The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (4.21.2025)
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 April 21, 2025.
This week, our top 3 issues are these: 1) we discuss what the latest projections from the Permanent Fund Corporation are telling us about where the Permanent Fund is headed on its current course (2:02); 2) we examine the opportunity to make some small headway in generating substitute revenues and reducing the need for PFD cuts (20:13); and 3) we explore some budget-related good news (40:56).
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 April 21st 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 what the latest projections from the Permanent Fund Corporation are telling us about where the Permanent Fund is headed on its current course. Second, we examine the opportunity to make some small headway in generating substitute revenues and reducing the need for PFD cuts. And third, we explore some good budget-related news. And now let's join Michael.
Speaker 2:So, brad, we've got some things to discuss this morning and we're going to talk a little bit. There's been a lot of movement here in the legislature over the last few days. Of course, we had the passing of the Senate education and then the sending it back and the governor now has vetoed it, and today they're supposed to have a uh and an attempt to override it. But we've also got pf, the, the new permanent fund correction, or corporation projections and stuff. So tell us what are we out here with number one, so number.
Speaker 1:I'm not going to talk about the veto today because I'd um, it's either gonna, it's either going to be sustained or not by the end of the day, and there's really not that much to say about it, I suspect it won't be sustained.
Speaker 1:Exactly change, substantially change, the, the constitutional provision regarding the permanent fund to to to merge the two account fund that's established by the corporation, that are established by the constitution, the, the corpus and the earnings reserve. The permanent fund corporation's proposal to merge those two together into a single fund. And I I continue to be troubled by that. I continue to do numbers on that and I continue to try to understand what's really going on with the permanent fund corporation, their earnings and what the motivation is behind or what the effect of motivation also, but what the effect of merging those two accounts would be, because I oppose it. I think it's bad, but I really want to understand what's going on.
Speaker 1:Monthly the Permanent Fund Corporation publishes a number of reports. One of them is their financial statement for the month. That shows what they've gained, what they've lost, what they've contributed to the general fund in terms of the POMV draw, what they've received in from their share of royalties, the permanent fund share of state royalties, and then the financial reports, or the financial report. Financial statement for the month is pretty interesting and we do a couple of charts based on that Well, several charts actually based on that. Each month they also publish the Permanent Fund Corporation also publishes what they call history and projections each month and that takes a look back at the earnings and the draws that have been made on the Permanent Fund. It looks at the gains and the losses in the permanent fund from a backwards perspective and then sort of a projection forward, not only for the current fiscal year but also for the 10 years forward, plus or minus Sometimes it's more, sometimes it's less, but for the projection forward for a number of years about where they see the permanent fund going. And this month I spent a lot of time looking at the history and projections and trying to understand exactly what their cash flow is and what their obligations are, as well as what their cash flow in is. Tried to sum it up in a chart. And if you snag that chart and control oh my God, Michael, you were sitting there, weren't you, With your finger ready to go, You're on the finger on the trigger, ready to go, All right. So this month I summed it up in a chart and this is based upon the history and projections that the permanent fund has given for the as of March. They do it in arrears, so it's history up to March and then it's projections for March forward.
Speaker 1:And for those on the radio, the chart really is. It has three lines on it. Well, two lines and a bar on it. The two lines are the statutory net income, which is basically the cash flow into the permanent fund, except for their share of royalties, the deposit, the royalty deposit. The state is making it's cash flow in from interest, from dividends, cash dividends that have been declared sales, cash they've made on stock sales or asset sales during the period, and so it's cash in and the red line. And then we've got a red line on there essentially for cash out, and that is the POMV draw that's being distributed to the state under the POMV statute, plus inflation proofing, which is the portion of the earnings reserve that is being transferred back or projected to be transferred back to the corpus to compensate for inflation. So the red line is the combination of those two.
Speaker 1:No-transcript, and I start the chart in FY19, which is the first year of the POMV draw. So, because we're calculating the effect of the POMV draw and we're calculating the effect of inflation proofing, I start at the first year of the POMV draw and what you see there is from FY19 through FY24, which is the history part of this. And that's one, two, three, four, five, six years. In those six years the cash in the statutory net income has exceeded the cash out only one year of those six years and the other six years the cash in has been less than the cash out, has been less than the POMV draw plus inflation proofing.
Speaker 2:And I need to dumb this down because I haven't had all my coffee this morning for most people but what you're saying is, over the last six years, in only one year did the earnings reserve make enough money to actually fund the 5% POMB draw? Plus inflation-proofing, plus inflation-proofing In only one year out of the last six since we started this have we had enough money to actually cover the draw.
