The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (11.10.2025)
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 November 10, 2025.
This week, our top 3 issues are these: 1) we explain what, to us, seems missing so far from this year’s Governor’s race (2:02); 2) we explain what irritates us about how many in the Top20% support taxes (18:00); and 3) we review the Permanent Fund’s first quarter investment returns and what they tell us about the Permanent Fund Corporation’s performance (37:33).
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 November 10th, 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's 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 explain what to us seems missing so far from the governor's race. Second, we explain what irritates us about how the top 20% support taxes. And third, we review the permanent fund's first quarter investment returns and what they tell us about the permanent fund corporation's performance. And now let's join Michael.
SPEAKER_00:Brad Keithley from Alaskans for Sustainable Budget. You can find him at aK4SB.com. And uh he bro comes in every week to uh do a deep dive with us on a bunch of different topics, usually three big issues. And uh today is no different. And boy, I gotta tell you, it's um what's missing from the governor's race so far? Well, apparently it was a Matt Clayman because he's just jumped in at the last minute, so now there's 14. What else is missing from the governor's race so far? Bradley, hit me with what's going on here.
SPEAKER_01:Well, Michael, I was I was flipping through the uh ADN and other publications to sort of come up with this week's list. And um my eye got caught on the ADN article that has the picture of all of the then candidates, pre-claimant, uh, then candidates, uh, with under the headline, in an already crowded race for Alaska governor, candidates looked to fundraising as a barometer. And I just finished reading a couple of politico articles that were analyzing the results of the of the off-year elections in uh New Jersey and Virginia and elsewhere and analyzing why those candidates did as well, why those the issues in those races and the position that the winning candidates took versus the positions that the that the losing candidates took. And the politico article articles uh emphasized that the winning candidates had focused on the state of the economy, particularly the impact of the economy on middle-income uh families in those particular states, and had just ground and ground and ground uh on those issues, talking about health care, the cost of health care, talking about the cost of food, talking about the the just the costs of living in those states and what could be what could be done uh at the state level and what the and what those candidates were proposing to do at the state level to deal with those issues. But the but the articles really emphasized it, we there was an empathy that the winning candidates had an empathy with what middle income families were facing in those states, um, regardless of party, regardless of race, regardless of any other discriminator uh among the among the uh uh the voters, and just and and how they were emphasize empathizing, emphasizing the empathy that they had for uh for the economic circumstances those candidates were facing. Right. I thought, well, that's interesting. So then I came back to Alaska and I looked at I came back to the ADN article and I looked at all the pictures of all the candidates that are running. And none, to my knowledge, and I follow it as closely as I can, none of those candidates are picking up on that theme and emphasizing the same thing. Maybe you know, Alaska polling tells you that it's different, that that middle income families aren't concerned about their own economic situation in Alaska. And by middle income families, I I mean 80% of Alaska families, those between the low 20% and the top 20%, 80% uh of families.
SPEAKER_00:Um, that's actually a 60%, but but it's 10%, right, on both ends. It's math. Math is hard in the morning.
SPEAKER_01:It's hard sometimes. Let's take the 20% out of it. But but the the but but you know, maybe Alaska is different, but I don't see any of those candidates uh focused on that issue. I what I see is various special interests, that they're focusing on various special interests and hoping that they that that those voters who are concerned about that special interest will adopt that candidate because of that candidate's focus on special interests. For example, just to just to go through the ADN light up a little bit, Tom Begage talks a lot about education and the K through 12 industry and needing more spending on K through 12. Uh Click Bishop talks a lot about infrastructure and more spending on construction and infrastructure. Bronson talks a lot about about social issues. Crum, I don't know what crumb talks about, but but it goes on and on and on about special interest issues that they're hoping to slice and dice the electorate on. Maybe, maybe that's a consequence of of the way we're going about elections with uh with rank choice voting. Because to get into the final four, especially with a crowd this big, you're gonna have to have you know maybe 10%, 12%, 15% to get you into the into the final four. And maybe they're focusing on those slice and dice issues because they think that will generate the the the you know the narrow slice they need to get uh to get into the final four. Maybe that's maybe that's what's going on.
SPEAKER_00:Right, to get them across the finish line. They need just to attract the special interest just so they make it to the top four.
