The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (2.16.2026)
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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 February 16, 2026.
This week, our top 3 issues are these: 1) we discuss what the House Finance Committee is up to with its recent actions on the PFD (2:16), 2) we explain how recent data from the Permanent Fund Corporation itself demonstrates why the goal of the proposed one-account Permanent Fund Constitutional amendment is to open a back door into the Permanent Fund corpus (16:22), and 3) we discuss our comparison of the impact of PFD cuts and the Governor's proposed sales taxes by legislative district and how it shows that, in virtually all of them, using a sales tax leaves more money in the pockets of the median Alaska household (36:35).
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.
Welcome & This Week’s Top Three
SPEAKER_02This 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 February 16th, 2026. The Weekly Top Three is a regular segment on the Michael Duke Show. The show broadcasts on both Facebook Live and YouTube Live, as well as via streaming audio from the show's website weekdays from 6 to 8 a.m. I join Michael weekly in the first hour of Tuesday show from 6.10 to 7 a.m. for a discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, YouTube, SoundCloud, Spotify, and Substack pages, also on the Alaskans for Sustainable Budgets website, as well as the projects page on national blog site, Medium.com. You can find past episodes of the weekly top three also at the same locations. Keep in mind that in addition to these podcasts, during the week, you can also follow and participate in the discussion with us of these and other issues affecting Alaska's fiscal and economic condition by following us on the Alaskans for Sustainable Budgets Facebook page and through our posts on Twitter. This week, our top three issues are these. First, we discuss what the House Finance Committee is up to with its recent actions on the PFD. Second, we explain how recent data from the Permanent Fund Corporation itself demonstrates why the goal of the proposed one account permanent fund constitutional amendment is to open a back door into the permanent fund corpus. And third, we discuss our comparison of the impact of PFD cuts and sales taxes by legislative district and how it shows that in virtually all of them, using sales taxes leaves more money in the pockets of the immediate Alaska household than PFD cuts. Now, let's join Michael.
Why House Finance Zeroed The PFD
SPEAKER_01There's a lot of things that have been going on this uh this last few days, uh, including the whole thing on the on the PFD uh and new information on how the permanent fund is performing and everything else. So let's just uh let's just let's just get started. Uh let's talk uh here, number one, about what's really happening with a permanent fund dividend, uh, because the legislature decided in their infinite wisdom, the finance committee in the house, to just zero it out. And uh they've decided uh that just makes it easier. Although I had to laugh at um I had to laugh at uh Andy Josephson, uh his comment in this whole thing. Yeah, he's like, don't worry, I'm sure we'll have a PFD. But what was interesting to me was his quote that says, What constrains us in what they want to spend on, what constrains us is public perception and desire for a dividend. I mean, he admits the quiet part out loud. That's what's that's what held back their spending, is that people expect and want a dividend, and that just constrains them. Anyway, I'll let you go here.
SPEAKER_02Poor then. Um and Andy can't win. Uh last year, I mean, this whole thing is a reaction to what happened last year. Last year, uh he put the full dividend uh into the first draft of the House Finance Committee, uh the House Finance Committee draft of the budget, put the full PFD in as the as the governor had proposed. And that caused them all sorts of problems, particularly because Neil Foster, who's a co-chair of House Finance, has committed in repeated campaigns up in his district not to vote against a full PFD. When he has a chance to vote for a full PFD, he says he will do it. Now, there's a lot of a lot of caveats that he's worked in over the years, but that's that's sort of a standard that's come to be accepted up, expected of him in his district. So last year, Andy put the the full PFD in the budget, and fully expecting that they would that they would amend it at some point and and and return it down to lower levels, um, and that that would be easy. The problem was, the problem is, the problem was for him last year, was that the the house finance committee is divided so tightly that he couldn't afford to lose Neil's vote. Neil wouldn't vote for an amendment that would reduce the PFD down below the down below the the full PFD. So they ultimately had to deal with that. They ultimately passed out of, if I recall correctly, they ultimately passed out of house finance, a full PFD in the budget, and then had to vote it down on the floor, had to had to reduce it on the floor when they didn't need uh Neil's vote. Um, it is it is so Andy, in response to that uh box that he put himself in last year, decided to go the entire different another way this year and not put the PFD in at all. That way, what Neil's voting on is Neil's voting to increase the PFD from what's in the House budget any at any point. Makes him a hero.
SPEAKER_01Makes him a hero. Now I voted for something.
