The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (10.27.2025)
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 October 27, 2025.
This week, our top 3 issues are these: 1) we explain why Legislators should ask those pushing for more spending to clarify at the same time how the proponents propose to pay for it(2:09); 2) we explain why one of the most prominent champions of PFD cuts is the very definition of hypocrisy (19:34); and 3) we discuss why, after taking some odd turns, MustRead Alaska’s Jon Faulkner seems to be coming to the right conclusion on the ill-advised proposal to consolidate the two Permanent Fund accounts into one (39:02).
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 Keithly, 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 October 27th, 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 NationalBlogsite 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 explain why legislators should ask those pushing for more spending to clarify at the same time how it should be paid for. Second, we explained why one of the most prominent champions of PFD cuts is the very definition of hypocrisy. And third, we discuss why, after taking some odd turns, Must Reed Alaska's John Faulkner seems to be coming to the right conclusion on the ill-fated proposal to combine the two permanent fund accounts into one. And now let's join Michael.
SPEAKER_01:Well, Brad, we got the weekly top three, so let's uh let's dive right into it. I know you have a lot to say about a lot of stuff, so let's uh let's get down to the to the nitty-gritty here and get started uh with this week, uh, which is uh how legislators should be asking those who uh push for more spending to say exactly how they're supposed to pay for it. Let's uh let's get started.
SPEAKER_00:Michael, when uh back in 2013, when we started talking about, when I started talking about spending cuts and the need for spending cuts uh as a way of balancing the budget, because you could see from the forecast, even the Rosie forecast back then, you can see from the forecast that we weren't growing revenues at the rate we were growing spending, uh, and that we were going to hit the wall at some point. And I started talking about spending cuts. And I recall one of the one of the first public sessions when I talked about that, the pushback was, well, where would you cut spending? And it was a good question, but also sort of a trick question, because what it what it was intended to do was to activate those constituencies that would oppose spending cuts in that area to start pushing back and uh and start uh uh uh saying, well, we can't do spending cuts in this area, uh, without, of course, them giving an alternative area to do spending cuts. They just oppose spending cuts in their area. And it's and it and it was a pretty effective tool back then, uh, and it's continued to be a pretty effective tool with respect to uh with respect to the response to uh spending cuts. Where would you cut spending? Um uh and uh as we've seen, that's not uh there's there's not been a good answer to that in the intervening decade. We need to start, in my opinion, and as we've discussed on the show before, we need to start pushing back on those who say they want to increase spending and ask them sort of the flip side of the same question, where would you increase revenues? Because we don't have enough revenues uh to pay for even the spending we have now, much less increased spending. And so where would you uh where would you increase revenues? Or in the alternative, where would you cut spending if they wanted to go down that road? But but but mostly where would you increase revenues? As as we've gone through the show over the last few weeks, I've seen various articles pop up with uh the legislative, with the local uh boroughs and the local assemblies, local cities, municipalities uh uh putting together their legislative wish list for the for the coming year. Um, and I see you know long lists from some Fairbanks, Fairbanks North Stark Borough. I see short lists from others. Uh, but there's a generally speaking, there's just a broad list of uh of requests for increased spending that are going to come to legislators when they meet with the local bodies before they go before they go down to Juno. And I think I think the legislators ought to be prepared to to push back in the sense of, okay, we don't have enough money to pay for what we got. You're asking us to increase spending in certain areas. Where would you come up with the revenues? And at least start getting these bodies and others, other special interests who are going to come to the legislators during the course of the session, at least start getting them to think about that they have to responsibly when they ask for increased spending, they have to talk about, they have to talk about where would they come up uh with the additional revenues. Right. The other the other thing that's interesting about looking at all of these or following all of these local bodies and and the legislative uh wish list that they're coming up with is they're all different. I mean, what we found in 2018 when or 20, yeah, 2019, when Governor Dunley we tried to do the spending cuts, the deep spending cuts at the beginning of his administration. What we found was legislators sort of uniformly would say uniformly would say, yeah, you can cut spending, but don't cut spending in this area, because this area is important to me. And by the time you add it up 60 uh legislators, you pretty much wiped out any any spending cuts because legislator X would say, you can cut you can cut spending across the board, but don't cut it in this area. And then the next legislator would say, Well, don't cut it in the next area. And then the legislator, the next legislator would say, Don't cut it in the next area. By the time by the time you add all those up. And I was reminded of that when I was reading the Frontiersman uh the article on the Matsu Borough, uh, their spending, uh, their priorities. And this is the um, this is uh Tim Bradner's uh summation of it. The final list for state funding was adopted in borough resolution RS 25072. A key priority for the Matsu is for the legislature to fully fund the state's share of school bond debt reimbursement. The borough is carrying a heavy load of debt from construction of schools, all of which, by the way, occurred with a footnote in the in the in the bonding that said the state may or may not uh uh fund this. Uh, but the borough is carrying a heavy load of debt from construction of schools. And while the state has promised to pick up a significant share, promised a significant share of the annual school bond payments, this isn't legally guaranteed. No shit. Um and so, and so you you find this. This is the this is the Matsu Borough. You find something different from the Fairbanks North Star Borough, you find something different from the Fairbanks Assembly, you find something different from Homer, Ken Eye all over the place, Juno. Uh they all have something different. And so it reminds you as you go through these, it reminds you that that while everybody, well, generally people will say, yeah, spending cuts, there is just never a consensus on where the spending cuts um should be. But in any event, the the the the pushback legislators, when legislators hear these things, I would encourage them if they aren't already, and I know some are, but if they aren't already, the pushback should be, okay, fine. Yeah, okay, I got I got your spending now, where you want increased spending. But where would how would you pay for it? What what's what's the what's the area, what's the revenue source you would use to pay for it? And maybe they'll get some good ideas of that out of that. I recall in the early days, 2013, 2014, there were some decent ideas, particularly about the university system. Uh there were some decent ideas about about where to cut where to cut spending. So I I I it it's time, it's past time, but it's time for pushback on this increased spending, not just saying, no, we don't have the money, but where would you come up with the revenue? And I and I think it will, I think if it's done effectively, I think it will start, it will sober people up to the reality that this isn't free stuff, that that you've got to pay for it somehow. And you, by talking about wanting increased spending, you are on the hook responsibly to talk about where the revenues would come from.
