The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (1.26.2026)
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
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 January 26, 2026.
This week, our top 3 issues are these: 1) now that all of the pieces have been filed, we explain and start to analyze Governor Dunleavy’s proposed fiscal plan (2:09), 2) stripped of the hype, we discuss how far along the Alaska LNG project is really (17:39), and 3) we explain why, rather than writing op-eds patting themselves on the back, the Permanent Fund Corporation Board members should be doubling down on working harder to achieve the earnings levels the Fund should be generating (38:34).
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.
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 January 26th, 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, now that all of the pieces have been filed, we explain and start to analyze Governor Dunleavy's proposed fiscal plan. Second, stripped of the hype, we discuss how far along the Alaska LNG project is really. And third, we explain why, rather than writing op-eds patting themselves on the back, the Permanent Fund Corporation board members should be doubling down on working harder to achieve the earnings levels the fund should be generating. And now let's join Michael.
SPEAKER_01:Brad, uh, it's been an interesting week. Um, and you and I have talked only a little bit this last week here uh since uh last Tuesday about some of the stuff that we're seeing. Uh, but we've got to we've got to we've got to get down into it. Obviously, the number one thing that we need to talk about is the governor's fiscal plan. Last week you had some predictions. You're like, oh yeah, I mean, he's got an opportunity, he could do it. It's what uh what do you think? Dunlevy's fiscal plan, hit me with the hit me with the the the your thoughts on this.
SPEAKER_00:Well, again, I want to start out by by uh commending the governor for finally stepping up. Finally, finally stepping up with a fiscal plan, a fairly comprehensive full fiscal plan that addresses the uh the the deficits that the state's uh state's been running. Not perfect. Uh a lot of places where it needs additional work, but I but I think the governor deserves credit for finally stepping up uh with a plan. I've seen some criticism already, certainly on Facebook, um, where you can find criticism, you know, just at the drop of a hat.
SPEAKER_01:Have you been on the internet? I mean, come on, have you been on the internet?
SPEAKER_00:Uh, and I've seen some criticism this morning in the ADN and in the Juno Empire articles um that are unfair. I mean, they're not counting a big chunk of money uh in those articles. But so I there it has its criticism. I will say that there needs to be places needs to be improved, but the governor needs credit for finally stepping up and having a more comprehensive plan than he's had before. That said, uh let's uh let's do some weed diving here on uh on what this plan does. I've got a couple of charts uh that try to capture uh what's going on with uh with the the fiscal plan, with his proposed fiscal plan. The first one, Michael, if you've got it, is the detailed, the one that has all the columns and all the all the blocks on it. Thank you. That's it. Um and this is an effort to break down the uh the governor's proposed new revenues um and compare those to the target that the governor put in the OMB 10-year plan that was published in December. As you will recall, in the 10-year plan, the governor put a line in that that was meant to absorb the deficits that were in that plan called new revenue measures. And the new revenue measures uh were substantial, uh, that that the plan projected were substantial and went on throughout the entire 10-year period. The line at the top of this chart uh is the target that the governor set in the in the 10-year plan. So it's$1.531 billion in fiscal year 27,$1.592 billion in fiscal year 28, uh,$1.848 billion in fiscal year 29, reaches a high of$1.9 billion in fiscal 30, and then goes on from there. Uh, and that's what the governor said we needed to, that was the deficit the governor said we needed to fill. The the the blocks before below it are the various chunks of revenue that he raises um in um in his proposal. And uh his proposal includes uh uh a sales tax that we will discuss in some length, uh uh going to POMV 50-50 for the PFD, which is a reduction from the current statutory PFD. It aligns the going to 50-50 POMV aligns the PFD with where we are in terms of draws that we're now making from the permanent fund, and that results in a reduction from the statutory PFD, adjustments to the oil tax, uh, a spending cap that the governor has proposed that has some impact on lowering the deficit, uh what he calls a market-based corporate income tax, which is really the internet tax that the legislature just finished, not overriding the governor's veto of. He puts it back in, slightly different version, but puts it back in. Um, and then uh there is another measure that the governor has in there to reduce the corporate income tax, and that is a reduction in the in the revenue uh raising measures that he's that he's included. We can go to the second chart, sort of skipping away from the blocks and all of the, thank you, of all of the the details. This chart shows the combined revenue, the dotted line, the blue dotted line, the the top line, the solid blue line, is the same from the uh 10-year plan, the same target that the governor put in the 10-year plan. The dashed blue line is the revenue, the total revenue that the governor's raising from his various revenue measures. And the red bars on this chart are the remaining deficit, the deficit that from what the governor said in the 10-year plan that's not closed as a result of the new revenue measures that he's adding. As you can see, we we keep substantial deficits. The governor doesn't, the governor's proposals don't close the deficit in any of the years. In fiscal year 27, it's still fairly substantial, over a billion dollars. Fiscal year 28, it starts going down as the new revenue measures kick in. And in fiscal year 2029 and 2030, the the new revenue measures get fairly close to zeroing out the deficit. Uh, we're