has been lower from
what they've actually done.
The permanent fundcorporation's performance has
(43:46):
been lower from what they'veactually done compared to their
own passive benchmark, comparedto putting it on autopilot, and
it's been significantly less.
The deficiencies have been 3%,4% of a return on the fund's
performance.
So what we're doing is.
(44:08):
We're buying off on theseheadlines that people are
creating and saying, oh, we mustbe in good shape because look
at oil's going up, oilproduction's going up, so we
must be better off in terms ofrevenues, without looking at
what's actually going on in oiltaxes and permanent fund
corporations saying, oh look, weachieved a higher level than we
(44:30):
had before.
Well, it's not the level thatyour own benchmark says you
should be achieving and it'scertainly not the level you
could be achieving if you tookWarren Buffett's advice and did
a 90-10 split a 90% investmentin the S&P 500 and a 10% in the
bond market to provide a hedge.
You're not achieving what yourown benchmarks and what
(44:53):
objective benchmarks out therein the world are telling you you
should be achieving.
You're leaving money on thetable, and this is the problem
with merging.
To go back to the first segment, this is the problem in spades
that shows up if you merge thetwo accounts together.
Nobody cares about earningsafter you merge the two accounts
(45:14):
together, because you're alwaysgoing to get the 5% draw,
regardless of what the permanentfund corporation is doing.
So we're not focusing enough onit now, although the
information's out there thattells us we could.
It's going to be even less.
The problem's going to be evenworse if we merge the two
accounts together.
Speaker 2 (45:35):
And, of course, this is something that we've harped
on.
I brought it up to severalcandidates and there's been kind
of a glazed look of people'seyes.
They're not paying attention tothis part.
You and I seem to be the onlyones talking about this specific
issue with the permanent fundand the earnings potential
that's slipping between ourfingers.
The cost of a billion dollarsin management fees every year to
(45:58):
deliver subpar returns comparedto their own passives, let
alone to a Vanguard or an S&P500, just to their own passive
benchmarks.
They're falling behind andeverybody looks at you like what
I mean and, as you said, themainstream media between this
and the whole PICA and otherfield things with the revenues I
mean nobody's digging into this.
(46:20):
Where is the doggedness and thedetermination to get to the
bottom of these numbers?
Like you said, it's not hard tofigure out when you actually do
the work and look at it andyou've done all the work to
begin.
Somebody could write a storywith you helping them just going
back to your articles andsaying this is what Brad
Keithley said.
Shouldn't we be discussing this?
This is crazy.
Speaker 1 (46:40):
Here's the problem with the legislature.
The legislature is entirelyfocused on spending.
They all get in on oh we oughtto be spending on that, or we
ought to be spending on that, orwe ought to be not spending on
this or not spending on that.
They're elected byconstituencies that are focused
(47:01):
on spending.
Are you going to spend on me?
Are you spending too much?
You're not spending we.
We really don't have anybody inthe legislature that I can
identify who focuses on therevenue side, who says are we
getting what we should?
Is the state getting what itshould?
On the revenue side, we don'thave any revenue focused
legislators who are saying, whoare looking at the oil taxes and
(47:24):
say wait a second, we'resupposed to be getting this.
This is what SB 21 was sold on.
We're supposed to be sharing inthe benefit, but we're not.
The benefit's coming years out.
We don't have anybody focusingon the permanent fund revenue
saying are we getting thepermanent fund revenue that we
deserve?
Speaker 2 (47:45):
Well, this is what happens when you have a
legislature that's focusedcompletely on the spend.
To me, this is astonishing thatwe don't have a media that is
digging deeper into these.
It's basically become a game ofparaphrasing press releases.
At this point, right, there'sno deeper analysis on any of
this.
The permanent fund not earningthe right returns, the downsides
(48:09):
of the combining of the funds.
The few articles that we've seen, only opinion pieces, have
brought out the dangers ofcombining the funds, not the
actual news articles.
Said so-and-so on this sidesaid it could open up the corpus
or whatever, and of courseagain the PICA and all the new
field things you know with SB21,and basically saying, said
so-and-so on this side, said itcould open up the corpus or
whatever, and of course againthe pika and and all the new
field things you know with sb21,and basically saying, oh, look
at this, we're safe, neverlooking at the actual analysis
(48:32):
underneath.
This is a real.
This is a real.
There's multiple problems here,but that's a real problem.
When it's not, we've got amedia that's not informing the
public as to both sides of theissues.
Speaker 1 (48:44):
At that point, yeah, and Must Read.
I mean, people will think aboutMust Read what they want, but
Must Read has been pretty goodabout digging stuff out.
But in this situation, mustRead is just accepting the press
release from the Permanent FundCorporation and just
regurgitating it.
Oh, look, how great we are.
Look, we got us to.
Got us to 85 billion.
Don't look, don't look at theguy behind the curtain.
(49:05):
That could have got us to 125billion.
Don't, don't worry about that.
We got to 85 billion, aren't we?
Aren't we good, and that's it.
We tend to legislators,politicians in the state tend to
accept revenues as they are,whatever.
Whatever revenue reportingfunction or whatever revenue
(49:27):
agency reports.
The number is well, that's thenumber.
On the spending side, it's ohno, we need to be spending more
on K-12, or we need to bespending more on corrections, or
we need to be spending more onthe university.
Everybody gets excited on thespending side, but we don't have
anybody who's digging in on therevenue side and said wait a
second, we should be getting alot more revenue.
(49:49):
If you believe the principlesof SB21, we should be getting a
lot more revenue as oilproduction goes up, not less,
which is what's happening withproduction taxes.
Or on the permanent fundcorporation Look, the stock
market's taken off.
Or on the permanent fundcorporation look the stock
market's taken off.
We should be getting a lot morerevenue from our investment
portfolio, not just mediocre,you know, bouncing along, not
(50:12):
even keeping up with the passiveindices.
We don't have anybody who'sdigging in on the revenue side
and that's a huge problem.
It's as much.
Not digging in on the revenueside is as much a problem as
overspending is.
On the spending side.
We've got a lot of people whofocus on overspending.
We have very few people who digin on the underrevenue side.
Speaker 2 (50:35):
Yeah Well, it's frustrating to watch and to see.
Bruce Tangeman is going to giveyou the final thought here.
He says if it will only getworse in a couple of years, once
the ERA is overdrawn anddrained, just to balance the
budget, next up will be thelegislature saying start selling
shares of Apple because youbetter have our POMV draw ready
July 1st.
Well, and of course, once theERA is drawn and overdrawn and
(50:59):
gone, then of course it's intothe corpus and the seed corn.
And then we, then we, then weface that doom loop of less
money earning money, and so thenwe have less money in the
earnings.
So then the next year we haveto take more of the seed corn
and more, and it may be a 20year cycle, but we'll, we'll,
we'll drain that account down ifthat's what they do.
