The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (3.3.2025)
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 March 3, 2025.
This week, our top 3 issues are these: 1) we explain why we believe Alaska oil tax reform is not only justified, but needed (2:06); 2) we discuss the fiscal irresponsibility of how both increased K-12 spending as well as defined benefits are being pursued (19:25); and 3) we explain how the PFD is being squeezed from both the left and right (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 March 3rd 2025. The weekly top three is a regular segment on the Michael Duke 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 explain why we believe oil tax reform is not only justified but needed. Not only justified, but needed. Second, we discuss the fiscal irresponsibility of both how increased K-12 spending as well as increased defined benefits are being pursued. And third, we explain how the PFD is being squeezed from both the left and the right.
Speaker 2:And now let's join Michael, let's get to it. I mean, I hate to be the broken record, but boy, there's some. It's like you know, lions. It's Groundhog Day again in the legislature, right? I mean, this is where we're at. Let's start off with the latest and greatest oil, oil taxes. Um, and boy, there's a lot of uh angst on the part of the right. Uh for, uh for uh. Rob yuntz, I mean, there was a whole thing. Dan fagan wrote an article about how this is how republics die and all this kind of stuff. I mean, in his article about it, um, but there's. You know, you have a finite resource that's owned by you, the people. You have a finite, limited resource. Shouldn't you get the maximum yield out of that, since it's only going to be here one time? I mean, I'm just asking as an owner maybe we should do more. But you know I'll leave it to you.
Speaker 1:Yeah, I read Fagan's piece. It was Hillcorp's talking points. Somebody slipped him the bullet points and he just put words around it. So here's the deal to me with oil taxes. And keep in mind that I was a big proponent of SB21, that I testified in favor of it, I helped draft part of it, I was a big defender of it in the referendum on it in the subsequent election cycle and I've been a believer in it in terms of its ability to restart investment in Alaska and it's proven to do that.
Speaker 1:But here's the problem. Here's the problem. It's in the current environment where we have all this massive investment going on and we have new production coming in, it's overshot the mark. You can tell that in two ways and this is very simple, very, very simple. You can tell that in two ways.
Speaker 1:If you look at the fall revenue forecast, the fall revenue forecast projects big increases in production Over the 10-year period covered by the forecast. Projected production levels rise by over 35% from $467,000 at the start start to 640,000 at the end. But now let's look at the revenue side. Yeah, we got big production coming up right. Now. Let's look at the revenue side. Royalty revenues over that entire period only rise by 1%. Productions rising by 35%. Royalty revenues are only rising by 1%. Production's rising by 35%. Royalty revenues are only rising by 1%. The answer to that is a lot of the production, a lot of the increased production. Most of the increased production is coming from federal lands from which we don't get royalty. So what's going on is state lands. Production from state lands is still staying relatively constant. The big rise is coming from federal production. So you would expect royalty to sort of stay where it is over that period. It only rises by 1%. But here's the big deal and here's what Mike Schauer and Feagin and others on the right need to concentrate on. Over that same period, revenues from production. Now production itself is rising by 35%. Right, revenues from production through the production tax are dropping, dropping, dropping by 30%, from $940 million at the start to $658 million at the end, and driven by that, overall unrestricted petroleum revenues also fall over the period.
Speaker 1:Production taxes, revenues from production taxes, which apply both to the state and to the federal lands. So there's no, we're not getting any problems with the federal lands. Production taxes apply to the federal lands. Productions increasing by 35%. Production taxes are dropping by 30%.
Speaker 1:There's another way to look at that. We don't have a gross revenue system but you can calculate the percent. Take on the gross and that's a fairly good measure of how your production tax system is changing, how your production tax system is changing. So you can look back and you can look back at the pre-ACES period and we had about 17% from the gross. That's what the production tax generated about 17% from the gross. During ACES that jumped up to 32% from the gross.
Speaker 1:Bad, too much and it disincentivized investment in the state. Dollars went elsewhere. During the first 10 years of SB21, it came back down to about where it was pre-ASIS, to about where it was in the old system about 16% of the gross and that's lasted for about 10 years. About 16% of the gross and that's lasted for about 10 years. Now, when you look at the fall revenue forecast, it's dropping. The SB21 stays in effect but the revenue from the gross is dropping to about 12%. It's dropping by about 4%.
Speaker 1:What's going on is that in SB21, the legislature put in a lot of incentives. They put it for example they have one-year amortization. Usually, when you have a tax code to encourage investment, you allow amortization over a shorter period than the life of the investment, right, so you allow amortization over five years, maybe, or 10 years, right, and so you can amortize the capital ACES, or I mean SB21 allows amortization over five years, maybe, or 10 years, and so you can amortize the capital ACES, or I mean SB21 allows amortization over one year. So every dollar they put in an investment is a credit against revenue.
