The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (9.8.2025)
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 September 8, 2025.
This week, our top 3 issues are these: 1) we discuss Sen. Robb Myers recent op-ed in the Alaska Landmine, which explains that the proposal to change the current two-account Permanent Fund system to a one-account system is really about protecting state revenues, not protecting the Permanent Fund (2:24); 2) we dive into the state’s new fiscal analysis of the Pikka oil field and what the numbers are telling us about SB 21 (19:21); and 3) we explain how, by not looking at the numbers, Must Read Alaska is missing the big story behind the performance of the Permanent Fund Corporation (39:14).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
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 September 8th 2025. The weekly top three is a regular segment on the Michael Duke Show. The show broadcasts on both Facebook Live and YouTube Live as well as via streaming audio from the show's website. Weekdays from 6 to 8 am.
Speaker 1:I join Michael weekly in the first hour of Tuesday's show from 6.10 to 7 am for a discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, youtube, soundcloud, spotify and Substack pages. Also on the Alaskans for Sustainable Budgets website, as well as the projects page on national blog site mediumcom. You can find past episodes of the weekly top three also at the same locations. Keep in mind that, in addition to these podcasts during the week, you can also follow and participate in the discussion with us of these and other issues affecting Alaska's fiscal and economic condition by following us on the Alaskans for Sustainable Budgets Facebook page and through our posts on Twitter.
Speaker 1:This week, our top three issues are these First, we discussed Senator Rob Meyer's recent op-ed, which explains that the proposal to change the current two-account permanent fund system to a one-account system is really about protecting state revenues, not about protecting the permanent fund. Second, we dive into the state's new analysis of the PICA oil field and what the numbers are telling us about SB21. It will be a surprise to some. And third, we explain how, by not looking at the numbers Must Read Alaska is missing the big story behind the performance of the Permanent Fund Corporation. And now let's join Michael and now let's join.
Speaker 2:Michael, let's get into it. Brad, let's dive in and get started First things first. Rob Myers is right on the Permanent Fund Corporation. He's right on a lot of stuff, but on the Permanent Fund Corporation especially. This is a big issue. Let's get into it.
Speaker 1:Yeah, I agree with you. Rob Myers is right on almost everything. He wrote a in this particular case. He wrote a column that appears in both Must Read. I'm going to be interested in your take on that after the break or after the hour. But he wrote a column that appears most in Must Read and in the Alaska Landmine, the title of which is why we Shouldn't Combine the Permanent Fund Accounts. This is a topic that we've talked about a lot on the show over the course of the last few weeks.
Speaker 1:It is the proposal by some, including the Permanent Fund Corporation, to consolidate the two accounts that are set up by the Constitution for the Permanent Fund. One is the corpus and the second is the Permanent Fund earnings account, the account into which the earnings from the fund are put. The proposal by some is to consolidate those two in a way that would eliminate the protections that the Constitution creates for the permanent fund. The way that the Constitution currently sets it up. You can the legislature can draw from the earnings reserve of the second account of the permanent fund, but if it runs out of the runs through the earnings reserve, it can't get into the corpus. The corpus is constitutionally protected the statute or the provisions of the Constitution say the legislature cannot appropriate from the permanent fund corpus, and so the legislature has a hard stop on what it can do past the earnings reserve. It can't keep going. What the proposal of merging those two accounts into the one account system is is to open the door for the legislature to continue to make withdrawals from the permanent fund account, the singular permanent fund account, even though it's already, even though it's run through what it would have been in the old earnings account. It can continue to draw from the permanent fund what would have been the old permanent fund corpus.
Speaker 1:Rob's point and I think it's an excellent one is summarized in this paragraph. It says the point of combining the accounts is state spending. The point of removing the floor, removing the protection, highlights the real reason we're trying to combine the accounts. It's not about managing the health of the fund, it's about managing the health of the spend. And his point is that by setting up a draw from the permanent fund, the combined permanent fund account, you have a steady stream of draws that are coming from the permanent fund. So, even though you run through what would have been in the old permanent fund earnings account, you would have had to stop With the one account system. You just continue to draw from the permanent fund and you can start draining into the corpus. You can start pulling from the corpus as a result of merging the two accounts. And so Rob's point is look what they're really trying to do, what the proponents of that is really trying to do is to protect the spend, to protect the revenue stream, to protect government spending, instead of protecting the permanent fund, because you're setting up a situation in which you can run through the old earnings reserve account and continue on into the permanent fund corpus in a way you couldn't in the past.
Speaker 1:The current system, the current two account system, protects the permanent fund corpus. It protects the permanent fund. What Rob's point is is the merging the two accounts together protects the spend, protects the revenue stream from the permanent fund and diverts and changes what you're really trying to protect. It's a huge point that it's a hugely significant change in what you're doing with the old permanent fund. It's no longer permanent. I mean it can be drained down If the spend is higher than the earnings coming into the fund. If you're taking more out through the draw than is coming into the fund through earnings. Permanent fund is no longer permanent. I mean it can be drained down as a consequence of the change. So they still want to call it the permanent fund, but it's no longer that.
