The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (9.29.2025)
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 29, 2025.
This week, our top 3 issues are these: 1) we discuss Alaska’s K-shaped economy and how it helps explain outmigration (2:06); 2) we explain the parts of the story that the Permanent Fund Corp’s claims about a “successful” FY25 ignore (18:11); and 3) we discuss why op-eds proposing new or continued spending should come with a fiscal note (38:23).
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 29th, 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 a.m. I join Michael weekly in the first hour of Tuesday show from 6.10 to 7 a.m. 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, medium.com. 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. This week, our top three issues are these. First, we discuss Alaska's K-shaped economy and how it helps explain out migration. Second, we explain the parts of the story that the permanent fund corporations claims about a successful FY25 performance. Ignore. And third, we discuss why op-eds proposing new or continued spending should come with a fiscal note. And now, let's join Michael.
SPEAKER_01:Let's get started. Uh this week's topics include is number one, something called Alaska's K-shaped economy. What what are we what are we talking about today? The K-shaped economy. I'm I'm curious.
SPEAKER_02:Well, there was an article in the ADN uh repeat of an article from the Washington Post that I found uh interesting and um and dived into uh a little bit. The headline of the article was The Wealthiest Are Boosting the Economy as Consumer Spending Rises Again. And this is really a story about how averages can be distorted. Um what's going on? What this article uh develops using a lot of economic data and and economic data I've heard friends elsewhere in the country discuss. What's really going on is the top 10%, the top 20% are increasing uh consumer spending. They're they're finding a uh they're finding their their wealth enables them to increase consumer spending and they're spending it on various goods and various segments of the economy that are tied to that segment of the income bracket uh are doing uh are doing well. But that's masking what's going on with the other uh 80%. Um and and with the other 80%, you're fine, you find when you look at income data and you look at spending data and other similar data, you find that they're sort of barely breaking even. They're sort of they're sort of hanging on, they're not boosting consumer spending, they're not, their income data isn't or their incomes aren't aren't boosting overall income. They're just sort of staying staying even. And what economists describe what's going on is a case-shaped economy with the top income brackets going up, both in terms of income and in terms of consumer spending. And on an inflation-adjusted basis, the bottom income brackets sort of in a in a slow but but steady, steady decline. The result is that, and you can see this in the in the income data that we look at from the IRS about Alaska. The result is the averages are going up. Consumer spending overall is going up, but it's being driven, and this is national, the that's being driven by the top income brackets that are driving it up, the top, the top leg um of the K or the top arm of the K. Um, it's being moderated significantly. I mean, if if all of the income brackets were doing the same, uh, we'd have a super spike going on. But it's being moderated significantly by the by the sort of steady decline, slow decline that's going on uh with the bottom arm of the K, uh the lower income brackets. So my question was all right, this is a really good national article. Let me dig into Alaska data for a little bit and and see what I can find with respect to Alaska data. And the Alaska data, Alaska, I I know it will come as no great shock to anybody, but Alaska isn't isn't the first thing that that economists think of when they develop this sort of data. So the data shocking. The data isn't isn't isn't as fulsome, certainly, as what you see at the national level, but there's some. And you can see the same thing again by looking at the income data, uh, both from the Census Bureau and from the IRS uh income tax statistics, you can see the same sort of rise going on uh in um in in incomes in the upper arm of the of the K bracket. And you can see the sort of same sort of steady sort of decline-ish going on in the lower arm, the middle and lower income Alaska family uh bracket. So I doubt I dove into that a little bit more and said, okay, so what's the what's really the cause of what's going on in the middle and lower income bracket? And there's a lot of things that that are are going on in there. But one of the things is the slow and steady decline of the PFD. Alaska used to not look as much K-ish as it looks now. It used to, uh compared to the national average, it used to be much flatter um uh in terms of both arms. Both arms used to be much look closer together than they are now. And a driver behind that was the PFD. Uh, when you look at income data on a household basis or on a family basis as opposed on an individual basis, uh, the PFD was a not insignificant source of income to households in the middle and lower income brackets. As the PFD is we all know the PFD has declined. I mean, not only not only in terms of not only against inflation, but just absolutely it's a decline. And as that income, as the PFD income has declined, you find Alaska forming a more and more sharp K. Right.
SPEAKER_01:With uh with the upper income brackets. You're talking about you're talking about the difference between$4,000 for a family of four and twelve thousand to four, you know, to fourteen thousand dollars for a family of four. Yeah, that's a significant bump.