Speaker 1:Right difference in that has been covered by. In the case of up to 24, it's been covered by drawing down the accumulated earnings reserve that had built up from prior years, and so there's been a reserve in the earnings reserve from cash in exceeding cash out, statutory net income exceeding cash out. There's been a reserve that's built up in the prior years, and so what they've been riding on for the last six years is that built up reserve that existed prior to that time. Now keep in mind that that reserve got depleted by $8 billion as a result of two $4 billion ad hoc draws that were made off from the earnings reserve transfers into the permanent fund corpus. So that reserve isn't very big anymore. But what they've been riding on over those last four years is the or the last six years, rather is the reserve that built up. Going forward this is the shocking part. Going forward, this is the Permanent Fund Corporation's own projection. Going forward, the Permanent Fund projects that the cash out the POMV plus inflation proofing, will exceed earnings in every year, every year through the remainder of the projection period, which is a 10-year projection period, through FY34. So you see red bars, which is the difference between the cash out and the cash in red bars every year on out through the remainder of the projection period. And when they talk about depleting the earnings reserve, that's what they're talking about. I mean, they're talking about depleting all of the reserves that have been built up to this point that they've been writing down through the last six years, and they're talking about writing those out basically through the remaining 10 years. There's a lot of problems with this, but what this is essentially saying is we're not earning enough cash into the earnings reserve. We're not earning enough cash into the permanent fund. The permanent fund isn't generating enough earnings to cover the 5% POMV draw plus the deposit for inflation proofing that the statute requires that they're supposed to make. So where's the difference going to be made up? I mean, once we go through all the accumulated earnings reserve that we've been drawing on the last six years and we'll draw on a couple more years, where are they going to make up this difference and the difference?
Speaker 1:There's two other sources of income to the permanent fund that you would have to use to cover once the earnings reserve, the accumulated earnings reserve, is drawn down. Two other sources of income you'd have to use to cover One is the deposit that's coming from royalties. I mean there's a quarter of the royalties are supposed to be deposited into the permanent fund and they're supposed to be used to build up the permanent fund. Make the permanent fund permanent over time, build up this corpus. That's generating the earnings. One is that and that's eating your seed corn. I mean you've used this phrase before and it's very appropriate here to count on using the permanent fund share of royalties to cover the draw, cover the POMV draw. You're essentially just recycle, recycling royalties that are supposed to be put into the permanent fund. You're recycling those into the general fund If you, if you, use those.
Speaker 1:The other is the, the, the unrealized gains that the permanent fund has built up. Now, unrealized gains are the gains you realize out of stock. Let's say you bought stock at 100 and the market price now is 110. So you've had a gain of 10. That's unrealized if you had. It's realized if you sell the stock and take the 10 as profit. It's unrealized if you hold the stock and it tells you you've made 10, but you haven't traded it into cash yet.
Speaker 1:The permanent fund has always told us that it's holding that stock. It has unrealized gains because it anticipates that that stock is going to go even higher, that there's a value to holding the stock as opposed to cashing it out, because there's additional appreciation that's going to go on in that stock or on in the asset or whatever represents the unrealized gain. There's additional gain that's going to come out of that and you don't want to cash it too early. You want to keep riding that gain on up, and so you don't want to cash out. But what this is telling you is you're going to have to come up with some additional source to realize that cash gap that's in there.
Speaker 1:So what this really tells me is one of two things is going on.
Speaker 1:What this really tells me is one of two things is going on.
Speaker 1:Either the 5% draw that we projected for the permanent fund is too high.
Speaker 1:We can't support it. The only way we're going to be able to support it is to start writing down, start either converting the share of royalties that's coming in to cash out, essentially recirculating them to the general fund or we're going to have to start doing something with respect to the unrealized gains. And so either the 5% is too high or what I really think is going on is the permanent fund isn't earning enough. It isn't earning enough to cover the cash obligations, to cover the obligations that it's built for itself. And when you compare this we've talked about this in a prior segment when you compare the permanent fund earnings to the S&P earnings, for example, the permanent fund is way deficient compared to the S&P. We would have a permanent fund of over $110 billion now, as opposed to the $80 billion we have over $110 billion, if we'd been investing in the S&P just since FY20. So this is telling you that there's a problem, and even the permanent fund's own numbers are telling you that there's a problem here.
Speaker 2:This is a lot on this chart, but essentially what it's saying is and, brad, I think you said it was one of two things you said it's either the legislature is overspending or the permanent fund is not earning enough. It's not doing a good enough job earning money. I would argue that it's both, because if we were spending less, this wouldn't be as big an issue we still wouldn't be earning as much as we could, but this wouldn't be as big an issue. But, on top of that, we're not earning as much as we could, and so the divergence between those two is pretty spectacular.