Speaker 1:The other thing that really bothers me about this combination not only do we no longer have a permanent fund and not only have we changed the focus to focus on protecting the revenue, protecting the spend, as opposed to protecting the fund. The other thing that bothers me is we've changed hugely. We're hugely changing the incentives around the permanent fund. So currently the incentive for the permanent fund corporation though they're not living up to it very well, we'll get into that in the third segment. But the incentive for the permanent fund corporation is to maximize earnings, is to optimize earnings, make sure that earnings are sufficient to at least to cover the draws from the fund, to make sure that earnings are strong, to build up the fund, to produce additional earnings to cover the needs that the legislature creates by drawing from the fund.
Speaker 1:The old PFD system did the same thing.
Speaker 1:It focused on earnings because permanent fund dividends came from earnings and so people focused on earnings because that's what was going to drive the permanent fund dividend. The entire incentive system and the entire focus was on earnings. What happens when you merge the two funds together and you start focusing on the draw? Is the permanent fund corporation really no longer has its primary focus on earnings? It can go on autopilot because the legislature is drawing 5% from the permanent fund regardless of what the earnings levels are, and so they're not focused as much on earnings as they have been in the past. The public because and this is a problem with the way that we've started to treat the PFD over the last few years as sort of the leftover but the public is no longer as focused on earnings because earnings are no longer driving the dividend. Now the dividend is being set by the legislature out of the draw on a sort of on an ad hoc basis. So the focus comes off earnings, and that is a complete change from what the fathers of the permanent fund had in mind.
Speaker 2:They had in mind keeping the permanent fund corporations focused on earnings, maximizing earnings every day keeping the earnings going and keeping the people engaged with that, because obviously that's their stake in the game. And now that it was taken out of the people's hands and I mean it's a brilliant, it's a it's a brilliant observation, because I hadn't even considered that changing the focus of the permanent fund corporation itself, when they had to answer to the people, for you know the, the size of the dividend, they had to focus on those earnings, and now not so much.
Speaker 1:Well, and and and the change from the two account system to the one account system will be to change, will be to even lessen the legislature's focus on earnings. I mean, under the current system, under the two account system, the legislature at least keeps a focus on earnings because that's what drives the earnings reserve and that's what drives what's available to them to use to help supplement revenues for state spending. If you merge the two accounts together and you have just a 5% draw, regardless of what the earnings are, then the legislature doesn't get as concerned about earnings anymore because they're going to get their 5%, regardless out of the combined accounts. It changes the dynamic and it changes the incentives and incentives I mean we talk about incentives a lot on the program. Incentives are hugely important and so it changes the incentives for the legislature, what they focus on. They only focus on yeah, are we going to get our 5% or not? And it changes the incentives for the permanent fund corporation because nobody's looking over their shoulder anymore, focusing on earnings, they're just focusing on whether that 5%, whether they've got enough liquidity in the combined permanent fund account to fund that 5% in the combined permanent fund account to fund that 5%. So I think there's.
Speaker 1:It's a. It's a huge problem. It's a huge problem and I don't want to. I don't want to minimize that problem. It's a huge problem to change the focus of the permanent fund from focusing on the health of the permanent fund itself to just the earning stream, but it also changes the incentives in a way that I think is is ultimately detrimental to both Alaskans and to the legislature and to everybody else. We're no longer the permanent fund corporation isn't sitting there every day, as it should be at least sitting there every day saying how do we maximize earnings? They can go on autopilot and say look, you're going to get your 5% regardless. It doesn't really matter what our earnings are.
Speaker 2:Well, we can already see some of the arguments that are stacking up and, in fact, some of the people I had.
Speaker 2:Last time we had Rob on, I got a message from Joshua Church, who had written that opinion piece in the Newsminer, about how, oh, you've got it all wrong.
Speaker 2:This is needed because you know stability and some other things, and I think we're going to have Joshua on to give his side of the story. But again, there seems to be a lot of trust us, we know what we're doing kind of thing going on here. And yet we've seen the track record and basically mean that they would have to turn it into one fund right then, and there just to be able to operate government. So, no, I don't trust the people in the government that they're going to do the right thing, that the people in the legislature are going to do the right thing and have and this has always been my challenge, even between you and me when we talk about taxes is I am not confident that they will. You know that they will have fiscal restraint when any kind of new money gets dumped on them, because they're trying to spend everything and then some anyway, right. That's why there has to be some kind of spending limit or cap?
Speaker 1:Well, and we've talked about incentives there also. I mean, we've talked about why it's important, about who you're taxing, who you're raising the revenues from. You want to raise revenues from the people who have the ability to push back on spending and say, look, we're not going to provide you any more money because you're spending too much. And the problem with using PFD as your revenue source is the only people you're really hurting are middle and lower income Alaska families who don't have much political power. Even though it's 80% of Alaska families, they really don't have a whole lot of political power. So if you're going to tax, if you're going to have additional revenues, you want to focus it to create an incentive on people to push back on spending, the people who have the political power to push back on spending.