But the problem.
Speaker 1 (51:19):
The problem that Bruce is talking about there
isn't just an overspendingproblem.
The problem is an under-revenueproblem.
The problem is the permanentfund corporation is not earning
what it could and should be interms of the investment bundle
that we've passed along to them.
They're just sort of rockingalong at a mediocre level and
(51:43):
not investing and not focusingon the maximization of earnings.
It's an under-revenue problemas much as it's an overspending
problem, and it's a problem thatAlaskans should be focused on,
because if you're not gettingthe revenue, you should be
getting out of oil and you'renot getting the revenue, you
should be getting out of thepermanent fund.
(52:03):
Where does that pop up?
Well, it pops up in terms ofPFD cuts to generate there and
it pops up in terms of taxesdown the road because we're not
getting the returns, we're notgetting the revenue we need to
get from our existing asset base.
So it's an issue that peopleshould be focused on.
It's an issue I thinkpoliticians would benefit from
(52:24):
focusing on, but it's one thatpoliticians just aren't digging
into.
Speaker 2 (52:33):
How do we win, brad?
I mean, how do we get people tosee this?
How do we get people to pay?
I mean, like I said, you and Iare talking about it, but almost
nobody else is talking about it.
I mean I can't think of anotherperson, like I said, all the
politicians that I've talked toabout it, but almost nobody else
is talking about it.
I mean I can't think of anotherperson, like I said, all the
politicians that I've talked toabout it went what.
I mean they just like to havevery little at least.
I guess Bernadette brought itup during our last conversation
(52:54):
because I've been, I've beentalking to her about the
permanent fund and the board andthings like that.
I mean she's at least talkingabout it, but nobody else is.
It's like this is a non-issue.
Speaker 1 (53:06):
I mean maybe, maybe it's, maybe it's becoming the
same way that the education taskor the education community is.
You aren't spending enough forus.
Why are you not spending enough?
You're failing us, maybe on therevenue side is you, as a
politician, are failing us bynot getting the maximum return
out of our resources, either onoil, not going back to ACES,
(53:27):
just fulfilling the obligations,the commitments of SB21.
You're failing us by notpushing the permanent fund
corporation or structuring thepermanent fund corporation in a
way in which they earn thereturns that they are capable of
earning, should be earning,that the market's generating in
terms of the investments.
Maybe it's becoming taking thesame tactics that the
(53:53):
corrections community does orthe university community does or
the K-12 community does, andfocusing it on the revenue side,
accusing the politicians ofshorting Alaskans by not
focusing on getting the maximumreturn out of our asset base.
Speaker 2 (54:09):
All right, brad Keithley.
Thank you, my friend.
As always, it's good to talkwith you.
We appreciate you coming onboard.
Thanks much.
Speaker 1 (54:16):
We'll talk to you soon, Michael.
As always, thanks for having me.
Well, that's a wrap for anotherweek's edition of the weekly
top three from Alaskans forSustainable Budgets.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
SoundCloud, Spotify and Substackpages, and keep track of us
(54:37):
during the week on Facebook andTwitter.
This has been Brad Keithley,Managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the weekly top threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of September 8th 2025.
The weekly top three is aregular segment on the Michael
(00:28):
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 6.10 to 7 am for adiscussion between the two of us
about our three issues.
(00:49):
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site mediumcom.
You can find past episodes ofthe weekly top three also at the
(01:13):
same locations.
Keep in mind that, in additionto these podcasts during the
week, you can also follow andparticipate in the discussion
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
(01:33):
Twitter.
This week, our top three issuesare these First, we discussed
Senator Rob Meyer's recent op-ed, which explains that the
proposal to change the currenttwo-account permanent fund
system to a one-account systemis really about protecting state
revenues, not about protectingthe permanent fund.
(01:55):
Second, we dive into thestate's new analysis of the PICA
oil field and what the numbersare telling us about SB21.
It will be a surprise to some.
And third, we explain how, bynot looking at the numbers Must
Read Alaska is missing the bigstory behind the performance of
(02:18):
the Permanent Fund Corporation.
And now let's join Michael andnow let's join.
Speaker 2 (02:24):
Michael, let's get into it.
Brad, let's dive in and getstarted First things first.
Rob Myers is right on thePermanent Fund Corporation.
He's right on a lot of stuff,but on the Permanent Fund
Corporation especially.
This is a big issue.
Let's get into it.
Speaker 1 (02:43):
Yeah, I agree with you.
Rob Myers is right on almosteverything.
He wrote a in this particularcase.
He wrote a column that appearsin both Must Read.
I'm going to be interested inyour take on that after the
break or after the hour.
But he wrote a column thatappears most in Must Read and in
(03:06):
the Alaska Landmine, the titleof which is why we Shouldn't
Combine the Permanent FundAccounts.
This is a topic that we'vetalked about a lot on the show
over the course of the last fewweeks.
It is the proposal by some,including the Permanent Fund
Corporation, to consolidate thetwo accounts that are set up by
(03:32):
the Constitution for thePermanent Fund.
One is the corpus and thesecond is the Permanent Fund
earnings account, the accountinto which the earnings from the
fund are put.
The proposal by some is toconsolidate those two in a way
that would eliminate theprotections that the
(03:55):
Constitution creates for thepermanent fund.
The way that the Constitutioncurrently sets it up.
You can the legislature candraw from the earnings reserve
of the second account of thepermanent fund, but if it runs
out of the runs through theearnings reserve, it can't get
into the corpus.
The corpus is constitutionallyprotected the statute or the
(04:20):
provisions of the Constitutionsay the legislature cannot
appropriate from the permanentfund corpus, and so the
legislature has a hard stop onwhat it can do past the earnings
reserve.
It can't keep going.
What the proposal of mergingthose two accounts into the one
account system is is to open thedoor for the legislature to
(04:45):
continue to make withdrawalsfrom the permanent fund account,
the singular permanent fundaccount, even though it's
already, even though it's runthrough what it would have been
in the old earnings account.
It can continue to draw fromthe permanent fund what would
have been the old permanent fundcorpus.
Rob's point and I think it's anexcellent one is summarized in
(05:09):
this paragraph.
It says the point of combiningthe accounts is state spending.
The point of removing the floor, removing the protection,
highlights the real reason we'retrying to combine the accounts.
It's not about managing thehealth of the fund, it's about
(05:31):
managing the health of the spend.
And his point is that bysetting up a draw from the
permanent fund, the combinedpermanent fund account, you have
a steady stream of draws thatare coming from the permanent
fund.
So, even though you run throughwhat would have been in the old
permanent fund earnings account, you would have had to stop
(05:55):
With the one account system.
You just continue to draw fromthe permanent fund and you can
start draining into the corpus.
You can start pulling from thecorpus as a result of merging
the two accounts.