Speaker 2:But basically, bill, for you and me who haven't had enough coffee yet today, just look at that bottom line there, the red, starting at 2025, and move outward Every year for at least the next 10 years. It's a minimum of half a billion dollars in the red, meaning, over the next 10 years, we will draw $5 billion more from the earnings reserve than it is. That is in it, and that's the money that's going to come out of the permanent fund itself, the corpus of the fund, and so I mean that you again eating your seed corn. This is the argument they're making and, um, again, this just goes to show you that we are overspending and not earning enough.
Speaker 1:Both of those.
Speaker 1:Brad. Yeah, basically, what's going on with this proposed constitutional amendment is the permanent fund sees this. The legislature may see this, although I'm not sure they've seen these numbers displayed in this way. But the permanent fund corporation sees this, knows they can't sustain the 5% draw, knows that there won't be enough cash coming into the earnings reserve to sustain that 5% draw and sustain inflation proofing, statutory inflation proofing, and so they're seeing this and they're going up. Can't have that. We need to sustain the 5% draw. So if we merge the two accounts together, if we merge the earnings reserve and the corpus together, we'll set up a situation where we can start drawing from the corpus to cover that gap and no one will see that because we've created a backdoor into the corpus.
Speaker 2:We no longer see those separate accounts. That's the thing, though. Brad right, this doesn't fix the problem. All this does is fix the problem. All this does is obscure the problem. The problem still remains the problem of we're spending too much and we're not earning enough for the permanent fund. Those two problems still remain. Combining the funds simply obscures the problem.
Speaker 1:It obscures the problem, but it also creates a backdoor into the corpus. I mean, it obscures what's going on. The problem remains. It obscures what's going on, which is they've got a backdoor now into the corpus and they start pulling the corpus down, either by rerouting the permanent funds portion of royalties or by cashing out um uh on on appreciating assets, cashing out too early in order to generate cash to to cover the 5% draw.
Speaker 2:So I think it was Rick who asked why. I mean, are you giving this to the legislature? Are you addressing the legislature with this information? And you know he said I think it would be better served there. But Brian asked the question that I asked. You think they would actually listen, would they actually look at? This is all information that's readily available to them. Why aren't we talking? I mean, why aren't they talking about this as well in these kinds of ways? I mean, this is pretty, pretty bleak hard facts, when you can look at this and say, okay, here's where we're going to go, and and these are based on, I'm sure, the rosy numbers of the department of department of revenue and the governor's 10-year forecast and everything else this doesn't include any major spending boons, I'm sure, like defined benefits or anything else.
Speaker 1:Now let's be clear. These aren't deficit numbers, these are shortfalls in the POMV draw. These are shortfalls in the POMV draw plus inflation proofing. So it is the failure to generate revenue to support the spending that's going on.
Speaker 2:Right, I mean it is a deficit in terms of we're going to be drawing from the corpus of the fund because we're not earning enough, but it's still again based on the average revenue that the state is going to need, right, I mean? So it's, it is based on a number that is based on real, you know, projections that have been put forward. So it's not technically a deficit, but it just shows that the problem is there. All right, Brad Keithley, Alaskans for Sustainable Budgets, Our guests.
Speaker 2:We're continuing on with the weekly top three. We just finished up with a lot of numbers and colors and bars and graphs and everything else to basically tell us that we have a couple of problems. One, the permanent fund is not earning enough money. A couple of problems. One, the permanent fund is not earning enough money. Even if it just pegged itself to the indexes, we would have made tons more money rather than whatever fancy manipulations that they're doing right now. And two, we're obviously spending too much, because if the 5% draw isn't being covered by the earnings of the fund, I mean that's obviously an earnings problem, but we should also be cutting back on our spending to make it fit what we're actually taking in. That's the bottom line, but number two of the weekly top three is a small ante. I don't know what you mean by that, Brad. What do you mean? A small ante? Hit me with it.
Speaker 1:Well, the Senate passed a corporate law, what James Brooks describes in an article in the Beacon and in the ADN as a corporate tax update. The Senate passed it 16 to 4. It's on its way to the House and it is something that I think is a small ante into the solution of our fiscal problems in the state. The update itself, the corporate tax update itself, is only generate 65 million a year at best. The range that the fiscal note gives it is somewhere between 25 million and 65 million. Even at 65 million, that's only 3% of the deficit we're running, so it's not the solution to anything. The headline says it could generate millions for dividends and services, leaving the impression that it's a big part of the solution. It's not. It only covers 3% of the deficit, but it is part of the solution. Even at 3%, it is part of the solution and I think it's something that is important to understand and discuss. A lot of people have complained that. Some have complained that it is a change in the corporate rate.