Speaker 1:Here you want to focus the incentives on earnings. Keep the entire focus on earnings every day, day in and day out and day out, and what this does, what merging into the one account system is lessen. That focus on earnings a lot because they're going to get 5%, no matter what. No matter what the earnings are. You know, if the earnings are 3%, they still get 5%. If the earnings are 2%, they still get 5%.
Speaker 1:We want to keep the focus on earnings to make sure that the permanent fund corporation is maximizing earnings.
Speaker 2:Bruce Tangeman comments in the chat room and, wow, he agrees with me. Unfortunately, the PFD variable will solve itself next year. The PFD we get next month will be the last PFD we receive. The question will shift to if the POMV draw can cover the budget next year. I mean, I can already see this is an argument that's going to be set up. But again, this is the argument that they've been trying to get set up for the last four or five years now and I agree with Bruce. I think this will be the last PFD we see, because next year, $2 billion deficit, potentially more, they could take all of the PFD and they still don't have a fraction of what they need to cover the gap.
Speaker 1:Brad take all of the PFD and they still don't have a fraction of what they need to cover the gap, brad. Well, yeah, I mean I disagree with Bruce on that. I do think the PFD will continue. I think the pushback on the elimination of the PFD would be serious, but it won't be a lot. I mean it'll be sort of a token PFD to say, yes, we still have one. As opposed to what the founders of the permanent fund the 1981 provision on permanent fund dividends intended. It'll just be a percent of that together will I mean?
Speaker 1:Eliminating the PFD and eliminating the basis for the PFD on earnings has detracted from the incentives for Alaskans to focus on earnings. Merging the two accounts together will detract from the focus, eliminate the focus of the legislature on focusing on earnings, and so it will just be on. We will just be focused on the automatic pilot of do we get our 5% draw? Have they created enough liquidity in the permanent fund to get our 5% draw? We really don't care about what they're earning. Just give us our 5% draw and it'll be like a frog in boiling water, right, I mean the 5% you're earning, 3%, you take out 5%. It'll start on this decline.
Speaker 1:Permanent fund balance will start on this decline, but it'll be a little bit every year and so, like the frog in the boiling water, you won't really notice it for a while and by then it'll be too late. So we need to keep the focus on earnings and we've eliminated that with respect to the permanent fund dividend because we're not basing the permanent fund dividend on earnings anymore. We at least need to keep the legislature's focus on earnings to generate the focus that you have enough, that you're generating enough in the earnings reserve account so that we can support government. If you eliminate that, if you eliminate the two-account system, merge the two accounts so that there's no longer a concern about whether or not we have enough in the earnings. We're earning enough to have enough in the earnings reserve, then the entire focus on earnings goes away and we just start writing the chute downuce follows up with that.
Speaker 2:He says well, how will it be funded then? Era overdraw, drain adia, drain pce. We're running out of funding sources. I mean, yeah, I mean I think that's the whole point here is that we are running out of funding sources and they're going to find a way. Brad, you might be right, maybe it's a token pfd, but I I mean, how do they justify that? If they're, if they're still a billion dollars upside down? Do they just say sorry, buttercup, that's how it works. You know, there's not even a $300 PFD in your future.
Speaker 1:Yeah, I think they want to keep the illusion of a PFD, even though it's not what the founders intended the illusion of a PFD going. Alaskans are getting a share of the commonly held resource wealth. I think they'll want to keep the illusion of that going, but they'll need to find other funding sources and hopefully the focus is on finding funding sources that generate the incentives to push back on spending. That's what we don't have. We don't have that right now. We don't have people pushing back on spending.
Speaker 2:Brian calls it the loot. The permanent fund act. Yeah, that's my favorite. Right there, that's it. Right there, some truth bombs. We're continuing now. The weekly top three continues Brad, keithley, alaskans for Sustainable Budgets. We move on from the Permanent Fund Corporation. We'll be back to that. We'll be back. Brad's next topic PICA is not going to save us. I mean, we keep hearing about this. We've had several politicians talk about this on the program recently that oh, there's all this new oil and everything else, but it just it's not as it's. No, it's not going to. It's not going to save you, brad, give us the, give us the full rundown here.
Speaker 1:So there's been recently a lot of a lot of news about, about Santos's PICA project. There was a headline in the ADN this past week. Alaska's biggest oil project in decades is set to begin production ahead of schedule and there's a lot of excitement about the additional oil. The implication of that I mean what most people are reading into those headlines oh, more revenues for the state. The state will be saved. We'll have the additional oil production to those headlines. Oh, more revenues for the state. The state will be saved. The additional oil production will result in additional revenues. A big part of of the revenues that people associate with oil, part of it comes from royalties, but a big part of the additional revenues that people associate with oil come from production taxes. Uh, and the and the receipt of production taxes as a result of of production, uh, of additional oil. That's how we've sort of set up uh state, uh state revenues uh, a significant sum of it comes from from royalties, but, but historically the most significant sum of it comes from royalties, but historically the most significant part of it has come from production taxes. Interestingly enough, at the same time as all these headlines were coming out from the press and otherwise about, you know PECA is going to start up early and there's all this production coming on.