Creating “Surplus” To Justify New Spending
SPEAKER_02At any given point in time. But but there's something else that's going on here. I mean, so Andy's claim is what he did was he used the adjusted base budget um as the as as once he's got what he's got in house finance. But the adjusted base budget has a thousand dollar PFD. It has whatever last year's PFD was in it, uh, when you look at what the typical adjusted base budget is. So for the he made an exception, he he used the adjusted base budget, with the exception that he zeroed out the PFD when he put it in. And I think what's going on is that they are they want to spend more. I mean, if you look around at the various hearings and the various statements that are being made, uh the house five, the House uh leadership has made a commitment to doing a defined benefits uh uh uh bill this year, and they said they think they can get it through the Senate and they're gonna push hard for it. So they need to create space for that. They there a number of House of House majority members are saying they need to increase school spending even more, both on the operational side as well as on the capital side, because they have now all these stories of schools falling apart, um, and they need to increase capital spending for the schools, and so they need to create space for that. And you sort of start looking around, and there's and there's various additional spending categories that they want to do. So what they're I think what they're doing is they're layering is they're is they're starting out with a zero PFD so they can layer in all this additional spending. And then, and then at the end, after they've layered in all the additional spending, without having to say they're cutting the PFD, because they they've set the PFD at zero, without having to say they're cutting the PFD, they've layered in all this additional spending. And and so at the end, they will have some PFD, won't be much, but they'll have some PFD, but they've they've created the space to layer in all the additional spending while they're while they're going forward. Some members are putting a lot of stress on the on the on the way that the house finance budget is constructed where it says there's a surplus. The house finance budget actually says there's a surplus, and the surplus is the amount that was in the adjusted base for the PFD that's no longer there because they took it out. And so when you look at the budget, it's actually showing a surplus. And so house finance members are saying, oh, there's a surplus, or house house majority members are saying, oh, there's a surplus. Look at the budget. There's a surplus. And so, since there's a surplus, we need to be spending it on this, and we need to be spending it on that. And and I think there's a chance it's gonna come back to haunt them because they're creating all these expectations and allowing their members to create all these expectations that they're going to have additional spending in these in these various categories. Um, and and they're they're gonna try to fit it in house finance in the house finance budget because there's a surplus. And then at the end, when they have to deal with the PFD, they're gonna put themselves at risk of running out of room for dealing with dealing with the PFD. So I Andy's Andy's gone from one extreme last year that put him in a box to another extreme this year that is that threatens to put him in a box. Um, but it's it's interesting to, I mean, as a as a as a watcher of the process, it's interesting to see how you know there there is a standard that you could just use, which would be last year's adjusted base, and it would be defensible because that's you know, if you're gonna use an adjusted base budget as your starting point, that's that would have the thousand dollar PFD, and you put it in there.
SPEAKER_00Yeah.
SPEAKER_02And and and so it's just really it's um it's a um interesting uh uh situation that the House is putting itself in. But I but I think they're really I think they're really trying to create room to stack additional spending on without saying they're cutting the PFD to do it. Right. They're just gonna say, look, you know, we had to put on this additional spending in it's needed for the state, and this is the amount left over at the end of all that.
SPEAKER_01Well, and I and I think it I think people are seeing that, including um Will Stapp, who's no fan of the PFD. He said he's concerned that the majority members will use that budget surplus as the basis for adding more spending on state services to the budget. He said, quote, when I hear the co-chair of finance talking about all this that he's going to spend money on and he deposits the entirety of the PFD into the general fund, that makes me think they're not taking this deficit very seriously at the moment. I'm not super optimistic at the moment that they're going to have downward pressure on the butt on the budget. No, of course not. I mean, that's the whole point. They the party has to continue, Brad. The part the spending party has to continue no matter what. That's that's the whole point. There is no deficit, there is no crisis, the spending must continue until the world implodes.
SPEAKER_02Yeah, it's uh I mean I I think Staff's got that staff's got that right. Um they they are trying to create the impression that they've got room for needed additional spending, uh, like the Defined Benefits Program, and like uh and and like the increased education spending they want to do. They've got room for this needed additional spending without having to go to taxes. It's not the Democrats that's pushing you into taxes, they would say. We have we have additional room uh in the budget to for this for this needed spending. Um and so you they're trying to create this impression. But I, you know, somebody needs to exercise a lot of restraint on what they finally try to layer in the House finance budget that they're gonna find at the end of the day they've put themselves in a world of hurt by creating all these expectations for additional spending and finding out, you know, in in March when when they do the spring revenue forecast, oops, oil prices have slipped even further, revenues have slipped even further, and we just we just don't have room for any of it. Right.
SPEAKER_01Well, and and of course, on the revenue side, they've completely poo-pooed and declined to engage with the governor's bill at all. And in fact, instead, they've got a new combination education and flat tax idea for all for education that they're gonna put in. They've taken all the stuff from last year's discussion on oil taxation, and they're gonna take that. So no broad-based revenue. It's gonna be everybody's gonna have to pay a chunk of money every year for education, and the oil companies are gonna get some of their stuff in there, which is not I'm not opposed to per se, but it still doesn't address the long-term revenue issues that we have uh going on.
SPEAKER_02Right. Senate resources yesterday, Kathy Geisel uh put forward some amendments to the amendments to the governor's bill that um uh would add uh substitute in a bunch of revenue items, particularly on the oil side, uh, and added uh a really bizarre, what she calls an education head tax, but which is is the tax, the level of the tax adjusts upward depending upon your income status. I it's a it's a mess. Um, it doesn't raise much revenue, and and it's a mess to try to think how you're gonna administer that. But yeah, they're they're they've they've got some proposals coming on the on the revenue side, but not nearly the level of proposals needed to uh balance the the deficit that this that the state's facing. They're not taking it seriously.