Speaker 1:This is not the Hillcorp loophole we're talking about. This is an entirely different statute. What this statute does is expand the definition of the corporate income tax to include companies like Amazon and others that are delivering online sales into Alaska. Right now, our definition of the corporate income tax only includes from the standpoint of online businesses only includes companies whose costs are largely in Alaska. It doesn't include companies whose costs are largely outside Alaska but who do business in Alaska by delivering products into Alaska. And so we're not. Amazon is not subject to the corporate income tax. Other online sellers are not subject to the corporate income tax. A share of their profits from doing business in Alaska. They're not subject to the corporate income tax. A share of their profits from doing business in Alaska. They're not subject to the corporate income tax because of the way that our corporate income tax code is written Elsewhere. As online businesses have become much more a big part of commerce elsewhere, other states have updated their corporate income tax codes to include corporations who make sales into the state, even though their costs may be located elsewhere, even though the origin of the products may be elsewhere. They've updated the corporate income tax to include companies who make sales into their states. Alaska is operating on a prior version of a multi-state to reflect that our corporate income tax will apply also to corporations who are doing business in Alaska through sales not just cost, not just where they're sending the product from.
Speaker 1:Good bill, a good update, keeps us on par with what's going on in other states and pass the Senate, as I said, 16-4. It's going over to the House and basically, what I want to say here is this is an ante into the game. This is an ante of get a small ante, but nevertheless an ante into the game of getting our budget under control. I know there are advocates out there that say we can only, we're only going to be able to solve the budget by cutting spending. But Dunleavy tried that in 2019, did an accomplishment, couldn't even get, didn't accomplish it, couldn't even get 16 to back him up in the legislature, to back him up on the level of cuts that he proposed, and we've been running deficits ever since. Actually, we've been running deficits since 2013.
Speaker 1:So this is a small ante into updating the Alaska corporate code to put us on a par with other states in terms of how we're calculating our corporate income tax, and I think it's an important thing to do. I'm concerned that those are going to have a knee-jerk reaction that says tax even though it's not an increase in tax, even though it's a tax essentially on non-resident, out-of-state industries that are doing business in Alaska. I'm concerned that there are those who are going to have a knee-jerk reaction saying tax no.
Speaker 2:But you and I have talked about the effects of taxes because, again, this is a tax that wasn't being levied before on businesses, like you said, like Amazon, that are outside. In a lot of ways it's a hidden tax because it't affect directly affect businesses here in the state of Alaska. But if you think that Amazon is going to just eat whatever tax increase that is in there, I mean you and I both know that's going to be passed on to the Alaskan consumer I mean it's it, is it? I mean they're quoted in the article as saying, oh, this isn't a tax increase? Well it, it is a tax increase. Well, it is a tax increase, because it's a tax that you haven't received before. So therefore it's an increase and it's going to be paid by someone. And I guarantee you the corporations that are involved are not going to just eat the cost. They'll just tack a portion onto whatever they're selling to do it or pass it directly onto you.
Speaker 1:Michael, in large part what's going to happen with this tax is it's going to come out of taxes that are being paid to other states. So since Alaska is not calculating corporate income tax on this basis, other states are getting a bigger share of tax as a result of calculating it on this basis, in part because Alaska isn't. It's sort of like, when you think of it, it's the equivalent on a personal level of the Oklahoma income tax. We've got guys who come up from Oklahoma, work on the slope, non-residents here, go back to Oklahoma and Oklahoma has an income tax and so when they go back to Oklahoma they're taxed on the income that isn't taxed anyplace else.
Speaker 1:If Alaska had an income tax I'm not advocating at this point that we do, but if Alaska had an income tax what that would do is reduce their Oklahoma income tax. It would count as tax in Alaska. That would reduce the tax burden in Oklahoma. So in a lot of respects it's not increasing the cost to the company. It's simply shifting the costs that they're the taxes that they're paying from one jurisdiction to another jurisdiction. I mean, the loser in the Oklahoma income tax case is the state of Oklahoma, and I don't think the state of Oklahoma is going to be able to find a way to increase costs, to increase costs to Alaska.
Speaker 2:But that's assuming that every state has something similar that they're already taking and it won't be something additional, and there's no guarantee that that is the case. So in some cases this may cause an increase, right, I mean? I'm just I'm trying to be above board and intellectually honest on this. Not every case is going to be an Oklahoma style case is going to be an Oklahoma style case.
Speaker 1:But this isn't a sales tax. It isn't a tax that is a tax on the sale that the company will say okay, we're paying a 3% tax on this delivery and so we need to increase your cost by 3%. It's a cost on the corporation, a cost of business on the corporation, and it's hard to think I mean what you're what you're. What you're essentially arguing is that somehow they would do Alaska Alaska centric pricing. That would that would charge a different rate to Alaska for the product than they're charging in in other States. The underlying, the underlying charge would be different to Alaska, not the charge for the for transportation, which is which to Alaska, not the charge for transportation, which is separate, not the charge for sales tax that would apply in other states. What you're essentially arguing is that they would somehow increase the underlying price.