Speaker 1:Dor released, department of Revenue released a new report focused on PICA and focused on the revenues and in part focused on the revenues that are going to be generated from PICA. And this report, the August report, the August report on PICA is fascinating in terms of the breakdown of what revenues are actually going to come from PICA and the timing of those revenues. The report on page eight, for those who want to read it for themselves, the report on page eight dives into revenues and it says and here's the key provisions of it Oil production is going to begin in FY27. And what the news reports now reporting is oil production may even begin at the tail end of FY26. But full oil production is going to begin in FY27. And then the Department of Revenue report goes on to say production tax revenue begins in FY34. So we're going to have first oil in 27, but production tax revenue isn't going to begin in 34.
Speaker 1:You know, back when we did SB21, the claim of the proponents of SB21 and the hope and the expectation of the proponents of SB21 was look as oil production, we're going to generate additional oil production and as oil production goes up, alaskans are going to share in the benefits of that oil production, right alongside the producers, and so it's in Alaskans' interest to change the tax structure to have oil revenues, to have oil production go up, so oil revenues to the state will go up with it. That happened plus or minus through the 20-teens, but as we've gotten into the 2020s there's been this big division between what that expectation that is, oil production climbs so well, oil revenues between the expectation of that and the reality of that. And the PICA analysis sort of brings that home. It says oil production begins in 2027. Production taxes don't even begin to have an impact until 2034, seven years later, and even then production taxes aren't at full force. In FY2039, the remaining carry forward annual losses are insufficient to bring production tax to the minimum tax floor and from FY24 onwards, no carried forward annual losses remain.
Speaker 1:What that's really saying is look, production taxes do begin in 2034, but they're not at full force because you still have a bunch of credits that are lowering the production taxes, not just the credits that most people have talked about in the last decade, which are tied to price, tied to oil price. These are credits that are helping to significantly reduce oil tax production tax responsibility. So we have production starting in FY27. We don't have the production tax even begin until FY34, and it doesn't kick into full force until FY39 and FY40.
Speaker 1:What's happened during that time period, during the initial stages of PICA? Production is building up, it plateaus for a few years and then it starts coming down. By the time the production taxes kick into full force, the production is on significant decline and so Alaska only starts collecting full production taxes in 2039 and 2040, only starts collecting full production taxes once production is in significant decline. So what we're seeing here is in the PICA analysis I think really brings home what's going on with SB 21 in the current decade. We've had a division between the expectation that as production climbs, alaskans will benefit along with producers. We've had a division between that expectation and the reality which, as production increases, producers are benefiting, federal government's actually benefiting through federal corporate income taxes, but Alaska isn't benefiting until much later on and until production started in decline. I think it captures the brokenness or the way in which SB21 has become broken in the current decade in a very significant way.
Speaker 2:But we keep hearing the I'm sorry, I don't, I'm not trying not to laugh here, but we keep hearing the politicians saying this is the answer. I mean, look, we're going to. I mean they're all pointing to PICA and all these new fields and the reserves and all these new projects and they're going to save us. But again, if, even if production starts next year, it'll be what? 10 years and nine years before we really see the full uh, the full uh revenue from how do we survive the next 10 years at $1.7 billion per year average shortfall to make it, you know, to make it to that point. I mean that's, that's the question. I think you're right to make it to that point. I mean that's the question. I think you're right. This is obviously showing exactly where our problems are in this SB21. I mean, shouldn't we be opening up the?
Speaker 2:I mean this is always what happens right with Alaskan tax schemes, whether it was the original or ELF or ACES or SB21. We have all these aspirational goals that it's all going to work out and then we're like, ooh, it's not working as intended and we have to come back. A lot of times we drag our feet on doing it because, well, we don't want the oil companies to be uncertain into what that's going on, but it always ends up hurting somebody. Uh, you know, usually us, uh the state instead of the oil companies. But I mean, even when it was ELF they drug their feet on this kind of thing. I mean we've got to address this. We can't just keep going on as like it'll correct itself. That's not how it works.
Speaker 1:What the politicians are doing is they're capitalizing on the impression that was created back at the time SB 21 was passed that it's a shared effort. It's a shared effort in terms of all these oil tax credits are going to be in there to incentivize investment, but once that investment starts paying off in terms of increased production, there's going to be a shared benefit. So it's okay to make these changes in oil taxes because we're investing. All of us are investing in the future, the producers are investing in the future and Alaskans are investing in the future through taking a reduction in oil taxes in order to spur this investment. Because at the end of it, at the end of the rainbow, there's going to be this shared benefit. As production increases, alaskans will increase or revenues will increase as well. And politicians are still playing on that. Jim Jansen, in an op-ed about a year ago on the ADN still played on that Said oh well, just hang on. When production comes, when production increases, alaskans are going to benefit alongside the industry. Well, that's not happening. That's not the way SB21 is playing out with all of the various provisions in it. It's playing out so that there's a division that's occurring. As production starts, producers are getting the benefit of the increased production while the state is waiting.