Speaker 1:We also instituted what's called GBR gross value reduction, and that's on new oil, oil from regions that are from areas that hadn't previously been produced. That was an incentive to go out and develop additional oil, and that applies both to Prudhoe I mean there were areas in Prudhoe that hadn't been developed and it applies to Willow and PECA and the others and PICA and the others. The revenues from, or the gross value reduction is you take 30% of your revenues off the top, exclude that before you start calculating taxes, before you start calculating the revenues that are included in taxes, and then we've got the per barrel credits that are on top of that. All of those combined are hitting in a way in the current environment to reduce one more time, or 15 more times, whatever it takes to get it through people's brains to reduce production taxes by 30% over the 10-year period, at a time when production volumes are increasing by 35%. Sb21 has. The internal workings of sb21 have sort of gone wrong.
Speaker 2:They're over correcting for the problems that we had which historically in this state, which historically in this state, we have a problem with right. I mean that there was, you know, elf, and then aces, and then it always swings back one way or the other. For it, you know, it's even for just a little bit, and then it runs off into the park, always swings back one way or the other, it's even for just a little bit, and then it runs off into the Parker brush in one side or the other. It seems like every time where it's good for a finite period of time and then it runs askew, because we're trying to predict market behavior. And, of course, all these oil companies. They've got a whole floor full of accountants and lawyers, and the state of Alaska has got three people auditing the books versus a whole fleet of accountants and lawyers, and so this is inevitably what's going to. You have to come back and revisit it every handful of years, I think, to make it work.
Speaker 1:Yeah, I'm not, I'm not, I'm not. I don't think this is a way where the oil companies are cooking the books. This is the way. This is the way SB21 operates. When you get in this environment, what we told Alaskans in 2013 and 2014 is help us increase investment. What the industry told Alaskans was help us increase investment by reducing your take from production taxes. Take a hit from production taxes, help us, and when volumes increase, that'll result in investment. It'll result in volume increase. When that happens, you'll benefit too. We'll share in the benefit.
Speaker 1:What's happening now that we've gotten to that point is the exact reverse Production taxes or production volumes are blowing out 35% increase, but production taxes, revenues from production taxes, are dropping. So when I see people like Shower and others you know knee-jerking the industry reaction to taxes, oh my God, bad. You know horrible. You know we're going to leave, we're going to do this, we're going to do that. When I see them knee-jerking the industry reaction, I get upset because that's not what you should be doing. You should be looking at the numbers, and I've written about the numbers. We've got them in the Alaska Landmine column. You and I have talked about the numbers on the show before. When the Fall Revenue Sources book first came out, I was just shocked at what was going on with production taxes. You've got to look at the numbers and you've got to look at what's going on, don't knee jerk a reaction. Now you know I'm not a big fan of the way Willikowski is proposing to fix it with a limitation on the production credits and with the limitation on the related limitation on deduction of capital investments.
Speaker 1:That's a matter of revenue design. We talk a lot about revenue design on the show. That is revenue design. He's trying to design how to get $400 million and that's the design he's using. I'm not a big fan of that design because I don't think that's getting at the heart of the problem, which is the amortization and the GVRs Credits are part of the problem. Per barrel credits are part of the problem, but I don't think that fix is getting at it.
Speaker 1:But the number's about right.
Speaker 1:I mean I've done these numbers a lot and if you look at gross, if you look at share of gross and if you look at what would happen if we didn't have these deductions going on in the way we're, having them go on in the next 10 years, over the next 10 years, yeah, about $400 million is the right number.
Speaker 1:You and I have talked about this on the show a lot, right, but so I just don't give me your knee jerk. You know talking points from Hillcorp in the case of closing the Hillcorp loophole, or from the oil companies in the case of the production tax fix. Look at the goddamn numbers and see for yourself what's going on. And what's going on is, now that we've developed a tax code that has encouraged making all these investments, now that we're getting to the point where those pay off in terms of increased production, production taxes are going down, and that's not what was intended in 2013 and 14. That's not what was told Alaskans in 2013 and 2014. And that's not what should be happening, consistent with a constitutional obligation that says maximize revenue for the benefit of Alaskans.
Speaker 2:Right, and this is again. This is what we've been saying for a long time. There's money on the table and we need to be looking at it, but the second we start talking about it, you know immediately the right is activated over the fact that we shouldn't do anything more with the oil companies. But we're leaving money on the table. There's money on the table and we, you know we are the owners, and again, it's a finite resource. 60 seconds, brad.
Speaker 1:Well, I owners and again, it's a finite resource 60 seconds, brad. Well, I mean, and people talk about consistent tax code. We need consistency in the tax. Well, this isn't consistent. The fact that we're losing revenue at a time production is increasing, the fact that our take of gross revenues are going down, that's not consistent. The provisions that are causing that are consistent with what happened before, but you have to look at the environment in which those provisions are applying and and it's resulting in a significant I mean 30% drop in production tax revenues is huge, right, and that's and that's what's going on.
Speaker 2:Yeah, how can we have more production yet less revenue in the other end? And that's, you know, that's the kind of the continual question that we should be asking ourselves. There's a lot of factors there, but this taxation is definitely part of it. This is, this is some, this is some crazy stuff. And again, the fact that you, as an oil and gas company attorney you know, former guy in the industry is saying there's still money on the table ought to raise the eyebrows for people who are like, no, the oil cut we, everything you know, you know, um, we, we've, we've got to be paying attention to this. This is a, this is a deal, and it could again help with some of the issues that we're having. Uh, as well, and as as in citizen owners, we should be getting. I mean, the Constitution says that we need to get the maximum yield. I mean, that's what we're supposed to be getting as owners out of this whole deal.