down to like a remaining deficit of 260 million and 232 million, not chicken feed, but still, but still fairly close in the in the big scheme of things. When you read the ADN article this morning and you read the Juno Independent, they're missing a piece of the revenues. They're missing the piece of the revenues that results from going from the statutory PFD down to POMB 5050. And so they say the new revenue measures only raise about$900 million, and they complain about how short that is of the governor's target. When you add in the impact of going from the statutory PFD down to POMB 50, the new revenue measures raise a significant amount, about$500 million a year. That step raises about$500 million a year on average over the over the period. And so in 2029 and 2030, you see the new you see the revenues that the governor is proposing getting fairly close to the to the target that he laid out. 2031, it starts slipping away a little bit. Um that's because at that point the governor starts implementing, the governor's proposal is to start implementing the corporate tax reduction. And from there on out, the corporate tax reductions, elimination essentially by 2032, the corporate tax eliminations just drive that deficit right back up. And so what you've got is the deficits in the later years not resulting so much from the continued spending that that we've that we've seen cause deficits in the past. It's from the reduction in revenue that's occurring as a result of the elimination of the corporate income tax. Michael, if you can just flip back to the previous chart for just a second so I can show that. You see the red, those able to see it can see the red below the zero line starting in 2031, continuing on through 2036. That is the elimination, essentially the elimination of the corporate income tax, both for corporations generally, as well as the petroleum corporate income tax. So we're eliminating, we're eliminating the corporate income tax on oil companies as well, uh, in what the governor's proposing. And you can see those big numbers, minus 260 million in 2031, minus 450,$540 million in 2032, and then continuing out on and growing, you can see those big deficit numbers. So when you flip back to the other chart, Michael, I'm sorry to do this to you, but when you flip back to the other chart, you can you can see there, almost there, you can see that the deficits are growing in the latter years as you're eliminating uh the corporate income tax. And the the net revenue benefit uh of uh of what the governor's proposed, the net by the time you get to 2035 and 2036 is very minor because the corporate income tax has essentially consumed whatever uh whatever additional revenue there is out there. So the governor deserves credit for finally putting a plan on the table, but that plan doesn't solve even the deficit in in any year, doesn't solve even the deficit that he outlined, he himself outlined in the in the 10-year fiscal plan that they put out in December. And by the time you get toward the end, it's it's just growing back to as bad as it ever was. Now, the governor will say that in those latter years, we're gonna that that will be offset. Those deficits will be offset by increased oil and gas and by the start of the AKL and G line. But we've already got in this plan, in the revenue side of this plan, the governor's plan, we've already got the benefit of the growing revenues in oil and gas. As we've talked about before, even while the production's going up, uh income tax, the uh sorry, the severance tax, the production tax on that production is going down. So we've already got all of those revenues in there from increased oil and increased oil production. AKLNG is interesting. There's another chart I won't get into at this point. We'll talk about it in a later show. But AKLNG has shows a lot of revenues, but a lot of those revenues in the AKLNG chart that the governor is sort of relying on to cover these deficits in the later years, are coming from the corporate income tax on the AKLNG project, and he's eliminating the corporate income tax. There's a problem anyway, because Glenfar is organized as an LLC, and so it wouldn't be subject to the corporate income tax in the first place. But the government, even if you close that loophole, even if you close the LLC loophole, the subchapter S loophole, the governor's eliminating the corporate income tax. So all these revenues that people have said are going to come from the AKLNG project go away when you eliminate a big chunk of them go away when you eliminate the corporate income tax. So there's a big hole at the end. I'm gonna write about this some in the in the Friday column, but there's a big hole at the end of the in the last five years of the governor's plan because of the elimination of the uh of the corporate income tax. Nonetheless, governor deserves credit for coming out with a plan. He's gonna take a lot of criticism for it. There's a lot of work, but sort of the basics are there that you can begin to work with to start trying to bring things together.
SPEAKER_01:It's uh it's fascinating to watch. You know, it's like uh you do so good over here, and then oh, you fall on your face over here. You know, you're going all over the short term, it's all gonna be good, and then the long term it's gonna be bad. You know, uh, we're gonna have a sales tax for a little bit and then it's gonna fall off, you know, and it's just like it's uh it's it's almost like it's uh in some ways self-defeating. And it's uh it's a frustrating thing to watch. But we'll see, uh we'll see what uh what comes of that in more. I said, look at these charts, Brad, and I and I see all this. I just, you know, I kind of shake my head. Like I said, it's it's two steps forward and one step back, or 1.75 steps back, right? I mean, we we keep we're trying to bring it into order, but at the same time, then we start cutting off the the thing and the corporate income, you know, and and at some point I'm just like, okay, what how are we getting to these, I would say half measures, but it's not even half measures. Like I said, it's it's it is this is this more of a paper tiger? Is this more just a pencil whipping this thing to show that you're doing something, or or what, what's your take on that?