SPEAKER_01:Right. And then in the top four, maybe the maybe the the theme changes, but but and maybe that's what's going on. But it just struck me that that there's really not a focus in Alaska on on the economy and on the and on the economic impact on on middle income families that you saw in other states. It's not that we don't, it's not that we don't have issues in Alaska. At the same time I was going through the articles, there's there's one in by James Brooks, it's in the Alaska Beacon, uh, and in the uh Alaska Public Media and elsewhere, the headline of which is the number of debt collection cases in Alaska state courts is soaring, uh following national trends. It's not that we don't have issues, economic issues, uh in uh uh in the in middle income uh families in Alaska, uh, but it's just that it just that we're not concentrating on it. And and in fact, we have one candidate who's who is who is affirmatively running away from it. And it's just odd. I mean, so the Democrats were the winners in New Jersey and Virginia, right? Both sort of bluish states, and so you would sort of expect that they would do well. Yeah, but they were they were the ones appealing to the to the to the middle income economic interests. Here's Begich in an interview in the Juno Independent, which is frankly, you know, a paper worth following uh in the state uh as uh as we go through sort of the evolution of the state's press. Uh, but Begich hasn't had an extended interview with Mark Sabatini in the Juno Independent. And and this is what he this is what Sabatini wrote and what uh Begich said about the permanent fund, uh the PFD. Off discussed proposals by lawmakers and permanent fund officials include a state constitutional amendment amendment mandating a dividend and altering state law to establish a baseline amount tied to the success or failure of the permanent fund. Well, we already have the statute that ties to the success or failure of the permanent fund. But Begage said he supports these proposals without yet setting a definitive baseline amount. It could be$1,000. That's what we've been getting on average, if you don't take into account inflation. It could be twelve hundred dollars, he said. That's a negotiation that you have to have with the legislature and the population because if you don't, it doesn't matter what you do. You have to have a majority of the people supporting that constitutional change. Well, either$1,000 or$1,200 is a huge tax on middle-income families. You're taking money out of the pockets at a time when politicians elsewhere are talking about emphasizing the economic needs of middle-income families. You're taking money, uh a PFD of$1,000 or$1,200 compared to the current statute, is taking money out of the pockets of middle-income families. Money that is their share by statute, their share of the state's commonly held wealth. And if you cut it, it's not going to their benefit. The benefit's going to the top 20%, oil companies, the non-residents who don't have to pay taxes for their share of government costs. It's it's subsidizing them. So in an environment, in an era where winning candidates elsewhere are trying to emphasize things that the state can do to help middle income families. Beggic is running away from it. And I just I just think that's I think that's odd. And I think it's I think it's something, an issue that if a candidate started honing in on it, the candidate would find more success than uh than maybe they are honing in on a special interest.
SPEAKER_00:Isn't that indicative, though, of most candidates at this point, or most politicians, or most people, they they they there is no empathy for what's going on in the middle class. Again, there's complete and total disconnect from what's happening in the middle class and the private economy. We've said that a dozen times, I mean, dozens of times, that they're more focused on what, like you said, you pointed out. They're focusing on the special interest, who's getting paid by what? The construction industry, the education lobby, the this lobby, the that lobby. You know, that's what's important. But the private economy as a whole and the effect of the economy on the middle class or the lower middle class, that doesn't matter. It's a complete and total non-starter for most of these people when it comes to it.
SPEAKER_01:Yeah, and and and maybe it also reflects how dominant we have allowed government to become in the economy of Alaska. That that that the that the debate is how you divide up the spoils of government. The debate is how you divide up the richness of government uh and who gets to benefit from that richness, where we where we take the state's money and and who gets who do we direct it to and who gets to benefit from that. Maybe that's maybe it's an indication of how of how dominant we've allowed government in Alaska to become uh in the economy compared to New Jersey or Virginia, which which don't share that same uh that same characteristic, notwithstanding the fact they're blue states or blue states. Um it maybe maybe it's a reflection of that. But I but I think it's I think it's sad. I think it's a sad state of affairs that we don't have at least one or two candidates who are who are focusing on their empathy and on the and emphasizing the economic situation faced by middle-income families and trying to be responsive to that, not in terms of increasing government largesse that's going to those families, but allowing them to keep more of their income, their share of the commonly owned wealth, uh in their pockets as opposed to taking taking more and more and more of it for government so government can redirect it to one segment or another.
SPEAKER_00:Yeah. No, I mean it is, and it that is the sad part of uh what we seem to be missing um in the governor's race, um, which is kind of where we're going. Uh Matt Klayman jumping into the race now. And I mean I, you know, I just you know, one more that's all we needed. We just needed one more person in the race to make it all better, right? That's what it was all about.
SPEAKER_01:I mean, Matt Klayman, Matt Klayman's worse than Tom Begage. I mean, is worse than the than the thousand twelve hundred dollars Tom uh Klayman has said that we don't need the PFD. It all should go, it all should go to government so government can re can redirect it back out. Yeah, I mean, you know, Mondami, they're they're they're farther along down that curve than than Mondami is. I mean, yeah, to some degree, uh I I won't take this too far, but to some degree, the the Alaska race in terms of its emphasis on what what government can do, you know, the economic might of government can do and redirect it in certain ways, and and and it it reflects more the New York race, the New York City race, even from the Republicans. It reflects more the New York City mayoral race than it does the uh than it does the the the races in New Jersey and Virginia. Um, because it's because the the Alaska race is government has all this money. We're gonna take even more of it from you through deeper PFD cuts. Government has all this money, and the race is who can give me the most votes? Who has the most votes out there? That if I promise to give you the money, you'll vote for me. Give give the money to your segment, you'll vote for me, and I'll be able to get into the final four. That's sort of what's going on here. Yeah, and and it's and that's a lot more New York. Yeah, that's a lot more the New York race than it is the New Jersey and Virginia race.
SPEAKER_00:It's uh it's kind of crazy to watch. And of course, now we're now we've got the whole uh uh you know, now we've got the the whole kind of breakdown of 15 different candidates. And as you just said, nobody's really showing empathy as of yet for the plight of the everyman. Uh probably um probably uh uh Bernadette has probably been the one that's been closest to any of that, but even she fumbles the ball on some of the questions on budgets and and breakdowns and things like that. What's it gonna take, Brad? What's it gonna take to get all this squared away? I I just I don't have an answer for you.