SPEAKER_01:Well, and I think you bring up the valid point again that 2018-2019, when Dunleavy was pushing to cut the budget, you know, it was always there was always a bunch of budget warriors up there who were like, We're with you, boss. We're we're with you, we'll cut the thing, except, oh, don't wait, don't cut that. That's in my backyard. Oh, oh, wait, don't don't cut that. That's it. I mean, this is the again, the you know, don't tax him, or don't tax him, don't tax me, tax the man behind the tree kind of thing. It's always somebody else that has to pick up the bill. And this is the politician's disease of not only do we know better than you how to spend your money, but we know better than you how to, we should protect all this spend, but this other spend. And we, I, you know, in principle, we agree with the idea of cuts, just as long as we don't get hurt. I mean, they don't understand that we've created such a dependency state that no matter what you do, no matter where you cut, somebody is going to be uh is going to be injured. I mean, Will Stapp was talking about that one program that he has been he was trying to cut. It was, I think he said it was a$50,000 program, wasn't serving anybody, had hadn't, hadn't had a constituency served in years, couldn't get the thing cut because somebody might need it one day, somewhere, somehow. And it was just a simple$50,000, wouldn't even affect anybody. I mean, that's the point that we're at today in state government. Yep.
SPEAKER_00:So I think the pushback on that is how do you how do you pay for it then? What who do you want to tax? Who who pays for this program, this additional program that that, or this program that you want to keep, this additional program that that you want to add, who pays for it? Who are you suggesting pay for your spending? And if some of the Matsu boroughs say, well, it ought to be done through PFD cuts, then okay, they're at least they're on the record saying that. But they're also saying at that point they want they want middle and lower income Alaska families statewide to pay for theirs to pay for their spending program um in the Matsu. So I so I, you know, it's not it's gonna be the it's not gonna be the end-all cure cure-all, but at least it's going to create a a sense of responsibility on the part of those asking for increased spending to come up with legitimate ideas on on how you uh how you uh how you pay for it. Back in 2013, 2014, my response at that time, and my response really consistently since has been across the board. Everybody shares in the burden uh across the board. Frankly, that would be my response also uh uh on the revenue side, just like the fiscal policy, the 2021 legislative fiscal policy working group said, it's a little bit of everything. It's a little bit of PFD cuts by restructuring it down to POMV 5050 from the current statutory method. It's a little bit of broad-based taxes, it's a little bit of oil taxes, it's a little bit of spending cuts, a little, it's a little bit of this and that. You spread the burden, and as a result of that, you limit the burden on any one given one given uh constituency or one given class. I think that's I think that the fiscal policy working group, I think, had had a great idea in that regard. And I think it's also a great idea in with regard to uh with regard to spending cuts that everybody shares the burden a little bit instead of focusing it on just on just one group. But it's a question that I think needs to be asked. Where would you come up uh with the additional revenues to pay for the spent the additional spending that you're proposing?
SPEAKER_01:We've already seen this new crop of uh gubernatorial candidates come in and the ones that we've interviewed, we've asked, we've talked a lot about a lot of this stuff, and we're hearing kind of this strident call from many of them of, well, no, no taxes. I'm not interested in tax. I'm not interested in this at all. I'm not, I just, you know, but again, this is a this is a collaborative effort. And if the legislature has no interest in cuts, which it obviously doesn't, and there's no interest in generating new revenue, we're back to the same old, same old, only this time there's no more deep pockets to pull the money out of. There's no more piggy banks left, there's no more couch cushions to flip over. Uh, and so what do we end up with in these uh you know, for these candidates?
SPEAKER_00:Yeah. So what the candidates are really saying, when a candidate tells you no taxes, I'm not interested in any new revenues, I'm just I'm I'm against all that, what they're really saying is PFD cuts because there's no place else to go. There's no other revenue source that that is available to the legislature is available to to the state as a whole. What they're really saying when they when they when they don't say anything else is they're really saying saying PFD cuts. And if, like Bernadette, they say no PFD cuts, then they're just off in la la land someplace. They're off they're you know visiting Disneyland, fantasy land, uh uh in in the course of their campaigns. Because that we we saw that in 2018, we saw that in 2019. Not gonna happen. The only way that would possibly happen is if you is if you is if a gubernatorial candidate ran with a collection of legislative candidates that were all committed to that principle, that we're gonna do it by cuts, and here's here's the cuts we're gonna do. But a gubernatorial candidate, we saw this with Dunley, a gubernatorial candidate on their own saying that they're gonna do this through spending cuts just doesn't work because you don't see in the legislature the the political will, the collective political will to agree on to agree on those spending cuts.