SPEAKER_00:I think that I think the governor's trying to trying to hit a lot of targets at once. Um like like Ben Carpenter's proposal did. He wants to he wants to reduce and then eliminate the corporate income tax because uh the belief is that would spur more corporate activity in the state. Um, and so that's one target. Another target is we want something uh less regressive than uh uh PFD cuts, but we don't want to go to income taxes. Uh and so you got sales taxes, and so we got sales taxes proposed in there. But we don't want to we don't want to say we're going to sales taxes forever, so we gotta we got a cutoff on that. Another is he wants to show that that oil and gas is gonna ride to save the day. Um it's not, but he wants to he wants to you know make that make that argument. And so you have these things phasing out, so because oil and gas somehow magically is gonna ride to save the day uh in the latter years. And so it's a lot of different, I mean, I can just see how this meeting goes. We want to make a point that oil and gas is gonna come save us. We want to make a point that we're gonna eliminate the corporate income tax, we want to make a point that we're gonna replace PFD cuts with something, with something less regressive. We want to make and you sort of go through all these points and you say, okay, now go do a plan that does all this stuff. And and and that's what this is. It's a plan that does all that stuff. The problem is by the time you do all that stuff, some of it's running contrary to other things that you're trying to do. By the time all you do that's this stuff, you're not hitting the targets that uh that he put out in the 10-year plan. So instead of instead of it being a backward, let's start with the deficits that we've shown. Let's start with the the the new revenue measures that we've shown in the 10-year plan, and let's fill those in. Instead of that, they've sort of started ground up and saying we want to make a bunch of these different points, and so bam, here you go.
SPEAKER_01:You know, I mean, I'm I'm happy that the governor fight, but I mean, God, in the final, in the in the in the bottom of the ninth inning, he drops this out there, right? Uh or that, you know, at that at the three-yard line, he drops this out there. And it's like, he's not gonna have to carry this over himself. You know what I mean? This is this is so performative, I guess is what I want to say at this point, right? Am I wrong with that? Or is it just like No, that's a word.
SPEAKER_00:I mean, I mean he's laid out the pieces, and and I think, you know, my goal over the rest of the session is to is to articulate how these pieces could be put together to achieve the objective of of closing the deficits, which is the objective we ought to have, of getting fiscal stability in the state. And he's laid out pieces to work with to do that. Um but but he's done it in a manner that is highly complex. And in a legislature that only meets for however long our legislature meets, uh, especially in an election year, um, it's just asking a lot for them to do it. But he's but he's sort of uh maybe it's a game of 52 pickup. He's laid out the cards, it's just you know, getting them in order is now the is now the challenge. And it's a big challenge given given all the pieces that are out there.
SPEAKER_01:Continuing with Brad Keithly, Alaska's for sustainable budgets. We talked about the the fiscal plan. I'm sure there'll be many more discussions on the details of that as we go through. Um, as I said during the commercial break, I have a feeling this is really more performative than anything else. I'm I don't I don't know how I don't know how this is necessarily gonna get through this legislature uh and everything, but it does lead us to one of the big components that the governor talked about, and that of course is the AKLNG. Hey, we're we're doing this, we're doing that. Oh, the AKLNG's now got a contract with not a contract, a letter of intent with Hillcorp and Exxon Mobil and all that. And but but really, Brad, you and I have talked about this a lot, and I don't want to be Debbie Downer, but I want to be realistic. How far along is the AKLNG project really? Because we were supposed to have final investment decision, which is the price tag, at the end of last year. And here we are at the end of January, and they're like, Oh, it's coming, it's coming, don't worry, it's coming, it's it's gonna be here. I mean, it seems like we're betting on the if come before we've even laid the first foundation stone of anything.
SPEAKER_00:Yeah, so so the AKLNG project, Glenn Farn, announced a bunch of stuff. I think what Suzanne Downey said it was the longest press release she'd ever read, announced a bunch of stuff on Thursday, late Thursday afternoon in advance of the uh governor's state of the state. And and from all that, the ADN on Friday ran an article that had the headline Alaska LNG says it expects to start laying pipe as early as December. And and so you had this bunch of stuff come out, and then you have this headline, and then you had people saying, Oh my god, they've done it. I mean, they've they've succeeded in putting all the pieces together. It it's taken because of the length of the press release, it's taken a while to sort of sort through what they've actually done. Uh, but it's it's interesting. So the press release was mostly about supply, equipment supply, and engineering contracts that they're nearing or conditionally have entered into. They're in a variety of different things, variety of different phases. But it sort of it's sort of describing how they would build the pipe uh with all these different with all these different pieces and it's an extensive list and it's not completely a finished list but it's a fairly thorough list that gives you a pretty decent outline of of how they would how they would construct the line. Then they had these the as you say letters of intent with with Hillcorp and with Exxon um which are important because of Point Thompson because of the Point Thompson field uh which is sort of the startup volumes to the to the project and then uh and then Conico sort of coming along and saying uh uh yeah you know we're ready to go we're ready to negotiate too and so from the supply standpoint from the supply standpoint all of a sudden you you get a sense that maybe there's things that are beginning to fall together and maybe there's a there's a you know a pot at the end of the rainbow on the supply side the gas supply side but then you look you look there there's three parts you know can you build get do you have all the pieces together to actually build the line do you have supply and do you have market and then from the market side you start looking at it and you go wait the only market they've got in there is NSTAR and um the Donlin project and NSTA and Donlin combined are less than 5% of the volume um yeah they don't even have Chugach in there. So so you've got all this stuff yeah we sort of know how we're gonna build the thing and yeah we sort of have supply but we still don't have market and so the project you once you