SPEAKER_01:I don't I don't have an answer either, Michael. I mean, I would think there was out of 13, 14, 15, whatever the heck we're up to now. 14. Out of out of out of out of that number, you would at least have one who is trying to carve in on the on on middle income families and and and recognize that 60 or 80 or 70 or whatever percent it is, recognize that percent of the population as as an important segment of the population that should be appealed to. And but we don't. I mean, we've got we've got people who are just you know flitting off of I can build more, I can use your money, take your money through PFD cuts and build more infrastructure than anybody else that we can't maintain, right? We don't have enough money even now to maintain what we got, but I can do more of it, I can build more of it, or I can you know have a bigger K through 12 education, or I can have a four more defined benefits for government. I mean, it's just that's what's going on. It's everybody's you know, slicing and dicing into into all these segments and how they can take your money and and give it and give it to those folks. It's just disappointing.
SPEAKER_00:I mean, I don't want to be gloom and doom, but it feels a lot like people are standing over the corpse and they're carving it up, you know what I mean? I mean, really the the the the the turkey dinner, it's like we're just getting carved up and the people are taking their little sections of special interests off, and the rest of us are just laying there like, what do we do? I mean, it's crazy.
SPEAKER_01:Out migration is an issue in this state, it's an issue, it's a middle, it's a middle income issue. I mean, yeah we have an increasing number of top 20 percent, we don't need to worry about them, but we're losing in the in the middle income brackets, working family, working age uh families. We got nobody talking about that. I mean, I would think that would be an issue that you would want to appeal to. Maybe you're concerned that your voters are leaving and so they can't they won't be voting for you because they're walking out the door. But I would think that is a middle income issue that you might that you might want to be talking about. But you know, nobody's doing that. I haven't heard the word out migration once uh in this camp in this campaign. It's certainly not in Tom Begitch's interview with the with the Juno Independent.
SPEAKER_00:Well, I know we did talk about that with uh we talked about that with Shower and with Bernadette as well. We've talked about that with both of them, so I know that it is an issue and they are aware of it. So at least they've mentioned it. But like you said, not many other people are talking about it. Brad's over here distracting me with so much good news. I just didn't know what to do. Um, all right, Brad, the number one irritating thing in the top twenty when the top 20% um uh, you know, when they support taxes, that's the thing. When they support taxes, it's uh, you know, because you but you've talked about how you believe that it's gonna take some form of tax to try and fix the problem, but when they jump on board, then things get problematic.
SPEAKER_01:Yeah, and this was triggered by, you know, I very seldom read letters to the editor, because you know, I read the opinion columns and the and the community voice columns and and the longer pieces. I very rarely read the the short-formed uh letter, uh letters to the editor. But this one, the title of this one in the in the ADN caught my attention. It's letter time for more taxes, and it's real short, and this is what it says Are you tired of our state and local politicians complaining about financial issues, disappointed about poor public service, decaying infrastructure and schools? Look in the mirror. The free ride is over, Alaska. Time to pay the fiddler. Here's how, here's how so, here's how. No more PFD checks. Reinstate the state income tax, mandatory minimum sales tax for anchorage of five percent, all effective immediately. That would be a good that would be a good start. Okay, I get it. Top 20% are starting to recognize, at least those who are dependent on government, government largesse, they're starting to recognize the good times may be over. Um, and that, and then there may be a need for uh additional revenue. But the thing that ticks me off is is every time, and Natasha you ticked me off when she did this, and Klayman ticks me off when he does it, and all ever all of these guys in the top 20 percent, when they start talking about taxes, the first thing they say is no more PFD checks. So, what does that mean? What that means is they want to cut the the revenue source, cut a revenue source, the share of the state's commonly owned wealth, that revenue source that goes to middle and lower income Alaska families that make it has the largest impact, is the largest uh uh uh has the has the largest uh uh impact on the on the economics of middle and lower income Alaska families. They want to cut that first. And what does that do when you cut that? It buffers the top 20% non-resident and oil companies because that means they don't have to sh they don't have to contribute as much, if any, to government costs, because those government costs are being are being buffered, are being subsidized, are being are being taken care of by the amount that you've taken out of the pockets of middle and lower income Alaska families. The biggest beneficiaries of PFD cuts are is not government spending, as as some people think. The biggest beneficiaries of PFD cuts are the top 20% non-resident industries and the oil companies who don't have to pay taxes, who don't have to pay a share, a share of of the increased costs. They get to free ride on the backs of the PFD cuts. They get to free ride on the backs of the dollars that are being taken out of middle and lower income Alaska families. So when I see one of these one of these articles or one of these commentaries that say, yeah, I'm ready for taxes, but first cut the PFD. What that really is saying is first subsidize the heck out of me to the maximum extent you in the top 20%. First subsidize the heck out of me to the maximum extent you can by taking the state's share, the the cotton the share of commonly owned wealth that otherwise is going to middle and lower income Alaska families and using that to subsidize my taxes to prevent me from having to pay taxes first, and then maybe I'll pay a little bit more. This shows up all sorts of places. So, you know, uh Zach Fields and Elise Galvan in not this legislature, but in the legislature before last introduced income taxes. They were ready to stand up and say, we need to pay our fair share. Top 20% need to pay our fair share. Well, you go in and you analyze what their income taxes would do. In the case of Fields, it didn't even raise$100 million. In the case of Galvin, it raised a little bit more than$100 million, depending upon what assumptions you made. The deficit's$1.7 billion,$1.8 billion. So what they were doing was they were putting on this thin veneer and saying, yeah, we're paying our fair share. But behind that was continued deep, deep, deep, deep PFD cuts on middle and lower income Alaska families uh to make up the difference between the hundred million dollars that their two tax approaches would make and the$1.8 billion, the$1.7,$1.8 billion deficit uh that uh that the state's running. So it just it just, I mean, I maybe some of these people mean well. Maybe they say, oh, maybe maybe they're saying, oh, it's time for me to pay my fair share. But when they start it with no more PFD checks, wipe out the free stuff for wipe out the free money for middle and lower income Alaska families, and use that free money to subsidize my taxes. Use that free money to make sure I don't have to pay taxes. The top 20%, the non-resident, and the and the all companies, that just that just irritates the heck out of me. It's like it's like grating on a chalkboard or fingernails on a chalkboard or whatever, whatever. Yeah, you're gonna come up with that sound, aren't you?
