The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (1.13.2025)
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 January 13, 2025.
This week, our top 3 issues are these: 1) we discuss whether the legislature should fund the Alaska Gasline Development Corporation’s “Hail Mary” to keep the #AKLNG project alive for yet another year (2:20), 2) to complement the Department of Labor’s recent analysis of Alaska’s population, we look at IRS data to examine where the drain in Alaska’s working age population is by income bracket (18:54), and 3) we explain why the energy “royalty relief” touted by some as a solution to the Cook Inlet gas situation is, in fact, an unnecessary subsidy being taken out of the pockets of middle & lower-income Alaska families statewide (37:52).
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.
Hi, this is Brad Keithley, managing Director of Alaskans for Sustainable Budgets. Welcome to the weekly top three the top three things on our mind here at Alaskans for Sustainable Budgets for the week of January 13th 2025. The weekly top three is a regular segment on the Michael Dukes Show. The show broadcasts on both Facebook Live and YouTube Live as well as via streaming audio from the show's website. Weekdays from 6 to 8 am.
Speaker 1:I join Michael weekly in the first hour of Tuesday's show from 6.10 to 7 am for a discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, youtube, soundcloud, spotify and Substack pages. Also on the Alaskans for Sustainable Budgets website, as well as the projects page on national blog site mediumcom. You can find past episodes of the weekly top three also at the same locations. Keep in mind that, in addition to these podcasts during the week, you can also follow and participate in the discussion with us of these and other issues affecting Alaska's fiscal and economic condition by following us on the Alaskans for Sustainable Budgets Facebook page and through our posts on Twitter.
Speaker 1:This week, our top three issues are these First, we discuss whether the legislature should fund the Alaska Gas Line Development Corporation's latest Hail Mary to keep the AKLNG project alive for yet another year. Hail Mary to keep the AKLNG project alive for yet another year. Second, to complement the Department of Labor's recent analysis of Alaska's population, we look at IRS data to examine where the drain in Alaska's working-age population is, by income bracket. And third, we explain why the energy royalty relief touted by some as a solution to the cooking gas situation is in fact an unnecessary subsidy being taken out of the pockets of middle and lower income Alaska families statewide. And now let's join Michael.
Speaker 2:Brad Keithley comes in and talk to us about the three big subjects that he thinks are important for the week. Of course we're only. Today is one week from today. The, the session launches in the legislature and it will be. Well, I mean, I think it's just a, it's a la la land, let's put it that way. I just I don't know how they they, they seem to be living in a completely different world than we're living in, but we're going to go through that. Brad, welcome to the program. I guess let's just dive into it. The AK legislature are they going to fund this Hail Mary pass that we've been talking about? I mean, we've heard it. You know, glenn Farn, that's the name that's been whispered around and I dived into it a little bit yesterday, but you're going to give us some more details on this. So should the legislature fund the Hail Mary, let's get into it.
Speaker 1:Well, Michael, let's cover the Hail Mary part first. Abner Dunleavy and others announced a little over a week ago that the AKLNG, the Alaska Gas Line Project, had entered into what you call preliminary agreements agreements to agree, yeah.
Speaker 2:With an undisclosed. I thought the wording on that was weird. So it's a framework. It's an agreement, framework to an agreement. So you're agreeing to agree sometime down the road. I don't think that. That I mean I wouldn't sell a house on that kind of agreement, Would you.
Speaker 1:Well, here's the problem they're facing. The problem they're facing is they're coming into this legislature no-transcript, was sort of faced with the decision well, do we go ahead and wind it down or do we do something else? And so they had these agreements to agree with an undisclosed company that they held a big press conference to announce, with Dunleavy himself saying you know the equivalent of oh, we're further along than we've ever been before and I've been a skeptic but now I'm a believer, and that sort of stuff. And that was really motivated. That whole thing was motivated by the deadline that the board itself, the AGDC board itself, had put on itself last year. So they had to show something coming into this legislature that there had been progress, and the agreement to agree is sort of as far as they had gotten and what they had to show for it. So they throw that out there, Undisclosed partner Within, I think, 24 hours.
Speaker 1:Jeff Landfield had the name landfield has his sources had the name um, put it out there in a tweet, uh, and that sort of motivated everybody to admit, well, yeah, that's who it was, uh, glenn farn. And uh, the reaction I've had from my friends in the industry throughout the industry LNG industry is, is basically who, uh?
Speaker 2:they have.
Speaker 1:The Glen Farn does have projects, uh. They've got some projects down in Latin America. They've got some projects other places. They've got two, uh, lng, lower 48 LNG projects, uh, that they bought into and are managing, neither of which has reached FID final investment decision. But they certainly aren't a pipeline company, a big pipeline company, which is what I think Frank Richards, the head of AGDC, the head of the Alaska Pipeline Project, was trying to imply. They certainly aren't one of the major pipeline companies or one of the major LNG export companies that you think of.