Speaker 1:You know, and people say, oh you know, taking this money away from the oil companies, they'll leave, they won't.
Speaker 2:No, I mean, this is they're making more money than God out here Are you kidding me.
Speaker 1:All we're talking about is maintaining the same level of gross revenues and I know we're not on a gross revenue system but we, but our rate, design the way we design. The net profits tax produces a certain level of take from the gross and you can see that consistency over time. You can see it before ACES. You can see it much higher during ACES. Of consistency, you can see it coming back down in SB21. And that's a good measure of whether you have a consistent result from the tax code. And our take from the gross is falling and it's falling.
Speaker 1:I mean it cannot be more obvious. At a time when production volumes are going up by 35%, production tax revenues are going down by 30%. It can't be more obvious that something's gone wrong and that the shares have flipped in a way so that Alaskans are not getting the same share that they thought they were getting out of SB21 and they got out of the first 10 years of SB1. So for legislators, I mean I understand, I sort of understand the knee jerk against taxes, I sort of get that. But for legislators to not look at the numbers and understand that we're not asking for more, we're just asking for the same share that we got in the first 10 years. We're trying to restore the results we had in the first 10 years For legislators to not get that Right, the balance right.
Speaker 1:It doesn't reflect well on them Right.
Speaker 2:It's got to be equitable in both directions and that's been part of the problem. Again, the challenge it has fallen out of sync and we need to go get her done, so to speak. All right, uh, we are about 90 seconds. Uh, we're about 90 seconds. Uh, before we hit this, give me a tease for number two, brad. What, uh?
Speaker 1:well, number two. Number two is it's going to be another rant on or another discussion. There we go. Discussion.
Speaker 2:You're ranting. It's fine, it's okay.
Speaker 1:Undefined benefits in K-12 and the press for additional spending in those areas.
Speaker 2:Yeah, well, I'm starting to wonder quite honestly, and I guess we can bring this up, and yes, thank you Anthony. Anthony says oh, please, you've heard worse in the checkout line of Fred Myers than you know it when Brad had the slippage there. Yes, he's right, I have heard worse in the checkout line of Fred Myers. I've heard things and I was like man, I don't have any kids around here, do I? Because dang Anyway, in the fact that I'm starting to wonder if this is just all kabuki theater where they want to lay all this at the governor's feet.
Speaker 2:They know they don't have the money to do it, but they want to lay it at his feet and try and make him the bad guy in this situation that they sold a big pack of stuff knowing that it was undeliverable, and I'm starting to wonder if that might be the case. And you can comment on that. Probably by the end of it I'll bring it back up, brad, all right, number two of the weekly top three. Um, I mean, it seems like this is just a repeat from last week and the week before the week before that last year, and I mean maybe, uh, so number two is defined benefits and K-12 spending. Brad, the gift that just keeps on giving. What's happening?
Speaker 1:Oh, it is a repeat. It's probably a repeat from every show we've done for the last 10 years. You see all these articles about both K-12 and about defined benefits. I mean just looking over the range of newspapers in the state. From the Catch Can Daily News, representative Bynum, a Republican, proposes a one-time BSA hike, a one-time BSA hike. Down on the Kenai, you've got assembly calls on state to boost school funding. Also from the Kenai, saldotna joins call for increased school funding. I mean you've got With no policy change right.
Speaker 2:With no policy change. Yeah, exactly.
Speaker 1:Everybody and his brother out there pushing for increased K-12 funding and I can sort of get the need for that. I can sort of see the inflation argument around that, but where's the revenues kind of come from? It is the height of fiscal irresponsibility to be facing the kind of budgets that we're facing, the kind of budget deficits that we're facing, and you can see them over the next 10 years. You don't just next year, you can see it the year following that. But if you look at the fall revenue forecast, you can see it over the entire 10-year period, in significant part due to the drop in production tax revenues. You can see the deficits that are sitting out there, that the deficits that are sitting out there, and in that context to be pushing for substantial increases in spending. Keep in mind that HB 69 has a $330 million plus or minus price tag next year but there are two additional increments of increases. Then it's adjusted automatically, adjusted by inflation, right by the time you get to the end of the 10-year period.
Speaker 1:Sb 69 is a billion dollars a year and for legislators to be pushing that before they have the revenues in place to pay for it is just fiscally irresponsible. I mean it's Congress, I mean it's just like Congress let's keep spending, let's keep spending, let's keep spending. In the case of Congress, it's and we'll keep borrowing and we'll keep borrowing, and we'll keep borrowing. In Alaska it's let's keep spending, let's keep spending, let's keep spending. But there's no borrowing power that sits behind that, that enables you to balance it out that way, and so it's let's keep spending, let's keep spending, let's keep spending, let's keep growing the deficit, let's keep growing the deficit, let's keep growing the deficit. It is fiscally irresponsible.