Speaker 1:For, you know, let's get these timeline rights. First oil begins in FY27. Let's just focus on what Department of Revenue said. First oil begins in FY27. Production tax revenue doesn't begin until FY34, eight years later, begin until FY34, eight years later, and it's not even and production tax doesn't kick in fully until FY2040, which is what, 13, 14 years after the date of first oil, when we're already in production decline. So what's happened is the reality of what Alaskans were sold on is different than what Alaskans were sold on, than the projection of what Alaskans were sold on. Shared sacrifice, shared benefit, it turned out. It's shared sacrifice, still sacrifice for Alaskans for 14 years, a decade and a half after first oil. And that's just not what SB21 was sold on. It's not the expectation that was there when SB21 was driven. And PICA this analysis of what's going on in the PICA field is just an absolute demonstration of where that's failing.
Speaker 2:What do you think the chances are that they actually address this, though. I mean, we've already seen the pushback on any kind of suggestion that maybe we should be looking at. I mean, we saw when the Fiscal Policy Working Group came out and said well, one of the things that they recommended was a revision to the oil taxes. And they're like whoa, whoa, whoa, whoa, wait a second, we can't do that. So we got the Democrats and the big government Republicans on the one side, you know, pushing all this government spend. But even the fiscal conservatives on the other side are saying well, we can't look at oil taxes, that would be dangerous. I mean, again, we're supposed to be looking at these things. If they're not working as intended, we need to fix them.
Speaker 1:Yeah, well, it depends on whether politicians are pushing for the source of revenue that has the weakest resistance, right, and so it's initially been the PFD, as we got. Well, it was initially the savings accounts, the SBR and the CBR. Those were those were supposed to be there for, you know, for pulling down when we have bad times. So they had the, the, the force of least resistance. So politicians went for them. And then politicians went for the PFD because it only affects middle and lower income Alaska families, um, and so we'll come up with all these rationalizations while we're taking it, but the focus is on middle and lower income alaska families, not the, not the ones who donate to us and not the ones who, uh, who have the the loudest uh voice, uh, in the press and in the and in the communities. So so they, they take from them.
Speaker 1:Now what we're really seeing I mean this merges the first, the first segment, with the second segment now what we we're really seeing is oh yeah, we're going to need more revenue, so let's merge the two accounts in the permanent fund together so that we can continue the permanent fund draw, regardless of what actual earnings are, regardless of the permanent fund corporation's performance.
Speaker 1:That'll be that's sort of a you know, and we'll doctor it up in nice pictures and nice rationalizations for why we're doing it, but the real intent is to get at the permanent fund corpus, start draining the permanent fund corpus if they need it. That's the point of least resistance. So we're just going to continue to find what the source of least resistance is as we go. The oil companies put up a lot of resistance. They fund a lot of the oil companies put up a lot of resistance. They fund a lot of campaigns, they put up a lot of resistance, and so you know they may be toward the end, but in terms of delivering on what Alaskans were promised back in 2013 with SB21, we're failing. We're failing to do what the promise was in SB21 of shared sacrifice, shared benefit. It's turned out to be shared sacrifice and then Alaskans sacrifice some more as the oil companies start to benefit.
Speaker 2:Bruce said. I recall Bert I'm assuming he's saying Bert Steadman I recall Bert saying you got to open up the books and look under the hood every 10 years or so to make sure things are working as hoped. The last tax change was MAPA in 2014,. 11 years ago, I mean SB21 was also in that era. But yeah, I mean that should be what it is. You need to look under the hood every 10 years or so to make sure things are working as hoped. And obviously they're not. Obviously, if they're going to put production on and you're not going to see any revenues till really nine years later, that's obviously not working as intended. Well, I guess, unless you intended to give away the farm for Alaskans, brad, right? I mean that's kind of what we're looking at now.
Speaker 1:Yeah, just to make it clear, SB21 and MAPA are the same thing. Oh, make Alaska.
Speaker 2:More.
Speaker 1:Alaska Production Act or something like that. All right, it's what those MAPA it tends to be, what those in the Parnell administration call it. Sb 21 tends to be what everybody else, what everybody else calls it, but yes, I mean it is the producers. The producers made this, made an excellent point in the late 2000s and the early 20-teens, when we saw investment going like everywhere else but Alaska, because we had Aces at the time, and Aces was an overreach, and so we saw investments start back into the oil industry in a big way in 2008, 2009, 2010, 2011,.
