The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (5.19.2025)
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 May 19, 2025.
This week, our top 3 issues are these: 1) we explain why this year’s PFD cut — which is the 10th in a row and the largest yet — is, like the others before it, nothing more than a bailout paid for by middle & lower-income Alaska families of the Top20%, non-residents, and the oil companies (2:18); 2) we discuss how, in its latest press release, the Permanent Fund Corporation is trying to divert attention away from its recent performance (19:40) and 3) we explain how dealing with supersized and uneconomic Alaska energy projects is like a game of whack-a-mole; just when you have one down, another pops up (38:31).
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 May 19, 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. 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 project's 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 discussed this year's PFD cut the 10th year in a row and the largest yet and why? Like the others, it's nothing more than a bailout paid for by middle and lower income Alaska families of the top 20%, non-residents and the oil companies. Second, we discuss the latest numbers from the Permanent Fund Corporation and why they are just their latest effort to spin the narrative about their performance their performance. And third, we discuss how dealing with supersized and uneconomic Alaska energy projects is like a game of whack-a-mole Just when you have one down, another pops up. And now let's join Michael.
Speaker 2:All right. Well, brad, surprise, no, yes, I mean mean there's a lot of things going on here, but uh, you know, of course, the the big thing is the biggest cut to the pfd ever, the biggest tax on alaskans ever. A thousand dollar pfd, that's all we're getting adjusted for inflation. It's the smallest pfd since the program's inception. Um, and they're shocked, shocked, shocked. I tell you, if the Alaska economy is in the toilet, they just don't understand how that could possibly happen.
Speaker 1:All right, Give it to me, brad. Lowest PFD adjusted for inflation since the inception of the program. There's a milestone that we're hitting that I think you know. I could do it next week, I could do it the week after that, but I'm going to do it this week. This is the 10th year of PFD cuts, the 10th year that the Alaska legislature has failed to follow the Alaska governor. In the first year and in subsequent years the Alaska legislature has failed to follow the PFD statute and it is noteworthy for a number of reasons. It's the 10th year. It is the smallest PFD adjusted for inflation since the beginning of the program. This year is the largest PFD cut in the last 10 years in terms of percentage of the PFD being cut. This year 72% of the PFD is being withheld and diverted over to spending for Is it 72 or 82?
Speaker 2:72%, 72%, 72%, okay.
Speaker 1:So the deficit is taking 82%. To fill the deficit it's taking 82% of the POMV draw, but the percent of the cut of the PFD is 72%. Got it, we were at 71% before in 2022, but this goes above and beyond that. Over the course of the 10 years you know I do these charts and I just keep running totals Over the course of the 10 years the amount of the PFD cut, the amount per PFD taken from Alaska families, is roughly $18,000. I mean, if you do it to the dollars and cents it's $17,829 and some odd, but $18,000 taken per PFD from Alaska families.
Speaker 1:So it's a. I mean, and it's the year after, this is the year after the Senate said absolutely 2575 POMV draw, we're going to keep 25 for the PFD. We promise we're drawing a line in the sand. That's what we're doing and then the very next year rubs out that line and crosses over and cuts even more deeply. That's the 82% number that they're taking from the POMV draw for government now, as opposed to the 75-25 that they said they would keep in place.
Speaker 1:So from a number of different perspectives, it is sort of the bottom of the barrel. Not that we can't go deeper in subsequent years, but this year is sort of the bottom of the barrel in terms of PFD cuts. I want to flip it for a second and talk about what it also is. It is the largest single bailout in Alaska history of the top 20% and oil companies and non-residents those who are getting bailed out are being protected from having to contribute to the additional costs of Alaska government by PFD cuts. I ran some other numbers. This year's PFD cut will take roughly 28% of nope, that's not it. I think that's in the next segment.
Speaker 2:Michael, no, no, ignore that, ignore the man behind the curtain.
Speaker 1:This year's PFD cut will take roughly 28% of the adjusted gross income from the lowest 20% of Alaska residents, roughly 12.5% from the lower middle income bracket lower middle income bracket roughly 9.2% from the upper middle income bracket. That's the effect of this year's PFD Cup. How much is being taken out of the pockets, out of the income of Alaska families? 9.2% of adjusted gross income from the upper middle income bracket, but only 3% from the top 20%, only 1.5% from the top 5%, only 0.7%, 0.7% from the top 1% and zero, of course, from non-residents. The overall average that's being taken of adjusted gross income from Alaska families is about 5.5 percent, a little under 5.5 percent, 5.4 percent from overall from the pockets of Alaska families. That's the effect of the PFD cut. That's the tax rate. If you want to think about PFD cuts in terms of taxes. That's the overall tax rate from Alaska families, if the burden was spread evenly flat across all Alaska families. But against that 5.5%, more is being taken from 80% of Alaska families, from middle and lower income Alaska families. More is being taken from 80% of Alaska families than is being taken from the top 20% and of course, none is being taken from non-residents and the oil companies who haven't had a tax code revision since 2013,. The old companies are avoiding paying the additional costs of government. So we've hit, in terms of the 10th year, we've hit a milestone where we ought to be looking back at what the impact is. That 10 years also coincides, incidentally, with the period of time during which we've had working Alaska families, working age working Alaska families out, migrating from the state, the decline in the state's population, working age population. It's also not coincidentally. It's also coincides with the period of time where the top 20 percent has increased, has grown in terms of want to admit it or not. We're seeing the effects of the PFD cut over that period of time.