Speaker 1:And so what it strikes me as, having seen this sort of thing in the industry over the past 50 some odd years, what it strikes me as is we had to get somebody, or else we're going to have to wind this project down. These are the guys that were willing to enter into agreements, to agree so we could justify continuation, continuing the project. And it's sort of like a Hail Mary. We couldn't. We couldn't get anybody else, we couldn't get anybody any of the big names in the industry to sign onto this thing, to participate in this thing, and so we got these guys and that's what we got, and so we're going to sort of run with that and see how far, see how far that can, that can take us and that's sort of that's sort of what the that's sort of what. The impression is that I've gotten, both from listening to the press release last week, from from talking to friends in the industry and trying to understand who Glenn Farn is, that this is sort of what we've come to.
Speaker 1:Here's the question. So Glenn Farn is the company that has said AGDC previously had said that the company they were talking to wouldn't go forward unless there was a backup commitment by the state to refund the money that they would put into the research necessary to get to the FID decision, the final investment decision. Right, that they wouldn't go forward unless the state was on the hook to refund the money that they would put into that all of $50 million. Right, and and and so ADA, another state agency, ada, stepped up and said we will guarantee the $50 million, we will guarantee to refund the money. To now we know Glen Farn.
Speaker 1:In the event that Glen Farn spends all this money and can't get to FID, can't get to a final investment decision, can't get a final final investment decision means they got people out there willing to fund the project, right, can't get to the project. And so turns out ADA didn't have the authority to do that, doesn't have the $50 million to do that without legislative authorization. So this is going to come full circle into the legislature, into the, into the, into the legislature this coming session. The governor has included the $50 million for the for to provide the money to ADA to have this backup. The governor has included that in a supplemental budget and that supplemental budget will go to the legislature and it's up to the legislature to decide whether whether to pass that 50 million. And it's up to the legislature to decide whether whether to pass that 50 million, appropriate that 50 million dollars to ADA to provide the backup to the commitment that that Glenpard says it needs before it, before it will go forward, even with the research necessary to do to get to FID.
Speaker 1:And the question to the legislature is are you? Are you willing to fund it? Are you willing to put the 5050 million on the line? Because, in all honesty, that $50 million is likely to be pulled down. Glen Farn has never done a project of this scope. They've never financed. Even if you accumulate all their financing together, they've never financed anything on the order of magnitude that we're talking about with AGDC. It truly is a hail Mary to whoever would stand up and sign the agreements. It truly is a hail Mary. And the high likelihood is that this thing isn't going to go and the state and ADA is going to be on the hook for the $50 million, and the state is going to be on the hook for the $50 million. So the question the legislature is going to be are you willing to appropriate this $50 million to ADA to finance this scale? Mary?
Speaker 2:Care to make a guess, because I mean, I'm feeling like these guys are like oh yeah, we got to you know again. I feel like they're in a whole different world than we are and they're like sounds good to us, let's do it. I mean, that's my base feeling. Is that somebody is going to say, yes, well, what do you think?
Speaker 1:Well, I guess there's two. There's two questions. Did they say yes and will they say yes? And you might be right on the on the. Will they say yes? Because you know, everybody seems gung ho that we got to have projects in the state, even if they're never going to go. Seems gung ho that we got to have projects in the state even if they're never going to go and even if we're spending money throwing money down the rabbit hole.
Speaker 2:Most, of the most of the legislature, including a lot of the conservative members, are on record saying we've got to have Alaska gas. It's this emotional thing right? It's like they're not. They've been ignoring LNG in favor of trying to figure out a way to noodle it. And now here's somebody put it on a plate for them to say, oh look, this will fix it. I mean, I have a feeling that it's going to. I mean, I have a feeling it's going to pass. I would put, I would say five bucks as it passes. You know what I mean.
Speaker 1:Yeah Well, it shouldn't pass. Let me, let me, let me try it, let me try it from my direction.
Speaker 1:It shouldn't pass. I mean we've got conservatives out there saying we shouldn't spend $50 million on this. We shouldn't spend $50 million on that. We shouldn't spend it on K through 12. We shouldn't spend it on. I mean there's a long list of things that fiscal conservatives have said we shouldn't be doing. What's still good.
Speaker 1:Money after bad, after chasing this gas line dream for decades, it is throwing an additional $50 million on the fire. Now some people say, well, it's only $50 million, but $50 million is a sum of money, especially when we're in the deficit situation already, especially when we're facing a $1.5 billion deficit already. It is throwing an additional amount of money on that deficit. And to me, you've got to weigh the pluses and the minuses. The plus is, yeah, you get to carry on the charade for a little bit longer with AGDC. The minus is at the end of the day, the money's going to go away, the money's going to disappear. Ada's going to have to pay the guarantee back to back, to back to Glen farm because, again, these guys have never done a project of these size, of this size. They've never even remotely raised money along along along these lines and, and the odds are. It's not going to, it's not going to work. So what? Why are we throwing $50 million more on this Hail Mary when, when the high likelihood is not going to, it's not going to work?
Speaker 2:Yeah Well, I mean again, this is the problem and I think you know this is in my mind. This is just somebody trying to milk more money out of this dying. It's kicking and screaming and it's making its way towards death. Somebody's just trying to milk a little bit more money out of it on the way by, whether that's the companies who are doing all the work or the agencies themselves. It just seems like this is the last gasp here before they get let go. Can we get another 50 million out of them? That's kind of what it feels like in the long run.