SPEAKER_00:It's like yarn yarn between your teeth, right?
SPEAKER_01:I mean, it's like, you know, oh it's just it's just irritating as heck because what what they're really saying is, yeah, I'm sort of ready to pay ready to pay. I'm I'm I'm ready to say I'm ready to pay taxes, but I'm not really ready to pay. I mean, taxes, god no, I'm not ready to pay the rates, the the rate of taxes that we're imposing on middle and lower income Alaska families. God no, I'm not real ready to pay that. I don't want to pay, you know, eight percent, ten percent, thirty percent, like we're taking from middle and lower income Alaska families. Uh-uh. I want to pay my little one percent, right? Um 0.06, right? Or whatever it is. Yeah, 0.6%. And and and that's just I, you know, it just I part of it is the media, part of it is politicians haven't done anywhere near a good job explaining what's going on with PFD cuts, who's really benefiting from PFD cuts. So maybe people don't understand it, and and part of it is maybe just you know, the the ignorance of of the the the fact that they're in the top 20 percent, and and so they don't feel the effect that that middle and lower income Alaska can families are feeling through PFD cuts. Maybe that's part of it, but it's just irritating because it's it it it it it it it it it it indicates that they just don't understand economics, they just don't understand the impact of what PFD cuts are doing to middle and lower income Alaska families, and that they don't understand the benefit of the free ride that they're getting from shifting that free money from from you know being spread prorrata across all across all families to being concentrated to the benefit of of upper income non-resident and uh and the oil companies.
SPEAKER_00:I just have to chuckle because I feel so vindicated in everything that we've said because the the the they used the actual words that I said. I said, one day they're gonna come back and they're gonna tell us what are they gonna tell us? The free ride is over. And what does he say? The free ride is over. This is exactly the tack that I knew that they were gonna take. And like you said, I knew that they were gonna take all of the PFD and bolster all of that, and they would consume all the money, and then they would look us in the eye and say, Oh, the free ride is over. I mean, you know, that that's the that the irony of this, they don't understand how this works and what's actually going on, but they know all the money's there, and that's what they want to take. And but now the free ride's over for everybody else.
SPEAKER_01:Yeah, exactly. That's the point. The free ride is over for everybody else. We want to we want to take that free money, and that it's actually your share of the commonly owned wealth. We want to take that free money, take it away from you, and they want we want to use it all for our benefit by by subsidizing taxes we would otherwise have to pay. We're willing to pay a little bit, we're willing to pay$100 million or so uh in taxes, but we want the other$1.7 billion,$1.6,$1.7 billion. We want that covered by free money. We want the benefit of the free ride as opposed to the benefit as opposed to the free ride, the benefit of the free ride being spread across across all Alaska families. And and some of it is ignorance, but you know, people, Zach Fields ought to understand this, at least Galvin ought to understand this. People who are who are you know going out there and saying, oh, I'm in favor of an income tax, this minuscule income tax compared to the size of the deficit. I'm in favor of an income tax, they know what they were doing. They know what they're doing because they have fiscal notes that show the revenue raised through their so-called income tax, and they have budget budget documents that show the size of the deficit, and they know that they aren't covering anywhere near the deficit, and they know that the remainder of it's going to be paid up by shifting the free money from the for the benefit of all Alaskans over to the benefit of the top 20% non-residents and and oil companies. So some of it, some of it is ignorance, but some of it's malicious. And and and the maliciousness irritates me even more than the ignorance of it us does. But all of it, all of it irritates me.