Speaker 2:I'm saying that the underlying price across the board and maybe not just Alaskans would be paying it, but everybody is going to be paying it because if a corporation has a 3% cost increase in costs, um, they're again. They're not just going to eat it, it's going to go in somewhere, uh and and so I think again, I think it's just disingenuous for folks to say it's not really a tax because we won't pay it. We probably will. Maybe in some cases we won't, but in other cases we will. I just think again, we shouldn't soft sell it to say, don't worry, it's a net zero thing and it's free money. I think it's just important to say that.
Speaker 1:Well, we're talking about a fraction, I mean. So what you're suggesting is somehow Amazon reflects it in its overall cost and somehow Amazon bumps up the price slightly to cover this additional cost, or cover this additional cost in its overall price. And so the price to New Hampshire, the price to Maine, the price to Washington, the price to Illinois is all bumped up a little bit. So the fraction of cost that ultimately gets to Alaska is going to be even in that situation, the fraction of cost that's going to get to Alaska is going to be minute.
Speaker 2:Well, and I agree, I'm not saying that it's not. Here's my problem. Again, it's the disingenuousness of saying this could not cause an increase, which is how they're acting, like this couldn't be. And maybe it's a nickel, maybe it's a buck, I don't know. But again, just to say that this is not a tax, is, uh, you know, to say this isn't a tax increase, it is a tax. It'll be minute and probably almost unfelt, but don't blow smoke up my skirt and tell me it's raining. You know what I mean. Don't, uh, don't, don't, don mean. Don't tell me what it's, not when it is.
Speaker 1:You know this is how we never solve the problem you and I had a debate about when we did the tax on e-cigarettes. I say, as you take a draw on your e-cigarette, we've got to have. We are not going to cut our way out of this. I know that there are people in the chat room right now who are screaming all caps that we're going to cut our way out of this. It's not going to happen. We have gotten we saw in 2019, there are too many buildup forces, even in conservative districts. There's too many buildup forces to cut our way out of this. So there's going to be revenue somewhere. Having a revenue option that accepting all of your arguments, having a revenue option that has a minute effect on Alaskans off off off shores a bunch of the, a bunch of the cost effect. Having a revenue option that does that is a hell of a lot better than a lot of other revenue options.
Speaker 2:Again, you're missing my point. I don't disagree with you on that. What I'm saying is don't tell me it's one thing when it's not. That's my whole point. See, this is the problem when we start to lose trust in our leadership is when they look at our face with a straight face and say, well, this is absolutely not a tax, this is absolutely won't and maybe it won't cost us much, but it was something, and that's the thing. That's what gets me, brad, not the fact that we don't. We need the revenue. I'm not arguing that. I'm not arguing about anything. I'm just saying when you look, all right, let's accept that I mean it is a tax.
Speaker 1:Let's accept that for a moment. It's a hell of a lot better tax than a lot of other options.
Speaker 2:Not disagreeing with you on that. That's what I'm saying. I'm not disagreeing on that. My point was don't tell me it's one thing when it's not, or don't tell me it's not something when it obviously is. And that's the bigger problem, the heartache that I have with this. I don't have a problem with the overall idea of it. Yeah, everybody's going to pay it. I mean, people in New Hampshire will be paying a tax because we increased our tax. Maybe it's a nickel, maybe it's a penny, maybe it's whatever. But again, it's just the disingenuousness from these people refusing to address the actual issue, saying that they don't want to say tax, they don't want to, they are afraid to say it, they don't want to talk about it. It's always new revenue, right, it's not. It's again. Just don't call it what it is.
Speaker 1:The actual issue is we're running huge deficits. That's the actual issue, a hundred percent. And, and the actual and the actual impact of this is to reduce those deficits in, in, in, in, in. Not in a huge fashion, again, it's only 3% of the of the size of the deficit. The projected revenue, even at best, is only 3% of the size of the deficit, but it reduces it, at least some, and it reduces it in a way that, again, accepting your, accepting your argument it reduces it away in a way that has a minute impact.
Speaker 2:Yeah, it does have a minute impact. I'm not going to disagree with any of that. Again, that wasn't my whole point. My point was don't tell me it's something, it's not, when it is obviously Anybody that looks at it. It's obviously, again, of all the things that could have been done out there, definitely probably the least harmful of all things that could be done out there. But again, it's the fact that they're trying to tell us that it's not a tax. That's what gets me, because, again, it's that disingenuousness that we keep hearing, because they're refusing to acknowledge the problem that we're spending too much, we're in deficit spending. We're in deficit spending, you know, and then we did so again. This is my fear, if we ever did come up with some other form of tax, um, without any kind of controls, is that they'll just spend it all. They still won't acknowledge the problem. The problem is we, we, we were spending too much money. That's the bottom line and they're just not acknowledging it.