And so Rob's point is look whatthey're really trying to do,
what the proponents of that isreally trying to do is to
protect the spend, to protectthe revenue stream, to protect
(06:18):
government spending, instead ofprotecting the permanent fund,
because you're setting up asituation in which you can run
through the old earnings reserveaccount and continue on into
the permanent fund corpus in away you couldn't in the past.
The current system, the currenttwo account system, protects the
permanent fund corpus.
It protects the permanent fund.
(06:40):
What Rob's point is is themerging the two accounts
together protects the spend,protects the revenue stream from
the permanent fund and divertsand changes what you're really
trying to protect.
It's a huge point that it's ahugely significant change in
(07:02):
what you're doing with the oldpermanent fund.
It's no longer permanent.
I mean it can be drained downIf the spend is higher than the
earnings coming into the fund.
If you're taking more outthrough the draw than is coming
into the fund through earnings.
Permanent fund is no longerpermanent.
I mean it can be drained downas a consequence of the change.
(07:25):
So they still want to call itthe permanent fund, but it's no
longer that.
The other thing that reallybothers me about this
combination not only do we nolonger have a permanent fund and
not only have we changed thefocus to focus on protecting the
revenue, protecting the spend,as opposed to protecting the
(07:47):
fund.
The other thing that bothers meis we've changed hugely.
We're hugely changing theincentives around the permanent
fund.
So currently the incentive forthe permanent fund corporation
though they're not living up toit very well, we'll get into
that in the third segment.
But the incentive for thepermanent fund corporation is to
maximize earnings, is tooptimize earnings, make sure
(08:09):
that earnings are sufficient toat least to cover the draws from
the fund, to make sure thatearnings are strong, to build up
the fund, to produce additionalearnings to cover the needs
that the legislature creates bydrawing from the fund.
The old PFD system did the samething.
(08:30):
It focused on earnings becausepermanent fund dividends came
from earnings and so peoplefocused on earnings because
that's what was going to drivethe permanent fund dividend.
The entire incentive system andthe entire focus was on
earnings.
What happens when you merge thetwo funds together and you
(08:50):
start focusing on the draw?
Is the permanent fundcorporation really no longer has
its primary focus on earnings?
It can go on autopilot becausethe legislature is drawing 5%
from the permanent fundregardless of what the earnings
levels are, and so they're notfocused as much on earnings as
(09:12):
they have been in the past.
The public because and this isa problem with the way that
we've started to treat the PFDover the last few years as sort
of the leftover but the publicis no longer as focused on
earnings because earnings are nolonger driving the dividend.
Now the dividend is being setby the legislature out of the
(09:35):
draw on a sort of on an ad hocbasis.
So the focus comes off earnings, and that is a complete change
from what the fathers of thepermanent fund had in mind.
Speaker 2 (09:51):
They had in mind keeping the permanent fund
corporations focused on earnings, maximizing earnings every day
keeping the earnings going andkeeping the people engaged with
that, because obviously that'stheir stake in the game.
And now that it was taken outof the people's hands and I mean
it's a brilliant, it's a it's abrilliant observation, because
I hadn't even considered thatchanging the focus of the
(10:12):
permanent fund corporationitself, when they had to answer
to the people, for you know the,the size of the dividend, they
had to focus on those earnings,and now not so much.
Speaker 1 (10:21):
Well, and and and the change from the two account
system to the one account systemwill be to change, will be to
even lessen the legislature'sfocus on earnings.
I mean, under the currentsystem, under the two account
system, the legislature at leastkeeps a focus on earnings
because that's what drives theearnings reserve and that's what
(10:42):
drives what's available to themto use to help supplement
revenues for state spending.
If you merge the two accountstogether and you have just a 5%
draw, regardless of what theearnings are, then the
legislature doesn't get asconcerned about earnings anymore
because they're going to gettheir 5%, regardless out of the
(11:06):
combined accounts.
It changes the dynamic and itchanges the incentives and
incentives I mean we talk aboutincentives a lot on the program.
Incentives are hugely importantand so it changes the
incentives for the legislature,what they focus on.
They only focus on yeah, are wegoing to get our 5% or not?
And it changes the incentivesfor the permanent fund
(11:29):
corporation because nobody'slooking over their shoulder
anymore, focusing on earnings,they're just focusing on whether
that 5%, whether they've gotenough liquidity in the combined
permanent fund account to fundthat 5% in the combined
permanent fund account to fundthat 5%.
So I think there's.
It's a.
It's a huge problem.
It's a huge problem and I don'twant to.
I don't want to minimize thatproblem.
(11:50):
It's a huge problem to changethe focus of the permanent fund
from focusing on the health ofthe permanent fund itself to
just the earning stream, but italso changes the incentives in a
way that I think is isultimately detrimental to both
Alaskans and to the legislatureand to everybody else.
We're no longer the permanentfund corporation isn't sitting
(12:13):
there every day, as it should beat least sitting there every
day saying how do we maximizeearnings?
They can go on autopilot andsay look, you're going to get
your 5% regardless.
It doesn't really matter whatour earnings are.
Speaker 2 (12:24):
Well, we can already see some of the arguments that
are stacking up and, in fact,some of the people I had.
Last time we had Rob on, I got amessage from Joshua Church, who
had written that opinion piecein the Newsminer, about how, oh,
you've got it all wrong.
This is needed because you knowstability and some other things,
and I think we're going to haveJoshua on to give his side of
(12:45):
the story.
But again, there seems to be alot of trust us, we know what
we're doing kind of thing goingon here.
And yet we've seen the trackrecord and basically mean that
(13:16):
they would have to turn it intoone fund right then, and there
just to be able to operategovernment.
So, no, I don't trust thepeople in the government that
they're going to do the rightthing, that the people in the
legislature are going to do theright thing and have and this
has always been my challenge,even between you and me when we
talk about taxes is I am notconfident that they will.
You know that they will havefiscal restraint when any kind
(13:41):
of new money gets dumped on them, because they're trying to
spend everything and then someanyway, right.
That's why there has to be somekind of spending limit or cap?
Speaker 1 (13:50):
Well, and we've talked about incentives there
also.
I mean, we've talked about whyit's important, about who you're
taxing, who you're raising therevenues from.
You want to raise revenues fromthe people who have the ability
to push back on spending andsay, look, we're not going to
provide you any more moneybecause you're spending too much
.
And the problem with using PFDas your revenue source is the
(14:10):
only people you're reallyhurting are middle and lower
income Alaska families who don'thave much political power.
Even though it's 80% of Alaskafamilies, they really don't have
a whole lot of political power.
So if you're going to tax, ifyou're going to have additional
revenues, you want to focus itto create an incentive on people
to push back on spending, thepeople who have the political
power to push back on spending.
(14:32):
Here you want to focus theincentives on earnings.