Speaker 1:There was an interesting Rob Meyer sent a clip last night of a debate on the House floor yesterday where they were debating a bill to where the legislature was proposing or some of the legislature were proposing, to subsidize the student loans, pay back the student loans or pay the student loans for those moving to Alaska to fill certain slots, teaching slots or government slots. There was an interesting debate yesterday about where those in the legislature proposing that subsidy were describing it as important to stem the tide on out-migration and to bring Alaska families, bring people, back into Alaska to grow Alaska families to spend government money in terms of paying for student loans, paying off student loans, to bring those a select group of outsiders or insiders to Alaska and help them subsidize their student loans. The only person who mentioned the PFD was Kevin McCabe. To his credit, kevin pointed out that, at the same time that some are proposing to do that, the PFD has been cut and we've had out migration in those who are most affected by the PFD cuts and the private economy has declined during that period of time, has declined during that period of time. And so it's really I mean you can just see what's going on in the legislature in terms of some proposing to take PFDs.
Speaker 1:Make the situation worse for middle and lower income Alaska families. Take income from them. Shield the top 20% non-residents and the oil companies from contributing to the share to government costs. Take money from middle and lower income Alaska families and then give it to a certain subset of Alaska families and subsidize them. Provide financial incentives to grow that sector of the economy at the same time as you're taking out the PFD and providing disincentives. As you're taking out the PFD and providing disincentives obvious disincentives to broad scale, you know, working class, working age, alaska families taking the incentive away from them, creating disincentives by PFD cuts.
Speaker 1:So it is, oh and, by the way, that bill passed the House to tell you where we are, to tell you where we are in the legislature. So we've come to sort of a spot in the road where it's useful to reflect back on what's happened. We've had 10 years of PFD cuts. We've taken roughly $18,000 out of the pockets of Alaska families or out of the pockets of individual Alaskans. Over that period. We've had out-migration pockets of individual Alaskans. Over that period We've had out-migration. We have disproportionately funded government on the backs of middle and lower-income Alaska families. We've shielded, we've bailed out the top 20% and non-residents and the oil companies from contributing a share of costs really any share of costs toward the increased costs of government over that period. And we are where we are we have out-migration and we have a poorer state as a result of it.
Speaker 2:Yeah, and again, shocked, shocked. I tell you that we continue to have this out-migration and all we need to do is make sure that the government workers get their incentives to come in and get paid. Meanwhile, the private sector is out there scrambling and again we're losing working age families and folks like that. But don't worry, we'll keep spending it better than you can. That's the bottom line. We'll keep spending it better than you can. I mean talk about tone deafness, passing the House last night after all that debate and everything else, after cutting thousands of dollars from our PFD to give to some no-neck who couldn't figure out that their student debt might swamp them in the long run. It's just so insulting. It is just so insulting at this point and folks should be you know, they should be furious about this.
Speaker 1:I mean we clearly have a we-they attitude in the state and it shows up in a number of places. We have a we. Government workers are more important than the private sector. We need to subsidize the government sector. Don't worry about the private sector. We'll just take the money out of, you know, working-age Alaska families in the private sector to help subsidize the government sector. We clearly have a we-they there. We clearly have a we-they between the top 20% non-resident industries and the oil companies. They don't want to pay. They are big advocates I mean Sarah Hannon and the Juneau delegation that were pushing the bill last night.
Speaker 1:They're in the top 20%. They're in the top 20% by virtue of just being legislators, because the legislators voted themselves a raise to put themselves in the top 20%. They're in the top 20% and they're saying we don't want to pay for it. We want these subsidies. We want this loan forgiveness. We want to pay for it. We want these subsidies. We want this loan forgiveness. We want to pay for people to come to Alaska. We just want it to be our kind of people. We don't want it to be the rest of you out there, the private sector people We've got to protect our team, not your team.
Speaker 2:Your team is evil, brad, this whole thing is just a microcosm of everything that's going on and it's wrong in the government. They take the PFD and then they argue yesterday about how they need to give money to again a bunch of nitwits who can't figure out how to take care of their own debt, went into it eyes wide open but now can't figure out. Now they need a bailout. They need a bailout. Meanwhile, they're going to take an ax to every Alaskan family out there to the tune of thousands of dollars. I mean, my family just in this year alone lost $12,000 plus in dividends because they decided they needed to spend that money on somebody else who couldn't pay their bills.