Speaker 1:Yeah, but we are spending too much money. We are, we are running huge deficits. We've got to close those deficits. We've been closing them with the most regressive tax ever proposed in terms of, in terms of PFD cuts. Um, we've got to close them somehow. And this is, this is in in the, in the broad range of things, the broad range of things that you can use to close the deficits. It is got to be one of the least burdensome, least impactful of the options.
Speaker 2:Because it's the most broad based. I mean, let's face it, everybody's paying. I mean, people from all over the US will be paying for our little stipend for sure. So I agree with you on that Absolutely.
Speaker 1:What I'm concerned about is that we just have people just say, oh, it's a tax, so no. Well, how do we ever solve the problem? How are we ever going to solve the deficits? Because we are solving them through the most aggressive tax ever proposed. We are solving them through the most aggressive tax ever proposed. We're solving them through PFD cuts. We're solving them by taking money out of middle and lower income Alaska, alaska families not even any other families, only Alaska families. We're solving them by taking money out of their pockets. We've got to solve the situation and, okay, I will grant you, it may be viewed as a tax under the circumstances that we described in the segment. I will grant you, it may be viewed as a tax, but in terms of the range of taxes, it is way the hell at the far end of low impact, as you say, broad-based taxes.
Speaker 2:Right? Well, and I guess my whole point is, brad, words matter, Definitions matter, truth matters, right, and in showing that it is a tax and saying this is the best thing we could do because it affects you the least, somebody could embrace that and acknowledge that we've got problems. That's the whole point. The point is avoidance. See, they're doing stuff for outside, things that hit people outside, that it's the lowest impact stuff that nobody will see because they don't want to acknowledge. Because then people might say, well, why are they taxing us? They're already getting all this money from the permanent fund, they're getting this money from royalties, they're getting this money from the dividend. Why do they need more? Right, and that might make people question what's going on.
Speaker 2:To me, it's about the avoidance of the issue more than anything else. I'm not squawking about the nickel that it might cost me on an Amazon order. I'm saying this whole thing is don't continue to lie to me and tell me it's a sunny day when it's pissing rain all over us, right? I mean, that's what's going on and that's what irritates me is that they continue, with a straight face, to look in the camera and say it's not a tax. We don't do taxes around here. You're taxing the hell out of us. You're taking our PFD. You've gotten all the money straight from the oil companies. You're getting all this other stuff. We are some of the most heavily taxed people in the country. We just don't see it because it's stealth. So they're continuing their stealth tax by putting it on something that's outside that we won't really even see or notice. That's what I'm saying.
Speaker 1:Okay, all right. Well, that's a fair point, but we've got to close. It's also a fair point that we've got a huge deficit that's not going to go away by just magically saying we, magically, magically saying we're going to, we're going to cut spending down to whatever the hell the revenues are.
Speaker 2:Again, I'm not disagreeing with you on this. See, that's the thing you think I'm disagreeing with you. I'm not. I'm just saying we're violently agreeing. I'm violently agreeing.
Speaker 2:Use truth. Don't try and deceive and obfuscate what the actual truth is. Just tell me true, tell me like it is. You know, the thing is, again, they don't want to have this conversation, brad, because it would expose what's going on, that the reason we have the deficits which you are right 100%, we must fill, we must squash the reason we're having these deficits is because we're spending more than we take in, which, at its root, is a spending problem. But again, there is no political will to fix that. I'm with you, 100%. I agree. We've been trying that on this program. You and I have been talking about it for 10 years. I've been talking about it for 15 years before that. There is no political will to fix that and I don't know how to. Honestly, we had this conversation last week. I have no idea how to fix that. Honestly, we had this conversation last week. I have no idea how to fix that. No, I thought if we talked about it enough, people would listen, but people just don't give a crap, apparently.
Speaker 1:Well, it's because they're not personally affected, michael. I mean the top 20%, the donor class, the old companies, the non-residents aren't personally affected, aren't being affected by the deficit because they don't have to contribute to the costs. And the 80% that are affected I mean a lot of them are on this program. We're bitching about the costs, we're bitching about the spending because we're personally affected by it, but the people who can actually move the needle aren't affected by it by the way we're doing it.
Speaker 2:All right, brad, keith Lee Alaskans for Sustainable Budgets the weekly top three. We're on to number three, which is some good news. Brad saved the good news for last, for all the beatings that we've taken here. Now we've got some good Brad. What is the good news? What is?