sort of come away and you parse through all this stuff you're really from a market standpoint you're nowhere closer as a result of all these things that were announced on Thursday uh than than you were going into Thursday you always knew NSTAR was going to sign on you always knew that that Donlin was going to need gas out of the cook inlet and if cook inlet doesn't have gas they're gonna have to take it from some LNG source either the big line coming down or the imported LNG so you always knew those those were sort of there there's no there's no additional markets that are announced as as part of the Thursday announcements this line is not going to be built just for in-state market the in-state market at max right even if you add n star you had you add to Gatch you had Donlin you you think about restarting the the fertilizer plant which is a fairly significant load about the same size as Donlin you add in a couple of data centers you're still not going to get anywhere near the type of market you need the number of people you need paying for the costs associated with this project so the market's not going to go this project's not going to go until you have international buyers until you have global buyers and none of that was announced um on on there was no progress announced on Thursday on what about this discussion uh that Trump had with Japan and the one with Korea uh the takeoff line to fair banks I mean does any of these things add to that or are they just kind of the takeoff line to Fairbanks I mean that's that's with all due respect to fair banks and how important that is to fair banks I understand it it's negligible in terms of additional volume so it's that's not that's not going to make the project go. It's it I I found it interesting there there's I can't find an article that makes the connection or describes describes the connection but I found it interesting that Trump sort of exploded on Korea uh over the weekend on Friday and over the weekend uh for not moving fast enough on making investment decisions korea hasn't passed a fundamental law through its legislature that authorized it authorizes it follows up on the investment levels that that Trump says that Korea negotiated in the uh in their tariff negotiations and Trump on over the weekend threatened Korea with reimposing high tariffs because it's not moving fast enough on the investment i i found that interesting the the timing interesting connect in connection with where uh the pipeline is maybe there's no maybe there's no connection but Korea certainly has been uh bandied about as one of the big customers Japan Taiwan others have been bandied about uh as sort of the saviors of this project in terms of off take volumes and in terms of investment and the fact that that trump is frustrated with the pace at which Korea is moving uh could be an indicator that that you know he's trying to trying to pull everything together in any event the the long story short is the announcements on Thursday long list um and and and interesting um and sort of addressing two of the three key components of how you do this uh but by the time you sort of parse through it it certainly doesn't live up to the to the headline that the ADN gave it on Friday of Alaska LNG of supporting the headline that the ADN gave it on Friday of Alaska LNG says it expects to start laying pipe as early as December.
SPEAKER_01:If it starts laying pipe in December without additional concrete commitments from foreign purchasers it's going to be a big white elephant because they're gonna have a a big pipe for a very very small volume uh going to uh going to in-state purchasers and the concern about that I mean let's let's say they went ahead and built the pipe and they only have the in-state purchasers they don't have the the global purchasers the per unit cost of of of that supply would be huge I mean we're talking about we're talking about multiple multiples of imported LNG uh to pay off the pipe uh with that sort of small volume so well and and the question is who's gonna who who's going to invest in it right I mean that's the thing we were supposed to have the new price tag um and supposed to understand it and Rob said that they were supposed to have the feed at the end of December and they said they're keeping it confidential um I mean what do they have it and they're keeping it they're keeping it under their hat because I mean you know why because they're scared because it's not$44 billion it's$80 billion I mean what's what's the you know why why hold it back?
SPEAKER_00:Well they're negotiating with the foreign purchasers and and you don't want to show all of your whole cards maybe in those negotiations. You want to negotiate a price let's say let's say that the cost would just the the cost you need a price of just to pick a number out of the air you need a$7 price$7 per mmbtu price in order to in order to justify the in order to meet the investment. And let's say you can get$8 or$9 out of the foreign purchasers. None of those are true but let's just say that for the moment um and so you want to sort of hold that back so you don't want the purchasers to be able to figure out oh they only need$7. There's another piece of that uh they're asking the legislature to to lower the property tax take a 90% reduction in the property tax right now. And now Dunlevy's asking to do away with the corporate income tax. And and if you know if you if you have the investment number if you have the the the cost number you can sort of figure out whether those things are necessary whether you need to make the reduction in the property tax and you need and and you're gonna have to eliminate the corporate income tax in order to make the thing economic you can sort of start putting those pieces together. So part of this is they is they may not want to release that number so people can start figuring out oh we don't have to do that we don't have to we don't have to reduce the property tax. We don't have to eliminate the corporate income tax on this project in order to make it economic because they've they're many they've been managed somehow magically to bring in the investment price at a fairly low level. So there's there there's a there's a negotiation strategy going on here. That having been said I don't see how the legislature would ever agree to make the the the reductions that the that Dunlevy and the project are asking for without knowing what the investment cost is, without knowing whether and I certainly don't see the RCA, the Regulatory Commission of Alaska ever approving a contract between the project and NSTAR without knowing what the investment cost is going to be because that's going to drive the per unit cost uh of the of the delivered supply to uh NSTAR. So there's gonna be things out there that are going to force that number out finally legislature saying we're not going to make these changes unless you tell us uh RCA saying we're not gonna approve this contract unless you tell us uh there's gonna be things that force that out there but you know you for negotiation purposes you might want to hold it back for a while.