SPEAKER_01:Kevin just talked about how resource development is is the uh is the is you know is the long-term solution. But again, just like I've said to many legislators, um the the problem with resource development is that it is a I mean it's a longer-term fix. How do we get over the next five to ten years? That's my question, right? I mean, how do we get through the next five to ten years where we're already predicted to have all those things uh, you know, have have these these huge deficits and everything else? How do we make it? That's the problem. I agree. Resource development's a great idea, but I mean, we need money tomorrow. That's like, you know, I'll pay you, I'll pay you Tuesday for a hamburger today kind of thing, right?
SPEAKER_00:Yeah. And and and Michael, I mean, the only resource development that under any anything approaching the current tax schemes that produces the kind of revenue that we're that we need to be talking about is oil. See, only I mean, gas does even even the LNG project wouldn't produce that type of revenue. It's oil. And under the current oil tax code, we lose money. The state loses money from resource development because of the way the tax code works with all of the deductions and the exclusions and the and the credits, the state loses money. You can see that. If anybody wants to dispute that, go to the current, go to the spring revenue forecast and look at the production tax revenue line across the next 10 years. It goes down dramatically. Production's going up by 40%, resource development. Revenues from production taxes are going down by over 30%. I think it's closer to 40%. They're going down by by that percent. Why is that? Because with all of the resource development, the deductions, exclusions, the credits, the the all of the all of the things that flip in, it reduces production taxes. So, you know, people who say people who say resource development, uh, it's the same thing as saying spending cuts. It's it's it's not gonna happen in terms it if you want to change the oil tax code, that'd be great. But it's not gonna happen under the current oil tax code. It's not gonna happen with current current uh mineral development under the under the small royalties and taxes we get from that. It's not gonna happen. And so, you know, you're just you're just trying to you're trying to deflect the conversation away from of away from things that are going to happen. And I just uh it's a it's a waste of time. I mean, I appreciate Kevin saying it. I appreciate that legislature, but it's just a waste of time because it isn't gonna produce the type of revenues we're talking about. And particularly in the case of oil, of oil, it's gonna reduce the revenues. Additional development is gonna reduce the development, uh reduce the revenues that we get at least in the next 15 years. And you and I'll be done by then, or I'll be done by then at least.
SPEAKER_01:What, you're putting a timeline on it? Wait, Brad, wait. That's uh that's it uh you know, but it is you know, I had a lot of conversations this last weekend with people who were asking the question, you know, how do we get out of this? How do we, you know, how are we going to you know pull out of this tailspin uh that we can see you know where the state is going, how do we how do we do it? And the the the bottom line is is that it's gonna hurt one way or the other. You're either gonna have to cut or you're gonna have to create new revenues. And we're the ones that are gonna end up paying the bill one way or the other. And um I mean that's that's kind of where we're at right now.
SPEAKER_00:Yeah, my my point has been, and I and I continue to think it's true, my point has been if you structure revenues in a way that it affects everybody, including the top 20%, the oil companies and the non-resident industries, if you structure revenues in that way, they'll start pushing back on spending. Right now, they're getting a free shot because all of the burdens being shifted to middle and lower income Alaska families, they're getting off, as Hammond put it, scot-free. If you shift the burden so that they have to pay, so that as spending goes up, the oil companies have to pay more, the top 20% have to pay, non-resident industries, tourism, fishing, uh uh, and oil, uh, they have to pay more. If you shift the burden so that as spending goes up, they have to pay. They will start using their lobbyists to push back on spending. But right now they don't. Right now they get that right now, they get a free shot.
SPEAKER_01:No, and uh Kevin just said something about long-term planning. I agree. Like I said, I think resource development is great for long-term planning, but we have to have a short-term plan to get us out of where we're at right now, and that's part of the problem. We are ready to go. Uh, jumping into it with number two, Brad Keithly, Alaskans for sustainable budgets, the weekly top three. You can find him at ak4sb.com is his website. Of course, he writes a column for the Alaska Landmine every week, the chart of the week column. You can go out and see that there. And he loves to uh he loves to argue with you on Twitter and X and Facebook. So go out there and do all those. You can argue with him everywhere you want to go. Uh, so Brad, uh, number two of the weekly top three, you want to talk about the very definition of irony. Hit me with it.