Speaker 1:Yeah, I think the AGDC board had it right last April when they sent the letter to the legislature and said look, if we can't get this thing financed, if we can't get a project put together by the end of the year, we're going to start closing it down. Well, we got to the end of the year and all you got was Glenfarn. All you got was agreements to agree with Glenfarn, with a company that won't even put up the money to do their own analysis and get it to FID, with a company that needs a backstop from the state even to do that. That's not a realistic deal.
Speaker 2:Yeah, it's never a good sign. I mean we can all look at it and see that the math is not. I mean just look at the Woods-McKenzie report. With the 80% subsidy it still doesn't come in at world price on gas, even with an 80% subsidy. So I mean that's best case, rosiest scenario, and you got to ask that question To me. I look at it. We've talked about it enough. I'm not an oil and gas expert. I've never pretended to be, but I've had enough conversations with folks like you and others that you know make me to that. The Wood-McKenzie report, which is supposedly supposed to bolster the argument for in-state gas, even the rosiest assumption, is that it doesn't even what was two, two and a half $3 more than what market prices were at that point, even with an 80% subsidy. Meaning the state or the feds or somebody else is on the hook for 80% of the construction costs. I mean you don't need $50 million to figure out if that's going to work or not. They're not going to reach FID at that point.
Speaker 1:You know. So let's look at this for a moment from Glenn Farn's perspective. They want to be a player, they're trying to be a player. They're trying to, you know, get themselves into the major leagues. Here's a company, agdc, out there that can't attract anybody else, can't attract any of the majors to go into a relationship with them. They throw this hook out at Glen Farn and says look, will you work with us on FID? And I tell you what, if it doesn't hit, we'll pay you back for all of your expenses. So, from Glen Farn's standpoint, they want to be a major player. They're sitting out there, they're going. Nobody else is going to go into this deal. We can go into the deal and we get our money back if it doesn't pan out In the one, in 1,000th chance. It does pan out, we may be a major player, right, right, but there's nothing, no cost to us, other than maybe a little diversion of management time. No cost to us going down this road.
Speaker 2:No, I mean, and I mean, let's face it, you would never. I mean, how? How long did they keep under wraps the? Uh? Under Walker's administration? They had people that they were working with companies that they were in. It was never leaked. I mean, this leaked in less than 24 hours. Don't tell me that wasn't intentional. Don't tell me Glenn Farn wasn't like yeah, put the name out there so they know that we're the ones that are working. I mean, you know what I mean? It's a prestige thing, it's theater at this point, but my fear is, is that the legislature, with all the legislators that we've talked to who are so spun up about we've got to have Alaska gas, we've got to have it. Lng is not the answer. We could be cut off at any moment. All these things.
Speaker 1:I just feel like they may buy it hook line and sinker, and that's kind of the scary part. Well, if fiscal conservatives vote for it, please don't try to convince me again you're a fiscal conservative. I mean, if you're a fiscal conservative, you weight risk, you weight the potential payoff, you weight the cost, you weight where you are in terms of cash flow, in terms of your debt situation. You weight all those things. And when you weight all those things, this is not $50 million. This is not a good use of $50 million.
Speaker 1:If you claim to be a fiscal conservative and you nevertheless vote for this, please don't tell me you're a fiscal conservative again, because you're just the same way as the K-12 people, the K-12 industry, the university industry, the defined benefits industry. You're just throwing money, good money after bad, in a situation where we don't have a surplus, where we don't have money to be wasting. We're a billion and a half in deficit and you're just throwing another 50 million, another half a hundred million in there on top of that. Don't claim to be a fiscal conservative If you want to vote for it. On top of that, don't claim to be a fiscal conservative If you want to vote for it.
Speaker 2:Claim to be something else.
Speaker 1:Yeah exactly, Don't claim that you're a fiscal conservative.
Speaker 2:No, it's frustrating to watch and I have a feeling that this entire session is going to be an exercise in frustration. I mean, I think this is much ado about nothing. Quite honestly, I don't think they may spend the $50 million, but I mean, I think this is a pipe dream and it's a distraction, and the legislature has gotten very good over the last 20 or 25 years at distractions, being distracted and creating distractions.
Speaker 1:Yeah, they don't want to deal with the real problem, which is the billion and a half deficit. So they create all these other issues to go off on because they don't want to deal with the core issue. That's sitting there like the elephant in the room, and that's as true for the progressives as it is now for the fiscal conservatives, if they go off on this tangent.
Speaker 2:Brad Keithley, alaska's for sustainable budgets the weekly top three. We move on to number two of the weekly top three, which is who's leaving Alaska or otherwise, who's not moving to Alaska? The inflow and outflow. We keep hearing Brad man. We've got an out migration crisis and then they said, well, but as many people didn't move as we thought wouldn't move in. The thing is, but it's, it's a crisis. I mean, they're using it to justify everything from pension reform to, uh, everything else else. What does it actually look like? You've got some thoughts here on this.