Speaker 1:Apparently they decided they needed to spend that money on somebody else who couldn't pay their bills. Apparently, yeah, I mean. People often say that the PFD program's a wealth transfer. It's not because the PFD comes from the commonly held wealth. It is a share of the commonly held wealth. We're not taking money from anybody else to pay the PFD. It's coming from income earned off royalties deposited in the permanent fund. We're not taking top 20% money. We're not taking oil company money because it's royalties. It's not even taxes. We're not taking any money from anybody else.
Speaker 1:And so when people claim that the PFD is a wealth transfer program, I just sort of see red. But there is a wealth transfer going on, and yesterday's debate encapsulated it. It's a wealth transfer from middle and lower income Alaska families, from those whose PFDs are being cut to create these subsidies that are going to select groups. And that is a wealth transfer because they're taking money that otherwise is due under the statutes, is otherwise due to middle and lower income Alaska families, and they're transferring that wealth $18,000 in the aggregate per PFD now over the 10 years. They're taking that wealth and sprinkling it on other people and it's just you know, it's just aggravating, or just, you know, ludicrous that that they do that and then to have the people in the top 20 percent, like Sarah Hannon and others Andy Story from Andy Story from others from Juno have those people say, oh, they need it.
Speaker 1:Those people need it. Those people you know we need to subsidize them. They, you know, they've got student debt. We need to help them. We need to help them, bring them up to Alaska. To have those people who are in the top 20% and won't make any significant contribution to those costs to have them argue that we need to make that transfer out of the pockets of middle and lower income Alaska families is just infuriating. But we've had that for 10 years and can't seem to stop it.
Speaker 2:Yep, I mean, that's exactly where we're at right now and we keep sending the same folks back and expecting different results. And again, I don't know exactly how to change some of this, although I will say, brad, I don't know if you caught my interview with Bernadette Wilson this last week, but it was good it was. I mean, well, let's just say that she said all the right things and she's talked about it. You know she talked about she's fine being a one-term governor. She wants to go in there and start just whack-a-moling everything. I mean, it's it. It gives me a little bit of hope that maybe there's still somebody out there that sees the real problem for the trees. But you know, it's, it's. I don't know of any other solution right now, because we keep sending the Burt Stedman's and the Gary Stevens's and the and the Bryce Edgman's of the world back to the legislature and they're just going to keep doing the same thing they've been doing.
Speaker 1:Yeah, I'll say. I'll say this. I'm skeptical of those who who who argue that spending cuts are going to do it. We had that with Dunleavy in 2018. Didn't happen in 2019. Hasn't happened since. I am much more receptive to those like Ben Carpenter, who talk about comprehensive solutions and not only talk about comprehensive solutions, but have walked the talk in terms of making proposals for comprehensive solutions to solve the fiscal situation.
Speaker 2:Proposals for comprehensive solutions to solve the fiscal situation. Okay, we're continuing on with Brad Keithley, alaska's Four Sustainable Budgets. The weekly top three continues. The Permanent Fund oh, they're spinning some numbers out there. We're doing great. We're doing great, don't worry about us, we're doing fantastic. That 4.8% return is exactly what we what, what do you mean? Harvard is doing a 9% return. We don't care, we're doing fine. Fine, just fine, brad.
Speaker 1:Well, there was an article at must read. Uh, that, uh, that was just the regurgitation of a press release written by the permanent fund corporation, and I and I really I want to make a distinction anymore between the permanent fund corporation and the permanent fund. Permanent fund corporation is people, permanent fund corporation is the manager of the permanent fund. That's where the problem is. The permanent fund itself is just numbers, it's just deposits in various accounts and that's doing whatever it's doing. It's the permanent fund corporation that's managing it and that's where I think our focus should be on the permanent fund corporation. But there's a press release that they issued oddly way late in the cycle. The March results have been out for a half a month, more than a half a month, from the permanent fundent Fund Corporation, but they're just now getting around to issuing a press release.
Speaker 1:Suzanne Downing on Must Read reprinted it sort of verbatim. The headline of it was despite volatility in markets, permanent Fund exceeds benchmarks and they're patting themselves on the back for having achieved a return that is equal to one of their three benchmarks or that exceeds one of their three benchmarks. And I thought to sort of evaluate this. It might be useful to sort of look at what the numbers have been for the last several years. So, michael, if you've got the table that, you can pop up there. This table looks at the returns the permanent fund has earned per fiscal year against all of the benchmarks that the permanent fund corporation has used over the last 10 years, over the period I guess it's 12, 13 years over the last 13 years, and they've changed benchmarks over time. Interestingly enough, they haven't stuck with specific benchmarks. They kept changing them over time. The permanent fund return is in the second column and totals, over the full period from FY12 to FY24, averages out at 8.12%. And then the total fund. Well, I'll talk about the S&P 500 here in a second. The third column is the total fund return objective, that's CPI plus 5%. That's basically what the POMB draw is based on. And then they have various other benchmarks they've used over time performance benchmark, the passive index benchmark, risk benchmark, and it goes on and on and on.