Speaker 1:And I just, you know, at some point you just you see Kenai. You see Saldatna joins, forna joins call for increased school funding. You see Assembly calls Kenai, assembly calls on state to boost increased funding. You say Ketchikan Republican Jeremy Bynum proposes a one-time BSA hike. All of these people who are pushing for increased spending, not telling us how they're going to pay for it, not talking about the revenue side, at least at the same time, if not in front, to sort of set the stage for the increased spending, all of these people pushing for increased spending and not talking about revenue at the same time is just very frustrating and it's fiscally irresponsible. We're just going deeper and deeper and deeper. The state's going deeper and deeper and deeper into an unsustainability hole that I'm not sure how we ever get out of. We keep going. Defined benefits has its own bizarreness.
Speaker 2:Yeah, I know the New Reason Foundation commentary on this is like hello, hello. Has anybody been paying attention to this? There are other states that have defined benefits that have worse employment retention problems than we do here. The Reason Foundation brought that up Like hey, you saying that this is the magic bullet that'll bring all the new employees back and hold on to the employees you have. And yet they mentioned two or three states that have defined benefits plans like you want, and they're hemorrhaging people faster than we are in Alaska, which is you know. Come on, this is not the magic bullet.
Speaker 1:Michael, here's the thing on the fiscal side. There's still no fiscal note.
Speaker 1:Yeah, there's still no fiscal note on defined benefits. There wasn't a fiscal note last year. Actually there was, but the one they got they didn't like because it said it increased the deficit. So geisel and others just sort of dismissed that fiscal note and said, oh no, we're working on another. There was by the end. There wasn't. There still wasn't one, there isn't one now.
Speaker 1:These are the same people, the people pushing this, pushing this bill without a fiscal. These are the same people, the people pushing this, pushing this bill without a fiscal note, are the same people who are complaining about the governor's holding on to the wage study. Right, that the governor has the wage study, but he's not. He's not giving it out, they claim, and so you know he's, he's. He's artificially, you know, tilting the playing field by not giving out this, by not giving out the wage study. They've had a whole year the proponents of defined benefits have had a whole year to do this damn fiscal, do this fiscal note, and they haven't done it and it's still not done Now, chuck. And what that does is give Chuck Kopp and Giesel the ability to say, oh, I know we haven't done it yet, but when it comes we think it's going to say this and say that, and so it's all okay.
Speaker 2:This is the Cliff Grow. This is going to save you money. Comment on the program oh, this is going to. We're going to actually save money on. Show me on this napkin how that's going to work out.
Speaker 1:Just show me the numbers, give me a spreadsheet, I'll run them. If you're right, if that's what the calculations show, fine, then that point goes off the table. But the fact you haven't given it to me, the fact you haven't published those numbers in a year, over a year since this started, the fact you haven't given it to me, the fact the only numbers out there are the ones that you didn't like so you dismissed it, the fact you haven't shown me the numbers over the entire year makes me a little skeptical of what those numbers are going to show. And once again, it's just fiscally irresponsible to be going down this road, especially without a fiscal note. But even if we had a fiscal note, if it showed a deficit, we don't have the money. And to be pushing forward on these spending programs without talking at least at the same time about revenues, how you're going to pay for them, but to be pushing forward on these spending programs is just fiscally irresponsible.
Speaker 1:You know all the legislators like to claim that, oh, they're fiscally responsible, they know what they're doing. They're looking out for Alaska's best interests. No, they're not. They're looking out for the beneficiaries of the spending. They're not looking out for Alaskans' interests beneficiaries of the spending. They're not looking out for Alaskans' interests, running us into a deficit, forcing us to do stupid things down the road, like taxing the oil companies more than the right number from a gross standpoint. Forcing us to tax Alaskans more than we should be is stupid.
Speaker 1:We need to make these judgments about what we're doing at the time we're doing them, as opposed to passing a spending bill and then putting our backs against the wall on the revenue side down the road and saying, oh well, we'll get to the revenue someday. It's just not fiscally responsible, it's not sustainable, it's not good policy, it's not good anything. It's not good for Alaskans, it's not good for the state's overall well-being. All it's doing is putting a bunch of money that we don't know yet where we're going to get it from, and we don't know yet where we're going to get it from and we don't know the impacts of that, the adverse impacts of that. We don't know exactly how much.
Speaker 1:Putting a bunch of money in certain people's hands.
Speaker 2:Yeah, we don't know exactly how much, we just know it's going to be a gop, right. I mean, that's the thing. We just we still don't even know. But we've got the fiscal note on HB 69 and it huge, yeah, yeah. Well, I was talking about defined benefits, but yeah, exactly we still don't know where it is.
Speaker 2:And you know, brad, I said it earlier during the break before we came on that I'm starting to think that maybe the you know, maybe there's a cadre out there that understands all of a sudden or maybe they knew this from the beginning that there's not enough money. But they said, well, we'll just run on all these things, we'll run on pumping up the BSA, we'll run on defined benefits, we'll run on these programs. We know there's not enough money for it, but we'll just lay it all at the governor's feet. That's really one of the only explanations for rushing HB 69 through, the whole thing that they got here, that they want to lay it at the governor's feet. The governor is going to veto it, and then they could say, look, we tried, but it's you know, tall man, bad that.