Speaker 1:So a couple of things generates this segment, michael One, last week you had a question from somebody who said, well, I didn't know, it was middle and lower income Alaska families that are leaving the state. And then the second in the meantime, there was an announcement by the Department of Labor and Workforce Development this past week. Alaska's population grew by 0.3% from 2023 to 2024, but we have a continued loss in out-migration. There's a lot of numbers that the Department of Labor have thrown out in terms of where the population shifts are going on, and they're showing it regionally and they're showing it statewide and they're showing it by age bracket who's moving in, who's moving out, where the out migration is where the problem is. The one thing that Department of Labor has not done, and all these numbers that they're floating out there do not do, is break down where the inflows and outflows are, what the net is by income bracket. And you can do that, and we have done that. You can do that by looking at IRS data, because IRS keeps track of the number of people filing and the number of people covered by the filings, the number of people in the family, in the household filing. They keep track of both the number of people filing and the number of people in the household holds a total number of people covered by income bracket and since 2015, coincidentally, they've kept it by age. They've divided the inflows and outflows, the number of filings, by age. So you can see a breakdown by income bracket, by age as well. So, following up on last week's comment and following up on the Department of Labor stuff, we've broken down the numbers by income bracket.
Speaker 1:So if you'll throw up the first chart, I'll walk through these. The first chart shows the percent change in individuals. These are the total number of individuals covered by the filings covered by the IRS filings. In greater detail for some of this stuff to 2021, the latest year for which data is available from the IRS. The red bars are where the IRS data indicates we've lost filers, lost Alaskans. The blue bars indicate where we've gained Alaskans and the distinction that this shows is clear that we've lost Alaskans in every bracket below $100,000. That we have had a loss in the number of people covered by the number of residents covered by the IRS filings, the tax filings, in every bracket below 100,000. That's where we're losing people. In the brackets above 100,000, we've gained Now in the bracket between 100,000 and 200,000, the gain is modest, but once you get above 200,000, you have huge increases in the number of people that are in the state, that are that are falling in these brackets. For example, in the 200,000 to 500,000 bracket you have a gain of 40.9 41 percent of people covered in the in the tax filings. From 500,000 to a million you have a gain of 50 percent and from a million you have a gain of 50% and from a million up you have a gain of more than 65% in the number of people in the state. So you can see from this that population-wise, the population is covered by the income tax filings. Population-wise, we have a decline in middle and lower income Alaska families, families with incomes of less than $100,000, and an increase in families, in families size of families that are greater than have income greater than $100,000.
Speaker 1:Let's go to the next slide the elderly slide. There we go. So this breaks down, so the IRS also breaks down. The data began in 2015, breaking down the data between tax returns that for the head of the family was 60 years old or greater and tax returns where the head of the family was less than 60 years old. So roughly that breaks down into working age and retirement age or retirement on your way to retirement or retirement age. And this is the chart that shows what the IRS calls elderly 16 and above returns. The number of returns for people 16 and above, for families headed by somebody 16 and above all, are blue, with one exception Between 10,000 and 25,000 income bracket is at zero. It stayed even between 2015 and 2021. But every other income bracket where you have retirement or near retirement age, families headed by somebody in retirement or near retirement age grew both middle and lower income and upper income. Upper income grew in the same order of magnitude as the population as a whole, as the population covered by the IRS filings as a whole.
Speaker 1:The next slide is the one that really tells the story. So we know we're losing residents in middle and lower income Alaska families. We know that the elderly segment is growing. So where's the loss? And the loss is obvious and this is this chart shows it the loss is in working age, middle and lower income Alaska families. That's where we're losing population. That's where the net out migration is occurring. In every bracket below a hundred thousand dollars, every income bracket below a1,100, we've lost families, we're losing households between 2015 and 2021. In every income bracket above $100,000, we're gaining residents.
Speaker 1:We have net in-migration in families in households above $100,000. Now, between $100,000 and $200,000, it's very slight. It's 0.3%. Essentially that's an even. We've stayed relatively even with families with households between $100,000 and $200,000. But once you get above $200,000, there's been growth. We are adding families.
Speaker 1:That's not where out migration is occurring. The out migration is occurring in the red. It's occurring below a hundred thousand dollars and there's varying uh percentages of of people that we're losing in in the middle and lower income alaska brackets. But that's where we're losing people, according to the IRS data. So what this is telling me is yes, we have net out migration, but that doesn't tell me enough. It doesn't tell me where the net out migration is occurring. The DOL data, the Department of Labor data, will tell you where it's occurring geographically, but it doesn't tell you, by income bracket where we're losing people. This data, the data from the IRS, does and it's telling us that we're losing people. Where we are losing people is in the middle and lower income brackets. In fact, in the upper income brackets we're gaining people. We have net emigration in the upper income brackets. We're losing people. In the lower income brackets. We have net emigration in the upper income brackets. We're losing people in the lower income brackets.
Speaker 1:One other thing that you then ask well, why? Why are we losing people in those income brackets? It's because their income relative to where it could be, income relative to the cost of living, income relative to the upper income brackets is going down. It's going down because of PFD cuts. We are taking money, we are taxing the very people that are leaving.