SPEAKER_00:Yeah, I mean actually maybe hypocrisy, as I thought through this morning, which issy it is. Um, so you know how your eyes will roll back in your head when you read something and and you just go, oh my god, this is just so stupid. Well, I think my eyes did a 360 yesterday when I was reading the letters to the uh editor in the in the ADN to prepare for today's program. There's a letter in there from Representative Andy Josephson. Um, and and this is the headline: A Nation of Laws with Checks and Balances. And in the letter, Josephson criticizes the current federal Trump administration for being lawless and for not having checks and balances and for Congress, you know, rolling over the usual stuff that we're hearing these days for Congress rolling over and not acting as a check on the administration. And so, you know, basically the theme is we are now a lawless nation with uh with no checks and balances. And I sat there for a moment and I and I sat there and said, Andy Josephson, he's one of the biggest advocates for using PFD cuts, right? P non-statutory, violate the statute, contrary to statute, PFD cuts, non-le, non-lawful, non-law uh uh PFD cuts. One of the biggest advocates for that. And also, what PFD cuts do are avoid checks and balances because the governor, unlike on the spending side, where the governor can veto uh uh spending cuts on the or spending, increased spending, can veto increased spending. On the PFD side, the governor has no balance, the governor has no check on the legislature's decision to reduce PFDs. I mean, the governor can't increase uh the PFD, the allocation of the PFD when the bill comes to him. His the only choice is to veto the entire appropriation bill and send it back and say, I'm not gonna pass it, I'm not gonna approve it until uh until you increase the PFD. And that's never happened. And and Dunleavy has reasons why he's never done it. And so there's no there's no check on the legislature's unchecked, I guess to use the word twice, the legislature's unchecked decision on how to, on how to set uh on the level at which to set PFDs. The governor has no role in it because it because of the way uh the bill comes to him. So when we're talking about lawlessness, when we're talking about not following the laws, and when we're talking about a system without checks and balances, a step that that one political body can take without checks and balances from the other, we're talking that the PFD is the poster child for that. There is, there is, it it the law says you will do one thing, the legislature hasn't done it since 2017. The the checks and balances of the governor stepping in and and and reversing what the legislature's done or modifying what the legislature's done hasn't been there since 2017 because of the way the legislature does it. So, so the very thing that Josephson's complaining about at the federal level is the very thing he's doing, he and other legislators are doing at the state level. Uh, they are acting in a manner that contrary to statutes, and they're acting in a manner that that has no has no checks. Uh they're setting it up in a way that has no checks and balances on the decisions they're making. To me, respect for law, respect for process, respect for checks and balances begins at home, right? If you if you're if you're gonna want to complain about something at the federal level, be damn sure you're doing it uh at the state level. And and so, you know, I I read Justice's letter, I Justiceson's letter, I read it two or three or four or five times. And and there's just nothing in there. There's no synapses firing that recognizes what he's complaining about at the federal level is the very thing he's doing, um, very thing he's doing at this at the state level. I've got to say he has no credibility with me on these issues when he's talking about these issues at the federal level because he's not doing it at the state level. He was co-chair of house finance, he was chair of the of the house uh of the operating budget, uh bringing the operating budget forward forward to house finance. He was on the conference committee uh that uh that addressed uh the the budget. And and in none of those did he respect the law that's on the books with respect to the PFD. And in none of those did he set it up in a way that the governor could effectively have a check and balance on uh on what the legislature was doing with the with the PFD. So those those at the state level, and and Andy just happened to catch my attention yesterday, but there have been others. Those at the state level, at the state representative level, state legislature level, who are complaining about what's going on in at the federal level in terms of lawlessness and in terms of absence of checks and balances, they better check themselves, right? Their own positions at home with respect to what they're doing because they are doing the very, very same thing uh at home that they're complaining about at the federal level. And and frankly, guys, you have no credibility when you complain about it at the federal level if you're not living up to it at the state level.
SPEAKER_01:But but wait, Brad, this is different. I mean, they know better than us how that money should be spent in this case, and so they should be, you know, that's that's how it is. I mean, again, you'll you'll never get them to admit that what they're doing is wrong in any way. It's it's always for the common good, it's always for the betterment of the state, or it's always, you know, well, we've got this, uh, you know, we've got this other stuff, we're following the other statute. I mean, this whole thing is is uh is just crazy. I mean, and but you know, again, for those of you who don't know, they could have changed the law in 2017 when this was first when this first came about and it started being a conflict. They could have changed it, but they refused to do it because they know it's a political hot potato and they don't want to they don't want to jump dive into that.
SPEAKER_00:You know, it's worse than that, Michael. When they passed the POM V statute, up until the final days, the POMV statute did have a provision changing the PFD. It did have essentially subject is subjugating the PFD to um to uh the POMV draw creating this this this you know uh leftover PFD that they now that they're now operating under. They had that in the statute. They couldn't pass it. They couldn't pass the statute with that provision in it. So so they took it out and then passed the POMB statute, and then immediately turned around and start claiming, started claiming there was an ambiguity in it. There wasn't. It was clear what they were trying to do in the days leading up to the final passage of the POMB statute. It was clear they couldn't pass it. They took it out, they passed it, and left the existing PFD statute in there. And that is that is as clear as as day in terms of what that means. It means the PFD statute survived. They couldn't get the votes to change it. And so it's it it has remained in the law. There is no ambiguity in that statute. That it has remained the law on the books since 2017 because they couldn't get the votes to change it, and yet they ignore it. So next time you know a legislator says, Oh my God, isn't it horrible what's going on at the federal level? And isn't it horrible that you know Congress is rolling over and there's no checks and balances? Hey, buddy, look at look in your own, look in your own state. Look at your own actions in your own state, and uh, and and look at what you're doing with respect uh with respect to PFDs. You're not following the law as as it's been on the books since 19 in since the early 1980s. Um you're not paying attention to, you're not creating checks and balances because of the way you figured out how to do this. So, you know, don't lecture me on what's going on at the federal level if you can't do the same thing that you're trying to lecture me about at the state level.