Speaker 1:I'm starting to wonder if that's the kabuki theater we're dealing with could be, could be, but they're not doing their constituents, they're not doing the ones they claim to be helping any any any good in that regard and they're giving the governor a free talking point. The governor the governor can bounce it back by saying, look, you didn't. You have, you have no revenues to cover this. And in the case of defined benefits, you have no fiscal note even to tell us how much it's going to be, how much it's going to be. You're just, you're running us, you're running us into the ditch Fiscally, you're being fiscally irresponsible.
Speaker 1:That's the governor's, should be the governor's response to all this, and they're just giving him that free pass on that. I mean, to most, I think to most Alaska families, that makes sense. Look, if you don't have the revenues to cover it, then why are you voting for the spending? If we don't have in our household the revenues to cover the vacation to Hawaii or to wherever we want to go, we don't take it, we don't spend the money until we have the revenues. And I think that's a powerful talking point that they're giving the governor. And they're not doing their constituents, they're not doing the interests that they claim to be representing any good, because they're just running them into a wall.
Speaker 2:We can get into that in the next segment with the whole zach fields thing. But you know, I mean, hey, don't worry, scooter kendall, he wrote an opinion piece, said he's a fiscal conservative. But I don't know if you caught that opinion piece in the adn. Hey, I'm a fiscal conservative, but and uh, you know, again goes on to say we really need to educate. And you know, again goes on to say we really need to educate. You know, education, you know everything. I mean it's again, it's all about constituencies. Who's getting paid? Follow the money.
Speaker 1:And if you're a fiscal conservative and you want to advocate for K through 12, fine, do it, but do it in a fiscally conservative way. Talk about where the revenues are going to come from. Pass the revenues at least at the same time. Advance the revenues to pay for this stuff at least at the same time as you're advancing the spending bill. That's what a fiscal conservative does. Fiscal conservative doesn't lead with spending and say, hey, we'll catch up with revenue somewhere down the road, don't worry about it.
Speaker 2:Yeah, well it's. I mean exactly, how do you pay for it? Big question, you know still no answer as to how you pay for all this. Nobody has a talking point. Go ahead.
Speaker 1:Final thought how do you pay for it and then who pays for it? Once you know how you pay for it, then you know who's paying for it and then you can discuss whether it's a reasonable approach to be taking money out of those people's pockets to advance the other side's interests. I mean, that's part of what you get when you get the. How do you pay for it? You get the who pays for it at the same time, and then you can have an honest discussion about whether it's good policy.
Speaker 2:Zen Kelly asserted last night in the KPBSD. There was a school board meeting last night with like 130 people on the Zoom call. They asserted last night that HB 69 has policy and is fiscally responsible. Saying it so is not making it. So there's a cadre of people out there that are just like, oh, it's fine, but the whole thing is the whole answer to this, and not to get too far down into the weeds on HB 69 specifically but the answer is always just give us the money, just shut up and give us the money. We'll figure out the policy later. The policy is what's creating part of the problem. If you don't work on both of these things together, history shows that if we just shut up and give you the money and you'll get to the other part later, you never get to the other part. And again, how do you pay for it? Who pays for it? No answer Crickets, 100% crickets on this.
Speaker 1:Brad, yeah, Show me the T-chart. Here's your spending over here. Show me the incoming. Show me the revenues over here. That's paying for the spending that you've got on the. That's paying for the liabilities you're creating through the spending. Just show me the T-chart and show me how it's. That'll show me how it's fiscally responsible. They can't do that because they don't have the revenues. I mean, even if they wipe out the PFD, they don't have the revenues to pay for this over the 10 year period to pay for. And this isn't, this isn't just a one-time deal, folks. This is $330 million in the first year. That's the. That's sort of the buy-in cost, right? You've gone to the auto dealer and he says, oh, it's only $330 million down. Don't look at the back end of this thing.
Speaker 2:Don't look at what the ultimate cost is. You can afford it. It's only $300 million a month.
Speaker 1:You can afford it and that's what they're trying to sell it as. But it's a bill that sets up a procedure, sets up a statutory formula that grows and grows and grows and grows and grows and grows until the end of the 10-year period. It's a billion dollars. So when you do your T-chart, when you show me the liability and show me the assets that are going to the income that's going to offset that spending, Show me a billion dollars. Show me what grows into a billion dollars At the same time as we've got production taxes, a big chunk of the revenue to the state going down by 30% over that 10-year period. Tell me how this balances out. Show me the T-chart where it balances out. And they can't, they can't. Yeah, that's the problem.
Speaker 2:They me how this balances out. Show me the T chart where it balances out. And they can't, they can't. Yeah, that's the problem, they just can't. I'm sorry, I'm don't answer. I don't understand the question.
Speaker 1:I'm sorry. I know it's fiscally responsible, but I don't understand what T charts are and I don't understand the question.
Speaker 2:What are you trying to say? This whole thing is is just it's astonishing to watch, but this is, this is where we're at right now. This is, uh, this is this is the, this is, this is fiscal reality in the state of alaska, and that's the thing they're just. They're ignoring everything else fiscal fantasy.
Speaker 1:I mean for scott kendall to go out and argue that he's a. He's a fiscal conservative. I'm a fiscal conservative.