SPEAKER_00:Well, you know, let's let's let's let's give me a solution then, Brad, because I mean they often complain, we complain about this, but we don't. I mean, what is the solution here? Is it a combination of things like the fiscal policy working group talked about? Is it a cut? Is it a tax? Is it a is it more oil revenue? I mean, what is the solution here of all this stuff? And this guy, if you had this guy, this letter writer across Matt, whatever his name is, Matt Newman, some random human being, Matt R Matt Newton, if you had him across the table and said, Okay, well, that's not going to work, and here's why, and you just explained everything to him and you're frothing at the mouth about all what's the solution then? What is the solution in Brad Keithly's mind?
SPEAKER_01:Well, it is the fiscal policy working group. It and the fiscal policy working group is basically a little of all of it. It's a little bit of PFD cuts because the proposal was to restructure the PFD from its current statutory structure, which doesn't take into account inflation proofing, and move it down to 50-50 of the POMV, which shares inflation proofing between the government and citizens. Uh, it was uh some oil taxes, it was some spending cuts, it was, and it was some revenue, some broad-based revenue uh from Alaska, from some broad-based revenue. And the benefit of broad-based revenue is that you then pick up contributions by non-residents. Reforming oil taxes pick up contributions by uh uh pick up contributions from the oil companies, broad-based taxes would pick up compared contributions from the top 20% who are who are making like zero contributions now, and it would pick up contributions from non from non residents. And the benefit of picking up contributions of from non residents is it would reduce the burden on Alaska families, they would get to keep more of their money. 15 let's let's assume 15% either a broad based sales tax or a flat tax, broad based income tax. Let's assume that 15% of that comes. From nonresidents. Well, that means that Alaska families can reduce the burden on Alaska families is reduced by that 15% because that's now being picked up by of the of the revenue base, because that's now being picked up by non-residents. So so it's a combination of some spending cuts, some oil tax reform, some PFD restructuring, and some um some broad-based taxes. The other benefit of broad-based taxes, I would tell Matt, the other benefit of broad-based taxes is that you then have broad-based pressure on government to reduce spending. Right now, the top 20% says spending, oh, that's fine. Yeah, we don't care about it because it comes out of PFD cuts and they don't care about PFD cuts. And it's funding a lot of their stuff. Right. So they don't, so they don't care about additional government spending. In fact, they support it. If you look at who's supporting, you know, child care, Julie Cologne's child care, or or you look at, you know, K012 spending, it's the top 20% who's supporting that. They don't care because they don't they don't pay for it. If you had a broad-based tax that picked up non-residents, picked up the oil companies and said, oil companies, you're going to pay a part of these deficits, too. Also, uh, you would have a more broad-based pushback on spending because everybody would have to pay for it. Right now, using PFD cuts, not everybody pays for it. So it is the fiscal policy working group. It is the little bit of everything because the little bit of everything, some spending cuts, some uh restructuring of the PFD, some uh broad-based revenue source, and some restructuring of all taxes, the little bit of everything spreads the burden in a way that gets everybody to start pushing back on government spending, as opposed to the structure we have now, where we have a segment of the population who actually cheers for government spending because they don't have to pay for it. The costs are shoved over on somebody else.
SPEAKER_00:All right. Brad's now giving you a solution, a possible solution. You can't complain that we don't ever all we do is complain. You can't complain that all we ever do is complain. Corey said no one should pay a tax in the private sector until the oil developers are paying their fair share, which is, I mean, they are Brad. We'll we'll talk about that in a second, because then then Kevin's response was, and don't forget the oil companies are the private sector. We need to get rid of the suck of government on encourage the private sector. Taxing the oil companies above a certain amount discourages the private sector. So, I mean, there's a balance there though, Brad, right? I mean, you have some background in this because this is where you came from, so you have a little bit of background on this, and even you have said there is room there to for them to pay their fair share in regards to what's going on on a finite non-renewable resource.
SPEAKER_01:Yeah, exactly. Um yeah, I have a lot of background in this, and there is there is additional room. The constitution, the constitution, the constitutional standard is the development of the state's resources for the maximum benefit of its people. And we are not at the point at which we are revenue optimizing, at which we are getting the most revenue we we can. Not not not the maximum, not not the extreme revenue of running them out of business, but the revenue at which you know they would continue in business and we would get we would get the most revenue we could, uh, as instead of going around going down the other side of the of the curve, the development curve. And we're not at that point yet. We're four or five hundred million dollars short. The the the and so we need to restructure oil taxes as part of this. The problem with Corey's point, and the problem with with with the point that people make about I'm not gonna go for taxes until the oil company, the deficits are too big. I mean, what the fiscal policy working group had to confront, because they're they were responsible people put in a room to actually confront this stuff, what they had to confront is the deficits are huge. And so it's not just you can't just say we're gonna tax one thing and close the deficit. If you tried to tax the oil companies one point an additional$1.8 billion,$1.7 to$1.8 billion, which is what what the deficit is, you'd you would, they'd leave the state. They would they'd shut down all development, they'd leave the state.$500 million they can afford, but a billion eight, they that it would it would just change the economics too much in the state. But if you say, I'm not gonna go, I'm not gonna support anything else until we until we do oil taxes, well, then you're you're you're not you're not coming up with a solution to to the problem to the 1.7, 1.8 billion dollars. Okay, because there's yes, oil taxes is part of it, but it's not oil taxes alone can't solve this issue.