SPEAKER_01:Well, we won't have to worry about Josephson and anything because you heard he's he's he's not going to uh stick around for the next, you know, he he's one of those guys that sees the handwriting on the wall and realizes the music is about to stop. And so he's going to uh remove himself from the dance floor. And we're seeing that with some of the more preeminent members of uh of the legislature who have had a hand in creating this crisis, and you can see now that they're getting ready to uh uh that they're getting ready to bow out and head off to greener pastures to let somebody else uh you know, leave somebody else holding the bag. Um, but that's that's you know not surprising at this point.
SPEAKER_00:Yep. Yep. But but don't, I mean, don't lecture me on the on the on the on your way out the door. So Andy doesn't get a free shot because he's leaving the legislature. Andy has, Andy has time and time and time and time and time again pushed for PFD cuts, enacted PFD cuts, voted for PFD cuts, voted against the statute time and time and time again. They've structured the budget in a way that the governor doesn't have a check and balance on it. Don't lecture me on your way out the door about now about the federal, the federal government not doing the same thing because you haven't lived up to it yourself at the state level and you had the opportunity to do so.
SPEAKER_01:What how do we reverse this, Brad? I mean, do you have any idea? I mean, I I just I'm trying to, you know, I'm trying to be positive here and and try and come up with solutions to some of these problems. I mean, is it just Replacing people like Josephson with people who will respect the law or have a solution or don't just see the money as a way to conglomerate power or do whatever. I mean, I don't what what's the solution here?
SPEAKER_00:Yeah, I don't know, Michael. I mean, you you've got the statistics on how much turnover we've had in the legislature since 2017. And we've elected people, you know, Dunley twice. We've elected people that have said they're gonna uphold the law, they're gonna follow the law with respect to the the PFD, they're gonna make the hard decisions on the cuts, and then they get in office. They get the special interests that, you know, start stopping by at their door, and uh, and they're they don't do it. Um, they don't put Alaska families first, they put the special interests first, they put the oil companies first in terms of not taxing them uh up to the constitutional standard of of maximum uh maximum uh uh benefit. They they let the non-residence industries skate with no taxes, no taxes uh on non-residents, not even small taxes, not even the trivial taxes that the top 20% pay through PFD cuts, the non-residents pay nothing uh in terms of in terms of contributions towards state government. The only state in the entire nation where non-residents pay nothing uh toward uh toward uh uh the costs of uh cost of state government. They let them skate. So, you know, we elect people who say they're gonna write do the right thing. We elect people who walk into office saying, I know I'm here to to put Alaska families first, and then they don't. They put the special interest first. So I I don't know. I mean, I I don't, you know, every two years you sort of you sort of want it to change, and you sort of, you know, elect people who who you think are gonna change, who are you think are gonna change it, who have the best shot at changing it, but then they go into office and they don't. So I'm um I'm I'm a little um I don't know, I'm a little skeptical about about whether uh whether that does it. I I we we we have to, I mean, what we had in 2021 to go back to that again, what we had in 2021 is a recognition that we had to solve the problem, and we set up the fiscal, the legislature set up the fiscal policy working group to solve that problem. Sort of like the old that to me, that was sort of like the equivalent of the old bricks, right? The old the old base realignment, whatever the heck it was, that that Congress set up at one point when we were spending too much on defense and we had too many military bases. Congress set up a uh a commission that said, these are the these are the changes we need to make, and Congress endorsed them. And and we got military spending under control. We got the reduction in the military bases, we found a way to do it. That's what the 2021 legislative policy working group was to me. It was the BRIC commission for uh uh for dealing with the state uh fiscal policy, and they came up with very solid recommendations. Came back to the legislature and Adam Wool, who was on finance at the time and others, said, Oh, we're not gonna do that. Yeah, I know we set up this commission, I know we set up this fiscal policy working group, I know we empowered it to come up with recommendations, and by God, somehow they did, but we're not gonna pay attention to that. And and so, you know, you sort of at that point you sort of lose faith. So I I the only way this is gonna happen is having the fiscal policy working group, another, another addition of the fiscal policy working group. And then when it comes back to the legislature, the legislature adopting it, people making the hard choices, people making the hard recommendations, and coming back to the legislature and the legislature adopting them.
SPEAKER_01:Brian said, and this is such a you're such a downer, Brian. Brian said, honestly, we have to collectively reach bottom like any other addict. That's you know, and I mean that's the thing, Brad, right? I mean, we're trying, so how do we fit, you know, how do we do it? Do we vote harder? Do we, you know, what does it take? And and I think Brian might be right. I mean, we literally will have to run the well dry, and then something's gonna have to happen. Now, the worst part is is that that, you know, when you're working from a crisis position, that's the worst place to make long-term, you know, solid long-term decisions. When you're in the middle of a crisis, it's always better to make those plans, you know, when you're not there. But apparently that's what it's gonna take to get some of these people on board, I guess.