Speaker 1:Alaska wasn't getting any of it, and so, and so the the the battle cry of of producers at the time was look, we need to re-examine what we did then, just, you know, eight years ago, uh, in 2006,. We need to re-examine what we did uh in, uh, uh with, with Aces, and reset the playing field so that we have this shared position. We have a shared sacrifice with the goal of getting additional production, and then we have a shared benefit coming out of that additional production. And so, yes, I mean Bert's right, we need to look at these things every so often. Producers aren't shy about saying that we need to look at it when they're on the downside of the break. Consumers. Alaskans should not be shy about saying that it's time to reopen it when they're on the downside of the break.
Speaker 2:But here's a typical response from a lot of those folks. This is Teresa, attacking the renewable resource major industry in the state makes zero sense. Who's attacking? We're not attacking. We're saying you're the owner, teresa, you own it and you're not getting paid on it for nine years after the production starts. That's not working as intended. Are you attacking when you're saying you need to get your fair share? I mean, that's the problem. But see, this is going to be the reaction from a lot of folks on the right. Is that, oh, we're attacking a major industry? No, we're not. We're trying to make sure that the limited resource that we get the maximum yield for the resource that we own. That's what the Constitution says maximum yield for the resource that we own.
Speaker 1:That's what the Constitution says. We're trying to fulfill the arguments of 2013 and 2014,. Shared sacrifice, shared benefit. That's what we're trying to do. We're not attacking the industry. We're not saying, hey, overreach, give us, like ACES did, give us the bulk of it. You make the investment, but give us the bulk of the benefit. That's not what anybody's trying to do here. It's not what we're trying to do. What you're trying to do is say, look, let's fulfill the commitment, let's fulfill the arguments of 2013 and 2014 of shared sacrifice, shared benefit.
Speaker 1:It's time for the shared benefit to kick in, but it's not kicking in. For the shared benefit to kick in, but it's not kicking in. A disproportionate amount of the benefit is going to the producers as opposed to being shared with the state, the resource owner. That's what the objective was of 2013 and 2014. So it's not. This is not let's go back to ACEs, where we grab all the benefit and leave none to the producers. This is look, let's achieve the arguments of 2013 and 2014. Let's go in and share the benefits, going forward in a timely manner. Let's not push the state's benefits as the current law is doing. Let's not push the state's benefits 13 and 14 years out. Let's make sure we achieve them at the same time as the producers is achieving them.
Speaker 2:Teresa clarifies that she said renewable resource. She was talking about the fishing industry. Okay, but again, it was a perfect example of what you're going to hear from some of the Republicans is that we're attacking the major industry resource out there. And then Frank says he again quotes the next thing you're going to hear do you want state services or do you want a PFD? Quote, unquote. I mean that's going to be the next argument, right? I mean, isn't that what we've heard so far? Do you want a PFD or do you want taxes? But now it'll be. Do you want state services or do you want a PFD? I mean these are the same kind of ridiculous arguments we've heard time and again. 30 seconds, brad.
Speaker 1:We're talking about two entirely different things. We're talking about getting Alaska's fair share of the revenue. We can argue about where it goes later on, but the constitutional obligation is to get Alaska's fair share of the revenue. And what's happening 10 years on from the passage of an act that said shared benefits, shared resource? What's happening 10 years on is we're not getting the shared benefit.
Speaker 2:We're continuing now. Brad Keithley, alaskans for Sustainable Budgets and the Weekly Top Three. We're going to continue here. We're moving back over to the Permanent Fund Corporation three. We're going to continue here. We're moving back over to the Permanent Fund Corporation, not now on the it's like this is a never-ending story, man but not on the combining of it, but on the performance of it, which Brad touched on as well in that first part. He references back to the must-read article that came out here just a couple of days ago saying that the Permanent Fund hit records. But even as they did that, we're seeing smaller dividends. And although she does make, suzanne Downing makes a comment that you know this move to try and consolidate the fund could be dangerous. They are showing that they hit records at $85 billion, brad.
Speaker 1:Yeah, here's the problem with Must Read, and it's sort of the same problem that we just talked about with the ADN, when they were saying, oh, PICA, additional production, great thing. Without looking at the underlying revenues, without looking at what's happening from the revenue split side, Must Read is sort of becoming the mouthpiece for the Permanent Fund Corporation. Look at us we achieved a record level in terms of the value of the Permanent Fund. We've hit $85 billion. But Must Read is not looking into the Permanent Fund Corporation's performance and whether the $85 billion should be a lot more. As we've made the point on previous shows it should be. We could be in the $120 billion range now if we had invested differently than the permanent fund corporation's been investing.
Speaker 1:So, just like the focus on the ADN is, look into the revenue split. Don't just buy off on the argument oil production is going up, so we're all going to be happy. Don't just buy off on that. Look into the revenue split. The same thing with respect to Must Read and the other news sources that say, oh, the permanent fund hit a record level. Look into the details and see whether there's something not as rosy going on. And that's certainly the case with the permanent fund corporation. We've talked about this on the show recently a number of times. We'll talk about it again, but when you look at the Permanent Fund Corporation's performance, they haven't matched. Not only have they not matched earnings, not only have they not provided sufficient earnings, generated sufficient earnings to cover the POMV draw that the legislature has been making, but they haven't even matched the performance that they would achieve if they, instead of spending a billion dollars on management fees, they instead put the permanent fund corporation investment or the permanent fund investment on passive investments and achieve the returns of their passive investment.