SPEAKER_02:Yeah, when when you're talking about middle and lower income Alaska families whose whose income is not is not huge to begin with. So when you're taking that out as a percent of income, and so I I extended this, I extended this thinking a little bit further and and sort of pondered whether that's the source of outmigration. We we have, or that's one of the big contributors to outmigration. We have talked about this before on the show. I've written columns about it before on the show, but I sort of went back to that data and looked at it again. And and the data shows when you look at when you look at the IRS statistics, when you look at the Census Bureau statistics, the data shows that we're losing um uh families, working age families, families below age 60, 60 and below. We're losing those families in the middle and lower income brackets. We're actually increasing families um uh in the upper income brackets um uh in in Alaska. So there's in migration in the sense that that that number the number of families, number of households are are is climbing. There's in migration going on in the uh in the upper income brackets. They don't need any additional help. They're they're doing fine, they're attracting more people here. But in the middle and lower income brackets, we're that's where we're losing working-age families. And and so, as sort of the the net of this is as you look at what's going on in Alaska, when you think about it in the context of a K-shaped economy, and as you look at what's going on in Alaska, as we are, as our arms, our K arms are getting farther and farther apart, as they're spreading, in part driven by the decline in the PFD, PFD cuts, as they're spreading like that, uh, you're seeing more and more out guy out migration among the lower the lower part of the lower part of the arm. They're finding better opportunities or other opportunities elsewhere uh in the US. Um and that's and that's I mean, we've we've made this point before, but I think seeing it starting from the national level and seeing what's going on at the national level and and going through the economics. And I for those interested, I would recommend this article. It's in the September 26th, published September 26th, so a few days ago, the wealthiest are boosted, the headline is the wealthiest are boosting the economy as consumer spending rises again. As you think about, as you read about that in the national context, you can see Alaska being affected by the same thing in terms of the in terms of the K, the K legs spreading farther uh and farther apart. And so the legislature, when the legislature thinks about, I mean the legislature, I don't know what they think about half the time, but when they think about the PFD, when they think about PFD cuts, they're thinking about, oh, we're gonna redirect this money to do good, right? We're gonna redirect it in the government. Well, they're not thinking about, I don't think. There's no indication they're thinking about who they're directing it away from and what that causes in in that general population. Um, and and if they're could truly concerned about the Alaska economy, that's something that that we ought to hear more about when it comes to those decisions.
SPEAKER_01:Remember, we we've had that conversation in depth ad nauseum on this show that they're they're not thinking about the private economy. The private economy is not, I mean, if it was an afterthought, that would be an improvement. It's not, they're not even thinking about the private economy. As long as the government spends and the government economy is doing well, they are not thinking about what is the effect of anything that they're doing on the private economy. There is no discussion because they get nothing from the private economy in their minds. Their full and whole source of income is the permanent fund and the oil revenues and the royalties, and that's all they think about. They do not think about what's going on in the private economy because it doesn't feed the coffers. So why should we care?
SPEAKER_02:But they're not thinking, Michael. They're thinking, they're not even thinking about set aside private and government. Good point, excellent point, important point, but they're not even thinking about middle and lower income Alaska families. They're they're they're thinking about select uh uh segments of middle and lower income Alaska families that they can that they can help by redirecting these funds out of the bulk of middle and lower income Alaska families into this subset uh that they're directing these government programs to. And certainly they're thinking about the government employees and the constituencies they create and the advocates they create by directing it into these subsets. But it's coming at the expense of a of a spreading K economy in Alaska and coming at the expense of worsening the economic position of middle and lower income Alaska families who then in turn, I mean, it's not like they don't have choices, then in turn are the biggest segment are leading the out migration. So it's right, we we don't, we don't, we're not having somebody sit in the let who's sitting in the legislature who's thinking through the impact of these things on on Alaska families or on the Alaska economy.
SPEAKER_01:Again, not surprising if you watch their behavior. And uh and again, it it's it it's about control, and I think you hit the nail on the head when you talk about constituencies. Because are they bolstering their constituencies? And is the constituencies really the lower income Alaskans, or is it the people who are writing the checks for their next campaign? Yeah, I mean, Brad, again, not shocking that uh that they are not really thinking about that. Uh, it's become such a bubble. I mean, the whole thing has become just such a bubble that at this point anything outside of that little bubble, what does it matter? As long as we create the programs that we say we need to create, we can feel good about ourselves, pat ourselves on the back at night that we we gave the the poor, poor, pitiful people the program that helped them. Um, as long as that money's there and we can get re-elected to come back, then what does it matter?
SPEAKER_02:Yeah, the the thing that the thing that I think that frustrates me the most about those who you know who say they're helping the poor. They don't they don't focus on, or if they do, they just ignore it. They don't focus on who they're taking the money from. They we're we're funding we're funding all these programs, all this addition, all this spending that's going on for the various programs. We're funding it by taking it out by using PFD cuts, we're funding it by taking it out of the pockets of middle and lower income Alaska families, generally. So we're we're we're robbing Peter. I mean, we say we're concerned about middle and lower income Alaska families, right? Legislators would say that that's the heart of the economy, middle income families, 80% of Alaska families fall into those brackets. That's the heart of the economy, that's who we're concerned about, that's who we're thinking about. They say that, and then they take the money out of their pockets, largely not out of the top 20%, certainly not out of the old companies, not out of non-residents, unlike any other state in the nation. Um, they take the money out of the pockets of those they say they're looking at that that are the heart of the Alaska economy, and they're directing it to these sub-segments. And and so the sub-segments, and and you know, and you got to create a bureaucracy to do that redirection and to provide the services. So that subsegment looks like it's okay. And when you focus on that sub-segment, you're going, hey, they're doing great. But then you don't, you don't go back and look, well, what did I do to the to the to the broader segment, the middle and lower income Alaska families that I took the money out of? Oh, they're going down and down and down. They're forming the lower leg of the K, and the K is spreading wider and wider. I mean, that's that's the that's the tragedy of this. We're we're focusing, we're focusing these dollars. We're taking the dollars broadly out of middle and lower income Alaska families, we're focusing it on subsets, and then we're judging the the success of it by looking at the subsets, and we don't look back at the people whose pocket we took it out of, and we don't look back at at how they're doing. And that's just uh it's it's frustrating.