Speaker 1:Over the last, what the press release is focusing on is, over the last 10 years, that the permanent fund return has exceeded its benchmarks. It's exceeded the total fund return. The CPI plus five has exceeded its performance benchmarks. It's exceeded its passive index benchmarks. But when you look at the individual numbers. When you look at the numbers by year, the reason that's occurred is because of the performance back in the 20-teens, because of the performance back in FY 15, 16, 17, 18, strong performances during those years.
Speaker 1:If you look at the year-by-year return, including this year, the permanent funds returns have been below its benchmarks on a year-by-year basis. In five of the last six years the permanent fund return has been below the CPI plus five. I mean people talk about we've got a problem with the earnings reserve and there's several reasons for that. But one of the reasons, a big part of the reason, is that the permanent fund corporation, in managing the permanent fund's assets, the permanent fund corporation, isn't earning a return that's equal to the withdrawal, that's equal to the CPI plus 5%. Draw In five of the six last years, the last six years, they haven't earned a return that's equivalent to that. And then that's just their benchmarks that they're picking and keep in mind, except for the CPI plus five. These are all benchmarks that the Permanent Fund Corporation has made up, has developed for itself. So when it says it's exceeding the benchmarks, what it's saying is we're exceeding a standard that we set for ourselves and, look, we exceeded it. But when you look at something external to that, when you look at, for example, the S&P 500, which is the second column I've got here, you can see that the Permanent Fund Corporation has vastly under-earned compared to an external benchmark, the S&P 500. Over the course of the 12 years or 13 years that are on the chart the S&P 500, the average return for the S&P 500 is 15.3%. The average return for the permanent fund is 8.12% a little over half, but not much over half, of what we would have gotten if we had used the S&P 500 as our tool, the S&P 500 exchange-traded fund, as our tool for returns.
Speaker 1:Putting that in another context, if you can go to the line chart for a second, if you can flip that up, this chart shows what the permanent fund balance would be. If we'd use the S&P 500, the permanent fund balance now, as of FY25, the beginning of the year of FY25, would be $113 billion Invested the way the permanent fund corporation has done. The permanent fund balance at the beginning of FY25 was $80 billion, $33 billion less than more than a third less than what it would have been had we invested in the S&P 500. You looked at it another way. The red and blue bars at the bottom of that chart show what the POMV draw would be if we invested in the S&P 500 over that period beginning of FY20 instead of the way the Permanent Fund Corporation invested it. The POMV draw in FY25 would have been $4.02 billion compared to what the POMV draw was, given how the Permanent Fund Corporation invested it, of $3.66 billion. The POMV draw would have been more than $300 million, nearly $400 million more, if we'd invested in the S&P 500, if we'd used that as our approach, as opposed to the active management that the PFC is extolling itself for in the press release. And you can see we already know what the FY26 numbers are for the POMB draw. We don't know what the ending balances are going to be for the permanent fund yet, but we know what the POMV draw is for FY26. The POMV draw for FY26, the way the permanent fund has invested it, is $3.8 billion.
Speaker 1:The permanent the POMV draw, had it been invested in the S&P 500, would be $4.5 billion, $700 million more than the way it was, than the POMB draw, the way that the Permanent Fund Corporation has invested it. So you have got to look at this Permanent Fund Corporation press release extolling themselves for how well they've done. You've got to look at it in context and you've got to look at it for what the alternatives are and you've got to look at it by year to understand that all of the pluses that they're claiming are nearly 10 years ago now, when in the last six years five of those last six years they haven't even met the CPI plus 5%. There is a problem I mean, I spent a lot of time focused on revenue side, because part of our problem, at least, is a revenue problem. There is a problem in what the permanent fund corporation is doing. There is a problem in how they're investing the permanent fund amount and it's costing Alaskans money in terms of under earnings and in terms of lower POMB draws and in terms of lower permanent fund balances that the otherwise would have.
Speaker 1:If the permanent fund corporation were here right now, what they would say is oh, but the S&P is more volatile. When the S&P goes down, it goes down harder than the permanent fund corporation, than the permanent fund does under permanent fund corporation management. Because we moderate, we balance out those that variability. Well, balance out that variability, well, yes, and you can see from FY22 on the chart, you can see from FY22 to FY23, both funds went down and the S&P 500 went down harder, more than the permanent fund corporation approach did. But the S&P came right out of it and has shot off, gone from $80 billion from FY23 to a balance of $113 billion by FY25, while the actively managed permanent fund under the Permanent Fund Corporation has only gone from $76 billion to $80 billion. So, yes, there is the potential for a bigger downside on the S&P, but that's more than offset by the bigger upside that you're getting out of some tool like the S&P 500 ETF.