SPEAKER_00:There's no again, there's no single magic bullet here. We didn't get here by what by one specific thing. It was a combination of things, and it's gonna take a combination of things to fix it. It's a holistic approach. You when you have a whole wall full of levers, you don't just pull one lever to get the to get the thing back on track. You know, you've got to pull a combination of we do a little bit of this, we do a little bit of that, we do it a little, you know, because there's no one thing that's gonna fill up that hole.
SPEAKER_01:That's the problem. I mean, Corey's point is the same, is is is sort of the same thing as the top 20% saying, well, let's just wipe out the PFD. That'll solve the problem, uh, and and just fully subsidize our taxes, non-resident taxes, and and and the taxes of oil companies. Let's that'll that'll do it. Well, no, it won't cause huge problems in middle and lower income Alaska families to wipe out the PFD. The same thing's true if we put the entire burden on the oil companies. You can't, the burden is too big to be put on any one segment. The genius, the genius of both Hammond and the fiscal policy working group was to spread it out and have everything be a little and have everything play a role of a little bit, um, uh making a little bit of the of a contribution toward the toward the full solution. When you do that, and when you spread that burden out long enough, that far enough, the burden on any one segment doesn't tip that segment over. Everybody can afford a little bit more. Governor Dunleavy even recognized at that at that point in his famous news conference where he talked about a sales tax. He said, What you want to do is get a little bit from here and a little bit of there. You can't ask one segment to bear the entire burden. He forgot that like three days later. But but everybody should understand that concept. And so for Corey to say, or for others to say, oh, I'm not gonna do this until they do that. Well, okay, how about this? Everybody does it at once. That's what the fiscal policy, that's what the fiscal policy working group suggested. And it's and and it's the adult in the room solution as opposed to the child in the room. I'm gonna hold my breath until you do, until you do X. The adult in the room solution is everybody makes a little bit of a contribution. That is that is the the focus. I mean, that's the solution that someone who's focusing on middle income families ought to be talking about. They ought to be talking about we've got a problem, we've got we've got a government that we can't pay for. We need everybody, everything to be part of this solution. We need some people to contribute more, everybody to contribute a little bit more. We need a little bit of cut in in government spending. That's the solution that focuses on middle-income families. And I don't find any of the candidates talking about the fiscal policy working group as the core of their of their agenda.
SPEAKER_00:Uh, continuing now, Brad Keithley is our guest. The weekly top three continues. Number three. We're talking about the permanent fund corporation, not the dividend, but the permanent fund corporation and the permanent fund earnings, the big, the big fund itself. What do the earnings look like? And we're getting some Q, we're getting some quarterly earnings reports here. Uh, and Brad has some thoughts, obviously, on this. He's got some thoughts on this because we ain't been doing so great uh comparatively uh in the past here. So, Brad, tell us what's happening.
SPEAKER_01:So we've talked a lot about this on the show, and we'll talk about it a lot in the future, which is, in my opinion, the failure of the permanent fund corporation, who's the manager of the permanent fund. They are the they are the investment bankers, they're the investment advisors, the financial advisors to to that guide the permanent fund, the the investments made by the permanent fund of the permanent fund money. Uh the the the the failure of the permanent fund corporation, I think, to to maximize, to optimize, to achieve the maximum benefit for Alaska, for Alaskans uh out of the out of the permanent fund uh corpus. And and so we've talked a lot about that on the show. This is a good point to to sort of step in and see what's going on, because the permanent fund corporation just released their first quarter, um, their September, uh uh month ending September, which is the also the month ending of the first quarter, the ending of the first quarter of their uh of their returns. And we keep a running chart that we publish as part of as part of our charts, uh, our regular charts on Facebook and Twitter and elsewhere. Uh, but we also talk about it on the show and we also put it in the Alaska Landmine column from time to time. So since this is the end of the first quarter and since we can sort of see what they're doing in the first quarter, I thought it'd be a good time to sort of check in and see see what their results are. If you have that detailed chart, Michael, and pop it up, that the spreadsheet or the chart?
SPEAKER_00:The spreadsheet. The spreadsheet or the spreadsheet.