SPEAKER_01:Well, and to use your analogy, I mean, we're robbing Peter and Paul to pay Paul, right? Because middle income Alaska families don't really get any benefit from all the programs are created. Lower income Alaskans are supposed to be getting the benefits, but you're robbing all the money from them to pay for those benefits, and you're robbing the middle class who don't get anything, and so they're the ones that are feeling everybody's feeling the pinch on the lower end to supposedly take care of the lowest income Alaskans. But if you gave them$12,000 for a family of four or$15,000 for a family of four versus three, four thousand dollars for a family of four, they probably could take them, they could probably grab themselves up by their own bootstraps and do it themselves. Instead, you've created bureaucracies and problems and and more overhead, and you've cut the middle uh the middle income Alaskans out completely because they don't they don't qualify to benefit from all these programs.
SPEAKER_02:Yeah. Yeah. It's uh it's uh no other state does it this way. Every other state, every other state gets a portion of its revenue from non-residents. Alaska doesn't. No sales tax, no statewide sales tax, no statewide income tax. Alaska doesn't get a portion of its revenue from non-residents. But but we have one of the highest, if not the highest, non-resident segment of our workforce that's non-resident of any state in the nation. We're just letting them get off scot-free. No other state does that. No other state has as regressive a tax, or as regressive a revenue system, if Randy's gonna flake off on tax, as regressive a revenue system as Alaska does. Yeah. No other state has that. So we're we're making it worse.
SPEAKER_01:Yeah. Frank has a good point. We don't have time to explore it, but he says legislatures also say private small business is the backbone of Alaska. Not true. The government spending is the only thing keeping Alaska failing. Um I mean, I I can't say that he's wrong at that point. Okay. Uh, we're continuing the weekly top three, our deep dive into Alaska's economy, politics, and more. Um, this uh number two uh today, we're gonna talk about the weak defenses of the Permanent Fund Corporation. Oh, they have a weak defense. Brad, what what do you mean here? Let's get with it.
SPEAKER_02:So Devin Mitchell, uh, who's the executive director of the Permanent Fund Corporation, has written this column that is making its way around the around the state. I've seen it thus far in the Alaska Landmine and Must Reed and in the Frontier Tiersman, and I'm sure it will make its way to the rest of the state's newspapers, those that haven't closed up, uh, will make it to the rest of the state's uh newspapers uh uh in in due course. And and basically it's uh it's a defense of of how the permanent fund is doing. It he offers it as as positives. This is how your permanent fund corporation is performing. But in the wake of the stuff that we and others have been saying, the analysis we and others have been doing of the permanent fund corporation, you can sort of view it as his defense, particularly when he published it in the landmine, where where all of my columns on the permanent fund corporation have uh have been.
SPEAKER_01:I noticed that. I was like, oh, I see. Brad must have poked the bear somewhere in there for them to file it here.
SPEAKER_02:Well, it's the it's their annual, they've come to their annual results, their annual report. And this is probably the letter that goes at the front of the annual report. But I just thought it was curious that the first place it showed up was was in the landmine. But I want to look at this for a moment. Do you have the chart that I sent? Can you oh my gosh, you're just on the ball today. I'm with it. Uh, okay, so this chart, we've talked about it before, but it's but it's time to talk about it again in light of what uh what of Devin Mitchell's column. Devin Mitchell, Devin Mitchell defends two things or promotes two things that the permanent fund corporation is doing. They they are producing long-term performance, long-term returns for for Alaskans. They're growing the permanent fund. And the other is they're generating revenue for the state uh in terms of uh in terms of uh additional POM POMV uh draws or POMV draws. This chart looks at uh since FY20 compares uh the performance of the permanent fund, both in terms of balance, in other words, in terms of growth, which is the red line at the top, and in terms of POMV draws or POMV returns, uh revenues for the state, to put it in Devon's terms, which are in the red bars. If you go back before FY20, if you go all the way back to uh FY uh 12, which is when uh uh uh Vanguard started their uh SP 500 uh ETF electronic uh traded fund, if you go all the way back, you would see that in 13 of the 14 years, 13 of the 14 years, the Vanguard SP 500 ETF, the heart of uh Warren Buffett's 9010 investment approach, the 13 out of 14 years, the uh Vanguard would have exceeded the returns generated by the Vanguard ETF would have exceeded those of the uh of the permanent fund. I just this chart just goes back to FY20 and looks at what the effect would have been. Essentially says, look, okay, so it would take a few years to recognize this is what's going on. Let's say we let's say they finally got they finally realized the permanent fund corporation finally realized what was going on and started in FY20 to make to shift the investments to the to the Warren Buffett approach. If starting in FY20, the blue line, which is it is the returns generated or the balances of the permanent fund, what the balances of the permanent fund would have been had it been invested in the Warren Buffett approach, the the S P 500 uh 90%, and uh a debt uh ETF uh long-term debt ETF uh 10%. Had it been invested in that, the blue line shows what the balances of the permanent fund would have been. The