SPEAKER_00:The problem is I'm not sure where bottom is. I mean, the bottom should have been in 2014 when we ran the CB the SBR dry and and started, and and the only thing we had left was the CBR. And but but that wasn't bottom because then we started tapping the CBR, tapped it hard, drained it, um, and and and ran that dry. Okay, that should be the bottom, right? Uh now we should have hit bottom. Nope. Now we're gonna start in on the PFD and we're gonna start cutting the PFD, you know, using these these made-up excuses that oh, there's ambiguity, and the PFD was always intended to be a was always intended to be a fail-safe and all that sort of stuff. And and so we started running the PFD, and now we're gonna run the PFD dry. And then we're gonna get into this in the in the in the third segment, but but the concern is now that we're about to run the PFD dry, there still isn't bottom because they're looking for a way to tap into the permanent fund corpus and start draining the permanent fund corpus out the back door. So, you know, where is the bottom? Is the bottom, you know, 50 years, 20 years from now when we finally drain the permanent fund? Is that when we finally hit bottom? And and at that point, where are we? I mean, we got nothing. Um, at that point, yeah. So it's the the the let's just we'll let it go till it hits bottom. I don't know where the bottom is. And and and and the bottom just keeps dropping it out. I mean, we just keep going down and down and down the rabbit hole.
SPEAKER_01:Yeah, Donna agrees with you. Donna just said Alaska won't hit bottom until the permanent fund is gone. Um, and that's that's part of the problem. I mean, and they'll never they'll never acknowledge that they're again, going back to the addict analogy, you'll never acknowledge that there's a problem until you hit rock bottom, and yet we have a lot of rock bottom left to go. Um if it if it they do combine the funds and they get access to that, uh and they get access to the corpus of the fund, then we'll just again, all of a sudden, we've built a whole new road to kick that can down for as many years as you get, which will just make the inevitable crash even worse now for our children. Because I mean, then they'll have nothing. There'll be nothing to fall back on. There will be no more revenue generator in the background cranking out money. It will be all on the backs of Alaskans directly from then on.
SPEAKER_00:The the five Alaskans that remain at that point. I mean, you talk about out migration, you know, with no cushion, with with with having to make dramatic cuts to government at that point, because we build it up to this huge level, and with no cushion sitting behind you, no SBR, no CBR, no, you know, even permanent fund earnings, uh, uh, and no uh uh and the corpus gone, you know, who will stay? I mean, you it will it will be a crashing nightmare at that point. Yet that's what we're doing. You can see it with draining the SBR, the scene, see it with draining the CBR, seeing with now with the with the effort to drain the permanent the permanent fund dividend. You can just see it coming. And but it's everybody, everybody's in it for themselves, right? I gotta get this done today. This is today. This is I don't care about tomorrow. This is today. I gotta do it today. And that's you know, that's the mentality that we're that we're you know sliding rapidly into the abyss on.
SPEAKER_01:Yeah, it's um it's it's a it's a cry and shame. I mean, it's a crisis at this point. Uh, and yet nobody really wants to uh nobody really wants to dive into it and uh and talk about it. Um I I just uh let's see, where yeah, quick Kevin just said we're 80 billion from the bottom. That's where we are. We're 80 plus billion from the bottom. Junkies are relentless, uh, was the other comment uh from uh from uh Brian uh as well. And I know Tim says that uh, you know, hey, it wasn't true out of state pay bed taxes, but you again we're not talking about we're not talking about visitors. We're not talking about, and by the way, that all goes to the local economies. It doesn't do anything for the state economy, but I mean we're talking, we're not talking about visitors and tourists, we're talking about people who work inside the state but live somewhere else. That's what we're talking about, which is I mean, there's hundreds of thousands of of dollars uh uh that are that's going out of state every year because of that. 40 seconds, Brad.
SPEAKER_00:Yeah, and I'll and and I I'll you know I'll I'll say visitors. Visitors ought to contribute also like they do in 49 of the other of the of the other the other 49 states. But it is that you're exactly right. That doesn't go to the state, and what we're talking about is state revenues and state spending.
SPEAKER_01:Yeah, no, it's uh it's a it's a challenge, and I just didn't want people to misunderstand. You're talking specifically about out-of-state workers, not visitors. Okay, Brad Keithly, Alaskans for sustainable budgets. Again, you can find him at ak4sp.com. The weekly top three, the big three things that he thinks we should be looking at. Number three has to do with this uh series that John Faulkner has been putting out in Moss Reed, Alaska, talking about the permanent fund. And uh Brad's had some issues with uh over the last couple articles on this, just taking some just taking some umbrage with some of the things in there, but he's finally found something that he can agree with John Faulkner on. Uh Brad, what's this?