SPEAKER_01:The spreadsheet. Okay, there you go. That might be helpful for those who who want to follow along. And this will be, you can also find this on the posts we make on the Alaskans for Sustainable Budgets uh website and on the posts we make on Facebook page and on Twitter and sort of all over the place. But this is a chart that shows the the the returns uh in very by various categories that the that the that that's that the permanent fund has achieved and also that other uh uh comparative uh uh investment approaches have achieved over a period of time. We go back, this goes all the way back to fiscal year 12 and does it by fiscal year up through the end of fiscal year 25. And then it does it uh fiscal year uh uh to date, uh the FESP FY26 to date, which is the bottom line before the gray bar at the at the bottom that says PF PFC averaging periods. And then it also does it by five-year average, three-year average, and one-year rolling average, 12 month rolling average. And we do those because that's what the permanent fund corporation itself does in terms of analyzing its own results. So let's go, let's go to the uh the the bottom bar, the PFC averaging periods, which are really sort of a good way of looking how the permanent at how the permanent fund corporation is is is doing. Um there are four columns in here that I that that I'll talk about. One is the first column is the permanent fund corporation's returns. The second column is the return that's been generated by the Vanguard uh 500 ETP uh ETF uh electronic uh traded fund uh over the over the same period. That's sort of the the key of the Warren Buffett 9010 approach, uh investment approach. The total fund return, which is inflation uh plus 5%, which is the permanent fund's stated goal. And then the other one is the passive index benchmark, the second uh under the other uh PFC benchmarks, the other column. And that is that is what the return would be, what the permanent fund corporation says the return would be if they didn't aggressively manage the fund, if they didn't, you know, try to pick and choose winners, if they just put it sort of on autopilot. That's what the that's what the passive index benchmark uh tells you. You can see on the five-year average that the permanent fund corporation has achieved a 9.54 percent return. That is about the same as the total fund objective, the inflation plus 5%, 9.53% over the period. And it's and it's greater than the passive index benchmark. So when you look at a five-year period, the the permanent fund corporation against those benchmarks is doing pretty well. It's still doing very poor compared to the to the Buffett 9010 rule, uh, which uh Warren Buffett once said, you know, you have all these advisors, these advisors just you know make you spend money and they throw you in circles. Here's a better way to do it. Just put it on autopilot with 9010, uh 90% in the Vancard 500 and 10% in a uh uh in a bond market uh ETF. And and against that 9010 rule, the Buffett 9010 rule, uh, the permanent fund corporation's performance even over the five-year period pales. Uh it's 9.54% compared to the Buffett 9010 of 16.45. The three-year average and the one-year average are showing how they're doing much closer in time. The five-year average sort of picks up a year that's that's in the past that that the permanent fund corporation did really well compared to its peers, and that's sort of continuing to influence the five-year average. The three-year average and the one-year average, rolling average, are telling you how the permanent fund's doing on the on the current basis. And there you see that the permanent fund is at uh on a three-year average is 10.41. That's that's over uh the the what they need to achieve in in terms of generating revenue to to uh uh uh meet the 5% plus POMV or 5% plus inflation rule, but it's particularly poor. That 10.41 is poor compared to the passive index benchmark. What would have happened if the permanent fund hadn't paid out nearly a billion dollars in in investment fees, what Buffett tells you you'll be taken to the cleaners over. Right, right. It's particularly poor against that. And then the one-year average is the same. The permanent fund corporation is at 10.10, that's higher than the total fund return objective. So they're at least paying for the POMV draw on a on a one-year rolling average basis. But again, it it is less than the passive index passive index index benchmark, which is more than 50 50 basis points higher uh at 10.78. And it's again very poor compared to the to the Buffett 9010 rule uh of 17.54%. So I think I think the takeaway from the first quarter, and when you look at these averages, these rolling averages, the takeaway from the first quarter is the permanent funds improving. The permanent fund corporations' returns are improving. They are better than they were at year-end, uh fiscal year 25, which you can see is in the highlighted in the yellow stripe across there. The the the the one-year, the nine, the nine year, excuse me, the five-year average, three-year average, and ten-year average or one-year average are all better than the fiscal year 25 uh results. But so they're improving, and they're improving against the the P the inflation plus five percent uh objective, which is what you need to fund the POMV draw, they're improving against that. But when you look, and and so they will say, Oh, we're doing okay, you know, we're we're we're funding the POMV draw, so we're we're doing fine, don't worry about us. But when you look uh when you compare it against what they could be doing, if they either just put this thing on autopilot and use their passive index uh passive index benchmark, or did the Buffett rule and put it as at 9010 or something approaching 9010, uh, which is the Warren Buffett recommendation, they could be doing much, much, much better, much better than uh than what they're doing. If you've got the graph, the graph, let's throw that up for uh just a second. Thank you. So this this compares the results. The blue line is what would have happened under the buffet rule, the red line is how the PFC is uh the permanent fund corporation is actually doing. Both the the lines at the top are what the balance of the permanent fund would be if you'd followed the buffet rule since 2020. It'd be roughly$50 billion higher than what the than than what the PFC has achieved over the same period. And the bars at the bottom are what the POMV draw would be if you took into account uh if the the higher balances coming from uh from the buffet rule uh investment. And as you can see there, the POMV draw would be significantly higher, would fund both additional dividends and take care of part of the deficit that the that the that the government has uh has created uh for itself do it due to the spending levels. It would it would help contribute to the solution, it would be part of the all of the above solution if we had better investment uh strategy coming from the permanent fund corporation. So first quarter results, some improvement. They'll claim that hey, we're covering the POMV draw finally. Uh and so we're doing great. But when you compare it against the alternatives of what they could be doing, even just put it on autopilot, one way or the other, we'd be doing much better.
SPEAKER_00:Yeah, and how much did the permanent fund spend for such poor results? Almost a billion dollars, right? 800 and something million in change in management fees. Yep. It's it's as opposed to just setting it and forgetting it and getting a 15.97% return on the three-year average. They spent a billion dollars instead, uh, and got a and got a 10% return. I mean, this chart right here just shows the the thing, you know, the permanent fund, and and for those of you who are you look closely at the chart here, the per the left column says permanent fund, and then the blue one is the vanguard SP 500 ETF, right? So you got the three-year average of 10.4 percent. The Vanguard returns 24.88 percent, and then you go all the way over to the final column with numbers in it, which is the passive benchmark, meaning if you just left it be, you didn't put it in the vanguard, you just left it be, it would have still had five and a half more percent return, just leaving it alone and not spending nearly a billion dollars to manage it. Yeah, I mean, this is this just nutty, and you look down that whole passive benchmark column, and for the most part, it's pretty comparative with the with the you know, you could have left the whole thing in there and still had a better return.