SPEAKER_01:So uh you and I have been accused of being a little bit negative nellies on this gas pipeline. It's not that I don't want the gas pipeline I want it but I also understand the reality of knowing that hey uh you it's got to make you know economic sense etc etc so in the big question here how far along are they really give me a give me a Brad Keithly special here what's the what what's the what's the actual possibility of this actually happening in your mind as you look at this from your again decades of experience in the oil and gas industry understanding how all this works working through this what's what's your take on this give me uh give me your your plus minus upside downside what do you think is going to happen yeah so if this were a mile race let's try it this way if this were a mile race um right now they've got maybe a tenth of a mile I mean they've got they've got big components of of how they're gonna build the thing they've got some components of how they're gonna supply the thing with gas supply but they don't have the market and so right now I mean this is not a project right now this is not a project that that you want to take to FID it's not a project that you're gonna start laying pipe anytime soon you don't have a project right now.
SPEAKER_00:Now that tenth of a mile jumps to you know a tenth of a mile left jumps to you know you're on the 10 year 10 year 10 yard line in the red zone going to score a touchdown it jumps huge if Korea comes on with a with a big uh uh takeaway contract uh japan comes on with a big takeaway contract and taiwan come on with a big takeaway contract you add a few a few more in all of a sudden you jump so so you're you're sitting there you're really on the 10 on your 10 yard line you're sitting there you're sitting there sort of waiting on those components the market components and if they start coming in in terms of real contracts not maybe I'll do it but in terms of real contracts then you're gonna make huge chunks uh of yardage real quick uh because you've got those other components taken care of but you're not past your 10 yard line yet without those chunks so again over and under you think this is I mean do you think it's 50%?
SPEAKER_01:I mean I and I I don't I'm not trying to nail you down I'm just looking at it going that there's a lot of a lot of the legwork has been done but again until they deliver that final cost estimate so people will know whether or not P you know the market will invest in it that's the thing. I mean are we blowing all this money and working through all these things just to get to the point to where you know we figure out that it's uneconomical because it's twice as much as what they thought it was going to be.
SPEAKER_00:Yeah you're working on the hope that you can that you can bring in deals with Korea Japan uh Taiwan and others you're working on that hope um and and me I don't think that I don't think those contracts ultimately come in I think people are waiting out Trump may and and they may not have to wait out long. I mean if if there's a Democrat wave in the House and in the Senate Trump's essentially done in two years. They may not have to wait it out long, but I think they're trying to wait out Trump. I those contract I think they think those contracts are less attractive than other contracts that are available out there in the world from ad knock or from various other suppliers various other projects that are out there. And I think they are saying you know if if they were good contracts they would have jumped on them. But but they're they're slow walking them and that makes me think that they don't think they're those countries don't think that they're economic. So I don't I don't think they come in I think the project ultimately fails because of that.
SPEAKER_01:But you know well we can hope we can we could hope I like I said I'm hopeful but not optimistic. How about that? That's uh that's that's my that's my take on this whole thing. I mean that's not that you know again Brad I I would love to have Alaska gas I'd love to have a lower electric bill I really would I'd love to have cheaper heating I'd love to have cheaper heating for the folks in Fairbanks I mean my life changed when I moved from Fairbanks to Wasilla my life changed because my my heating and my electricity electricity costs dropped to 20% of what I was paying in Fairbanks right because I had access to cheap LNG at that point. I want those things but again we can't keep blowing wind up people's skirts and telling them this is the you know this is going to be the the end all be all that's the problem.
SPEAKER_00:Yeah but but Michael here's here's sort of where where we're at there's a chance that especially with Trump there's a chance we could land Korea there's a chance we could land Japan there's a chance what we could land Taiwan there's a chance and so you don't want to sit there and go well this isn't going to work and so not do the work on how you would engineer the thing and not do the work on how you would supply the thing um because you know there's just a chance and you and it may never it may never come to fruition. There's a chance you know I it's not going to be the best contract in the world if Trump forces Korea into the contract because Korea's going to look for ways to get out of it. I mean I was in a I was in a deal once I negotiated and was administering a deal once where where my side really did a great job. I mean we got everything that we wanted plus some um and thought we'd really you know made our future and then about you know a year after we completed the contract the other side figured out that they had better alternatives elsewhere and so they started trying to get out of it and every you know comma every sentence every paragraph in the contract they were analyzing and making claims about it making claims that we breached and all sorts of claims and they were trying to get out of it and and ultimately we had to negotiate a resolution of that um so I'm a little concerned about the fact even if Trump you know pins Korea and they sign the contract after Trump leaves they may find them we may enter an era where they're trying to get out of the damn thing and sticking us with the cost um but but as long as you potentially might be able to land those customers you want to keep doing other stuff and sort of getting the getting the project ready. And in that sense they've done a good job if you look at it in isolation of where they've done what they've done with the engineering they've probably moved it down into the other team's red zone. If you if you look at the supply they've probably moved it you know past the 50 yard line they've progressed those pieces but the market I mean you got to have a market you're not gonna you're not gonna build this thing just for instance you're not gonna build this thing just for Alaska customers got to have a market and so and so you're you're getting all this other stuff done in the hope that the that the market lands I don't think it lands I think they weighed out Trump.