Speaker 2:I just, yeah, I was like wait, who? Who wrote this? Scott kendall? Yeah, okay, never mind scooter, I, I don't think you keep using that word. I don't think it means what you think it means, right. I mean it's you know, I'm a fiscal conservative, really, is that is that right? But that's the thing. That phrase is getting thrown around a lot and and I don't know if you caught Rob Myers's article in the Watchman talking about where we are politically in the state of Alaska, but he takes a knife to that and he just he's like there's no, most of the people in this state are not fiscally conservative and that's part of the problem. We've gotten into this big spending habit and it's everything to protect it. Jeannie was talking about again the Zoom meeting. Here we go 128 Zoom viewers watching the KPBSD meeting last night, lots of condemnation for critics of school spending and, of course, no shortage of platitudes, everything that I've seen. All the commentary on this is that it's all emotional, oh, it's for the children and we need the spending. How do?
Speaker 1:we pay.
Speaker 2:It doesn't matter, we just need to pay. But they're failing right now with the money. It doesn't matter, it's because you're not giving them enough. But wait, we gave them a lot back in 25th. No, it doesn't matter.
Speaker 1:I mean there's no self-analysis on any of this. Yeah and and no, and no fiscal fiscal analysis whatsoever. I mean I will, we'll get into this deeper into the, into the next segment. But it's also the same people, the house minority, house majority, excuse me, that's pushing this bill, pushing the K through 12 bill, right, and they said no on oil taxes. Nope, we're not interested in oil taxes, we're not interested in taking on oil taxes. We don't, we don't want to do that. So how do you ever make this balance, how do you ever make this proposal out there? Balance? You're not talking, you're not even trying, it's just spend it all and then we'll figure out later what the hell we're going to do, having done that.
Speaker 1:No, that's not how a fiscally responsible state works.
Speaker 2:Yeah, no, no, we'll pass it and then we'll see what's in it.
Speaker 1:There you go, there you go, the Nancy Pelosi view.
Speaker 2:We'll pass it. We had to pass it to figure out how much it was going to cost and what was in it. I'm just like what? That's not how it's supposed to, but okay, I mean you, do you? Number three is the PFD. I mean, do you even PFD?
Speaker 2:Bro Zach Fields wrote a piece and again it was again about the supersized. We got all these things we need to spend this money on and we can't afford to give you. In fact, one of his lines was we wasted 3.8. How did, how did he put it? We wasted 3.8 billion in, like what? That's exactly what he actually laid it out and said this is what we spent it on and it was a huge waste to do it. We can't fund PFD needs and also pay large PFDs. So the last five years we've squandered 3.8 billion on PFDs. We squandered it, your money. We squandered your money by giving your money to you, a portion of it, not even all of it, just some of it. We could have done so much better. We know better than you how you should spend it. If we give it to you, you squander it. I mean, that's just the height of arrogance here, brad.
Speaker 1:Yeah. So Zach Field's piece is sort of the takeoff of my point, which is that the PFD is in a squeeze play from both the left Zach Field's and the right. Zach Field's op-ed is just horrible. I mean the title of it is the reality is we can't fund Alaska's needs and also pay large PFDs. And now the definition, by the way, the definition of large PFDs is anything over $1,000. It used to be anything over $1,750 or anything over $1,500. Now large PFDs. I mean it's changed the terminology. You know, do policies by changing the terminology. Now it's anything over a thousand dollars as a large PFD. But what Fields is saying is look, we need to take your, we need to take the money out of the PFD and transfer it over. We need to treat it like just another CBR, a bunch of money we can play with, take the money out and transfer it over to spending.
Speaker 1:There's nothing in here in this piece. There's nothing in anything Zach Fields has ever said that recognizes who he's taking the money from. He's taking the money from middle and lower income Alaska families. He's not taking it from the top 20% in terms of share of share of income, significant share of income. He's not taking it from non-residents. He's not taking it from the oil companies, he's taking it from middle and lower income Alaska families and he's and he's essentially saying we need to tax middle and lower income Alaska families to pay for this spending.
Speaker 1:Zach Fields also says, in conjunction with Andy Josephson, as part of the House majority we don't want to tax the old companies, we don't want them to pay their fair share, we don't want to go fix SB21, the problems that SB21 is showing as it ages. We don't want to fix that. We just want to keep taking money from middle and lower income Alaska families because it's easiest to do that, because the subtext is, because it's easiest to do that because they don't send lobbyists down here, they don't make big campaign donations, they don't, they don't bother us in our offices, they don't, you know, send hordes of workers down here to have performative art on the front steps of the Capitol. It's easiest to take it from working middle and lower income Alaska families because they're working, they're trying to make a living, they're trying to just get through life and they don't bother us as much and they don't bother us as much. So what we've done is we found the soft spot in the fence and we're just taking as much out of that soft spot in the fence as we can.
Speaker 1:But it's not just Zach Fields. Zach Fields is a big problem. Andy Josephson is a big problem. They are not responsible. They're not fiscally responsible. They are taking the money in a way that has the largest adverse impact on the overall alaska economy and is by far the costliest to alaska families and their constituencies are the ones that are being disproportionately affected by this right.