Speaker 2:Right. But again, if you look at it even in the longer term, you'll see that even though it is more volatile, it earns more in the long run, which is why people are investing in the major fund that way, in a broad fund, because overall, on the 10 and 20 year charts, it does much better overall. I mean, if we'd started from the beginning, I mean we could have had 100 million, 100 billion dollars more, you know, if we started from the very beginning. But we wanted to be special and we wanted to do it our way. And yet here we are.
Speaker 1:So what? The permanent fund corporation press release that must read, just regurgitated what that press release is. And I've done this in my time in the private sector. What you've done is okay, I've got to issue a press release and I've got to claim victory on something least worst and I'll pat myself on the back. I'll pat myself on the back and so, yes, you write a press release that says oh, look at this, we were able to exceed in this one category.
Speaker 1:And if you look at the 10 years we're able to exceed in all of these categories against the benchmarks that we created in order to judge ourselves, yes, we're doing great, aren't we wonderful? But when you look at the external world, the world outside the permanent fund corporation, you look at the returns that people are getting outside the permanent fund corporation, you see how bad a job that they're truly doing. And when you look at the year by year numbers and see that in five of the last six years they've underperformed compared to the CPI plus five, which is the benchmark we're using for the POMV draw, you see, five of the last six years they've underperformed relative to that. That they're using to praise themselves is just a pile of very misleading words and not something that reflects the reality out in the greater world.
Speaker 2:Wait, what you mean to say is I'll just BS.
Speaker 2:I mean, you know that's what's going on. It's just a pile of hooey. At this point, All right. Well, that takes us out of the weekly top three. You should be sharing this chart, by the way, with all your friends and relatives out there. Folks on the radio can't see it. You should go back to the video on Facebook and take a look at these charts, because they definitely line out exactly where the problems lie on this. Yeah, david just said that mirrors the AK, the K-12 system. Big bucks for mediocre results. That's kind of what we're facing right now. Right, I mean, that's what we're doing. Big bucks, and it's a billion dollars a year. Right, brad, to manage that fund. That's about what they're 800 and something billion dollars a year.
Speaker 1:Yeah, the management fee report, which they haven't published for a while, by the way, I'm a little concerned about the delay About a month passed when they should have published the next one. But the last one they published showed that they were spending about a billion dollars a year 900, some odd million dollars a year on management fees for this actively managed fund. When they say, oh look, we equaled the passive benchmark, well, yeah, after spending a billion dollars, you were able to equal the passive benchmark. If you hadn't spent the billion dollars and you invested in the S&P, look at the results that we would have achieved with that extra billion dollars. But yeah, it is big bucks, we're spending a lot of dollars through the Permanent Fund Corporation.
Speaker 2:And this is really a quiet. Nobody's talking about this. You're the only guy talking about this anywhere. It seems like Nobody else is really bringing this up. Everybody's lauding, and if they are bringing it up, they're bringing it up in in the uh, in the context of, um, how they need to combine the funds. That's pretty much. That's pretty much what they're. You know where they're, where they're at. That's what. That's what they're combining it to. Oh, we need to. Uh, you know, we need to combine the funds to protect them, otherwise they're going to go away.
Speaker 1:Yeah, I think people are just, you know, a, they don't do the charts the way maybe I do, but B, I think it's just the complexity of it. You know somebody's going to stand up and say, oh, you're not doing the job you should. You're spending a billion dollars and having significant underperformance. And then they're concerned about, you know, the PFC, the supposed experts, standing up and saying, oh, you're wrong, and, you know, throwing a bunch of flash at it.
Speaker 1:We've seen that this session, with the various hearings that the PFC has been at. They have these glossy charts that show, oh, compared to our benchmarks, compared to you know, we get to make up the standard that we're comparing ourselves against, compared to our benchmarks, we're doing great and you know and have the you know sort of the MBA background of doing that. But you just look at the numbers. All you have to do is look at the numbers. All you have to look is at the year by year performance, even against their own numbers, even against their own benchmarks, even against their own CPI plus five inflation plus five percent return benchmark. They're deficient five of the last six years. All you need to do is look at those numbers and understand what's going on.
Speaker 2:So I don't want you to look at those, Just look at the 10-year number. Don't look at the one year, Look at the 10-year number. We're doing better. Oh and then and then you know some.