SPEAKER_01:But we'll see it reminds me uh a uh it reminds me of the old quote that says uh you know hope is not a strategy right I mean but I mean that's kind of where we're at right hope is the strategy at this point um maybe they're waiting out Trump maybe they're not um you definitely don't want to get them hooked into it in a short term and then like you're telling your story they come back and they're like now they're gonna battle it for the next five years over the contract or something like that. I I want to see it. I really do. And I hope I hope that they come in with something and we find out that it's you know not as bad as we expected it's not 80 million maybe or 80 billion maybe it's only 60 billion or something like that. But I mean until we see those numbers we just don't know.
SPEAKER_00:I mean I could change tomorrow until we see those numbers we don't know until we see the market's response to the numbers if they've truly got the numbers we don't know I I will say this the legislature should in my opinion the legislature should not proceed with the give ups that they're being asked to do the reduction in proper the 90% reduction of property tax the elimination of the corporate tax corporate income tax they should not proceed with those give ups until we see a market because I don't want us stuck out there having given those things when we don't know yet whether we need to I mean the state's got a revenue problem but we we've got we we we're we're counting on this I mean Dunleavy's own chart shows that we're counting on this to produce a lot of revenue and I don't want to I don't want to make those revenue give ups until we see that we need to and and we're we're a ways away from that until we see the numbers the investment numbers and until we see the what the market's going to do.
SPEAKER_01:Well it's gonna be it's gonna be interesting to watch I guess we'll see uh Rob also said that the new FID numbers are supposed to be uh I guess March is the new FID numbers so so I guess we got to wait another month and a half before we see uh where this all or maybe up to two months before we see where this all comes out but I I'll give Glenn Farn a lot of credit for spinning PR for saying we're almost there we're almost there we're almost there and trying to pressure everybody to move forward. Well uh I mean uh at least they're getting their money's worth out of their PR department I guess is is all we can say at this point.
SPEAKER_00:We're continuing with Brad Keithly Alaskans for sustainable budgets the weekly top three on to the third of the uh number three and this is the fact that all the permanent fund board corporation members may need to go see a uh uh uh uh orthopedic surgeon because they've given themselves rotator cuff damage from patting themselves on the back so hard uh you can hear the joints pop from here uh brad give me the give me the details here there was uh there was an opinion piece in the ADN and then it's it's making its way through the other papers uh signed off by all the permanent fund corporation board of trustees current ones that says the permanent fund in 50 long-term thinking that pays off and essentially as you suggest incurring rotate rotator cuff damage by patting themselves on the back for uh for all that they've achieved uh over the course of the permanent fund and all they're continuing to achieve through their whys and and and and understanding and knowing all knowing direction of the uh of the permanent fund i yeah it's I mean yeah okay you want to write that I guess if you're a permanent fund corporation board of trustee member you want to you want to you know claim credit that you haven't you haven't lost money but what's going on is a permanent fund corporation continues not Not to achieve the type of returns that it could be achieving out there. I wrote a column a couple of weeks ago in which I went back. The title of it, well, it's on the landmine. The title of it is uh the PFC's Maginot line investment strategy. Um, for those who know their history about the Maginot line. Uh, and I went back and I did something I hadn't hadn't done before uh by switching to another of the S P ETFs, electronic traded fund. The the Vanguard fund, the one I usually use, wasn't wasn't started until 2011. So I can go back, only go back to 2011 when I do it. But there are older ones out there. They're a little bit more costly, but there are older ones out there where you can trace the history of you can compare what the SP returns were compared to what the permanent fund said it returned its returns were going back in history. And out of the last 15 years from 2010 from after the 2008 fiscal uh financial crisis, the last 15 years from 2010 to 2025, the SP 500 has outperformed the permanent fund every year except one. One of the COVID years, the permanent fund did slightly better than the than the SP 500. But if you would have invested in the S P 500, even going back to 2000, if you would have invested or you know, even even beyond 2000, if you would have invested in the SP, even with what happened during the the financial meltdown in 2008, even with what happened during COVID, you we would be miles ahead. We would have a much bigger permanent fund uh by having invested in the in the Buffett approach, the 9010 approach, than following the permanent fund corporation's approach. Um and and the permanent fund corporation just doesn't acknowledge that. There's nothing in their in their claims about their history or where they're going or what they're doing that acknowledges that maybe they could be doing better, acknowledges that they need to stay alert to changes in the market, acknowledges that they need to, you know, look sort of beyond their billion dollar fees that they're paying out right now to all of their advisors, and maybe look at an ETF, maybe look at a low-cost uh uh passive strategy as opposed to all of this active churning uh that they've been going through. There's nothing in in the uh in that column that uh that goes through that. I will say they also take the opportunity in that column to talk about