Speaker 1:So when somebody says, oh, I'm concerned about net out migration, we've got to do something. We've got to do defined benefits, we've got to do, you know, we've got to do K through 12. We've got to do this, that or the other thing that will solve net out migration, well, the question is who are you going to have pay for? If you have middle and lower income? Alaska families continue to pay for it through PFD cuts. It's just going to be a death spiral. You're just going to continue pushing, you're just going to continue penalizing, continue raising the economic barriers on the very people that are already leaving. We know they're leaving, we know that they're leaving while the upper income brackets are coming. We know they're leaving and you're just going to increase, if you're going to fund these things, these additional things. Through additional PFD cuts, you're just going to push harder on the people that are already leaving.
Speaker 2:Well, what I found interesting in your charts and for those of you on the radio who can't see the charts, you can go back and watch them on Facebook but what's interesting is that you can see in all three charts that that percentile, or those quintiles there in the under $25,000 a year, were the hardest hits, and this is from 2015 onward, so this is right.
Speaker 2:When the PFD cuts started. 2017 is when the PFD cuts started and you could see that I mean 20% 28% in reduction. When you go to the first chart again, you go back under 25,000 has a 22% change in individuals. It's driving more of people, especially those who are in the lower income brackets, below that poverty line and causing them to have to think about this. I mean, this is it when you've got a 65% increase in people making a million dollars or more, or a 50% increase in people making $500,000 or more, and you've got a 22% 23% decrease in people who are 25 000 and less. That just shows you. This is exactly the. The pfd is a huge driver of what we're looking at here yeah, and it's a huge driver.
Speaker 1:it's a huge driver also middle-income alaska families. I mean, we emphasize the impact on lower income alaska families because by far they have larger percentages, but they're also negative percentages. They're also having an impact on middle income Alaska families. If you look at the average tax rate across all families that the PFD cuts represent, we are taking more from middle income Alaska families than we would if we used alternative revenue measures and you see the red in the middle income Alaska families as well, not as big as in the lower-income Alaska families, because we're pushing them harder. We're taking more as a percent of their income. But we're pushing middle-income Alaska families out also and the ones that we are rewarding through PFD cuts, because we're taking it out disproportionately, heavily disproportionately, out of middle and lower income Alaska families.
Speaker 1:The top tier Alaska families, the upper income Alaska families, are suffering a very small percentage share of their income, share of income, losing a very small share of income through PFD cuts and they're growing. I mean that's growing because they're not seeing the costs of government, they're not experiencing the costs of government. Those are all being shoved down. So those people are living. I just I think it's fascinating when you look at, you know we're losing people. All the data agrees that we're losing people. But I think it's fascinating when you look at it on an income bracket basis and see where we're losing people not geographically, but where in terms of income.
Speaker 2:That tells the story, definitely tells the story and it's eye-opening to look at, with those numbers. Again, you can go check out these charts, brad. Do you have these charts posted up somewhere yet?
Speaker 1:They will be in the Friday column in this coming week's Friday column.
Speaker 2:On the Alaska landline. I mean, when you look at those charts, brad, you realize that I mean the PFD. You could see where it just stabs the middle class like right in the heart and it's crazy to watch. And you get more and more folks who are in those upper income brackets and of course they want to protect what they have. So that's why we're continuing on with the business as usual. They don't want to see any other revenue measures because they're barely being touched by PFD cuts. It doesn't affect them at all. They're happy with, they're totally happy with the way things are going right now.
Speaker 1:And Michael. It spins off into all sorts of areas. All the legislators are now in the top 20% as a result of the pay raise that the legislature gave themselves 67% pay raise, yep.
Speaker 1:As a result of the pay raise they gave themselves, all the legislature is now in the top 20%.
Speaker 1:They're not seeing the economics that are hitting in middle and lower income Alaska families. They may hear about it from those families if they talk to them, but they're not seeing it personally the way some of them used to in the old days before the pay raises. And when you talk about things like the $50 million for AGDC, oh well, it's just $50 million, we'll throw it out there. Yeah, maybe it is a Hail Mary, but we'll just throw $50. Well, it's not their $50 million they're throwing into the pot. The $50 million will come out in the form of additional PFD cuts. That's where the marginal source of revenue is for past legislatures and certainly it looks like for this legislature, and so it's not their money they're throwing in. They're throwing in somebody else's money, other people's money, to make these bets. They're not feeling it personally and so it's showing up in a bunch of different ways. I mean it's showing up in the legislature being indifferent to additional spending, being indifferent to making bets $50 million bets on a Hail Mary and this data shows who's paying for it.
Speaker 2:Yeah Well, it's frustrating, chris asks. He says I may have missed it and it sounds bad, but why specifically is net out migration a bad thing?