SPEAKER_00:It's like it's like John took the high road and I took the low road, or maybe it's the reverse, whatever, but we're all getting we're all getting to the same place, thank God. Uh uh edition three or or or or third piece of this of his uh uh series um uh gets us to the same place. The third for for those who haven't focused on this yet, one of the big issues in the next legislature, next session is going to be uh whether or not the the legislature adopts the constitutional amendment that would merge the two accounts of the permit fund uh into a single account. And John uh uh calls it by its name, what what some call it, the 49 forward plan, uh is the is the name of this of the proposal to merge uh to merge the two together. And and my concern has been in John's previous articles, uh the previous parts of the series, he's been setting up, he's been supporting the argument in various ways that those who are behind the 49-forward plan uh have uh have been advocating, which is that you need to merge the two accounts together because the earnings reserve is otherwise running out of money. That's because we're using cash to pay inflation proofing or to contribute toward inflation proofing when we don't have to, when we can use the non-cash earnings of the uh the appreciated assets of the permanent fund to pay for uh to pay for inflation proofing. Um, and and John also in last week's uh uh uh column or last week's piece of it uh was talked about the earnings reserve in a way that left out the role of the permanent fund dividend uh in taking out money out of the permanent fund earnings and the and the disciplining effect that would have by limiting the cash that would go to the legislature, the disciplining effect that would have. And John left that out of the article. So I was I've been getting concerned that where he was headed with all this. But this week he talks specifically about the about the 49 forward plan, about the proposal to merge the two together. And he has um this paragraph. Present or these two paragraphs, presently, the corpus of the fund is untouchable. The earnings reserve account collects and holds all investment income from which the legislature draws under the percent of market value formula. The state now relies on these draws for over half of UGF revenues. The CBR still exists and acts as an emergency fund that requires the three-quarters vote majority to tap. This structure has served Alaskans well for 25 years. Legislative lawmakers can drain the ERA in a crisis, even tap the CBR, but cannot touch the corpus. Fund managers now separate non-expendable principal from earnings, thus supporting the firewall. Merge the accounts, adopt the 49 forward plan, bring the two accounts together, and this legal firewall vanishes. Um, and with that, with the legal firewall between the earnings reserve and the permanent fund corpus vanishing, you create a situation in which the legislature can straw down, start drawing down the corpus of the of the permanent fund. Those who advocate the 49 forward plan say, oh, that will never happen because we have a 5% cap on the POMB draw. And so that that will protect the fund.
SPEAKER_01:Statutory cap.
SPEAKER_00:That will some are even willing to put in the constitution. That will protect the fund from being drained down. The problem is the permanent fund corporation has not for several years, several years out of the out of the last several years, does not consistently earn enough to replace a 5% POMB draw. Between inflation um and the and the low earnings they've been achieving, they are earning less on the permanent fund than five than 5% real. And so when you start draining at a 5% POMB rate, uh you are actually, and and the permanent fund isn't earning enough to replace the 5%, you are actually starting into the corpus, what's now the corpus, and starting to drain the corpus out. And so the protection that that that those who you know walk around saying that they're in favor of this, of this plan, the protection that those claim is there, that that those that they claim is there isn't there. It it it it depends on what the permanent fund corporation is doing. And the permanent fund corporation, as we've talked a lot uh in previous shows, isn't earning enough on a consistent basis to fund that 5%. So you're just setting up a situation in which the draining can occur. I'm also concerned, frankly, that once you set up this system, once you merge the two accounts, once you take away the firewall, even if you put the 5% in the constitution, that can be drained, that can be changed by by additional actions uh as we go along, by additional constitutional amendments as we go along. 5%, well, that's really not enough. Let's go to 5.5%. That's really not enough. Let's go to 6%. Well, we really need 7% to cover the kind of spending that that you want out there. And you can just see that incrementally over time you increase the amount, the gap uh between what the permanent fund corporation is earning and what the per and what's being drained out of the POMB. And the corpus is going farther and farther and farther down. The the the genius, true genius behind the original, the behind the original permanent fund corporation, excuse me, the original permanent fund amendment was this separation into two accounts. That the corpus was permanent, inviolate, protected, can never, can never touch it under any circumstances. The and and so all you could spend is out of the earnings reserve. And you could only spend what was in the earnings reserve. You couldn't spend any any more than that. So if you drain the earnings reserve, too bad you're done. Uh that's the genius of the of the original of the original permanent fund. We shouldn't be changing it. And and finally, John Faulkner and I are on the same wavelength with respect with respect to that key provision that's going to be a big issue in the next legislature.
SPEAKER_01:And can't you see the handwriting on the wall already? If they get this plan where they combine the funds, and even if they enshrine the the draw amount in the constitution, can't you see them coming back in a few years and saying, well, you know, five is just not enough. We need five and a half. Otherwise, we're gonna have to tax you. They found the magic button. We're gonna have to tax you. So have to vote for this to do it. And again, in the short-sightedness of what Alaskans are showing me right now, that's what'll happen. And it'll go from five to five and a half to six to six and a half. And then, you know, in a few short years, then it'll all be gone. And then our kids will be left with nothing, absolutely nothing.
unknown:Yeah.
SPEAKER_00:So, so the the the way to deal with that, I mean, because we can see it right now at five percent. We can already see that it doesn't, that you're drawing more than than the than the permanent fund corporation is replacing. The way to deal with that is just never to start down that road. Always keep the the permanent fund corporation, the permanent fund corpus in a box inviolate, can't get at it, nothing, nothing you can do can break, can break into it. Keep that in a box and keep the spending to the earnings reserve account. And if the earnings res, if the legislature is gonna drain the earnings reserve account, maybe that will finally be the discipline that will stop them spending more, or the finally be the discipline that says, hey, we're gonna need to find alternative revenues uh that, you know, now we've drained the CBR, the SBR, and the permanent fund dividend, we're gonna need to find alternative revenues that will hit the top 20% oil companies and the non-resident industries, and they'll finally push back on spending. But but breaking that discipline, letting them have this side door, this back door into the permanent fund corporation is just a recipe for disaster. And John and I are on the same page with respect to that. Brad, final thoughts. Uh just over a minute now. Uh the final thoughts, Michael, is is we need to get back to where we were in 2021 with the establishment of a fiscal policy working group. And then we need the legislature to adopt it, just like Congress did with the BRIC commissions. We need the legislature to adopt it.