Keep the entire focus onearnings every day, day in and
day out and day out, and whatthis does, what merging into the
one account system is lessen.
That focus on earnings a lotbecause they're going to get 5%,
no matter what.
No matter what the earnings are.
You know, if the earnings are3%, they still get 5%.
(14:54):
If the earnings are 2%, theystill get 5%.
We want to keep the focus onearnings to make sure that the
permanent fund corporation ismaximizing earnings.
Speaker 2 (15:04):
Bruce Tangeman comments in the chat room and,
wow, he agrees with me.
Unfortunately, the PFD variablewill solve itself next year.
The PFD we get next month willbe the last PFD we receive.
The question will shift to ifthe POMV draw can cover the
budget next year.
I mean, I can already see thisis an argument that's going to
be set up.
(15:24):
But again, this is the argumentthat they've been trying to get
set up for the last four orfive years now and I agree with
Bruce.
I think this will be the lastPFD we see, because next year,
$2 billion deficit, potentiallymore, they could take all of the
PFD and they still don't have afraction of what they need to
cover the gap.
Speaker 1 (15:44):
Brad take all of the PFD and they still don't have a
fraction of what they need tocover the gap, brad.
Well, yeah, I mean I disagreewith Bruce on that.
I do think the PFD willcontinue.
I think the pushback on theelimination of the PFD would be
serious, but it won't be a lot.
I mean it'll be sort of a tokenPFD to say, yes, we still have
one.
As opposed to what the foundersof the permanent fund the 1981
(16:09):
provision on permanent funddividends intended.
It'll just be a percent of thattogether will I mean?
Eliminating the PFD andeliminating the basis for the
PFD on earnings has detractedfrom the incentives for Alaskans
(16:30):
to focus on earnings.
Merging the two accountstogether will detract from the
focus, eliminate the focus ofthe legislature on focusing on
earnings, and so it will just beon.
We will just be focused on theautomatic pilot of do we get our
5% draw?
Have they created enoughliquidity in the permanent fund
to get our 5% draw?
(16:51):
We really don't care about whatthey're earning.
Just give us our 5% draw andit'll be like a frog in boiling
water, right, I mean the 5%you're earning, 3%, you take out
5%.
It'll start on this decline.
Permanent fund balance willstart on this decline, but it'll
be a little bit every year andso, like the frog in the boiling
(17:14):
water, you won't really noticeit for a while and by then it'll
be too late.
So we need to keep the focus onearnings and we've eliminated
that with respect to thepermanent fund dividend because
we're not basing the permanentfund dividend on earnings
anymore.
We at least need to keep thelegislature's focus on earnings
to generate the focus that youhave enough, that you're
(17:38):
generating enough in theearnings reserve account so that
we can support government.
If you eliminate that, if youeliminate the two-account system
, merge the two accounts so thatthere's no longer a concern
about whether or not we haveenough in the earnings.
We're earning enough to haveenough in the earnings reserve,
then the entire focus onearnings goes away and we just
(17:59):
start writing the chute downucefollows up with that.
Speaker 2 (18:05):
He says well, how will it be funded then?
Era overdraw, drain adia, drainpce.
We're running out of fundingsources.
I mean, yeah, I mean I thinkthat's the whole point here is
that we are running out offunding sources and they're
going to find a way.
Brad, you might be right, maybeit's a token pfd, but I I mean,
how do they justify that?
If they're, if they're still abillion dollars upside down?
(18:27):
Do they just say sorry,buttercup, that's how it works.
You know, there's not even a$300 PFD in your future.
Speaker 1 (18:39):
Yeah, I think they want to keep the illusion of a
PFD, even though it's not whatthe founders intended the
illusion of a PFD going.
Alaskans are getting a share ofthe commonly held resource
wealth.
I think they'll want to keepthe illusion of that going, but
(19:00):
they'll need to find otherfunding sources and hopefully
the focus is on finding fundingsources that generate the
incentives to push back onspending.
That's what we don't have.
We don't have that right now.
We don't have people pushingback on spending.
Speaker 2 (19:14):
Brian calls it the loot.
The permanent fund act.
Yeah, that's my favorite.
Right there, that's it.
Right there, some truth bombs.
We're continuing now.
The weekly top three continuesBrad, keithley, alaskans for
Sustainable Budgets.
We move on from the PermanentFund Corporation.
We'll be back to that.
We'll be back.
Brad's next topic PICA is notgoing to save us.
(19:38):
I mean, we keep hearing aboutthis.
We've had several politicianstalk about this on the program
recently that oh, there's allthis new oil and everything else
, but it just it's not as it's.
No, it's not going to.
It's not going to save you,brad, give us the, give us the
full rundown here.
Speaker 1 (19:56):
So there's been recently a lot of a lot of news
about, about Santos's PICAproject.
There was a headline in the ADNthis past week.
Alaska's biggest oil project indecades is set to begin
production ahead of schedule andthere's a lot of excitement
about the additional oil.
The implication of that I meanwhat most people are reading
(20:19):
into those headlines oh, morerevenues for the state.
The state will be saved.
We'll have the additional oilproduction to those headlines.
Oh, more revenues for the state.
The state will be saved.
The additional oil productionwill result in additional
revenues.
A big part of of the revenuesthat people associate with oil,
part of it comes from royalties,but a big part of the
(20:42):
additional revenues that peopleassociate with oil come from
production taxes.
Uh, and the and the receipt ofproduction taxes as a result of
of production, uh, of additionaloil.
That's how we've sort of set upuh state, uh state revenues uh,
a significant sum of it comesfrom from royalties, but, but
historically the mostsignificant sum of it comes from
(21:04):
royalties, but historically themost significant part of it has
come from production taxes.
Interestingly enough, at thesame time as all these headlines
were coming out from the pressand otherwise about, you know
PECA is going to start up earlyand there's all this production
coming on.
Dor released, department ofRevenue released a new report
(21:26):
focused on PICA and focused onthe revenues and in part focused
on the revenues that are goingto be generated from PICA.
And this report, the Augustreport, the August report on
PICA is fascinating in terms ofthe breakdown of what revenues
are actually going to come fromPICA and the timing of those
(21:50):
revenues.
The report on page eight, forthose who want to read it for
themselves, the report on pageeight dives into revenues and it
says and here's the keyprovisions of it Oil production
is going to begin in FY27.
And what the news reports nowreporting is oil production may
(22:13):
even begin at the tail end ofFY26.
But full oil production isgoing to begin in FY27.
And then the Department ofRevenue report goes on to say
production tax revenue begins inFY34.
So we're going to have firstoil in 27, but production tax
(22:37):
revenue isn't going to begin in34.