blue bars at the bottom show what the POMV draw would have been uh had they adopted since FY20 if if they had adopted the the Warren Buffett investment approach. What you can see is that the red line essentially flatlines uh between uh uh FY23, uh the last downturn in the market, and FY26. The last point on this is the end of month FY26, the most recent for which the permanent fund corporation has published data. And you can see that the that the red line is just essentially flat across that time. No additional growth coming out of the permanent fund corporation's uh investment approach. But you see the blue line jumps from about$80 billion in FY23 to now$124 billion,$125 billion, if it had been invested in the SP$500. So when when Devin says, oh, we've had great long-term performance, we've had great uh growth in the in the permanent fund. No, you haven't. What that what the growth you've had is between 76 and 81,$5 billion of growth over essentially four years. In the meantime, if you'd invested in the S P 500, if you'd invested in the Warren Buffett approach, it would have grown from 80 billion up to 124 billion. He says, Devin says, we're generating revenue for the state. Okay, yes, there is a red bar there that shows you are generating a POMV draw for the state. But look at what it would have been had you been had you invested in the Warren Buffett approach, had you taken the 9010 approach based upon the SP 500. Instead of the 3.8 billion that everybody celebrates, uh everybody celebrates is coming out of the POMB um in FY26, it would have been 4.49 billion. It would have been$700 million more, nearly 20% more, uh, had we invested in the in the Warren Buffett approach just since FY20. If you go all the way back to FY12, which is where the SP 500 began, the numbers are huge. They're astronomical. The the differences are astronomical. So what what what what Devin's trying to do is say, hey, look, we got a red line and we got red bars. Isn't that great? Right. We've got a balance and we've got pom v draws. But that's that's not the story. The story is what could it have been had you taken a different investment approach, an approach that in 13 of the last 14 years produced higher returns than the investment approach uh you were taking.
SPEAKER_01:That's and would have to be measured by and would have cost nearly a billion dollars less, right? Because there's 800, 900 million in management fees for doing this of the investment approach that they're using versus just plugging it into the Vanguard formula and leaving it and setting it for getting it. They, I mean, it would have been a billion dollars per year less in investment costs.
SPEAKER_02:Yep, exactly right. Exactly right. And that billion dollars is being reflected in the red line. The red line is a billion dollars per year less over the last several years, a billion dollars per year less because of the investment approach they were taking, the costly investment approach they were taking. You're exactly right. The blue line is is very low, low cost. I mean, that's why Warren Buck Buffett recommends it. Because it's low cost. You're not you're not losing a bunch of your revenue, a bunch of your income off to paying for uh paying for so-called experts.
SPEAKER_01:This is just another one of those. I mean, this is gaslighting. This is exactly what this is. This is gaslighting. Uh, okay. We'll take our bad news here and we're gonna spin it in the best light possible and tell you that you're getting exactly what you deserve. This is, oh, look at what great stuff we're doing. Again, not looking at the alternative. And uh, I mean, this is not about somebody just said, when is all this theory going to hit the streets? When is Brad going to run for governor? I this is like this is not theory. You're looking at the raw numbers to say, here's what the comparisons are. And yes, the SP, the the the the Vanguard fund is more volatile, but even in its own volatility, it still provides more funding for the state in both the short and the long run. I mean, that that's that's crazy.
SPEAKER_02:Yeah, what you get, I mean, the the the permanent fund touts the fact that they're that their that their approach isn't volatile. Well, you look, look at FY23. Their approach went down also. It went from FY22, an FY22 balance of 81.9 down to 76.34. There, they have volatility also. It's not as volatile as as the S P 500, but the volatility of the S P 500 is biased upward. I mean, yes, there are some down years, but there are a lot more up years, and the up years are a lot bigger in terms of up than than the than the the approach being taken by the permanent fund corporation. I think the real telling, when people say volatility, the statistic to me that that kills that off is that 13 out of 13 out of the last 14 years, the Buffett approach, the 9010 approach has outperformed the permanent fund corporation. The permanent fund corporation says, yes, but there was one year, and it happens to be FY23. So you can see on this chart that one year that the S that the Permanent Fund outperformed the uh outperformed the SP 500. The permanent fund will say, Yes, there was there was one year that you know that we outperformed the SP 500. That's one year out of 14. Well, and and in the meantime, in those other 13 years, the SP has built up a huge balance compared to where the permanent fund corporation is.
SPEAKER_01:But even in the year that they beat the SP, as far as the drop was not as dramatic. If we had been in the SP 500, we still would have received almost 200 million dollars more in revenue from the POMB draw. I mean, this is you know, it's right here in front of you in black and white. You can look at the numbers for this five-year period or for the 15 or for the 15 years all told. I mean, again, it would have been every year, again, and without that billion dollars a year, 800 million dollars a year in fees to do it.