Speaker 2:I mean, zach fields represents a big chunk of the lower income group in the, in the, in the anchorage area, and yet he's the one that they're advocating taking a lot of that money from.
Speaker 1:I mean, when you start, when you start digging into fields as district, as it's currently constructed, it's really a bunch of limousine liberals. It's really. It's really people who are wealthy, live close to downtown, but live in the wealthy areas close to downtown, and so it's more. It's more that he he does have a poverty poverty section in in this district, but it's much more people who say that they want to do good things, they want to increase K through 12, but they don't want to pay for it. And so Zach Fields is responding to that by saying, okay, well, let me spend and I'll find a way to spend that doesn't take it out of your pocket. And you can praise me for all this good I'm doing, for the spending and it's not coming out of your pocket, so you can continue to support me, continue to give me done fixing. When you have people who knee-jerk against fixing the Hillcorp loophole, there's nobody and say, oh well, we don't want to give any more revenue. Well, look, the spending's already there. The governor's already signed the spending. We're already in deficit. The governor's already set up all these spending programs. They're not going away. We tried that in 2019. Didn't happen. Governor, hasn't tried again. They're not going away. We tried that in 2019, didn't happen. Governor hasn't tried again. They're not going away. So we've got these spending programs. We've got an existing deficit.
Speaker 1:Oil taxes would help fix that and by helping to fix that, would reduce the pressure on the PFD, would make the ability to hold the PFD a lot easier because we'd be paying for that spending that's already there. I'm not talking about the additional K-12. I'm not talking about defined benefits. I'm just talking about paying for the deficit that's already there. That would help fix that by restoring reforming oil taxes to get back to what we thought we were passing in 2013 and 2014.
Speaker 1:When people on the right opposed that they're pushing PFD cuts and they're pushing the state into a situation because there's nothing left. We've got the spending already, we've got a deficit already and if you can't reform oil taxes and do other things that increase revenues, increase alternative revenues to PFD cuts, you're just putting more and more pressure on the PFD. So the PFD is caught in this squeeze play. It's caught in this squeeze play from the left by Zach Fields and others saying oh, we got to spend and the PFD is bad, we've got to spend and so we'll just take it out of the PFD.
Speaker 1:And we've got people on the right saying, well, yeah, spending's there, but I don't want to use these revenue sources for this, that or the other reason to pay for it. So the only thing that is left when the legislature gets to the end of the day is the PFD. The PFD is caught in this squeeze play from the left and the right and their middle income families are the ones. Middle income families, which is like 60% I mean by the time you take lower middle, middle and upper middle like 60% of the population middle income families are the ones that are being squeezed and the legislature is doing that. My point is from both the left, from Zach Fields, and from the right, from legislators on the right who are just having these knee-jerk reactions to fixing oil taxes and closing the Hillcorp loophole.
Speaker 2:Becky Schwanke just dropped the big bomb in the chat room. She says wait till you see their ads to the health budget at today's closeouts in the house oh Lord, I mean because again, this was the next phase of the attack was the health care cuts? Because they're starting to close out things. They're trying to close that $2 trillion budget gap at the federal level and so they're going to stop paying for a lot to close out things. They're trying to close that $2 trillion budget gap at the federal level and so they're going to stop paying for a lot of the Medicaid things. And you can see the state's already. Oh, we're going to have to pay for all this. We're going to have to. No, you just shut it off. Shut it off. You know we don't want to take the money. Shut it off, find a way around it. If the federal can't fund it, then shut it off. And here's where we are. Here's where we are right now. This is.
Speaker 1:I mean this is madness. At this point it is Michael, and it's madness because it's madness for a lot of reasons. But yeah, okay. So the healthcare budgets, that's going to be, that's going to be yet another spending category and and that's going to be yet another problem and yet another hit on the PFD. We wonder why middle income and you and I I've done the analysis, you and I have talked about the analysis it's middle income, middle and lower income Alaska families that are doing the out migration.
Speaker 1:The top 20% is actually growing in the state. The number of top 20% households in the state is actually growing. It's middle and income Alaska families that are leaving the state. We wonder why that is Well, we're taxing them. We're taxing them through PFD cuts. We're taking income out of their pockets so that the top 20% non-residents and oil companies don't have to pay, don't have to pay. We're hitting middle income families, middle income Alaska families, hardest and the economics of staying here just aren't working for them anymore and they're leaving. But the economics of being in the top 20%, since you don't have to pay for any of this, since it's being funded entirely by middle and low-income Alaska families, the economics of being in the top 20% in Alaska are great, so we're getting more and more and more of those.
Speaker 2:It's the reason for the inflow of the top 20% and the retired population, while the working class population is exiting the state. And again this creates what we talked about earlier, kind of that doom loop of there's a smaller and smaller pool of people to draw from who are actually paying for that and eventually it's just going to be paid. Here's the thing when the PFD is gone and Zach Fields said the quiet part out loud, uh, we're going to get into this in the next segment. But he said, while most Alaskans recognize he goes, he's talking about PFDs. If we paid a $1,400 PFD, that would decimate basic services and we'd have to pass new taxes. And he says, while most Alaskans recognize we'll have to generate new revenue at some point to fund basic services, which basically they're going to have to have taxes.