Speaker 1:Well, I your our conversation last week. At the end of the last segment last week to heart, you said maybe I should do a good news segment. I'm not sure I can come up with it every week, but at least I at least I can come up with it some weeks. And this one, this one's sort of backwards, um, in the sense that the good news is it wasn't as bad as it could have been. But as we approach the end of this session, there is some good news out there. The first of it, I think, is that the capital budget passed the Senate, and the capital budget passed the Senate unanimously. Now that doesn't mean that everybody was in love with spending on the capital budget, but it does mean that people recognize we need a capital budget, that there are things in this state that need a capital budget. The match with the federal government so we can have roads for one thing is a huge part of that that we do need a capital budget, and I think the unanimity in the Senate passing the capital budget was a recognition that it was probably the lowest cost, most efficient, least impactful capital budget that we could possibly get away with. That there was capital budget restraint, and that's good news. I mean in the sense that it could have been worse. It could have been a huge capital budget because everybody wanted to spend and the Senate just kept adding more and more and more and more to it. That's not what happened. What happened was the Senate had restraint on the capital budget, was the Senate had restraint on the capital budget.
Speaker 1:Additional good news, I think, out of that capital budget is that a significant part of it was paid by reappropriations. Reappropriations are where the Senate has appropriated money in prior years to various budgets or to various projects. The capital spending is included. Appropriations to those projects Uh, the Senate has found, or the, the the legislative body finds that the uh, the projects are no longer needed or are not as important uh as using that cash for other purposes, or or or saving the cash by not pursuing that proper, that, that appropriation or that particular project and reappropriating the money to other projects, essentially saying we're not going to go forward with that project, we're not going to spend that on that project right now. We're going to take the money and reappropriate it to someplace that we need to spend it. I think the recognition. Otherwise, that money just sits out there and somebody will find a way to spend it at some point. So reappropriating, taking back money from projects that no longer have a priority, I think, is another good thing. The ADA dividend ADA, the Alaska Industrial Development and Export Authority, earns money not as much as it should, but earns money off of various projects or has appropriations made to it by the legislature that are essentially capital appropriations. They're essentially part of the capital budget, if you think about it right, and that money is sitting over in ADA and that money is sitting over in ADA and the legislature in this instance ADA normally decides what it's going to dividend back excess cash that it says it doesn't need. Well, the legislature in this case is pulling more money back from ADA. Essentially that's a re-approach. If you think about it that way, it's a re-appropriation from ADA back to the budget. So I think that's another good thing.
Speaker 1:There's increasing recognition, I think, as we get through this session, that the legislature does not want to make additional subsidies to the LNG project, the AKLNG project. If it lives, if it's able to get money from outside, great good thing, go ahead and do it, but the legislature is not going to put any more state money in it. At least this session of the legislature is not going to put any more state money in it. And also the same on Cook Inlet Gas. We're not going to subsidize Cook Inlet Gas. We found a market solution to Cook Inlet Gas and we're not going to either forgive royalties that are otherwise due, reduce royalties that are otherwise due or subsidize Cook Inlet gas solutions. So I think that's a good thing that the legislature has gotten out of the business of subsidizing the LNG project or subsidizing Cook Inlet.
Speaker 1:Another piece of good information. Another piece there's a headline this past week in the ADN that says Alaska lawmakers say pension reform is a two-year project. I think, recognizing the pension reform, the defined benefits, conversion to defined benefits or re-creation of defined benefits, it's not something the legislature is going to accomplish this session and I think in large part that's due to the pushback the legislature has been getting on defined benefits, the emphasis on show us a fiscal note that shows what the actual cost of this thing is going to be, and the legislature having to deal with the fact that there is a cost to it, that they can't just say there's no cost, similar to your no tax argument. You can't say that there's no cost. So I think there's a bunch of good things that are coming out of the legislature in the sense that they're not bad things in the sense of the legislature is holding back, reappropriating, pulling back on the capital budget and and sort of standing standing on where we are, as opposed to continually expanding on that side.
Speaker 2:This is. This is analogous to you know, looking in the couch and finding all the money under the couch cushions, right? I mean, this is sweeping out all the accounts for all this money that's been sitting these various accounts for all this time and basically been doing nothing. And the argument is and I've talked to several people in the legislature on this there are thousands of accounts out there with money just sitting in them that's been stagnant for years, for some project that was funded 10 years ago that hasn't really gone anywhere. There's millions and millions of dollars sitting out there. We should be doing this every year.
Speaker 1:Well, there are some re-approves every year. I think what's going on in this one is these were two fairly high projects. One is the Juneau Road. They're pulling back from the Juneau Road and they're pulling back from the Port of Nome because the feds are pulling out of the Port of Nome. So it's basically think it's what we're getting attention to is is they're pulling back even from high profile projects, not those that have gone stale and since been forgotten. They're pulling back from high profile projects as well.
Speaker 2:No, I mean there's you know how many, how many accounts are sitting out there and it just not just on the capital component of it but on, you know, on all the components of it. I mean how many accounts are sitting out there with a million here, two million there, you know, 500,000 here, 10 million here. I mean pretty soon you start talking about real money and this is part of that problem. When they're supposed to be sweeping some of the accounts out that have money in them, when they're supposed to be sweeping some of the accounts out that have money in them and the stuff that's appropriated, they need to have like a reappropriation committee where they go back and look and say, have we done anything on this? There's just money sitting in this account doing nothing. If we're not going to do anything must not have been that critical, let's pull it back in.