You know, back when we did SB21,the claim of the proponents of
SB21 and the hope and theexpectation of the proponents of
SB21 was look as oil production, we're going to generate
additional oil production and asoil production goes up,
(22:58):
alaskans are going to share inthe benefits of that oil
production, right alongside theproducers, and so it's in
Alaskans' interest to change thetax structure to have oil
revenues, to have oil productiongo up, so oil revenues to the
state will go up with it.
That happened plus or minusthrough the 20-teens, but as
(23:20):
we've gotten into the 2020sthere's been this big division
between what that expectationthat is, oil production climbs
so well, oil revenues betweenthe expectation of that and the
reality of that.
And the PICA analysis sort ofbrings that home.
It says oil production beginsin 2027.
(23:40):
Production taxes don't evenbegin to have an impact until
2034, seven years later, andeven then production taxes
aren't at full force.
In FY2039, the remaining carryforward annual losses are
insufficient to bring productiontax to the minimum tax floor
(24:02):
and from FY24 onwards, nocarried forward annual losses
remain.
What that's really saying islook, production taxes do begin
in 2034, but they're not at fullforce because you still have a
bunch of credits that arelowering the production taxes,
not just the credits that mostpeople have talked about in the
(24:26):
last decade, which are tied toprice, tied to oil price.
These are credits that arehelping to significantly reduce
oil tax production taxresponsibility.
So we have production startingin FY27.
We don't have the productiontax even begin until FY34, and
(24:47):
it doesn't kick into full forceuntil FY39 and FY40.
What's happened during that timeperiod, during the initial
stages of PICA?
Production is building up, itplateaus for a few years and
then it starts coming down.
By the time the productiontaxes kick into full force, the
(25:09):
production is on significantdecline and so Alaska only
starts collecting fullproduction taxes in 2039 and
2040, only starts collectingfull production taxes once
production is in significantdecline.
So what we're seeing here is inthe PICA analysis I think
(25:34):
really brings home what's goingon with SB 21 in the current
decade.
We've had a division betweenthe expectation that as
production climbs, alaskans willbenefit along with producers.
We've had a division betweenthat expectation and the reality
which, as production increases,producers are benefiting,
(25:57):
federal government's actuallybenefiting through federal
corporate income taxes, butAlaska isn't benefiting until
much later on and untilproduction started in decline.
I think it captures thebrokenness or the way in which
SB21 has become broken in thecurrent decade in a very
(26:18):
significant way.
Speaker 2 (26:20):
But we keep hearing the I'm sorry, I don't, I'm not
trying not to laugh here, but wekeep hearing the politicians
saying this is the answer.
I mean, look, we're going to.
I mean they're all pointing toPICA and all these new fields
and the reserves and all thesenew projects and they're going
to save us.
But again, if, even ifproduction starts next year,
(26:40):
it'll be what?
10 years and nine years beforewe really see the full uh, the
full uh revenue from how do wesurvive the next 10 years at
$1.7 billion per year averageshortfall to make it, you know,
to make it to that point.
I mean that's, that's thequestion.
I think you're right to make itto that point.
I mean that's the question.
(27:01):
I think you're right.
This is obviously showingexactly where our problems are
in this SB21.
I mean, shouldn't we be openingup the?
I mean this is always whathappens right with Alaskan tax
schemes, whether it was theoriginal or ELF or ACES or SB21.
We have all these aspirationalgoals that it's all going to
work out and then we're like,ooh, it's not working as
(27:24):
intended and we have to comeback.
A lot of times we drag our feeton doing it because, well, we
don't want the oil companies tobe uncertain into what that's
going on, but it always ends uphurting somebody.
Uh, you know, usually us, uhthe state instead of the oil
companies.
But I mean, even when it wasELF they drug their feet on this
(27:44):
kind of thing.
I mean we've got to addressthis.
We can't just keep going on aslike it'll correct itself.
That's not how it works.
Speaker 1 (27:53):
What the politicians are doing is they're
capitalizing on the impressionthat was created back at the
time SB 21 was passed that it'sa shared effort.
It's a shared effort in termsof all these oil tax credits are
going to be in there toincentivize investment, but once
that investment starts payingoff in terms of increased
(28:16):
production, there's going to bea shared benefit.
So it's okay to make thesechanges in oil taxes because
we're investing.
All of us are investing in thefuture, the producers are
investing in the future andAlaskans are investing in the
future through taking areduction in oil taxes in order
to spur this investment.
(28:37):
Because at the end of it, atthe end of the rainbow, there's
going to be this shared benefit.
As production increases,alaskans will increase or
revenues will increase as well.
And politicians are stillplaying on that.
Jim Jansen, in an op-ed about ayear ago on the ADN still
played on that Said oh well,just hang on.
(28:59):
When production comes, whenproduction increases, alaskans
are going to benefit alongsidethe industry.
Well, that's not happening.
That's not the way SB21 isplaying out with all of the
various provisions in it.
It's playing out so thatthere's a division that's
occurring.
As production starts, producersare getting the benefit of the
(29:19):
increased production while thestate is waiting.
For, you know, let's get thesetimeline rights.
First oil begins in FY27.
Let's just focus on whatDepartment of Revenue said.
First oil begins in FY27.
Production tax revenue doesn'tbegin until FY34, eight years
later, begin until FY34, eightyears later, and it's not even
(29:45):
and production tax doesn't kickin fully until FY2040, which is
what, 13, 14 years after thedate of first oil, when we're
already in production decline.
So what's happened is thereality of what Alaskans were
sold on is different than whatAlaskans were sold on, than the
(30:06):
projection of what Alaskans weresold on.
Shared sacrifice, sharedbenefit, it turned out.
It's shared sacrifice, stillsacrifice for Alaskans for 14
years, a decade and a half afterfirst oil.
And that's just not what SB21was sold on.
(30:27):
It's not the expectation thatwas there when SB21 was driven.
And PICA this analysis ofwhat's going on in the PICA
field is just an absolutedemonstration of where that's
failing.
Speaker 2 (30:39):
What do you think the chances are that they actually
address this, though.
I mean, we've already seen thepushback on any kind of
suggestion that maybe we shouldbe looking at.
I mean, we saw when the FiscalPolicy Working Group came out
and said well, one of the thingsthat they recommended was a
revision to the oil taxes.
And they're like whoa, whoa,whoa, whoa, wait a second, we
can't do that.
So we got the Democrats and thebig government Republicans on
(31:01):
the one side, you know, pushingall this government spend.
But even the fiscalconservatives on the other side
are saying well, we can't lookat oil taxes, that would be
dangerous.
I mean, again, we're supposedto be looking at these things.
If they're not working asintended, we need to fix them.
Speaker 1 (31:20):
Yeah, well, it depends on whether politicians
are pushing for the source ofrevenue that has the weakest
resistance, right, and so it'sinitially been the PFD, as we
got.
Well, it was initially thesavings accounts, the SBR and
the CBR.
Those were those were supposedto be there for, you know, for
(31:43):
pulling down when we have badtimes.