Speaker 1:What's what's really interesting about that, michael, is when they publish their results. They they publish them monthly, and monthly it's. They use a one, three and five, one one year, three year and five measure. Right, they don't publish the 10 year measure because it's not important enough to publish. But when they get caught and when they get in a hearing and they have to defend themselves and say how good they're doing, all of a sudden the 10 year measure comes out and the 10 year measure is loaded is is preloaded from all the, from the good years about a decade ago, and so they get to say, oh, look at these 10 year numbers. Well, we can't look at the 10 year numbers, 10 year number, because you don't publish them. You only haul them out here when you're trying to defend yourself. So it's well, I do not have a whole lot. I used to have a lot, but I don't have a whole lot of respect for the Permanent Fund Corporation anymore.
Speaker 2:Well, what happens when those 10 years, when they start to fall off, the 10-year sweep? Right, that's the worst part. What's it going to look like? What's it going to look like? What's it going to look like when those first couple, three years start to fall off and all of a sudden they're like, oh my God, we're underwater. I mean it's going to. Yeah, I mean, what happens then?
Speaker 1:Well then, we're going to hear about 15-year numbers and then we're going to hear about 20-year numbers, because, oh God, we don't want to talk about those. We're going to hear about whatever period of time it takes to haul in those early good years and keep our numbers up.
Speaker 2:It's amazing and this is a. Is this a function that the, that the, that the governor this is something the legislature is going to have to deal with right? This is not a gubernatorial power. He can't he can't change how they do those things. This is going to be something that the, that the legislature, is going to have to deal with right.
Speaker 1:No, no, it's, it's the permanent fund board, and and that that sets the, sets the allocation policy, sets the investment policy. And the permanent fund board is entirely appointed by the governor. It doesn't even have legislative oversight in terms of who's appointed. The governor has free reign to appoint whoever he wants to, and the parameters of what the permanent fund can invest in now legislative parameters are very broad, so it's the discretion being exercised by the permanent fund board, entirely appointed by the governor, that's driving this train.
Speaker 2:All right, let's continue on. Brad Keithley, alaskans for Sustainable Budgets. Whack-a-mole never my favorite game, to begin with, but now we're playing it here in the state of Alaska, brad. It just keeps popping up and we smack it, pops it up and we smack it. What are we? What are we doing here? What are we playing whack-a-mole with?
Speaker 1:Well, it it, this. This refers to investment, so-called investments by the state in energy projects for the last decade or so, including and we're still at it but for the last decade or so, the big, the big you know we ought to be investing in this thing has been the Alaska LNG project. You know nobody else will pay for it, but we ought to pay for it, we ought to, we ought to invest in it, we ought to invest the permanent fund in it or we ought to invest in it somehow, and we and we certainly ought to keep paying consultants on an annual basis to keep it alive. We ought to keep that investment going. And now that I think people are finally running out of patience with it and they've sort of outsourced that project to Glen Farn and outsourced the investment of it, hopefully, to Glen Farn, and the legislature has finally sort of calmed down in terms of, in terms of, oh, we need to be investing in this. Well, what happened then was we had the Cook Inlet pop up. Right, we need to invest in the Cook Inlet, we need to have oil and gas tax credits back in the early 20-teens, or we need to have a royalty holiday to encourage investment in the Cook Inlet In some fashion, use state money or by giving away state revenue, reducing state revenue. We ought to encourage Cook Inlet that sort of died down too, after people ran the numbers and understood what a bad investment that would have been.
Speaker 1:But you can't keep people down. You can't keep people down who want to spend on consultants and run the traps. And the latest one is an article by Nat Hertz that's in the ADN and the Alaska Beacon and is showing up in all of the other state newspapers. The headlines in the ADN version, the Alaska Daily News version, was Alaska utility execs to lawmakers let's revive the Susitna hydroelectric megaproject 30 years to build a big, huge dam across this. You sit in a river to generate electricity for for the rail belt still for the rail belt, because you'd have to have to distribute it through through power lines, build a dam. And now that, now that we've sort of played whack-a-mole with the Alaska LNG project, took a hard look, took a look at the numbers, that and said, well, that's really not a great deal to do. Now we played whack-a-mole with the Cook Inlet and and not you know, knock down additional investments, state investments in the Cook Inlet for a while. You can't, you can't keep these people down.
Speaker 1:The next thing that pops up is let's revive Sousa. Now they're going back to the oldies and goodies, right, what project haven't we done that we need to do that. We need to spend another 100 or 200 or 300 million on consultants to to figure out. And the next one that's popped up is uh, is to revive the susitna hydroelectric project. And it's just I mean michael, some people just, or some some interests just won't be stopped.
Speaker 1:You can whack them down on one project, you can whack them down on another project and they just pop up yet again with a third project. We never run out of ideas in this state, it seems, on how to spend state money, things the private sector won't invest in, how to spend state money on these various projects. And even though you know the project won't pencil out, even though you sit there and know the project won't pencil out in the long term, we nevertheless spend money on consultants. We nevertheless spend money on $100 million I think the quote in here is $100 million just to let's revive, let's re-up the data, let's look at the data again.