SPEAKER_02:Yeah, it's so the permanent fund corporation. Uh gaslighting is probably the right the perfect term to this. I really hadn't thought of it before. But the permanent fund corporations say, Here, look at look at what we've done for you. We haven't lost any money because we've we're not volatile, but we haven't made any money. But but the rest of the story is we haven't made any money, we haven't built up the fund in the same way that investing in the Warren Buffett approach. And this isn't This isn't the Brad Keithley approach. This isn't this isn't some fly by night approach. This is Ward Buffett saying this is the right investment approach, the 90-10 investment approach. You know, people say you don't have diversity in a 90-10. Well, you've got the entire SP 500. Corporations doing well, corporations doing bad. You've got that entire mix you're hedging against volatility by using that entire mix. And in 13 out of 14 years, it's produced a higher return, a better return, better values for uh for those who invest that way as opposed to what the what the permanent fund corporation is doing.
SPEAKER_01:And I don't mean to get stuck on this fees thing, but isn't Wyoming, this is what Wyoming is doing, right? They plug their, they have a fund. It's not like the permanent fund, you know, but they have a big fund that they use and they tag to the SP 500 Vanguard fund and they pay one guy$250,000 a year to manage everything. Uh, and uh they've seen greater rates of return and more stable, you know, again, following the blue line than we have spending$800 plus million dollars a year.
SPEAKER_02:Yeah, yeah. And and and that$800 million is really so the permanent fund board members who don't know what they're doing, by the way. The permanent fund board, we've already, I mean, they've established that. Heck, the chairman Jason Brunny says, I don't know what I'm doing. I I wish we had uh uh other people back who didn't know what they were doing. I mean, that it that$800 million is to give the the board members cover. Oh, well, you know, we didn't make these decisions, we relied on this and we paid a lot for this investment advice. Um, and so it must be right, and and it's not our fault. It's the it's the if there is a fault, it's the fault of the investors uh or a fault of all the advisors that uh that we hired. It's it's a CYA. But what you get, I mean, the other investment approach is to follow Warren Buffett. And who's been better at this over time than uh than Warren Buffett? So I it it's it's it is it is frustrating, it is gaslighting. When you read Devin's article, he he talks about none of this. It's all it's all the red line. Isn't the red line great? Red line didn't go down, isn't that great? The red line produced the red bars, which is which is revenue. Isn't that great? Yeah, but it could have been much, much, much, much higher.
SPEAKER_01:Yeah, because all the blue bars are all higher. That's the thing. I mean, nobody they didn't he didn't talk about the blue bars. Let's not talk about that. Let's just look at how pretty the red bars are. But the blue bars are higher every freaking time, even in the downturns, the blue bars are higher. Um, it's uh it's astonishing. Chris makes a valid point. Um, and yes, it would require a whole uh a whole uh kind of redirection. He said they'd have to sell a lot of real estate in order to invest the money that you're talking about. Well, again, that's what I think Brad is pointing out is that this is a whole different approach to what they've been trying to do. That's not generating the revenue. Yes, you'd have to take a whole different type of approach to make that work. Uh, Brad, am I wrong? Am I re misreading what you're saying here?
SPEAKER_02:That's exactly right. That's exactly right. And what you would be investing in is the S ⁇ P 500, and you'd be investing in some companies that are that are heavily in real estate. You'd be you'd be indirectly investing in real estate through through companies that that are heavily, heavily invested in real estate. You wouldn't be out of it, you'd just be doing it indirectly, and you'd be relying on the management of those companies to perform. And over time, you've seen that performance outstrips the performance of the permanent fund corporation who's investing directly in real estate. So, yes, you would take you would take your money out of the direct investment in real estate, but you would still be invested in a proportionate amount in real estate through your through the investment in the uh in the SP 500. Some people sometimes make that point, the point that Chris says and says, well, the red line isn't really what the red line is. The red line, you're you're not capturing all the appreciation that's gone on with real estate or with their other private investments. And the red line's really something else. Well, the permanent fund corporation re-eval revalues on an ongoing basis, revalues its investments to reflect fair market value. And basically what you're arguing is well, they're not really capturing fair market value. The red line isn't really what the red, the the actual investment base isn't what the red line is, the fair market value would be would be higher. Well, that means that the permanent fund corporation isn't doing their job in in valuing the fair market value of their assets. But setting aside that, you would still be invested. You'd be invested in pharmaceuticals, you'd be invested in real estate, you'd be invested in oil and gas, you'd be invested in all of the things that people want you to invest in, that people think you should be invested in, but you'd be invested in it through the S P 500 as opposed to directly investing in it. And we're seeing the difference in results, the difference between the red line and the blue line of investing through the S P 500 as opposed to investing directly.