all the the importance of merging the uh the two accounts together. And um, and and you know that that's been a continuous position that the Permanent Fund Corporation has has taken. As you and I've talked about, there's a the what all that does really is open a back door into the corpus. No acknowledgement of that. It I found it interesting. You had Josh Church on yesterday, and Josh was talking about this some, and um, and and Josh said that, well, you know, uh there's a way around that that even Brad is signed off on, which is to say that the return ought to be the the lesser of the 5% target or actual earnings as a way of protecting against against backdooring the corpus. And um, and and he suggested, you know, well, we'll just move toward that. He said he was writing a provision. But in this morning's Fairbanks news miner, there's uh there's an op-ed by Bart Labon, who he mentioned yesterday as one of his advisors. How can we best manage the permanent fund that doesn't mention that at all? Continues to press for uh the 5% uh uh take, which as you as you have correctly described, is there to protect the spend, not protect the corpus of the permanent fund, protect the revenues they're taking, protect protect the money, the level of the money they're taking from the permanent fund, not protect the permanent fund corpus for the benefit of future generations. And BART's still going down that same track. So I it it it was it was odd to see the permanent fund corporation praising itself in light of the various obvious the obvious facts that are out there that it could have been doing much better and it hasn't. It's been paying a billion dollars to people to essentially have subpar performances, and that it's and that it the one proposal that it's hanging his hat on, which is to merge the two funds, we promise that'll we promise that'll work, we promise that'll make us better, opens the opens the back door into the corpus, and and even when people say, Oh, we're open to compromise on it, as you can tell from Bart's uh column this morning, they're not.
SPEAKER_01:Yeah, there's there's not a lot of movement. I mean, I I applaud the the so-called tangiment option where they're basically saying it, you know, they'll they'll prevent that overdraw. But again, even if they take even if they only take what the fund earns, that doesn't deal with inflation proofing and some other thing, it still eats into the value of the fund uh as well. And and again, nobody else seems to be picking this up except a few people out there who are like, we'll compromise it a little bit.
SPEAKER_00:Um and it I I'll say, I mean, LeBon's piece just really uh pisses me off. I I don't know, can I say that? And it I said you did. All good. It really, it really, it really upsets me. I mean, it it makes me think that the whole tangible option of we'll compromise, we'll agree to you know, capping it at 5% or actual earnings if lower. Um, that that's just a sort of a misdirect to get us to stop talking about uh the effect of what the proposal is, which is to open a backdoor into the corpus. I mean, the fact that LeBon doesn't even talk about that, doesn't even talk about that compromise, certainly makes me think that this is all just a diversion diversion tactic to get people to stop talking about the corpus. It will, I mean, the proposal currently on the table, as you said yesterday to Josh, it will open a backdoor into the corpus. And the fact that the Permanent Fund Corporation Board and LeBon and others are just blowing right past that, I I I think is an indicator that that they're much more interested in protecting the spend and much more interesting, interested in protecting their billion-dollar fees they're paying to their to their friends than uh than actually managing the fund for the for the benefit of Alaskans.
SPEAKER_01:I I mean I found it interesting, and I and that chart on your Maginot line article, does it include the loss of the fees? Because again, if you think about it, even if you average it out at half a billion dollars a year, that means over 10 years we lost five billion dollars in management fees, right?
SPEAKER_00:I mean they only start they only started counting and they only started disclosing the management fees in 2017, I think, and they only started reducing the return by the amount of the management fees in 2021. So the large the large portion of that chart doesn't include uh the re the reduction uh due to management fees. So the so that would mean the SP return is even higher than in in relative scale, even higher than uh than what's showing.
SPEAKER_01:We need a governor that understands this component of it and makes those appropriate changes. But uh, I mean, good luck on that. I mean, that's the thing. I mean, we've been losing half a billion to a billion dollars a year every year for who knows how long, because they haven't been reporting it. But I mean, I imagine this is a good at least a good 10 years, right, Brad, that this this this management function's probably been in there um of this situation.
SPEAKER_00:Well, it's I mean, so the ETF's been available since 1995, I think, is when the SP is when uh uh State Street started their their ETF. Um, and so you can you can tell when you're actively management, actively managing while an ETF would produce better returns, then you're really hurting yourself. And so and so they've been actively management managing that entire time. I don't know if it's been a billion dollars, I don't know if it's been a half billion dollars since they have it disclosed. We don't know what the what the number is, but it's been something. I mean, they've been actively management, managing it, and so they've had to pay fees. Um, and so yeah, it's been it's been costing Alaskans both in terms of inferior returns and in terms of of the fees they've paid out to others. And and the and for the permanent fund corporation board to write this you know rotator cuff injury, uh op-ed in the face of those facts, just you know, shows how insensitive they are, uncaring, unconcerned they are about uh about the direction they've taken.