Revenue Plans, Head Tax, And Short-Termism
SPEAKER_01No, it's not, and again, anything to keep the party going. When you look at this, what do you see in this? Because I mean, I see people who are completely unserious about the crisis that's looming ahead of us. Because this is not just a this year crisis. This is an ongoing crisis, and they seem to have absolutely no qualms about uh just continuing the continuing the games.
SPEAKER_02Yeah, I I I think it what it strikes me is is that they're all short-term, it's all short-term plays. None of the of the I mean the governor's proposal I think was a long-term, was a long-term out, what was a long-term solution. But I think what the legislature is doing is just a bunch of short-term plays. I mean, basically what Andy's maneuver on the PFD, Andy Justice's maneuver on the PFD is, is to create space to to uh the appearance of space on a short-term basis to justify additional spending. But what that's going to do is just raise expectation spending expectations further. I mean, you once you start a program or once you kick in a program, uh, or once you kick in additional spending, you create constituencies around that additional spending that that then you know dig in their heels if you try to if you try to cut it later on. And and I think what he's doing is he's trying to create space for to layer on this additional spending that they want to do this year by saying, oh, we got a surplus, um, by eliminating the PFD and saying, oh, we got a surplus. But it's not it's not a long-term solution. It it's creating it's adding to your long-term problem by layering in additional spending and additional constituencies built about that or built around that additional spending. I just I don't see I don't see anybody serious other than the governor's proposal. I don't think anybody's here, I see anybody serious trying to get to a long-term solution. And they'll and you know, and they said in response to the governor's proposal, the house leadership initially said, oh, we'll get to it next year. No, they won't. It'll be another short-term fix next year. Somebody, at some point, and the and the and the in the the the fiscal policy working group in in 2021 did that. At some point, somebody's got to sit down and say, look, we need to create a long-term plan here. Fiscal policy working group did that, and and you know, the leadership on both the Senate and the House side didn't give them the time of day with respect to that plan. So it's just it's just one they're just they're scrambling. I mean, Andy's proposal to eliminate the PFD and create this so-called space for additional spending this year is just another, you know, short-term scramble to try to get through another year, get to another election, you know, get another, you know, another two years or another four years or whatever anybody's running for in their pocket. Uh, and then and then we'll get to it down the road.
SPEAKER_01Yeah. No, I mean, Rob says it right here, we're still concentrating on the one-year budget cycle and the two-year election cycle, not the long-term economic cycle. And that's exactly it. I mean, they're they're looking how we can get this through to next year and kick the can down the road just a little further. But again, as we've said, there's not a lot of road left. Um, if they create all this space for this additional$800 million, um, and then they spend half of it or more uh on an ongoing basis, because you know this is not one-time spending exactly, it's all permanent spending. That's the that's the that's the problem. The weekly top three continues. And uh we're going to uh take a peek now inside the permanent fund corporation with number two of the weekly top three. Uh, Brad, what's happening with the uh with the permanent fund? It's showing why they are trying to create this back door, right? I mean, it gives us some some great insight into what's happening here.
The 5% Draw And Backdoor To Corpus
SPEAKER_02Yeah, so we've talked a lot on the show about uh about the proposal to consolidate the two account, the current constitutionally created two account permanent fund system that has the corpus in one account and the earnings reserve in the second account, to consolidate those two accounts together. And uh the proposal made by uh the Permanent Fund Corporation Board and others to bring those two accounts together. The concern we and others have raised um is that what that creates is an opportunity for a backdoor into the corpus. The the proposed constitutional amendment would say that the legislature could draw 5% per year from this combined account uh uh in perpetuity, um, and and regardless of what the permanent fund corporation is earning. So if the permanent fund corporation is earning seven and a half percent real uh after after inflation, if the permanent fund corporation is earning seven and a half percent, that's all fine and dandy. Because you're drawing out five percent, the permanent fund corporation is putting in seven and a half percent. So the permanent fund, the permanent fund uh uh corpus is actually growing by two and a half percent in that situation. But if you're drawing out five percent and the permanent fund corporation is only earning four percent, then you got a problem because you're taking out more than uh than the permanent fund corporation is putting back in terms of real earnings. And the result of that is adjusted for inflation, the permanent fund is declining over time. We've said that basically what that does, the consolidation of the two accounts with the constitutional 5% draw, what that does is create a backdoor into the corpus by allowing the permanent fund, by allowing the withdrawal of more money than could be withdrawn under the old two account system because of the limitations of the of the earnings reserve. The earnings reserve has what the earnings are. If you don't earn enough, then you're automatically stopped from drawing any more because the earnings reserve doesn't have any additional money. It's the ultimate protection of the corpus. But the consolidation of the two accounts would um would allow the the legislature essentially to start drawing from the corpus in situations where the permit fund corporation isn't earning 5% return. Into that mix. This past week, the permanent fund corporation made a presentation, made its annual presentation to the legislature about what's going on with the with the permanent fund uh corporation and the permit fund. And there was one slide that just really just caught my eye. This slide is in the midst, is in the middle of the Permanent Fund Corporation's presentation. And it is it is uh talking about the various asset categories into which they've made uh investments public equity, fixed income, private equity, and so forth. Um, those