SPEAKER_01:Kyle just said the red line is smoke and mirrors. Well, if that's the case, if that's the case, then the permanent fund corporation has failed. If it's smoke and mirrors, that they're the ones that are providing this valuation, Kyle. So are they doing a good job? He says this is where the argument falls apart. The red line is smoke and mirror. This is the numbers that they're delivering. How does that I mean I just you know, uh, I I just don't understand that how this argument goes. I don't understand.
SPEAKER_02:To the extent that they're smoke and mirrors, they're smoking mirrors on the high side. Nobody is going to, nobody, no investment firm is going to say that, oh, our investments are worse than what they than what than what they're performing. To the extent there's a bias in here, the bias is on the high side. So if they're smoking mirrors, they're smoke and mirrors on the high side. The blue line is real. The blue line is real SP returns. The blue line is real investment returns by investing in the Vanguard uh SP 500 ETF. Those are real numbers. The red line, to the extent they're smoke and mirrors, to the extent they're they're made-up numbers, that's the high side. If he's saying they're smoke and mirrors, the real numbers are lower than that. Because the because the incentives and the investment bias is always to upscale your investment value as opposed to low scale it.
SPEAKER_01:And Kyle says, I know you don't understand because we're too stupid to understand. Kyle apparently has all the solutions out there. Kyle's got it, got Kyle's got it all. He can't explain how it's wrong. He just knows in its heart that we're wrong because we're fighting the we're fighting the machine. That's what it's all about there. Um, going back to Chris's comment where we'd have to sell a lot of real estate. Uh, Brad created the red line. No, those red lines came from the PFD and and from Devin Mitchell that came from the thing, right? I mean, this is not Brad's numbers. These are numbers that Brad took from Devin Mitchell's commentary and from the the reporting of the permanent fund corporation.
SPEAKER_02:So those are from the annual reports, those are from their monthly to the extent they're monthly. Those are from their monthly reports. The blue line is from is from simply looking at the value of Vanguard's SP 500 ETF, looking at the value of that over periods. Yeah. Um, so I'm I've created none of these numbers. I have calculated the numbers from existing numbers from published numbers, audited numbers. Uh, I'm not I'm not creating these numbers. No, that's okay.
SPEAKER_01:Kyle knows better. Uh, I just every time I go back to Chris's comments and I see, you know, you'd have to sell a lot of real estate in order. And yeah, that's being like people saying, Can't believe we'd have to sell our horses and buggies to buy these newfangled cars and do all that. You know, if it's not working, then and and there's a better way to do it. Yeah, you're gonna have to change the way you do things. That's that's how it works. Um, you know, it's it is what it is. The weekly top three continues. Uh, we're getting back into it here. Number three of the weekly top three, uh, and uh the the this is Brad's new point. All op-eds should be required to come with a fiscal note. We've got an op-ed and we think it's all well and great, but boy, it should really be required to have a fiscal note with it. Brad, what are you talking about?
SPEAKER_02:Well, I read I read a bunch of op-eds, I read a bunch of op-eds every week, and and I read a bunch of op-eds this past week, and and the cumulative effect by the time I got to the last one, they were all about we should spend on this, we should spend on that, we should be doing this, we should be doing that. The cumulative effect of of all those at the end was, yeah, but how much would they cost? And what's the re what's the expected return? We don't have the state is out of money, folks. I mean, the state doesn't have, I mean, because in part because we're not generating the revenue that we should be out of our existing assets, but the state doesn't have any money laying around spare that it ought to be that it should be investing in these things. Yet we get these articles that say, oh, you need to invest more in K through 12, you need to invest more in this, you need to invest more than that. And and at the end of it, I said, well, what we ought to have, what we ought what ought to be required, is that the the end paragraph of every one of these articles after they've made the case for why do we ought to spend on this, the the end paragraph ought to be a fiscal note that says, this is how much it costs, this is the long-term cost, this is this is the return that we're anticipating we're going to generate out of this. This is why it makes financial sense. And and with that baseline, with that sort of fiscal note for every one of the op-eds, we could start making judgments about whether whether, you know, A, we have enough money uh to spend on these things, and B, what the relative returns of spending on one thing is to the other. The thing that started me down this road was a an article by or an op-ed by Kelly Lessons, uh, Anchorage School Board, Kelly Lessons, that that says, opinion, riding the cyclone of Alaska school funding. And basically it was we ought to be spending more, we're going up, we're going down. We aren't really going down, but we're going up uh in uh we're not going up enough in uh in Alaska school spending, and we ought to be spending more. Fine. How much is it gonna what are you what are you arguing for in terms of cost? What's the return that you anticipate out of that? And and let's make a judgment about whether it's worthwhile to do that. All of these articles go, my thing's important, got to spend on that. Uh, doesn't matter what anything else is, doesn't matter we don't have the revenues, none of these articles talk about revenues. Doesn't matter that we don't have the revenues, we've just got to be spending on this because it's a good thing to spend money on. If we had fiscal notes, starting with this one, it would be it would be useful in trying to figure out what where and how we ought to be investing our money. Another one, this was by Tom Begage, he's running for governor, former state senator, now running for governor, Tom Begage. Alaska's energy security must come first. And it's an article about how we need to