SPEAKER_01:Somebody told me the other day, oh Brad is is being so hard on uh you know, he's being he's being so unfair. They've actually generated a pretty good return over the you know, over the years. So that's not as bad as you and I'm like, but you you say that, but where are the numbers? Look at the numbers. You you see that hockey chart where I mean the difference is a spread of 40 billion dollars, you know, on the uh on uh on the uh uh on the the Buffett one. And I mean, just where's your numbers if they're doing such a great job?
SPEAKER_00:So some people say, oh, they haven't lost money, they've earned a positive return. So they're doing great. I mean, they've they've earned a positive return. And so, you know, it may not be the best return, but they're earning a positive return. Well, when you I mean, it's it's opportunity cost, right? I mean, when you have the opportunity to earn this, earn 10, and you're only earning two, you're losing. That's an opportunity cost of eight. And and they're incurring the opportunity cost. Yes, they still may be positive, but that doesn't mean they're doing they're doing good because they're not doing as good as they could be doing. And that should be the measure. How good can you do uh in terms of in terms of your return? How good can you do in terms of your management? How low cost can you achieve in terms of your management? And you know, nobody they they don't they don't talk about that because they sure as heck don't want to talk about it.
SPEAKER_01:Uh Rob says we put the prudent investor rule in the statute in 2005. They may have had those fees since then. So 20 years. I mean, you know, 20 years of fees at uh half a billion dollars a year. That's at least a$10 billion loss in just in the opportunities, let alone in what the actual returns would have been. Um, I mean, yeah, this is a question, Donna actually said that's a good question for governor candidates. How are they planning to manage the permanent fund?
SPEAKER_00:The answer is going to be I don't know. I'm worried about affordable housing.
SPEAKER_01:I'm worried about it. Am I in charge of that? Yeah, I'm worried about jobs and affordable housing because that's the government's job. I mean, Jesus. I I'm sorry, I I don't I just I don't mean to blaspheme, but at some point I read, I mean, I read some of these responses, and I'm like, what the frick is wrong with you people? That you're saying that the that the biggest what's the biggest problem that's facing us in five years? Well, you know, housing costs are gonna be uh, you know, and energy costs. And and you know what that all stems from? A crappy private economy that you guys don't give two craps about. That's what it all stems from.
SPEAKER_00:Yeah, it also stems from just looking at your polling and and saying, you know, what are people saying? Not not truly understanding the government and what understands our revenue, what what drives our revenue picture and what could make our revenue picture better. It's just what the polls say. And the polls say, spend more on me, spend more on this, spend more on that. And so I'm gonna talk about those because because that's what the polls say, as opposed to, hey, I really understand this government, and this is where you know we need to be going. So it's it's also an indication of that, to me, at least.
SPEAKER_01:Yeah, I mean, they're all going after that same chunk of the electorate, right? I mean, the 15, 15, 18, whatever percent of the electorate that's gonna be, you know, on, and they're all hiding their blight under a bushel, their, you know, under a bushel until, oh, we can't really say what we think until we get to the primary. Jesus, people. Just just just say it like it is and talk. I mean, if you're looking for the super voters, the people who listen to a show like this and who are actually paying attention, then you you would say the number one problem is our budget because it touches everything else. You know, if I was the last guy in line when all those people spoke, I'd say, you know, all these things are great and they're all important, but the number one problem is the budget because it touches on everything that everybody's just talked about. And we need a fiscal plan. Yeah. End of story. Elect me, right?
SPEAKER_00:I mean, that's but or don't elect me, but at least listen to me.
SPEAKER_01:God. I mean, and and again, this permanent fund thing is uh is driving me to the edge of oblivion because the fact that we we have all these people again patting themselves on the back, telling you how great a job they're doing with a 4.58, 5.3, 6.7% return when the SP is doing, you know, twice that is frustrating.
SPEAKER_00:We've got about a minute here, Brad. Part of the problem, Michael, is the PFC doesn't have any competition. So there's nobody, there's no other investment arm coming in and saying, hey, I could get you a better return than the PFC because the PFC has a statutory monopoly on the management of the permanent fund. So they don't have they don't have they don't have any competition, they don't have to worry about alternatives because they've got a job, you know, for as long as they can last, doing the same thing they've always done. We we need to have people out there talking about alternatives.
SPEAKER_01:And we need a governor that has the strength of will to take this on. And I I so far haven't really seen anybody who's really brought this up at all. Berta Dett brought it up one time on the program after I talked to her about it, but that's about it. Nobody else is even really talking about it, which is kill me now. All right, uh, Brad. Thank you so much for coming on board, my friend. We'll talk about it. Thanks for having me. Talk to you next week, my friend. Thanks for coming on board.
SPEAKER_00:Well, that's a wrap for another week's edition of the weekly top three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, SoundCloud, Spotify, and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keithly, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week for another edition of the weekly top three.