Speaker 2:Yeah, they spent $200 million on the project already. They want to spend another $100 million. You're talking about the Alaska study industry, right? That's what it is. It's the Alaska study industry who promises to study the study that they studied before one more time to see if the study needs another study. That's, I mean, that's what happened. Now, all things being equal, we should have built the dam, the damn dam, as Tim says. We should have built the dam, you know, 30 years ago. It would have provided, you know, 50% of the electricity for the rail belt all by itself and been a project that made sense. But we just, we keep shooting ourselves in the foot over the years and instead we focus, focus on all this pie-in-the-sky stuff, whether it's solar or wind or the gas line or anything else. That won't make it. I mean again, but it's the studying of the study, of the one more study that needed to be studied before we studied the whole thing one more time.
Speaker 1:And this literally is that I mean this $100 million.
Speaker 1:The next $100 million that they're talking about is literally that it's to go back and restudy the prior studies to see what permits would need to be done now that we don't have or that have expired, to see what the economics are now, what the cost projections are now.
Speaker 1:It's literally another $100 million to restudy the prior studies. And, yeah, if there was some sense, some world in which this would pencil out and be a good return project, a project that produced a good financial return, there's some world that, if that existed, yeah, you might want to go back and update the studies and you might want to go back and look at the permits. You might want to do that, but you can tell now, just like you've been able to tell all the way along with the Alaska LNG project, you can tell now that it's not going to work, that it's not going to pencil out, but nonetheless, like a whack-a-mole, we have people who want to go back and study it again just to prove, just to update all that stuff that's useless, the stuff that was useless before. We want to update it so it can be even more modern and updated useless list as opposed to the old updated or the old useless list.
Speaker 2:And so your assertion here is that the damn thing was never going to work out, and it basically just shows that we're just stuck in a rut of studying everything, essentially Spending money, spinning our wheels to basically show like we're doing something instead. But we, I mean, what is your in this regard? And I know you're making a different point than what I'm trying to say here but if we don't do something like hydro or something else, how do we, you know, how do we? How do we? How do we take care of the ever expanding need for electricity and energy here in the state we?
Speaker 1:let the utilities. We let the utilities do their job. We let utility management do what they're supposed to do. And the RCA, regulatory Commission of Alaska, who oversees the utilities? We let them do their job. And their job is to meet the needs of their customers in the most reasonable cost fashion possible. Now, if you can get the state to pay for a bunch of it, yeah, that's a reasonable cost, but it doesn't produce a return to the state.
Speaker 1:These projects don't produce a return to the state. These projects don't produce a return to the state. So you just you have the utilities have willingly undertaken these obligations. Nstar has undertaken the obligation to provide gas. We've given them a monopoly in the areas in which they serve to provide that gas. They've undertaken the obligation to provide it in a cost reasonable manner and we've set up the RCA to oversee them. Same thing with the electric utilities. So we let them do what they're supposed to do and let the RCA oversee them.
Speaker 1:Now it'd be a different thing if utilities did a study and said look, this will produce a positive return to Alaska and to our rate payers if we make this investment and if the RCA signed off on it. It'd be a different thing if we did that. But we had the Susitna project back before. It didn't produce those sorts of economics or else we would have gone down that road. We've had the LNG project. It hasn't produced those sorts of economics, so it's more incremental. What the utilities have been doing is what utilities in the lower 48 do is they do incremental steps to meet demand as it grows in the most cost-effective manner that's available at the time. They foresee that additional growth.
Speaker 2:So if they were serious about it, they would essentially climb together and figure out how to build it themselves. Is what you're saying.
Speaker 1:Yeah, yeah it's. We get into these Hail Marys in Alaska. We get into oh my gosh, you know, we're so far behind, we've got to, we've got to do something, sort of like I mean, it's not that different from what we're doing on the financial side. We're so far behind, we've got to do something, so you throw these Hail Marys. We're doing on the financial side. We're so far behind, we got to do something, so you throw these Hail Marys. The Alaska LNG project oh, that would do it. Or the Susitna project, that would do it. Rather than the Hail Mary, we ought to be doing the Woody Hayes three yards in a cloud of dust at a time.
Speaker 2:It's about economics and I would love to see something like a large hydro project in the state. But it's got to pencil out. I mean it's got to make sense. And if it did make sense to begin with, I think the utilities because they've been building other hydro projects that one may have just been a little too ambitious, you know, and now they want to spend more money to go after it, and all of the utilities are in agreement on this. All the utilities in the state were basically on that letter to the legislature which, by the way, they had that for like three weeks and didn't say anything to anybody until the story broke yesterday. Even Kevin McCabe is like well, this is the first time I've ever hearing about it. I mean, nobody knew anything about it, so I don't know. It just seems like there's a lot of smoke and mirrors going on here.