on the left hand side, those are the categories, those are the buckets into which the permanent fund uh is um is investing. And on the right hand side is Calan Associates. This is the the financial uh uh advisor, uh, one of the financial advisors the permanent fund corporation uses to project forward how its funds, how the fund's going to do, is Calend Associates forecasted 10-year return on all of these buckets um that the permanent fund is going to invest in. And you go down to the bottom, so they have they have the projected return by category, by private equity, global opportunities, tactical opportunities, and so forth. You go down to the bottom, they have the projected, the portfolio, the all the categories together, projected nominal return at 7.3%, and then Callan's forecast of projected inflation, because you're trying to get to the real return, the after inflation return uh of the that the permanent fund's gonna be earning, and it projects a projected a pro portfolio projected real return after inflation return of 4.8. So if the if the if and this is over a 10-year period, so if the if the if the legislature is gonna be withdrawing 5% per year and the and the permanent fund is only going to be earning 4.8 per year, uh you can begin to see a little bit of a problem. You can begin to see uh the the fact that there aren't gonna be enough earnings being generated by the permanent fund uh to support the withdrawal. And so where's the where's the additional 0.2% uh in this scenario, in this projected scenario, where's the additional 0.2% gonna come from? Well, it's gonna have to come from the permanent fund corpus because the the legislature is gonna continue to be entitled to make this 5% withdrawal from the permit fund. The permanent fund corporation is only injecting 4.8% return into the into the permanent fund per year, and the extra 2.2% is gonna have to come out of the permit fund. This proves, I mean, it's sort of odd to see it come from the permanent fund corporation, but this proves the very point we've been trying to make that there that there are scenarios indeed. The scenario that the permanent fund corporation's own advisors are telling it to expect in the next 10 years, that there are scenarios in which the permanent fund corporation isn't going to earn a sufficient amount to generate enough earnings to fund what the uh what the the legislature is going to be taking out of the fund. Um it's a it was eye-opening to see that. Um and it just, I mean, it it proves the very scenario that we've been that we've been claiming. And some say, you know, some have responded, oh, that can't happen. Well, the permanent fund corporation is now itself is now telling you um it can happen.
SPEAKER_01Yeah. Of course, they would say, they would say, oh, but we would never draw five when there's only a 4.8. We we would never draw five. Of course, what they would say is then they would say, oh no, no, the return was 7.3. They would never talk about the real return. They would just they would focus on a true number, but not the true number in the case of what really matters. That's how they would do it, right? I mean, that's that's the spin that you would hear on this, and they would draw the full 5%. That would be my my prediction.
Real vs Nominal Returns And Inflation Proofing
SPEAKER_02Well, then they're not inflation proofing the fund. I mean, everybody talks about inflation proofing the fund. And so what the what what you're what that 4.8 is is the after inflation number, after you've inflation proofed the 2.5% is a projection of what you need out of the earnings, out of that earnings stream, that 7.3% earnings stream, the 2.5 is what you need to inflation proof the fund, which I think everybody says is is important. If you if you draw five and you said, oh, we can we can do that because we got a 7.3 return, what you're shorting in that situation then is inflation proofing. You're not keeping the you're not keeping the corpus whole um uh against inflation. So it's just, I mean, the it the 4.8 number the four the 4.8 number is the number that corresponds to the 5% that the that the legislature says they want to draw, that they want to set in stone in the constitution that they can draw out of the permanent fund. And what this is saying is the is that the is the permanent fund corporation projects they're only going to put 4.6 4.8% in. I've heard one defense of this that's that's that's interesting. The defense is this. The defense is look, the 5% again is against the average balance of the previous five years. And so pulling 5% against the balance of the previous five years is is is is less than in any in the year in which you're pulling it, it's less than 5%. You're not pulling 5% of the balance of the fund in that year. You're pulling 5% of the of the average balance over the preceding five years. And so that may be 4.3, it may be 4.5, it may be 4.7, but it's not five. What that assumes, though, that assumes that you have an ever increasing balance in the permanent fund. If you have, if you have a decreasing balance over the preceding five years, or a level balance over the preceding five years, then then the 5% draw is in the case of a level balance, is pulling 5% of the current balance. And in the case of a of a declining balance in the permanent fund, you're pulling uh you're pulling more than 5%. Uh by pulling the 5% average over the preceding five years in the declining situation, the average is going to be more than the than the the balance of the fund in the year in which you in which you make the draw. So that works in some scenarios, but it doesn't work in all scenarios. And here's the point. We're putting this in the constitution. I mean, it's not like we can say in any given year, oops, well, look, we had a declining balance this uh, we really can't pull out 5% because we'd be pulling 5.1 or 5.2 or 5.3, and that's more than earnings. So we really have to adjust it back to the back to the earnings. We're putting this in the constitution. And so and the constitution says the legislature can pull 5%. And every legislature, we've built up spending expectations in a way that every legislature is going to pull the 5% to meet the spending expectations they've created. So if you've got scenarios in which you're going to be pulling more than earnings, and that's exactly what this says, if you've got scenarios in which you're going to be pulling more than earnings, you're you're creating a backdoor into the corpus. And there's and there's really there's really not a good way, there's not a way of arguing against that. That's exactly what you're doing. And now the permanent fund corporation itself is telling us that yes, not only are there scenarios in which that occurs, we expect that scenario to occur uh over the next 10 years.