Speaker 2:They know it, they're talking about it now. You know we've been, you've been slamming me and Brad and everybody else for talking about hey, taxes are coming and we should have a discussion about what's the best form of tax for that, because otherwise it's going to get thrust down our throats and everybody's like they're talking about it Now. They're talking about it out in the open. They're going, the PFD will be gone, and then they'll come to you and go oh man, you know it's. Uh, you know it's. It's so sad when free rides die hard, but now you're going to have to pay sugar lips, right.
Speaker 1:Yeah, after, after the top 20 percent non-resident oil companies rode on, had the free ride all those years of by being able to push the burden off to off the middle of lower income Alaska families. Look, you know, if there's if there's one thing. If there's one thing that maybe is the theme of today is look at the damn spreadsheets. I mean Becky's right, others are right. When you look at the spreadsheets on K-12, when you look at the spreadsheets on defined benefits, when you look at the spreadsheets on healthcare, they just don't work. Increased spending on healthcare they just don't work because we've not set up the revenues to be able to pay for it. We're just plunging ourselves like Thelma and Louise. We're plunging ourselves off the cliff with nothing set up underneath.
Speaker 1:But on the right, look at the damn spreadsheets.
Speaker 1:Also, look at the damn spreadsheets on oil taxes. Look at the damn spreadsheets on what our take of the growth has been. Look at the damn spreadsheets on what our take of the growth has been. Look at the damn spreadsheets on what's happening to revenues from production taxes as production volumes are going up. Look at the damn spreadsheets and you will see the problem that is being created later in life in SB21, by all the things that we sprinkled in there life in SB 21, by all the all of the things that all the things that we sprinkled in there that there's a problem in terms of revenues not rising, state revenues not rising at the same way, in the same way as production taxes or production volumes are rising. Look at the damn spreadsheets. You know, you can't, I don't, it's not. It's not appropriate for the right to complain about the left increasing spending without having revenues. It's not appropriate for the right when the right won't even look at the damn spreadsheets their own damn spreadsheets and figure out what's going on with oil tax revenues.
Speaker 2:It's not appropriate. Brad got all silent. For me it's not appropriate.
Speaker 1:I was thinking about the FCC for a moment, yeah.
Speaker 2:Well, we're on Facebook now, Mother, but anyway it's. You know, look it's. The whole thing is astonishing to watch. Like you said, there's plenty of blame to go around on the left and the right, and we could name everything that's been going, that's been happening, but we literally have two groups in this state now. It's not Democrats and Republicans, it's not left versus right, it's not even conservative versus liberal. It is big government spend at any cost versus smallest government possible people. That's what we have left, and the problem is the smallest government possible people. They're a minor minority at this point.
Speaker 1:But, michael, all taxes are an issue. The smallest government possible people are using that knee jerk about taxes, about revenues, to to overlook what's going on. What's truly going on with oil taxes? What's truly going on with the way SB21 is operating? I don't have a. I view myself as a, as a small government person, but a small government person at least looks at the revenue sources and sees whether the revenue sources that you're relying on, that you're using, are producing reasonable results.
Speaker 2:Brad, we're down to the last two minutes here, so I'll give you a chance to summate on everything today. But I mean, I think it comes back to our same mantra of you know how do you pay for it, who pays and why. Can't we live within our means? I mean, I don't know if I summated it properly, but that's pretty much the big three things that we keep talking about here, and it's of all things, whether it's the spending on the defined benefits in the schools, whether it's proper management of the PFD and not spending twice as much on the management fees as other funds are doing. I mean, there's a million things out there, but nobody wants to talk about the other things.
Speaker 1:Yeah, nobody wants to talk about them and nobody wants to do the analysis. Nobody wants to do the spreadsheets. They all want to talk about them but nobody wants to do the calculations because they know that the calculations would disprove what they're talking about. And that's true on the left in terms of K through 12 spending this pie in the sky K through 12 spending. And it's true on the right in terms of oil taxes and this knee jerk on oil taxes that we've got going on on the right, because they haven't looked at the spreadsheets, they haven't done the analysis of what is happening with oil tax revenues in this new decade that we've gotten into with SB21. The problem is not as much the failure to do the analysis People who are just shooting off their mouths without doing the numbers the problem is as much that as it is the policies, that the policy roads that we're going down.
Speaker 2:Well, everything we're seeing is being driven by emotion. Like you said, they don't want to do the spreadsheets, they don't want to look at reality, they don't want to look at the fiscal note, they don't want to ask the hard question of who pays or how do we pay for it. They just want the spending because, emotionally, we need it.
Speaker 1:Or on the right, they just want the no taxes. It doesn't matter. It doesn't matter that we need the taxes to restore to get a share of the increased production, it doesn't matter. They just want no taxes period. End of statement. Well, the PFD takes the hit.
Speaker 2:Yeah, so you're getting taxed already. Anyway, brad Keithley Alaskans for Sustainable Budgets. Brad, thank you so much.
Speaker 1:Michael, as always, thanks for having me. 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. Top three.