Speaker 1:It reduces economic activity, reduces people who are going to small businesses, reduces people who are starting small businesses, reducing employees, and results in either higher wages, bigger costs to small businesses to attract the same number of employees, or it results in bringing up temporary Alaskans. If you look at the numbers of the non-residents that we have working in the state, those numbers are going up. What's going on is we're filling in gaps in the workforce by bringing up additional non-residents who don't contribute to the state, who don't contribute to the economics of the state, don't go to the small businesses, don't go to the restaurants, don't buy at the local stores. They fly in, do their job, get their paycheck, fly out and don't contribute to the economy of the state and don't contribute to the cost of the state. Because we don't have any way of recapturing Like in the other 49 states, Alaska doesn't have any way of recapturing a portion of the payments that the non-residents are receiving going out.
Speaker 2:Alaskans for sustainable budgets. Let me see if there's anything else out here. Teresa says just have a backup of $50 million to support the PFD. If not paid out by state statute, pay it out with a 50 million. I mean, again, 50 million is a drop in the bucket when it comes to the PFD, but again 50 million here. To paraphrase Milton Friedman, 50 million here, 50 million there. Pretty soon you're talking about real money, right? I mean, that's kind of where we're at. And Harold says anyone under $80,000 a year is struggling. I mean, I agree, I agree, and you can see it, and you can see that they're voting with their feet on the way out the door. That's what's happening right now, right, brad?
Speaker 1:Yep, exactly right, michael. I mean they're leaving People with across the board working age, working age Alaska families, the kind that you desperately want to attract. They're leaving at income levels below $100,000. They're leaving, they're not coming. I mean, however you want to phrase it, we have net out migration among working age Alaska families below $100,000.
Speaker 2:And Anthony makes a comment he says as a tradesman, the only thing that's kept me from having to exfil from Alaska is that my billing rates and take home have to increase with the economy. Compared to, let's say, 2015 to now, my rates have almost doubled, but my overall living quality has remained absolutely the same. More money required for the same experience, I truly feel, for people working for big companies that are locked into a pay scale. No idea how they do it. They don't. That's why they're leaving. You're 100% right. I mean, you're lucky in that your trades can scale with the economy, because that is a tough thing right there and they're not making it. They're leaving. That's why those folks are leaving. So it's kind of an interesting sale here, all right, and, and of course we'll have, we'll have more outflow as that goes. Uh, harold's talking about his kids going outside, his kids just taking jobs outside. It's, it's gonna happen because unless we turn this around, it's just gonna you're not gonna be able to get a start in alaska like you used to be able to.
Speaker 1:Yeah, all right, not, we're not. We're not providing them with the economic ability to sustain themselves.
Speaker 2:No, not, unless they go to work for government. I guess that's the only answer there. All right, we're continuing. Right now, brad Keithley Alaskans for Sustainable Budgets and the Weekly Top Three. We're on to number three here, brad. Don't worry folks, the pain will leave shortly, it'll be fine. The final one is energy royalty. Relief is coming, but, as we've talked about on this program many times, it's coming at the expense of everybody. Everybody's going to pay for this in the long run. Brad, let's hit it.
Speaker 1:Well, there's an article in the January 10th Alaska Beacon. It's reporting on a legislative panel that was interviewed or had questions asked of it by the RDC, the Resource Development Council in Alaska, and the headline is state lawmakers plan to continue to focus on the need for new Cook Inlet natural gas. And when you get down into the details of the article, it's talking about the bills that will be introduced this session by various legislators to provide royalty relief, that is, reduce the state take well, reduce or eliminate the state take from the development of Cook Inlet gas as a way of subsidizing the development of that gas to come into Cook Inlet. Here's my point about this issue we don't need royalty relief in order to if there is Cook Inlet Gas, in order to incentivize the development of Cook Inlet Gas. And my evidence for that is in a contract that NSTAR entered into with Fury. John Hendricks' Fury Company, a hex company, entered into with him to provide additional gas into the Cook Inlet. Hendricks had filed for royalty relief before entering into this contract, had been asking the administration for royalty relief before entering into this contract, but then NSTAR and Hendrix entered into the contract and this is what the contract provides. The contract's on file with the RCA, as it's required to be under the RCA's rules, because the RCA has to approve it.30 per MCF for contract year nine and then the contract years thereafter. But that price is predicated on the grant of royalty relief. If royalty relief isn't granted by the administration, that contract provides that NSTAR will pay the additional amount of up to $13.69, which is to cover the amount of the royalty relief. Nstar will cover that additional amount and pay it under the contract. So the effect of royalty relief isn't going to the producer. Under this contract the effect of royalty relief goes to NSTAR and flows through NSTAR to NSTAR's ratepayers. It's essentially a subsidy of NSTAR's ratepayers by the state. The state would otherwise get full royalty under the NSTAR contract. The state would otherwise get full royalty if it hadn't granted royalty relief. If it hadn't granted royalty relief and NSTAR would have and the producer wouldn't have been hurt because NSTAR would have paid the additional amount necessary to elicit, elicit the supplies, to, to, to enter into the contract.