SPEAKER_01And of course, the one thing that we said where it this could be um palatable would be if you put a writer in there that said 5% or whatever the average return is over the last five years. And uh I floated that with a couple of people and I started to get pushback like immediately, which immediately said to me, well, that's what they're going for then. They want that 5% regardless of what's happening. There is no, there is no, but we should plan for the worst case. No, no, we're gonna take 5% and we're not gonna put that into the uh into the constitutional amendment.
SPEAKER_02Yeah, they've they've they've created a scenario in which the they've we've built spending expectations on the continuation of that 5%. And so any given year in which the the return might be 4.5%, the average return over the previous five years might be four and a half percent, and you'd have to lower that down to four and a half percent, lower the drawdown to four and a half percent. Oh my God, the world's coming to an end because we're not we don't have enough to fund all the spending expectations we've created. So, yeah, this is, I mean, Rob has said this, you have said that, yeah, you're exactly correct. This constitutional amendment is to protect the spend, it's to protect the the generating enough revenue to maintain the spending at the levels to which we are creating it uh over time. It's not this amendment isn't to protect the fund, it isn't to protect the corpus of the fund for the for future generations, it's to protect the spend for current generations. And it and it is and it in that sense, it is just a continuation. It is the latest continuation of first we're gonna drain the CBR, uh SBR, then we're gonna drain the CBR, then we're gonna come for the permanent fund dividend and start to drain that down. And oh my gosh, we're about to run out of it. So now we're gonna start draining the permanent fund itself through through creating this back door of the of the mandatory five of the of the enabled five percent draw, regardless of the earnings that the permanent fund is uh is generating.
SPEAKER_01And I'm seeing more and more people start to embrace this idea. In fact, Shelly just said in the chat room, she said Dave Bronson and Josh Church had a lot to say about this last night at their Fairbanks and North Pole events. They support combining the principle with the earnings. I think there's a lot of Republicans who are coming on board to say, oh, this is a great thing. Again, not looking at the history of what this legislature and past legislatures have done, which is always the number one rule. It's like fight club. You don't talk about it, but the number one rule is protect the spend. That's what it comes down to.
SPEAKER_02Yeah, and but the but the permanent, I mean, the thing, and I'm gonna write about this on Friday, the thing that the Permanent Fund Corporation itself has given us now is a scenario in which their expected scenario in which they're not gonna generate enough earnings in order to support the 5% draw. And you know, and if people pass, vote for and approve, approve the constitutional amendment and then vote for the constitutional amendment, it's not the end of the permanent fund corporate, it's not the end of the permanent fund in the next five years or 10 years, but it's certainly we we have opened the door to the beginning of the end of the permanent fund. And just like the SBR, CBR, and the permanent fund dividend, we will drain down the permanent fund. The future generations will find, will look back and say, what the hell were those guys doing?
SPEAKER_01Well, and again, it's uh it becomes even a bigger problem because it's a it's a self-reinforcing doom loop, right? They start eating into the seed corn, which creates less revenue, which creates more pressure to keep that draw at 5%, which in turn eats more of the, you know, which again, it's that self-reinforcing doom loop that we talk about. That's exactly what's going on. And once you've strangled the golden goose, well then what's gonna happen, right? We can already see where this is going. All right, we can already see that that where and Brad is not gonna get into this today, but I had to chuckle because um in talking about Kathy Geisel's new income-based education head tax and everything else, she said it, folks. She finally said it. Remember what I said that once the PFD's gone, what are they gonna come back to us and say? They're gonna say, Oh, it's time for you Alaskans to pay your fair share, right? That's what they're gonna say. Here's her quote. She defended the approach as a way to ensure that, quote, everyone takes part in supporting the state, unquote. That's about as close to everybody pays their fair share as you can get to, right, Brad? I mean, that's this is the direction they're going.
Constitutional Risks And Spending Expectations
SPEAKER_02Yeah, so so they've drained, they've drained they they by draining the PFD, what they've done is they've protected the top 20%, non-residents, uh, and the oil companies. They've shifted what were what were payments that were benefited to everybody and particularly were important to the middle and lower income Alaska classes. They've they've shifted that to protect the top 20%. Once they run out of that, then oh now it's time for every for everybody to pay. Except I, you know, I looked at I I've done the analysis, a preliminary analysis on Giesel's head tax. It looks like it's progressive. It looks like it's like it charges the um the those uh those with higher incomes more. But when you do it as a percent of income, which is how you do distributional analysis, it takes more, that takes more from middle and lower income Alaska families than uh than than than from upper income families. So even even their tax, now that they've drained the PFD, now that they've shifted all this protection to to the upper incomes, now that they've done that, even the approaches where everybody pays something is going to put the bulk of the burden on middle and lower income Alaska families. It's it's amazing. It it is this is this is truly a plutocratic straight state. We become a plutocratic state where the where the richer in charge of the legislature and the richer they're protecting themselves by adopting revenue measures that continue to protect themselves all the way in. And and and the and the the two account system is another example of that by giving them a backdoor into the permanent fund corpus and starting to drain that to continue to protect upper incomes, the non-residents and oil companies from from contributing because they're gonna be taking it out of the corpus. They're gonna be taking it out of the pockets of future Alaskans.