SPEAKER_01:Yeah, that's what that's that's the basis for the Buffett rule. I mean, what Warren Buffett in his famous 2013, I think, letter to shareholders, um, uh, was talking about what he was going to do with his estate after he died and how he was gonna take care of his wife. And he said, you know, I'm gonna put my estate, the portion of my estate that I leave to my wife, I'm gonna put in in a 9010 uh approach, a 90% uh tied to the SP uh uh ETF and 10% uh sort of a uh a fringe over there, 10% uh in uh uh in bonds. And I'm gonna put on an autopilot. And the reason he said he was gonna do that is because these these fund managers, these investment advisors, will take you to the cleaners. They'll say, you need to be doing this, pay us, pay us a bunch of money to tell us that you need to be doing this, or pay us a bunch of money to have you to invest your money this way, or pay us a bunch of money to go that way. And he said, Yeah, they they talk about these great returns they get, but after you take out their fees, it's like it's like a uh a return that's much less than if you just stuck it in the Buffett Rule 9010 approach. Or and the and the and the PFC has sort of their own approach to that, which is the passive index benchmark. And what's going on is the permanent fund corporation is has a bunch of advisors who are taking fees either in the form of advisory fees or in the form of a percentage of whatever returns are generated when they put it with that with that advisor. Uh, and those fees are eating up the returns that that the permanent fund would otherwise be achieving, either by putting it in their passive and uh uh uh investing it according to their passive index index benchmark or investing it according to the Buffett rule. Warren Buffett's exactly Warren Buffett's letter in 2013 was exactly right. You will be eaten alive by the management fees that that are taken out of uh, you know, they look like spectacular earnings, but by the time you deduct the fees, they aren't. And that's what's going on with the with the permanent fund returns. You can see it by comparing it to the passive index benchmarking. You can see it by comparing it to the Buffett 9010 uh uh rule uh returns.
SPEAKER_00:It's uh it's pretty obvious when you look at the actual numbers. Uh it's uh it's it's it's it's pretty crazy what they continue to return. I mean, look at the just look at the Vanguard S P numbers. Yep, sure, some numbers are down occasionally, and occasionally it'll be down further than what the permanent fund earns, but look at the overall returns. 24.88 percent on a three-year, the 10-year average is 14.3834 percent over 10 years versus 8.35 percent for the managed fund. It's just it doesn't make any sense.
SPEAKER_01:What what the permanent fund will tell you is we don't like variability, we don't like you know the ups and downs that you get in the SP. And the SP does, you do have more ups and downs in the SP. We don't like those. We want we want reliability, we want, we want, you know, something that doesn't have that variability. And what you get is you you you you you you get these these minimal returns because you're paying a hell of a lot for the insurance of not having the variability. What the yes, the SP is variable, but the variability over time goes up and up and up and up. As you said, the 10-year average 14.34 percent goes up and up and up. What the permanent fund is doing by by by not having the variability, not taking advantage of the variability that goes up over time, is they have these you know middling returns of eight point of middling return of 8.35 percent. So it's I I I guess I guess if if your if your criteria is no variability, then yeah, the permanent fund's doing great. But if your criteria is actually getting the maximum benefit for Alaskans out of the out of the fund, you ought to be doing something else.
SPEAKER_00:That's the thing. If you don't care, I mean if you if you if what you're looking for is returns, you don't really care about the variability between the time you get there and the return at the end, right? That's the thing. Sure, it may have some wild swings, but if its long-term trend is up, up, up, why would you know what is why would you care?
SPEAKER_01:And that's and that's what the permanent fund is. The permanent fund is a long-term investment. You know, some people say, well, it's a retirement fund, and so you, you know, you have to have the money there. You don't. I mean, it it it it it it it is now at a size. If you look at the second chart, it is now at a size that is going to generate a pretty good chunk of change, regardless of the variability. And so what you want out of this is you want long-term returns, you want long-term, long-term benefits. And that's what the SP 500, that's what the passive index would give you. What's happening, that difference between the blue line and the red line is the value that the permanent fund corporation is giving up in order to not have variability. It is, it is, it is the loss that Alaskans are taking against maximum benefit, just so the line sort of looks like it stays the same, so it doesn't jump up and down.
SPEAKER_00:Well, and you're losing three quarters of a billion dollars in POMB draw because you can't, because you're not doing it. That's the biggest part of the problem. All right, Brad. Well, thank you so much for uh coming on board as always. This has been uh educational, and uh you got uh people people love to see you get a little wrapped up about stuff sometimes. So it should be fun, and you got a chance to tell people what they what the answer is, and we appreciate that. So all right, Brad. Well, thank you so much. It uh we appreciate you coming on board, Michael. As always, thanks for having me.
SPEAKER_01:All right, we will catch you, we'll catch you later. 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.