So they had the, the, the forceof least resistance.
So politicians went for them.
And then politicians went forthe PFD because it only affects
middle and lower income Alaskafamilies, um, and so we'll come
up with all theserationalizations while we're
taking it, but the focus is onmiddle and lower income alaska
families, not the, not the oneswho donate to us and not the
(32:05):
ones who, uh, who have the theloudest uh voice, uh, in the
press and in the and in thecommunities.
So so they, they take from them.
Now what we're really seeing Imean this merges the first, the
first segment, with the secondsegment now what we we're really
seeing is oh yeah, we're goingto need more revenue, so let's
merge the two accounts in thepermanent fund together so that
(32:26):
we can continue the permanentfund draw, regardless of what
actual earnings are, regardlessof the permanent fund
corporation's performance.
That'll be that's sort of a youknow, and we'll doctor it up in
nice pictures and nicerationalizations for why we're
doing it, but the real intent isto get at the permanent fund
corpus, start draining thepermanent fund corpus if they
(32:49):
need it.
That's the point of leastresistance.
So we're just going to continueto find what the source of
least resistance is as we go.
The oil companies put up a lotof resistance.
They fund a lot of the oilcompanies put up a lot of
resistance.
They fund a lot of campaigns,they put up a lot of resistance,
and so you know they may betoward the end, but in terms of
(33:09):
delivering on what Alaskans werepromised back in 2013 with SB21
, we're failing.
We're failing to do what thepromise was in SB21 of shared
sacrifice, shared benefit.
It's turned out to be sharedsacrifice and then Alaskans
sacrifice some more as the oilcompanies start to benefit.
Speaker 2 (33:33):
Bruce said.
I recall Bert I'm assuming he'ssaying Bert Steadman I recall
Bert saying you got to open upthe books and look under the
hood every 10 years or so tomake sure things are working as
hoped.
The last tax change was MAPA in2014,.
11 years ago, I mean SB21 wasalso in that era.
But yeah, I mean that should bewhat it is.
(33:53):
You need to look under the hoodevery 10 years or so to make
sure things are working as hoped.
And obviously they're not.
Obviously, if they're going toput production on and you're not
going to see any revenues tillreally nine years later, that's
obviously not working asintended.
Well, I guess, unless youintended to give away the farm
for Alaskans, brad, right?
I mean that's kind of whatwe're looking at now.
Speaker 1 (34:17):
Yeah, just to make it clear, SB21 and MAPA are the
same thing.
Oh, make Alaska.
Speaker 2 (34:22):
More.
Speaker 1 (34:22):
Alaska Production Act or something like that.
All right, it's what those MAPAit tends to be, what those in
the Parnell administration callit.
Sb 21 tends to be whateverybody else, what everybody
else calls it, but yes, I meanit is the producers.
The producers made this, madean excellent point in the late
(34:46):
2000s and the early 20-teens,when we saw investment going
like everywhere else but Alaska,because we had Aces at the time
, and Aces was an overreach, andso we saw investments start
back into the oil industry in abig way in 2008, 2009, 2010,
2011,.
Alaska wasn't getting any of it,and so, and so the the the
(35:09):
battle cry of of producers atthe time was look, we need to
re-examine what we did then,just, you know, eight years ago,
uh, in 2006,.
We need to re-examine what wedid uh in, uh, uh with, with
Aces, and reset the playingfield so that we have this
(35:29):
shared position.
We have a shared sacrifice withthe goal of getting additional
production, and then we have ashared benefit coming out of
that additional production.
And so, yes, I mean Bert'sright, we need to look at these
things every so often.
Producers aren't shy aboutsaying that we need to look at
it when they're on the downsideof the break.
(35:52):
Consumers.
Alaskans should not be shyabout saying that it's time to
reopen it when they're on thedownside of the break.
Speaker 2 (36:00):
But here's a typical response from a lot of those
folks.
This is Teresa, attacking therenewable resource major
industry in the state makes zerosense.
Who's attacking?
We're not attacking.
We're saying you're the owner,teresa, you own it and you're
not getting paid on it for nineyears after the production
starts.
That's not working as intended.
(36:20):
Are you attacking when you'resaying you need to get your fair
share?
I mean, that's the problem.
But see, this is going to bethe reaction from a lot of folks
on the right.
Is that, oh, we're attacking amajor industry?
No, we're not.
We're trying to make sure thatthe limited resource that we get
the maximum yield for theresource that we own.
(36:41):
That's what the Constitutionsays maximum yield for the
resource that we own.
Speaker 1 (36:45):
That's what the Constitution says.
We're trying to fulfill thearguments of 2013 and 2014,.
Shared sacrifice, sharedbenefit.
That's what we're trying to do.
We're not attacking theindustry.
We're not saying, hey,overreach, give us, like ACES
did, give us the bulk of it.
You make the investment, butgive us the bulk of the benefit.
That's not what anybody'strying to do here.
(37:06):
It's not what we're trying todo.
What you're trying to do is say, look, let's fulfill the
commitment, let's fulfill thearguments of 2013 and 2014 of
shared sacrifice, shared benefit.
It's time for the shared benefitto kick in, but it's not
kicking in.
For the shared benefit to kickin, but it's not kicking in.
(37:27):
A disproportionate amount ofthe benefit is going to the
producers as opposed to beingshared with the state, the
resource owner.
That's what the objective wasof 2013 and 2014.
So it's not.
This is not let's go back toACEs, where we grab all the
benefit and leave none to theproducers.
This is look, let's achieve thearguments of 2013 and 2014.
(37:51):
Let's go in and share thebenefits, going forward in a
timely manner.
Let's not push the state'sbenefits as the current law is
doing.
Let's not push the state'sbenefits 13 and 14 years out.
Let's make sure we achieve themat the same time as the
producers is achieving them.
Speaker 2 (38:11):
Teresa clarifies that she said renewable resource.
She was talking about thefishing industry.
Okay, but again, it was aperfect example of what you're
going to hear from some of theRepublicans is that we're
attacking the major industryresource out there.
And then Frank says he againquotes the next thing you're
going to hear do you want stateservices or do you want a PFD?
(38:33):
Quote, unquote.
I mean that's going to be thenext argument, right?
I mean, isn't that what we'veheard so far?
Do you want a PFD or do youwant taxes?
But now it'll be.
Do you want state services ordo you want a PFD?
I mean these are the same kindof ridiculous arguments we've
heard time and again.
30 seconds, brad.
Speaker 1 (38:50):
We're talking about two entirely different things.
We're talking about gettingAlaska's fair share of the
revenue.
We can argue about where itgoes later on, but the
constitutional obligation is toget Alaska's fair share of the
revenue.
And what's happening 10 yearson from the passage of an act
that said shared benefits,shared resource?
What's happening 10 years on iswe're not getting the shared
(39:13):
benefit.