SPEAKER_01Protecting the fund. That's what this combined, that's what this combining thing is all about. Protecting the fund because they're afraid of overdrawing the ERA, et cetera, et cetera. Kevin makes a point.$9.8 billion in realized gains in the ERA right now. So almost$10 billion is sitting there, to which they deposit the earnings every year. So if they're still depositing that 4.8% every year, we're still gonna be, they're still gonna be depositing three or four billion dollars a year into there, of which we can draw out. Why is it such a crisis now?
SPEAKER_02Because they can see the writing on the wall. They can they can see that that the way we're going, uh, that we've run into these deficits, we're gonna continue to run into these deficits. Um, and they need a guaranteed revenue stream to you know continue to continue the spend without having to pay for it themselves. And so it's the yeah, we got nine some odd billion in there now, but you know, uh if if you're not replenishing that at the rate at which you're withdrawing it, and remember we're we're withdrawing from that ERA at 5% now, if you're not replenishing it at the way rate at which you're withdrawing it, you're gonna you're gonna drain it at some point. And so they can see that day coming, and they're trying to set up a uh a mechanism to continue to continue the spend, continue to draw that 5%, regardless of what the permanent fund corporation is doing.
SPEAKER_01The other thing Except for they end up with exactly the same problem, only now it's 20 years down the road instead of next year. Sorry, go ahead.
SPEAKER_02The other thing is it takes the incentive off the permanent fund corporation, which is a real problem. The permanent fund corporation sort of has the incentive now to earn 5%. If the legislature, because you got to keep replenishing the earnings reserve, if the legislature can take 5% without regard to what actual earnings are, permanent fund corporation really doesn't care that much about what it's earning because the legislature is going to be happy, they're gonna continue to take 5% no matter what. And the permanent fund corporation can just sort of, as they've as they've been doing for the last several years, they can just sort of glide along, you know, enjoy the their status and the titles they've given themselves, but not actually not actually be earning enough to replenish it. But it doesn't matter because the legislature is going to draw 5% anyway. What the current system does is keep an incentive on the permanent fund corporation to continue to generate at least 5% real earnings. And I think that's that incentive is as important as anything else.
Who Pays: After The PFD, Then “Everyone”
SPEAKER_01I would be interested to see if more candidates would pick up on this and start talking about this, and not in the way that uh Shelly was just talking about, where Bronson and company is is all on board with the combining of the funds. Uh and this discussion on permanent fund earnings. I mean, why aren't we talking more 4.8% return? Brian said, that's like Christmas club returns. I mean, that's exactly right. What happened to the Harvard fund? What happened to the SP, the Vanguard? Why aren't we looking at those things? Instead, I wish somebody would pick up that baton, but so far I've seen crickets from all the uh all the all the uh candidates on this. We're down to the uh we're down to number three of the weekly top three, and now Brad wants to talk about uh this comparison between PFD cuts and sales tax by legislative districts. Now, the governor's sales tax, we've all been told, DOA, dead, forget about it. They're not even going to talk about, they don't have the time. They don't have the they just have no interest in it. They've all got alternative plans to keep the spend going. Uh, but Brad, you've done some analysis on this, and uh let's let's let's get into this.
Sales Tax vs PFD Cuts By District
SPEAKER_02Well, one of the things that fascinated me about that House Finance Committee hearing a couple of the weeks before last, when they took up the governor's proposed sales tax, one of the things that fascinated me was one of the lines of attack was well, have you looked at what the impact is on the Bush, for example, of the governor's sales tax? Because we've already got sales taxes out here. Have you already have you looked at what the impact of this sales tax the governor's proposed uh would have would have on us? And two of the of the representatives who particularly hit on that theme were Neil Foster and Nellie Jimmy, the the two two of the four Bush uh caucus uh representatives, House members of the Bush Caucus uh representatives. And they kept hitting them on how hard that sales tax is going to be and how it was aggressive and how it was gonna hurt you know their constituents. And kept asking Department of Revenue whether they'd looked at it. When Department of Revenue said no, they hadn't done it in detail, then they just said, well, this isn't worth this isn't worth our time. So, you know, I've got a week, I've got numbers. Um, and so I dug in and took a look at at what the at what the impact, the, the, the impact uh of uh sales taxes versus PFD cuts were. And with the American, with the with the Census Bureau data that's out there, you can actually look at it by legislative district. The Census Bureau breaks down median family income by legislative district throughout the throughout the U.S. But but it's available for Alaska. So you can you can find, and you can actually find it by Quintile uh as well, which is a fascinating look sometimes. But but you can look at the impact on the median family house median household income by legislative district. So you take that median household income and you look at what the impact is of PFD cuts uh on that median household income, and you look at what the impact of the sale proposed sales tax would be uh on that median uh household income. And I did that. I mean, it took me a lot of time, but I but I did that and and build a model that could that could that could replicate that and compared the two. And what what happens if if you yeah, there you go, there's all the numbers. And this this is in the Friday column in the Alaska Landminder on my Substack page for people who want to actually see this and try to try to understand it. And compared the two. And and