Speaker 1:The re, the. The only benefit of the royalty relief is going to NSTAR's customers. Who's paying the royalty relief? Well, it's going to come out of the PFD, yeah, it's going to come out of statewide it's going to come out of the pocket of everybody Because with reduced revenue, by giving royalty relief and that reduced revenue, the state isn't going to have the full amount of revenue and, as a consequence of that, it's going to have to backfill from additional sources to fill in the revenue that otherwise would get from the producer, and that's going to come from additional PFD cuts. And so you're going to have people in Bethel, people in Barrow, people in Dillingham, people in Fairbanks, people in Tok, people in Juneau, people in Ketchikan all paying an additional amount in terms of, or all suffering an additional amount in terms of, pfd cuts in order to subsidize NSTAR's customers, in order to flow that money through to NSTAR's customers.
Speaker 1:To me, everybody ought to pay their own way, right? If it costs an additional amount to get gas out of Cook Inlet, if that's what you want to do and you want to get additional gas out of Cook Inlet, then the people who benefit from Cook Inlet gas ought to pay for it. The people who benefit from that additional amount ought to pay for it, not the people in Ketchikan, not the people in Juneau, not the people in Fairbanks, not the people in Nome Barrow, throughout the remainder of the state. The people who get that gas ought to pay for it. But that's not the way we've set this up and additional royalty relief, which is what they're talking about through the bills and the legislature, is just going to make this worse. If we do have additional gas supplies that are developed as a result of it, the additional royalty relief is just going to come at the expense of additional people statewide who are going to be subsidizing. Nstar and Hendrix have demonstrated in this contract that NSTAR is willing to pay the full amount necessary to develop additional Cook Inlet supplies. If there is additional Cook Inlet supplies to be developed, nstar has demonstrated their willingness to pay the additional amount. The producers demonstrated their willingness to take that additional amount and develop the additional supplies without royalty relief amount and develop the additional supplies without royalty relief.
Speaker 1:Royalty relief is just a subsidy. If the state's added In that context, royalty relief is just a subsidy. The state's adding on. And it gets worse, michael. I mean some of the bills give royalty relief not only for gas. But George Rauscher has a bill that would give royalty relief also for oil new oil developed in the Cook Inlet. And why is that? Not because we need more oil, but they're trying to. By reducing the royalty on oil, they're trying to give additional revenues over to the gas side, because most wells in the Cook Inlet that produce oil produce gas along with it. So if you lower the royalty for oil, you're just giving more revenue over to somebody who's producing gas.
Speaker 2:And of course, this looks like this has a lot. I mean we were questioning whether or not the $50 million for the Glenn Fard thing was going to come through. This has a lot better chance of passing, I think, based on all the discussions that we've had and the fact that we've been kicking this can down the road for the last 18 months and the legislature is like we've got to do something. Everybody said it's on their priority list and if it's on somebody's priority list, that means somebody's going to get paid somewhere along the line.
Speaker 1:Yeah, well, I mean, michael, it's on their priority list because they don't feel the pain like the other 80% of Alaska families do. They don't feel the pain of additional PFD cuts. You know Andy Josephson who's supposedly an advocate for working Alaska families. Andy Josephson says, well, it's not much. It's not much, it's just an additional. You know, just a small amount to pay for additional, to incentivize additional supplies. Well, there's two things wrong with that statement. It's not all that small. I mean it's small to somebody who doesn't have to pay it, probably, but it's not all that small. But secondly, it's not eliciting additional supplies. Look, enstar's willing to pay the full market price for those additional supplies. They don't need royalty relief. They and the producers don't need royalty, royalty relief to enter into those contracts. That's what the new contract demonstrates. So we don't need it for additional supplies You're just giving.
Speaker 1:You're just giving somebody money out of somebody else's pocket elsewhere in the state. You're just giving somebody money. That's all this is. It's not enlisting additional supplies. Nstar is already willing to pay the full price. You're just giving NSTAR customers additional money out of the pockets of the people in the rest of the state. And you know, I guess you can do that if you're in the legislature. But it doesn't seem fair and it doesn't seem like it's something that you know. If we talk about that the highest priority is to stop out migration and keep people in Alaska, it doesn't seem like it's something that's designed to do that, because you're taking money, additional money, out of the people who've demonstrated. They're willing to leave the state and are in fact leaving the state now. You're just pushing them further and further and further down into the hole and pushing more and more and more of them out of the state. So you know the legislature can do it, but they're certainly being hypocritical about it.
Speaker 2:Last two minutes here. Give us your final thoughts on this royalty relief, and what does it mean and what should we do?
Speaker 1:Well, we don't need royalty relief. We don't need royalty relief in the Cook Inlet. The HECS contract has demonstrated that NSTAR is willing to pay full price for whatever it takes to produce to get additional production out of the cooking lot. Let's let NSTAR and the producers go ahead and negotiate that. Let's let them go ahead and enter into these contracts and NSTAR willing to pay full price and if the producers, if that's enough to elicit additional supplies from the producers, let's go ahead and let them do that. We don't need to be giving away state revenue and then the producers pay the state the revenue the states do in terms of royalty. We don't need to be giving away that royalty. The state doesn't need to be giving away that royalty in order to elicit additional production. Nstar is already willing to pay the price to elicit that additional production.