Speaker 2 (39:14):
We're continuing now.
Brad Keithley, alaskans forSustainable Budgets and the
Weekly Top Three.
We're going to continue here.
We're moving back over to thePermanent Fund Corporation three
.
We're going to continue here.
We're moving back over to thePermanent Fund Corporation, not
now on the it's like this is anever-ending story, man but not
on the combining of it, but onthe performance of it, which
Brad touched on as well in thatfirst part.
(39:34):
He references back to themust-read article that came out
here just a couple of days agosaying that the Permanent Fund
hit records.
But even as they did that,we're seeing smaller dividends.
And although she does make,suzanne Downing makes a comment
that you know this move to tryand consolidate the fund could
(39:56):
be dangerous.
They are showing that they hitrecords at $85 billion, brad.
Speaker 1 (40:02):
Yeah, here's the problem with Must Read, and it's
sort of the same problem thatwe just talked about with the
ADN, when they were saying, oh,PICA, additional production,
great thing.
Without looking at theunderlying revenues, without
looking at what's happening fromthe revenue split side, Must
Read is sort of becoming themouthpiece for the Permanent
(40:25):
Fund Corporation.
Look at us we achieved a recordlevel in terms of the value of
the Permanent Fund.
We've hit $85 billion.
But Must Read is not lookinginto the Permanent Fund
Corporation's performance andwhether the $85 billion should
(40:45):
be a lot more.
As we've made the point onprevious shows it should be.
We could be in the $120 billionrange now if we had invested
differently than the permanentfund corporation's been
investing.
So, just like the focus on theADN is, look into the revenue
(41:07):
split.
Don't just buy off on theargument oil production is going
up, so we're all going to behappy.
Don't just buy off on that.
Look into the revenue split.
The same thing with respect toMust Read and the other news
sources that say, oh, thepermanent fund hit a record
level.
Look into the details and seewhether there's something not as
(41:33):
rosy going on.
And that's certainly the casewith the permanent fund
corporation.
We've talked about this on theshow recently a number of times.
We'll talk about it again, butwhen you look at the Permanent
Fund Corporation's performance,they haven't matched.
Not only have they not matchedearnings, not only have they not
(41:56):
provided sufficient earnings,generated sufficient earnings to
cover the POMV draw that thelegislature has been making, but
they haven't even matched theperformance that they would
achieve if they, instead ofspending a billion dollars on
management fees, they insteadput the permanent fund
(42:17):
corporation investment or thepermanent fund investment on
passive investments and achievethe returns of their passive
investment.
Speaker 2 (42:27):
Let me rewrite the headline for you.
Instead of Alaska PermanentFund hits $85 billion record.
Even as Alaskans see smallerdividends, it should have been
Alaska Permanent Fund hitsrecords $85 billion, but it
could have been oh so much moreright.
Speaker 1 (42:42):
I mean that really should be the headline but it
could have been oh so much moreright.
I mean that really should bethe headline.
Yeah, it should be.
I mean it should be.
And what we're not doing, whatAlaskans aren't doing, what the
Alaskan news media isn't doing,is digging in.
Just like we're not digginginto the revenue side on oil
revenues, they're not digginginto the side, they're not
(43:05):
digging into the to the side,they're not digging into the
permanent fund corporation andlooking at it and looking at the
permanent fund corporationsperformance.
It's not, it's not that it'sdifficult to do.
The permanent fund corporationitself monthly publishes its
investments, investment results,and it compares its own
investment results against threebenchmarks that it's created.
(43:25):
So you know, you would thinkthey would have created them to
show the Permanent FundCorporation in a positive light.
But the Permanent FundCorporation's over the last
three years, each of the lastthree years, the Permanent Fund
Corporation's performance hasbeen less, has been lower from
what they've actually done.
The permanent fundcorporation's performance has
(43:46):
been lower from what they'veactually done compared to their
own passive benchmark, comparedto putting it on autopilot, and
it's been significantly less.
The deficiencies have been 3%,4% of a return on the fund's
performance.
So what we're doing is.
(44:08):
We're buying off on theseheadlines that people are
creating and saying, oh, we mustbe in good shape because look
at oil's going up, oilproduction's going up, so we
must be better off in terms ofrevenues, without looking at
what's actually going on in oiltaxes and permanent fund
corporations saying, oh look, weachieved a higher level than we
(44:30):
had before.
Well, it's not the level thatyour own benchmark says you
should be achieving and it'scertainly not the level you
could be achieving if you tookWarren Buffett's advice and did
a 90-10 split a 90% investmentin the S&P 500 and a 10% in the
bond market to provide a hedge.
You're not achieving what yourown benchmarks and what
(44:53):
objective benchmarks out therein the world are telling you you
should be achieving.
You're leaving money on thetable, and this is the problem
with merging.
To go back to the first segment, this is the problem in spades
that shows up if you merge thetwo accounts together.
Nobody cares about earningsafter you merge the two accounts
(45:14):
together, because you're alwaysgoing to get the 5% draw,
regardless of what the permanentfund corporation is doing.
So we're not focusing enough onit now, although the
information's out there thattells us we could.
It's going to be even less.
The problem's going to be evenworse if we merge the two
accounts together.
Speaker 2 (45:35):
And, of course, this is something that we've harped
on.
I brought it up to severalcandidates and there's been kind
of a glazed look of people'seyes.
They're not paying attention tothis part.
You and I seem to be the onlyones talking about this specific
issue with the permanent fundand the earnings potential
that's slipping between ourfingers.
The cost of a billion dollarsin management fees every year to
(45:58):
deliver subpar returns comparedto their own passives, let
alone to a Vanguard or an S&P500, just to their own passive
benchmarks.
They're falling behind andeverybody looks at you like what
I mean and, as you said, themainstream media between this
and the whole PICA and otherfield things with the revenues I
mean nobody's digging into this.
(46:20):
Where is the doggedness and thedetermination to get to the
bottom of these numbers?
Like you said, it's not hard tofigure out when you actually do
the work and look at it andyou've done all the work to
begin.
Somebody could write a storywith you helping them just going
back to your articles andsaying this is what Brad
Keithley said.
Shouldn't we be discussing this?
This is crazy.
Speaker 1 (46:40):
Here's the problem with the legislature.
The legislature is entirelyfocused on spending.
They all get in on oh we oughtto be spending on that, or we
ought to be spending on that, orwe ought to be not spending on
this or not spending on that.
They're elected byconstituencies that are focused
(47:01):
on spending.
Are you going to spend on me?
Are you spending too much?
You're not spending we.
We really don't have anybody inthe legislature that I can
identify who focuses on therevenue side, who says are we
getting what we should?
Is the state getting what itshould?
On the revenue side, we don'thave any revenue focused
legislators who are saying, whoare looking at the oil taxes and
(47:24):
say wait a second, we'resupposed to be getting this.