Speaker 1:To some degree. I think that's right To some degree. This is like empty positions or unfilled positions right, this is the capital side equivalent of unfilled positions. You've got this money sitting out in the accounts for projects that are no longer viable or certainly aren't high priority, but you don't want to pull those back because it is sort of like the money in the couch cushion. It's sort of like the savings account that no one knows about or the checking account that no one knows about. It's money that they're sort of holding in reserve in years like this maybe, where they're pulling it back in to help fund when oil's down or when the permanent fund isn't producing the earnings you want. It's sort of sitting out there. So you're right.
Speaker 1:Yeah, the other thing I think there's a big thing about pulling back from ADA, making ADA a dividend or having ADA a dividend more than what ADA wanted a dividend.
Speaker 1:If you think about ADA, it is just another capital appropriation.
Speaker 1:It's another way of doing a capital appropriation. It's essentially giving money over to an agency that the governor controls, but you're essentially putting a bunch of money over that organization, some of which is to be spent on specified identified capital projects that the legislature says here. We're giving you money to pursue this project sort of off books or in a separate set of books. Some of it is just money that ADA has generated, earned off of projects they've been involved in and they're holding on to. But pulling that money back in, dividending that money back into the general fund, which is where it originally came from back in the day, I think is a good thing also. So as you think about these re-approves and pulling money back in from projects that are dead, you ought to think about is the money that we've given ADA for the projects that they're pursuing. Is that more important than having the money back in the general fund to either close the deficit, help close the deficit or pay for the capital spending that we need to do? That has a higher priority currently.
Speaker 2:Yeah, no, I agree. And again, it's not just Frank just said well, hey, a lot of that's federal money. If we take it back the federal government, it will demand some. I'm not talking about draining stuff out of federal matches or anything else, but there's tons of money out there that the state just put into funds, and it's not all about capital or construction. There are monies in different accounts out there. I can't remember who told me this, that they had started looking at this. It is billions of dollars. There's billions of dollars in the various accounts out there that could potentially be swept back in if we really were serious about it. But of course you know they won't even cut unfilled positions. So I mean that have been vacant for 10 years. They won't even cut those. Do you think they're really going to want to go through and sweep money out of all these accounts? They may need that money one day for a rainy day. They may want to spend it on something else.
Speaker 1:Yeah, or a project or a capital budget. They want to, they want to pursue for certain reasons.
Speaker 2:So they keep it. They keep it sitting out there, yeah, holding it in reserve for that day when they need to be the hero or whatever, to about two and a half minutes here, brad. So what do you think happens today If the, if the veto, which I think is going to happen, it's not going to be overridden, it's going to stand. What do you project for the rest of this session? Are you think that they're going to try and the governor's got his proposal in there? Do you think that's going to go anywhere? Or do you think we're looking at a special session? What are you? What are you thinking?
Speaker 1:Well, we may be looking at a special session for the budget. I mean, we're still, there's still a deficit in the budget and I take the Senate at its word that it wants to hang on to a 2575 PFD. And so a 2575 PFD, there's still going to be a deficit. Even if you reduce the BSA from the $1,000 that's in the current House operating bill down to 680 or 650 or whatever the heck that number was we used last year, you still have a deficit. So there may be a special session on the deficit.
Speaker 1:I don't think, unless the governor really just wants to flail this horse to death, I don't think there's going to be a special session on education. I mean, people are getting exhausted by the issue and it's not making any progress and it's not a must have in the sense that the budget is you've got to. You can't end a session unless you have a budget signed by the governor. So it's not, it's not a must have and it can be papered over again with another. You know, one time, one time contribution to, to the, to the, to the BSA, and try it again next year. And frankly, I think that's where we end up. The governor has a bill out there. Maybe people will talk about it, but I don't think there's enough time left in the session to pass it and I really hope we don't. We don't go to a special session on that, because I'm not sure it's an ever-ending special session.
Speaker 2:Yeah, well, I mean, I'm not sure exactly what happens, even though there was one of the I think it was Hemshoot who proposed the original big increase said well, I could look at the governor's proposal. It might work. I mean, I don't know, it's all pie in the sky at this point. We'll have to see where it goes. All right, brad. Well, thank you for coming on board and sharing all this with us today and arguing with us. I appreciate that. I think it's fun. Iron sharpens, iron baby that's what it's all about. So we all understand where we're coming from. Thank you for coming on board, brad. As always, it's good to talk with you, my friend.
Speaker 1:Michael, as always, thanks for having me Appreciate it. 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.