Speaker 2:Brent Carpenter's in the chat room. He says so. Alaskans want to benefit from government fiscal policy by avoiding taxes and market rate gas. Seems to me that the only those who directly benefit from fiscal policy are the ones who will be able to afford to live here. That's the thing. They're ignoring the reality of all this stuff. I mean, you want to avoid taxes, you want to avoid market rate. It's not going to happen. You've got to do this, we've got to look at these things, and nobody. I'm surprised at the number of legislators who are again fiscal conservatives, who keep coming up with this well, we've got to have Alaskan gas. We shouldn't have to. We shouldn't import LNG. How are we going to afford to live here if we don't? If you know, you want to put a 40 billion dollar pipeline in the, in the hopper, and do all that and underwrite it and pay for it, or royalty relief or whatever mechanism you want to use. We're all paying for it at some point. Let's let's be honest about what the actual costs are here yeah, it's more, michael.
Speaker 1:You know I'm I'm I'm starting to to develop the view. You know, a lot of people say that it's the federal government trying to turn Alaska into a national park, that all of the federal government's actions are designed to turn Alaska into a national park for the top 20% non-residents and oil companies by protecting them from paying even full market price for what they're getting in terms of natural gas and in terms of other things. Protecting them from paying full market price, protecting them from paying full market price for government. By shoving the costs down on middle and lower income Alaska families by saying we're going to take it through PFD cuts, we're going to take it out of the economies, out of the economics of middle and lower income Alaska families. We're going to protect the top 20% non-residents who aren't contributing anything and the oil companies who aren't contributing anything more for the additional costs of government. They're just sort of you know, they're stuck at the 2013 terms in terms of what they're contributing to government. As government has grown, as additional spending has occurred, they haven't contributed any more to that. We're going to protect them. We're going to turn this into a Disneyland that protects those groups and we're going to take it out of the high and middle and lower income Alaska families and we can see what that's doing. It's driving middle and lower income Alaska families, residents, out of the state. They're leaving the state net out migration. The numbers are dropping in those income brackets while the numbers in the protected group, the top 20%, are growing. So it's not only are we going to turn Alaska into a national park for everybody else to enjoy, we're going to turn Alaska into this haven for the top 20%, non-residents and oil companies by continually taking it out and making life more difficult for middle and lower income Alaska families.
Speaker 2:So what you're saying is it's working as intended at this point, right, I mean, that's what you're saying. You're saying well, this is working as intended, because that's exactly what is happening. They're moving out and the top 20 percent are growing and everybody thinks it's fine, fine, just fine, it's. You know, that's the, that's the crazy.
Speaker 1:That's the crazy part and and and we're going to take additional steps like royalty relief, that we don't need to do. That the n-star hex contract demonstrates we don't need to do that. We're going to take additional steps like that to can to protect them even more so they don't even have to pay full market price for their gas. Now we're going to take money out of Ketchikan and out of Juneau and out of the other parts of the state to help protect South Central from even paying the full market price for their gas Right.
Speaker 2:I mean, add all the rural communities to that list who are having their PFD taken and they're not really receiving anything from. You know the gas shortage and you know, I guess maybe through the PCE or something, but I mean it's everybody's paying for this and it's going to be a great idea. That's what we're going to hear. This is a great idea. That's exactly what's coming down the road, I guarantee it, brad. Final thoughts for today as we get ready. We're one week out. They're going to start on next Tuesday. We're going to have our weekly top three and the legislature is going to start that day. What are your hopes for this legislative session?
Speaker 1:Oh, I hope. My hope is probably still bored, but my hope is the fiscal conservatives actually show up and actually act as fiscal conservatives and try to try to tamp down on spending and try to tamp down on the tamp down on the on the subsidies. But you've got I mean that hope is going to be stillborn because you've got fiscal conservatives and people who claim to be fiscal conservatives who are already advocates of spending the 50 million million to pursue the AGDC pipe dream. And we've got fiscal conservatives, george Rauscher, who have already introduced bills to extend the royalty relief. But my hope is the fiscal conservatives actually wake up, that the billion and a half deficit we're running this year and in all subsequent years finally jolts them awake and they start acting like fiscal conservatives and start drawing lines.
Speaker 2:Well, we'll have to see Brad Keithley, alaskans for Sustainable Budgets. The weekly top three wraps up Again. You can check out Brad's column on the Alaska landmine on Friday and he'll put those charts back in and write some context around it so that you understand what he's talking about. Brad, thank you so much for coming on board. Ben's final comment here Wealthy retirees don't even really need a private economy, just enough to meet their immediate needs. Change the oil, change the oil in the car, provide groceries. He's right. I mean, I'm just so disappointed in the peninsula that they didn't send Ben Carpenter back. I'm so disappointed, right now.
Speaker 1:Well, it's free Ben up to make comments like that and maybe free Ben up to run for governor. So you know, there's still some hope out there, ben, for governor.
Speaker 2:Ooh, his wife just screamed at you across the room. I can feel it right now. Thanks, brad, appreciate you coming on board.
Speaker 1:Michael, as always, thanks. Well, that's a wrap for another week's edition of the weekly top three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, SoundCloud, Spotify and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week for the next edition of the Weekly Top Three.