invest in all these renewables and we need to have additional support for the renewables, support uh being the buzzword for additional government uh uh credits, tax credits, or and or or investments of some of one sort or another in these these projects to provide a la Alaska's energy security. Okay, how much are you talking about, Tom? What what is the cost? What's the investment return on that? What's the what's the the betterment that we get out of those compared to what the baseline is? It's not like it's not like Alaska is gonna run out of energy. We're gonna have to import some in terms of LNG, um uh in order to provide uh support to the Alaska consumption side since it's heavily gas weighted. Uh, we're gonna have to import some. But it's not like we're lots, it's not like we're running the risk of running out of energy. Begage just wants it to be a different type of energy and wants and and is trying to fashion an argument about how that is important for Alaska's uh energy security. But but no numbers, no calculation of what the cost is, no calculation of where the revenues are going to come from, no discussion of what the of what the long-term return on that is. Just it's important to have energy security, and so you need to spend on these things. This isn't this isn't just a Democrat thing, though. I mean, lessons I think is a Democrat. Beggage certainly is a Democrat. This isn't just a Democrat thing. Here's we the next one that I ran across was one by George Rauscher. Uh and the headline is Alaska needs more power, not less. And he's talking about the coal plant uh back up in the uh back up in Susitna uh that is uh that some have proposed and some are uh trying to support uh that needs infrastructure, needs support to make it work, government support to make it work. Uh, but uh but Rouscher's talking about how important that is and how that would provide more power and how we could have more power if we just started looking at these other investments we could make in these other projects we could develop. Again, no numbers, no cost numbers, no no where's the no analysis of where's the revenue supposed to come from, um, and no analysis of what the what the long-term fiscal impact is. It's just uh the the the the cumul the cumulative effect of all this was we got a lot of op-eds, and we're gonna have a lot more op-eds as we get into the governor's race and we get into the legislative races. We're gonna have a lot of op-eds about you need to spend on this, you need to spend on that, you need to spend on the other thing. And oh, look at Alaska needs more power, Alaska needs energy security, Alaska needs to get off the roller coaster on K through 12 spending. But how do we pay for it?
SPEAKER_01:But how do we pay? Where's the fiscal note?
SPEAKER_02:How do we what's that cost? Exactly right. And that's the and that's the the sense I came away from. All of these Alaskans would actually benefit from from having a fiscal note at the bottom of all of these articles, all of these op-eds about, you know, where how how are we supp what what are the economics uh uh of these projects? In the absence of a fiscal note, I think that people should read these with a grain of salt and say, okay, yeah, yeah, okay. You want to spend on that, great. You want to spend on that, you want to spend on a new coal plant, you want to spend on this, you want to spend on on another thing. All that's great, but let me figure out what the costs are, or let me ask somebody what the costs are and see if they make economic sense. We have a lot of pie in the sky going on. Uh we've always had a lot of pie in the sky going on, but we have a lot of pie in the sky going on in this state right now. The LNG line's another one of those. We have a lot of pie in the sky going on, but nobody is grounded, none of these are grounded in in basic economics. And and to the extent we get off on an emotional, an emotional drive and we go down one of these tracks like K through 12 or or you know, building a road out to a coal plant or all of that sort of stuff, to the extent we get off on these on these tracks, that explains a lot of why we're in the fiscal situation that we're in. We're spending a lot. We aren't looking at the fundamental economics behind them.
SPEAKER_01:Yeah. No, I mean, this is uh this is again, we see this all the time, especially around election season, where everybody has every plan to put a chicken in every pot and do all this other kind of stuff, but they never tell you how it's going to be paid for, where the money's going to come from, or what the actual I mean, it's the long trail all over again, right? It's gonna generate millions of dollars and show your work. Show me the numbers. What do you what do you mean? How much is it gonna cost and what is the return going to be? It's aspirational. Everything is aspirational at that point. Oh, if we just build more, and if I hear one more Republican especially say, well, we just need more resource development, that'll get us through the next 10 years. I mean, it'll take 10 years to get the resource development off the ground. How do we survive between now and then? That's the question I keep asking.
SPEAKER_02:Oh, and and and as we discussed last week, and as we've discussed, you know, fairly often, and as we as I've got in the I think in last week's uh Alaska landmine column, resource development's costing us money. I mean, you when you look at the credits um and the deductions that the oil companies are to take, our as as production's going up, which everybody says, oh great, see resource development. Production's going up. As production's going up, revenues from from the production tax, from the from from the tax on oil, is going down. It's not not even staying, it's not even going up a little bit, yeah. It's not even staying, it's going down.
SPEAKER_01:I know.
SPEAKER_02:Development's costing us much.
SPEAKER_01:I I like your idea. There should be a fiscal note attached to each more each one. Yep. You gotta have a fiscal note attached to each one. It's true though, right? I mean, we got all these great ideas. Okay, great. How's it? How are we gonna pay for it? How's it gonna happen? How's it gonna oh you don't have that answer? Okay, great. That's that's uh that's great. Oh, we need more money for the schools? Okay, great. How's that gonna get paid? Oh, you don't have an answer for that? Okay, great. You know, uh it it's it's it's astonishing.