Speaker 1:I mean the utilities, I guess the utilities. You got to give them credit for this. If they can get somebody else to build it, they can get. They can get somebody. If they get state money to meet the obligation they have, then good for them. To meet the obligation they have, then good for them. I mean if they can find somebody else to finance their business while they get to run the business and get the returns off the business. If they can do that, then good for them. But you've got to look at the overall effect. And it's state money that otherwise can be invested, otherwise could be producing a return or otherwise could be injected into the private economy through PFDs. You got to look at those alternative uses of the money to figure out whether it's a good use of state money. And I just I mean you don't have to spend $100 million to figure out. It's not.
Speaker 1:But yet they want to spend the $100 million to claim it is.
Speaker 2:And again, as much as I'd like to see a large-scale hydro project, this project, like the gas line, has been sitting out there for 50 years. They've been talking about the Susitna-Watana hydro project Almost 50 years. This has been kind of sitting waiting in the wings and they dust it off every now and then. The last time was about 25 years ago. They dusted it off and talked a little bit about it, but that's all they do. I mean, how much have they spent? Terry said something If we spent the money we spend on studies, if we spent the money on projects, the projects would be done essentially.
Speaker 2:And that's the thing we get into these studies. On many of these things, some are not, some are not economically feasible, but other ones I mean again studying the study of the study that we studied before. That said, by the way, this wasn't economical 10 years ago. Do you think it's going to be even any more economical today? When it was 10 years ago, it wasn't economical. No, it's not. Oh, it'll be fine. It's not. Oh, it'll be fine today. Today is a different day. It'll be fine.
Speaker 1:We just we need to. I mean, I'm not sure how many people remember Woody Hayes, but we need to grind this stuff out. The utilities are there, have obligations to grind this stuff out, to figure it out on an incremental basis as we add additional demand. These sorts of out on an incremental basis as we add additional demand, these sorts of oh my gosh, you know, if we throw the hail Mary and 50 things go exactly right, we might break even those sorts of things. I mean, I understand why they do them, I understand why, as you put it, the study industry, the state's study industry, pushed them. But it's just like whack-a-mole. I mean you no more get one knockdown than the next one pops up, and then you got to go over and knock it down and the next one pops up and you just got to, I guess, deal with them, or else, my God, somebody might actually spend money on it. Yeah.
Speaker 2:Well, it's frustrating, but here's where we are. Any quick, we've got about two minutes here. Any project predictions, projections, predictions on what's going to happen with the override this morning at 9am. They're supposed to have a joint session this morning at 9am to try and override and everything else Does. Do they override the governor? If they do, does he then go back and veto out the funding part of it for another override, which is an even higher threshold? What do you think is happening here? You got any predictions?
Speaker 1:Well, the bill is fiscally irresponsible. It doesn't have the revenues supporting it. The legislature has gotten out in front of itself again. It wants to spend without saying how they're going to fund it, other than through additional PFD cuts, other than taking it out of middle and lower income Alaska families. It's fiscally irresponsible so it'll probably pass. I mean, the veto override will probably. The veto will probably be overridden because this legislature fundamentally is fiscally irresponsible. And the thing that I'm really going to focus on are the Republicans that vote for the so-called, the self-proclaimed fiscal conservatives who vote for this, who vote to override. They don't have revenues underwriting it so, or underwriting it so why are they? Why are they voting to override it? That'll be a question for them in the next election cycle.
Speaker 2:Yeah, no, and I and I see that uh already the, uh, the uh. A whole slew of women's clubs came out last night the Anchorage Republican women's club, the Valley Republican women, the Republican women of Kenai and the Kenai peninsula Republican women all basically said, if you vote for this, you're dead to me. Uh, if you vote to override no, we won't knock doors, we won't make phone calls, we won't raise money, we won't wave signs, we won't do anything for you. Which is probably one of the strongest things, I've, strongest reactions I've seen from any of these places in a while that they're, yeah, they're, they're, they're upset about it, they're upset about it. So, yeah, well, we'll see. I mean, the governor's got a couple different options here. If it does get overwritten again, he could still override the funding itself or veto the funding itself, and then it takes a 45 out of 60 instead of 40 out of 60. So let's hope he's fiscally responsible. Go ahead quickly.
Speaker 1:We've got to force. We've got to force a fiscal discussion. We've got to force a discussion about a fiscal plan and this veto and if the veto is overridden, governor line item vetoing the amount is the biggest step I know of to help force that fiscal discussion. So I don't think we should override the veto and I would support the Governor in cutting the amount down.
Speaker 2:if they do override the veto Because, Because, again, there's no money underwriting the whole thing. So where does it come from? That's the big question. Brad Keithley, Alaska's for sustainable budgets the weekly top three. Brad, thanks for coming on board and joining us.
Speaker 1:Michael as always, thanks for having me Appreciate you coming on board. 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.