Speaker 2:Let me rewrite the headline for you. Instead of Alaska Permanent Fund hits $85 billion record. Even as Alaskans see smaller dividends, it should have been Alaska Permanent Fund hits records $85 billion, but it could have been oh so much more right.
Speaker 1:I mean that really should be the headline but it could have been oh so much more right. I mean that really should be the headline. Yeah, it should be. I mean it should be. And what we're not doing, what Alaskans aren't doing, what the Alaskan news media isn't doing, is digging in. Just like we're not digging into the revenue side on oil revenues, they're not digging into the side, they're not digging into the to the side, they're not digging into the permanent fund corporation and looking at it and looking at the permanent fund corporations performance.
Speaker 1:It's not, it's not that it's difficult to do. The permanent fund corporation itself monthly publishes its investments, investment results, and it compares its own investment results against three benchmarks that it's created. So you know, you would think they would have created them to show the Permanent Fund Corporation in a positive light. But the Permanent Fund Corporation's over the last three years, each of the last three years, the Permanent Fund Corporation's performance has been less, has been lower from what they've actually done. The permanent fund corporation's performance has been lower from what they've actually done compared to their own passive benchmark, compared to putting it on autopilot, and it's been significantly less. The deficiencies have been 3%, 4% of a return on the fund's performance.
Speaker 1:So what we're doing is.
Speaker 1:We're buying off on these headlines that people are creating and saying, oh, we must be in good shape because look at oil's going up, oil production's going up, so we must be better off in terms of revenues, without looking at what's actually going on in oil taxes and permanent fund corporations saying, oh look, we achieved a higher level than we had before.
Speaker 1:Well, it's not the level that your own benchmark says you should be achieving and it's certainly not the level you could be achieving if you took Warren Buffett's advice and did a 90-10 split a 90% investment in the S&P 500 and a 10% in the bond market to provide a hedge. You're not achieving what your own benchmarks and what objective benchmarks out there in the world are telling you you should be achieving. You're leaving money on the table, and this is the problem with merging. To go back to the first segment, this is the problem in spades that shows up if you merge the two accounts together. Nobody cares about earnings after you merge the two accounts together, because you're always going to get the 5% draw, regardless of what the permanent fund corporation is doing. So we're not focusing enough on it now, although the information's out there that tells us we could. It's going to be even less. The problem's going to be even worse if we merge the two accounts together.
Speaker 2:And, of course, this is something that we've harped on. I brought it up to several candidates and there's been kind of a glazed look of people's eyes. They're not paying attention to this part. You and I seem to be the only ones talking about this specific issue with the permanent fund and the earnings potential that's slipping between our fingers. The cost of a billion dollars in management fees every year to deliver subpar returns compared to their own passives, let alone to a Vanguard or an S&P 500, just to their own passive benchmarks.
Speaker 2:They're falling behind and everybody looks at you like what I mean and, as you said, the mainstream media between this and the whole PICA and other field things with the revenues I mean nobody's digging into this. Where is the doggedness and the determination to get to the bottom of these numbers? Like you said, it's not hard to figure out when you actually do the work and look at it and you've done all the work to begin. Somebody could write a story with you helping them just going back to your articles and saying this is what Brad Keithley said. Shouldn't we be discussing this? This is crazy.
Speaker 1:Here's the problem with the legislature. The legislature is entirely focused on spending. They all get in on oh we ought to be spending on that, or we ought to be spending on that, or we ought to be not spending on this or not spending on that. They're elected by constituencies that are focused on spending. Are you going to spend on me? Are you spending too much? You're not spending we. We really don't have anybody in the legislature that I can identify who focuses on the revenue side, who says are we getting what we should? Is the state getting what it should? On the revenue side, we don't have any revenue focused legislators who are saying, who are looking at the oil taxes and say wait a second, we're supposed to be getting this. This is what SB 21 was sold on. We're supposed to be sharing in the benefit, but we're not. The benefit's coming years out. We don't have anybody focusing on the permanent fund revenue saying are we getting the permanent fund revenue that we deserve?
Speaker 2:Well, this is what happens when you have a legislature that's focused completely on the spend. To me, this is astonishing that we don't have a media that is digging deeper into these. It's basically become a game of paraphrasing press releases. At this point, right, there's no deeper analysis on any of this. The permanent fund not earning the right returns, the downsides of the combining of the funds.
Speaker 2:The few articles that we've seen, only opinion pieces, have brought out the dangers of combining the funds, not the actual news articles. Said so-and-so on this side said it could open up the corpus or whatever, and of course again the PICA and all the new field things you know with SB21, and basically saying, said so-and-so on this side, said it could open up the corpus or whatever, and of course again the pika and and all the new field things you know with sb21, and basically saying, oh, look at this, we're safe, never looking at the actual analysis underneath. This is a real. This is a real. There's multiple problems here, but that's a real problem. When it's not, we've got a media that's not informing the public as to both sides of the issues.