you can see the the you can see the percentage impact um of the PFD cut. Uh I've got it uh in in one of the columns, and then the percentage or the dollar impact and the dollar impact of the uh of the uh of the sales tax per median income household. And the and the and here's here's the here's the fascinating thing. In 39 of the 40 house districts, and in all 20 of the of the state senate districts, the sales tax tax takes less out of a out of the median income family in that district, takes less out of the median income family in that district uh than the PFD, then PFD cuts do. Or put another way, PFD cuts take more out of the median family in household income than uh than is than the sales tax would. There is money left over, money in the pockets of the median income family in four in thirty in well, 59 of the of the 60 legislative districts, money left over in the pockets if you restore PFD cuts and take that and take money out instead uh by a sales tax. The exception is is the richest district in the state in terms of median family income, household income, which is uh Kai uh Kai Holland's uh district in South Anchorage. In that district, the only district in the state where this happens, in that district, a sales tax would take more out of the pockets of the median household income, median household in that in that district than uh than than than the PFD cuts. That district has a median household income median, which means half of the of the of the households in that district have uh earn more and half of the district, half of the households in that district earn less. That district has a median household income of$171,000. So in that district, sales taxes would take more out of that, out of the median household in that district than uh PFD cuts would. In the other 59 legislative districts, the other 39 house districts in the 20 Senate districts, uh uh PFD cuts take more out of the out of the uh out of the household income. The two districts where it takes the most are Neil Foster and Nelly Jimmy's. The two who were most vocal, among the most vocal in attacking the Dunley V proposal are the two who would benefit the two districts who would benefit most um uh by substituting uh by by by substituting a sales tax for uh PFD cuts. They would benefit the median household income, median household in their districts would benefit most uh by by using the sales tax in substitution for uh for PFD cuts. And and it's by a fairly wide margin. I mean, the in in Neil Foster's district, the uh family household would end up with five percent more in its pocket. Uh if they if the PFD was restored and the sales tax was used instead to raise revenue. In Nellie's uh uh district, 3.8% where they would end up median, this is the middle family, median would end up with 3.8% more in their pocket. The the lower those in the lower half of the income bracket would end up with much more uh in their pockets than uh than even those numbers because these numbers all relate to the median household income. So what's going on? I mean, why if if if they benefit from from that from from substituting one for the other, why are they opposing why are they opposing the the Dunley bill? Why are they so vocal in opposing the Dunlevy bill? Well, it would make the spend harder. It's easy to go grab the P, it's easy for the legislature to go grab the PFD, grab a portion of the PFD. They don't have to go to the people, they don't have to explain what they're doing really. They just say, oh, it that's spend PFDs are spending and we're just reducing that spending. We're just, you know, we're we're just shifting it over to another use. It's easy for them to do, it's all within their control. A sales tax, they would have to affirmatively justify why they're why they're instituting a sales tax and why the spending that the sales tax would support is designed. Deserving of that additional of taking revenue out of the pockets of families. They don't have to do that. They've demonstrated over the past decade, they don't have to do that when they do PFD cuts because nobody asked that question. They've figured out a way to just sort of slither by and not answer that question. So even though, even though what that analysis shows is that even though a sales tax would take less out of the pockets of 59 of the 60 legislative of the median household in 59 of the 60 districts, even though a sales tax would take less out of their pockets, legislators are opposing it because it would make their ability to access the money more difficult, would make their ability to justify what they're doing more difficult. And so they are prioritizing the spend, prioritizing easy access to money that they can spend over an approach that actually makes the lives of their constituents better, makes the economic situation uh of their constituents uh better. It's a fascinating analysis. It was fascinating doing the numbers uh and and figuring out uh what the comparisons were. Uh uh.
SPEAKER_01Looks like we may have lost Brad for a minute here. Uh we're coming up at the end of the hour. Uh Brad Keithly. I'm sorry, we lost you there for a second, Brad. But uh final thoughts here. We got about a minute and a half.
SPEAKER_02Well, I'm just it it's a fascinating analysis in the sense that it shows that throughout the state, with one exception, Kai Holland's district, throughout the state, sales taxes are better for Alaska families. Leave more money in the pockets of Alaska families than uh than uh uh PFD cuts do. The governor Dunley's right in the proposal to make to make that substitution, that he's benefiting Alaska families by making that substitution. It's fascinating to see those numbers and then hear the legislators complain about it because, oh, it just makes their life difficult.
SPEAKER_01Yeah. Well, and they just don't have time. You know, they just don't have time to do it. Willie says, and I I think this is a little bit tongue-in-cheek, he says, Brad, your chart is full of holes, starting with the fact that nobody's getting a PFD. So the PFD is gone and you get a sales tax on top of the new tax. Sorry, you're all wet about rural Alaska in sales. Um, I mean, that's you know, again, this is all assuming that those two things were equitable and and and working, but he's not wrong. I mean, I think what we're gonna have is no PFD and some form of tax at this point, right?