This is what SB 21 was sold on.
We're supposed to be sharing inthe benefit, but we're not.
The benefit's coming years out.
We don't have anybody focusingon the permanent fund revenue
saying are we getting thepermanent fund revenue that we
deserve?
Speaker 2 (47:45):
Well, this is what happens when you have a
legislature that's focusedcompletely on the spend.
To me, this is astonishing thatwe don't have a media that is
digging deeper into these.
It's basically become a game ofparaphrasing press releases.
At this point, right, there'sno deeper analysis on any of
this.
The permanent fund not earningthe right returns, the downsides
(48:09):
of the combining of the funds.
The few articles that we've seen, only opinion pieces, have
brought out the dangers ofcombining the funds, not the
actual news articles.
Said so-and-so on this sidesaid it could open up the corpus
or whatever, and of courseagain the PICA and all the new
field things you know with SB21,and basically saying, said
so-and-so on this side, said itcould open up the corpus or
whatever, and of course againthe pika and and all the new
field things you know with sb21,and basically saying, oh, look
at this, we're safe, neverlooking at the actual analysis
(48:32):
underneath.
This is a real.
This is a real.
There's multiple problems here,but that's a real problem.
When it's not, we've got amedia that's not informing the
public as to both sides of theissues.
Speaker 1 (48:44):
At that point, yeah, and Must Read.
I mean, people will think aboutMust Read what they want, but
Must Read has been pretty goodabout digging stuff out.
But in this situation, mustRead is just accepting the press
release from the Permanent FundCorporation and just
regurgitating it.
Oh, look, how great we are.
Look, we got us to.
Got us to 85 billion.
Don't look, don't look at theguy behind the curtain.
(49:05):
That could have got us to 125billion.
Don't, don't worry about that.
We got to 85 billion, aren't we?
Aren't we good, and that's it.
We tend to legislators,politicians in the state tend to
accept revenues as they are,whatever.
Whatever revenue reportingfunction or whatever revenue
(49:27):
agency reports.
The number is well, that's thenumber.
On the spending side, it's ohno, we need to be spending more
on K-12, or we need to bespending more on corrections, or
we need to be spending more onthe university.
Everybody gets excited on thespending side, but we don't have
anybody who's digging in on therevenue side and said wait a
second, we should be getting alot more revenue.
(49:49):
If you believe the principlesof SB21, we should be getting a
lot more revenue as oilproduction goes up, not less,
which is what's happening withproduction taxes.
Or on the permanent fundcorporation Look, the stock
market's taken off.
Or on the permanent fundcorporation look the stock
market's taken off.
We should be getting a lot morerevenue from our investment
portfolio, not just mediocre,you know, bouncing along, not
(50:12):
even keeping up with the passiveindices.
We don't have anybody who'sdigging in on the revenue side
and that's a huge problem.
It's as much.
Not digging in on the revenueside is as much a problem as
overspending is.
On the spending side.
We've got a lot of people whofocus on overspending.
We have very few people who digin on the underrevenue side.
Speaker 2 (50:35):
Yeah Well, it's frustrating to watch and to see.
Bruce Tangeman is going to giveyou the final thought here.
He says if it will only getworse in a couple of years, once
the ERA is overdrawn anddrained, just to balance the
budget, next up will be thelegislature saying start selling
shares of Apple because youbetter have our POMV draw ready
July 1st.
Well, and of course, once theERA is drawn and overdrawn and
(50:59):
gone, then of course it's intothe corpus and the seed corn.
And then we, then we, then weface that doom loop of less
money earning money, and so thenwe have less money in the
earnings.
So then the next year we haveto take more of the seed corn
and more, and it may be a 20year cycle, but we'll, we'll,
we'll drain that account down ifthat's what they do.
But the problem.
Speaker 1 (51:19):
The problem that Bruce is talking about there
isn't just an overspendingproblem.
The problem is an under-revenueproblem.
The problem is the permanentfund corporation is not earning
what it could and should be interms of the investment bundle
that we've passed along to them.
They're just sort of rockingalong at a mediocre level and
(51:43):
not investing and not focusingon the maximization of earnings.
It's an under-revenue problemas much as it's an overspending
problem, and it's a problem thatAlaskans should be focused on,
because if you're not gettingthe revenue, you should be
getting out of oil and you'renot getting the revenue, you
should be getting out of thepermanent fund.
(52:03):
Where does that pop up?
Well, it pops up in terms ofPFD cuts to generate there and
it pops up in terms of taxesdown the road because we're not
getting the returns, we're notgetting the revenue we need to
get from our existing asset base.
So it's an issue that peopleshould be focused on.
It's an issue I thinkpoliticians would benefit from
(52:24):
focusing on, but it's one thatpoliticians just aren't digging
into.
Speaker 2 (52:33):
How do we win, brad?
I mean, how do we get people tosee this?
How do we get people to pay?
I mean, like I said, you and Iare talking about it, but almost
nobody else is talking about it.
I mean I can't think of anotherperson, like I said, all the
politicians that I've talked toabout it, but almost nobody else
is talking about it.
I mean I can't think of anotherperson, like I said, all the
politicians that I've talked toabout it went what.
I mean they just like to havevery little at least.
I guess Bernadette brought itup during our last conversation
(52:54):
because I've been, I've beentalking to her about the
permanent fund and the board andthings like that.
I mean she's at least talkingabout it, but nobody else is.
It's like this is a non-issue.
Speaker 1 (53:06):
I mean maybe, maybe it's, maybe it's becoming the
same way that the education taskor the education community is.
You aren't spending enough forus.
Why are you not spending enough?
You're failing us, maybe on therevenue side is you, as a
politician, are failing us bynot getting the maximum return
out of our resources, either onoil, not going back to ACES,
(53:27):
just fulfilling the obligations,the commitments of SB21.
You're failing us by notpushing the permanent fund
corporation or structuring thepermanent fund corporation in a
way in which they earn thereturns that they are capable of
earning, should be earning,that the market's generating in
terms of the investments.
Maybe it's becoming taking thesame tactics that the
(53:53):
corrections community does orthe university community does or
the K-12 community does, andfocusing it on the revenue side,
accusing the politicians ofshorting Alaskans by not
focusing on getting the maximumreturn out of our asset base.
Speaker 2 (54:09):
All right, brad Keithley.
Thank you, my friend.
As always, it's good to talkwith you.
We appreciate you coming onboard.
Thanks much.
Speaker 1 (54:16):
We'll talk to you soon, Michael.
As always, thanks for having me.
Well, that's a wrap for anotherweek's edition of the weekly
top three from Alaskans forSustainable Budgets.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
SoundCloud, Spotify and Substackpages, and keep track of us
(54:37):
during the week on Facebook andTwitter.
This has been Brad Keithley,Managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
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