Speaker 1:At that point, yeah, and Must Read. I mean, people will think about Must Read what they want, but Must Read has been pretty good about digging stuff out. But in this situation, must Read is just accepting the press release from the Permanent Fund Corporation and just regurgitating it. Oh, look, how great we are. Look, we got us to. Got us to 85 billion. Don't look, don't look at the guy behind the curtain. That could have got us to 125 billion. Don't, don't worry about that. We got to 85 billion, aren't we? Aren't we good, and that's it.
Speaker 1:We tend to legislators, politicians in the state tend to accept revenues as they are, whatever. Whatever revenue reporting function or whatever revenue agency reports. The number is well, that's the number. On the spending side, it's oh no, we need to be spending more on K-12, or we need to be spending more on corrections, or we need to be spending more on the university.
Speaker 1:Everybody gets excited on the spending side, but we don't have anybody who's digging in on the revenue side and said wait a second, we should be getting a lot more revenue. If you believe the principles of SB21, we should be getting a lot more revenue as oil production goes up, not less, which is what's happening with production taxes. Or on the permanent fund corporation Look, the stock market's taken off. Or on the permanent fund corporation look the stock market's taken off. We should be getting a lot more revenue from our investment portfolio, not just mediocre, you know, bouncing along, not even keeping up with the passive indices. We don't have anybody who's digging in on the revenue side and that's a huge problem. It's as much. Not digging in on the revenue side is as much a problem as overspending is. On the spending side. We've got a lot of people who focus on overspending. We have very few people who dig in on the underrevenue side.
Speaker 2:Yeah Well, it's frustrating to watch and to see. Bruce Tangeman is going to give you the final thought here. He says if it will only get worse in a couple of years, once the ERA is overdrawn and drained, just to balance the budget, next up will be the legislature saying start selling shares of Apple because you better have our POMV draw ready July 1st. Well, and of course, once the ERA is drawn and overdrawn and gone, then of course it's into the corpus and the seed corn. And then we, then we, then we face that doom loop of less money earning money, and so then we have less money in the earnings. So then the next year we have to take more of the seed corn and more, and it may be a 20 year cycle, but we'll, we'll, we'll drain that account down if that's what they do. But the problem.
Speaker 1:The problem that Bruce is talking about there isn't just an overspending problem. The problem is an under-revenue problem. The problem is the permanent fund corporation is not earning what it could and should be in terms of the investment bundle that we've passed along to them. They're just sort of rocking along at a mediocre level and not investing and not focusing on the maximization of earnings. It's an under-revenue problem as much as it's an overspending problem, and it's a problem that Alaskans should be focused on, because if you're not getting the revenue, you should be getting out of oil and you're not getting the revenue, you should be getting out of the permanent fund. Where does that pop up? Well, it pops up in terms of PFD cuts to generate there and it pops up in terms of taxes down the road because we're not getting the returns, we're not getting the revenue we need to get from our existing asset base. So it's an issue that people should be focused on. It's an issue I think politicians would benefit from focusing on, but it's one that politicians just aren't digging into.
Speaker 2:How do we win, brad? I mean, how do we get people to see this? How do we get people to pay? I mean, like I said, you and I are talking about it, but almost nobody else is talking about it. I mean I can't think of another person, like I said, all the politicians that I've talked to about it, but almost nobody else is talking about it. I mean I can't think of another person, like I said, all the politicians that I've talked to about it went what. I mean they just like to have very little at least. I guess Bernadette brought it up during our last conversation because I've been, I've been talking to her about the permanent fund and the board and things like that. I mean she's at least talking about it, but nobody else is. It's like this is a non-issue.
Speaker 1:I mean maybe, maybe it's, maybe it's becoming the same way that the education task or the education community is. You aren't spending enough for us. Why are you not spending enough? You're failing us, maybe on the revenue side is you, as a politician, are failing us by not getting the maximum return out of our resources, either on oil, not going back to ACES, just fulfilling the obligations, the commitments of SB21. You're failing us by not pushing the permanent fund corporation or structuring the permanent fund corporation in a way in which they earn the returns that they are capable of earning, should be earning, that the market's generating in terms of the investments. Maybe it's becoming taking the same tactics that the corrections community does or the university community does or the K-12 community does, and focusing it on the revenue side, accusing the politicians of shorting Alaskans by not focusing on getting the maximum return out of our asset base.
Speaker 2:All right, brad Keithley. Thank you, my friend. As always, it's good to talk with you. We appreciate you coming on board. Thanks much.
Speaker 1:We'll talk to you soon, Michael. As always, thanks for having me. Well, that's a wrap for another week's edition of the weekly top three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, SoundCloud, Spotify and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week on the Weekly Top Three.