SPEAKER_02Well, what he's skipping over is the fact that Governor's done Governor Dunley's proposal tied them together uh in a in a package that you that the that the PFD is restored and put in the Constitution so it can't be played with again. The PFD is is restored in exchange for getting a sales tax. If if there's not if that's not if there's not a tie, if you're just creating a sales tax on top of PFD cuts, then yeah, that's that's problematic. But but this is this was analyzing Governor Dunley's proposal, which which tied those two together and made one the substitution for uh for the other. And it shows that Dunley was correct, that that substitution works. I mean, not even Nelly or or Neil made made the attack on the fact that it was incremental, that was layering on top, because that's not what the governor's proposal is. They were attacking it, they were attacking the governor's proposal, saying that somehow that it was worse.
SPEAKER_01Bruce Tancherman in the chat room. He says, interesting either-or analysis. Unfortunately, this is an and proposition in the spender's mind. And I mean, I I would I would say that that's the legislature's position. This is an and position for them. We're gonna go ahead and take the PFD and give you a tax of some kind, as shown by their actions thus far this last 10 days.
Why Lawmakers Resist A Sales Tax Swap
SPEAKER_02Again, this was Governor Dunleevy's proposal to make it to make it an analysis of Governor Dunley's proposal to make it a substitution. I mean, what you're essentially what what what these attacks essentially are saying is oh, you forget about that part of Dunleavy's proposal where he ties them together and just view it as incremental. Well, that's a different, that's a different proposal. That's not what the governor proposed. The governor proposed one as a substitution for another. And analyzing that proposal, this shows that the sales tax is better than PFT cuts.
SPEAKER_01When you look at this and you look at the governor's race, uh, you look at what's coming, you look at the you look at the uh um uh at the uh you know, kind of the the roster of what's happening, you look at the numbers, the 10-year plan. What what happens, Brad? What happens in the next five years uh in this state based on everything you're seeing at this exact moment? What do you what do you see going on here?
SPEAKER_02Here, here's I I guess Michael, here's how I could here's how I pump myself up in the morning, and here's how I get depressed in the morning. The answers are there. I mean, Dunley, seven years in in the last year of his of his led uh of his of his term, way too late in the cycle. But Dunlevy puts out a good long-term solution. A good, a good response to the situation in which we find ourselves in. That if we adopted it as he's proposed it, tied together, if we adopt it, we put more money in the pockets of middle and lower income Alaska families, indeed, a lot of upper income Alaska families. We strengthen the Alaska economy, we strengthen the amount of money in the state because we start having uh non-resident money coming into the state that we don't have now. We we have a we have a long, solid long-term solution. So in the mornings, you know, when you start out and I go, Well, you know, we got there's solutions. We don't have to be in this situation. There's solutions. And then as the day wears on, you listen to stuff like you know, Willie and Bruce just came out with, oh, well, that wouldn't work. You know, it's all incremental. Um, and then you go, well, the practical, then you just get depressed thinking about, well, the practical situation is they'll never adopt the right solutions. They'll never adopt the right long-term-term solutions. We have solutions to this issue. We have things that would work, that would put more money in the pockets of Alaska families, that would make Alaska that would diversify Alaska's revenue source and have non-residents become a significant share of the revenue source, just like they are in the other 49 states. We have solutions that are out there that would work and make the Alaska economy stronger. But then, but but we just have a bunch of people who are naysayers and say, oh, that would never work, and you know, the legislature would never do that, and and and just, you know, and just attack it um uh from all sides. So, you know, you finally you finally just sort of give up. You finally say, Well, okay, it's not gonna work because everybody says it's not gonna work. There are solutions out there, there are long-term solutions out there that improve the overall Alaska economy significantly. It's just it's just getting the willpower well to bring together to adopt them.
SPEAKER_01It's the lack of political will. That's the whole point here. The whole point is the lack of political will, the willingness to be the adult in the room, and quite honestly, the willingness to give up the gravy train of the spending. That's what that's what the problem is. And with the with the group and the crew we have in there right now, there's just not enough, there's not enough people who are calling stop. There's not enough people who are pulling back on the reins. I mean, you got a handful of them, but they're all in the minorities, and the majorities are all just full steam ahead. Damn the torpedoes. Here's where we go.
SPEAKER_02Yeah, we don't have people we have people who are looking after government who are prioritizing government. We don't have people who are prioritizing Alaska families, Alaska households who are prioritizing getting pockets, money in the pockets, the private Alaska families.
SPEAKER_01Right, the private economy at all. It's all about what is the government spend. Forget about what's happening in the private economy. And that's that's that's troubling to uh troubling to say the least. Um, Brad, final thoughts here.
Five-Year Outlook And Political Will
SPEAKER_02Well, Michael, I uh we've got solutions. Uh we've got solutions that we and that we need to keep bringing forth and and need to keep talking about. Got a lot of naysayers out there, but we've got solutions out there. Um and it's just a question of developing enough political will to adopt those solutions. Enough political will that people get concerned about Alaska families as opposed to about how the government is doing.
SPEAKER_01All right, Brad. Thank you so much, my friend. As always, great to talk with you. We'll catch you uh next week. Michael, thanks for having me.
SPEAKER_02Well, 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 for another edition of the weekly top three.