SPEAKER_02:Yeah, you know, you you you made a statement back in the back in the segment, I think, is is very insightful. Show your work. Show your work. A lot of a lot of these op-eds wouldn't pass fifth grade, you know, the fifth grade math teachers requirement that you show your work when you turn in your test. Show your work on how your on how your math works. Show how you got to the answer that you got to. Um, I remember law school exams were like that. Show how you how you reach the conclusion you did. We don't do that. We don't do that. I mean, these op-eds, all these op-eds, George Roushers included, are just let's jump to the end, the end game. Oh, we have a coal plant, or let's, or Tom Begage, oh, we have all these renewables, or Kelly Lessons, oh, we have this great K through 12. This jump to the end without showing their work about how we pay for it, what it's gonna cost, how we pay for that cost, and what the what the return uh on uh on that investment on that investment is. And right, and and they're not they're not, we're not even passing the fifth grade test, yeah. Of of these uh of these proposals.
SPEAKER_01:Well, it is tis political season, Brad. Expect tons more of this, right? There'd be a chicken in every pot and a moose on every table, and let me show you how I'm gonna do it. No, I won't show you how I'm gonna do it. I'm just gonna promise that, and we'll figure it out on the other end. That's how it's gonna be because it's a good thing. It's a good thing. Alaska energy security is a good thing. Don't worry about how we get there, it's a good thing. I think a one million dollar deposit in my account would be a good thing. I think that would be a great thing. So tell me how that works. Tell me how that works, right? I I mean this is that's where we're at. I how can you how can you figure that out? Uh, you know, or back to you know, the red line and the blue line. They're pretty easy to go pull that information out. There's your work. I mean, show me show me how it's wrong. Oh, you can't. Okay. That's all I that's all I wanted to know. Um it's it's just one of those things, right? It's one of those things, my friend.
SPEAKER_02:Well, it's um, you're right. We're gonna have a lot more of these come up in in the in the campaign season, and I'm gonna be complaining about a lot more of them, I'm sure, as we go through. But for but for listeners and and readers, think about that. Think about what the fiscal note would be on this proposal, and think about why they aren't giving you the fiscal note. Think about why they aren't telling you what the economics are, think about why they aren't telling you what the cost is, what the what the opportunity costs of of what we otherwise could be investing in, or or or what the impact is on lower and middle income Alaska families if we're taking the money out out through PFD cuts. Think about that.
SPEAKER_01:It's the the worst part is that when I ask somebody how do we get out of the fiscal situation we're in, their answer is, well, resource development. We need to develop the research. Okay, well, I mean, first off, how do you pay for that resource development? What's the cost going to be to the state? And again, forget about the timeline because they're not even thinking about the timeline. The timeline is five to ten years. I mean, five years at a minimum, 10 years, you know, probably more than likely. But again, it's it's like they it's not a real, it's not a real answer. It's not a real answer.
SPEAKER_02:Yeah, particularly when you look at oil, and particularly the when you look at what the impact is on uh on production taxes. I mean, we've gone through, I've gone through all the periods now. I've gone through the current period, the next 10 years, and the and the and the future beyond that, using DOR data uh from Willow, Pika and Willow, and you can look at what the out what the out years look like. 25 year span. And all of those years, production taxes go down. Production taxes don't come back. And so people who say, oh, well, we gotta do the next 10 years, don't worry about that. The 10 years beyond that will be okay. No, we're not. They don't come back, they keep going down. And so it's and so when people talk about resource development, oil development, yeah, they haven't either A, they haven't done the numbers, or B, they're just lying.
SPEAKER_01:Yeah, again, aspirational. And yeah, you're right, Harold. That's exactly right. We're still chasing a pipe dream, millions being wasted on a gas. We were just talking about that. Where's the numbers? Where's the fiscal note on that? How much effort, energy, and wishing are we wasting on yet another program that's gonna go nowhere? Um, you know, it's it's it all sounds great on paper until the rubber hits the road, right? That's just that's where it is. It just it all is desperation. Brad, what else are you uh looking at this next week? Here, we got about two minutes here.
SPEAKER_02:Well, I did a piece uh a few weeks ago on um K through 12 and focused on why it's important to start when we look at increases in K through 12 revenues, start focusing on local governments. Um Alaska lags the national average hugely in terms of the percentage of revenue for K through 12 coming from local governments. And the and the result and the result of that is local governments really don't care that much about constraining K-12 spending. They're they're mostly advocates of additional K-12 spending because they don't have to pay much for it. If you push, like the other states do, if you push more responsibility for raising the money to pay for K through 12 spending on local governments, they would be more responsible in terms of constraining that spending and spending it more wisely. So I'm gonna do another uh another piece on that this coming Friday.
SPEAKER_01:Well, I I I'm interested to see where we go from here, where where it all ends up at. And we'll be watching that for sure as we go through. Brad, thank you so much for coming on board. As always, it's good to talk with you. Appreciate you being part of the show today. Michael, as always, thanks for having me.
SPEAKER_02: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 Keithly, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week on the weekly top three.