SPEAKER_01:They have to act. I mean, they had a blueprint, they had it laid out. I mean, it was left and right, both sides. I mean, everybody, you know, everybody ate a little bit of crow on that whole thing, and they had a plan, and yet they refused to enact it. And here we are, four years later, still struggling with the same thing. I mean, this is so painful, man. This is so painful. I had conversations with several legislators this weekend. And um, I mean, nobody, I mean, because I'm like, how how are we gonna fix this? And they just I just I just don't I don't know. I just don't know. And that's the problem, is that you know, nobody, they're all isolated insular islands unto themselves, and they can't all come together and get it uh and get it fixed. And that is just painful to watch. It's like we're watching the slow motion train wreck of what the state is gonna do, and it's it's I mean, I I don't know what the answer is at this point, Brad.
SPEAKER_00:Yeah, well, I my my uh my theme for a while at least is gonna be go back to 2021, reset the the fiscal policy working group, have them come up with the recommendations, and then just like the BRICS vote, uh in the in the what it was that 1980s, 1990s. I'm dating myself now, but just like the BRICS votes, uh, have the have the legislature adopt it. Um we're not we're not gonna get it done otherwise. If everybody's out for their own self-interest, if every legislator is out for their own self-interest, we're not gonna get it done because everybody's got you know something they got to protect, even the Republicans. You know, Julie Cologne comes the comes to mind immediately about her child care proposals. Even the Republicans, everybody has something that that the that they want to protect. And as long as we allow that diffusion and allow each of them to you know have something they want to protect, just like back in the 1980s, if we would have let you know everybody defend their own military base. Oh no, you can't close that, right? Because that's in my district. Um, it it it as long as we're as as long as we're in that, we're not gonna get it done because everybody's gonna vote their own self-interest, their own special interest, and and we'll never get it done. So 2021 was was was was a genius point in the sense of setting up that committee, was a genius point instead of in set in in the sense of them coming together on a set of recommendations. The failure was not in the the working group, the failure was in the failure of the legislature to follow through um and adopt it.
SPEAKER_01:Yeah, the BRAC, the base realignment and closure committee. That's what the BRAC was, yeah. But I mean BRICS is something else, then yeah. BRICS is the exit, right? BRICS is that's a Brazilia, Russia, India, and China. That's the BRICS. But I mean, you're right. I mean, it's a it's a perfect thing. It was in the 90s there, and I remember that whole time was that was definitely uh thing. And no, not Frank, 40% of our state budget does not come from non-residents. I mean, there's no there's no fra it's not even fractional coming from non-residents. I don't know what you're where you're where you're getting your numbers, but that it uh that ain't right.
SPEAKER_00:You may be talking maybe maybe talking about oil taxes. I mean, but that's not even 40% anymore. So I don't know. Yeah.
SPEAKER_01:Um, Brad, uh, you know, again, I I just I don't know, you know, again, maybe it has to hit the bottom, but you're making a valid point when you say hitting the because I kept thinking that maybe that's you know, once the PFD's gone, maybe we'll wake up is what I keep thinking. And then I realize that's why they're pushing so hard on this one account thing, because then if they get access to that, they don't have to the gravy train doesn't have to stop. They don't have to be the bad guys and make the hard calls because then they can just you know leave it to there and it'll just it'll just keep going.
SPEAKER_00:And you're exactly right, Michael. The subsequent elections, the subsequent amendments on amending five to five point five to five point you know, seven five to six, those are all about taxes. Do you want taxes or do you want just changes a little bit, just a little bit, just a 5.5, not not too much, just a little bit. And and those votes will go as you anticipate them. They'll they'll they'll be passed, uh, passed each time. And then ultimately, you know, somebody will get tired of doing those and will say, oh, let's just set it by statute, and then we're done. Then we're completely done at that point. So it's um uh don't don't think that we're gonna that that we're gonna cure this when we hit bottom because there is no bottom for a for a long time until the state is completely, totally, absolutely wrecked uh by draining, uh, by draining the permanent fund. We need to stop it before we start before we head towards the bottom.
SPEAKER_01:And I don't I don't know how, yeah, and again, I don't know how we how we get there from here. Um, all right, uh Brad, final thoughts here as we get ready. Oh, he was talking about it coming from federal dollars. 40% from federal dollars, and federal dollars come from non-residents. Okay, well that's not what we're talking about, but okay, all right. Uh twist it in in uh in in the way you want to twist it. Uh final thoughts here, Brad. I got about a minute.
SPEAKER_00:Oh, what I'm writing this week's column on, how about that? What I'm writing this week's column on is looking at the impact by PFD of PFD cuts by house district, by legislative district. And it's an eye-opener. I've I've been deep into the census data over the weekend, and I put together the numbers, and it's it's gonna be a big eye-opener about uh about what the impact is by house district. Uh, and you're gonna really wonder about what the why the Bush Caucus is pushing for for PFD cuts after after you look at the numbers. That's that's gonna be the Friday column this week.
SPEAKER_01:You must be really fun at parties. What'd you do all weekend? I was down in the census game. It was amazing. Man, Brad, he's a ball at party. So all right, Brad. Well, thank you. We appreciate you, and we appreciate you coming on board as always. This is uh um, yeah, this is uh this is it's just madness. I I don't even know, I don't even know how to put it any other way at this point. It's just absolute madness. So uh thank you for coming on board, and we will chat with you again uh next week, my friend. I look forward to it, Michael.
SPEAKER_00:Take care. 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.
