The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (3.30.2026)
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 March 30, 2026.
This week, our top 3 issues are these: 1) we explain why the projected FY27 oil revenue windfall seems to be burning a hole in legislators’ pockets (2:16), 2) we explain why SB274, the Senate Finance Committee’s proposed reduction of the POMV draw percentage, is addressing the wrong problem with the Permanent Fund (19:41), and 3) we explain that while the Administration and the AKLNG project have provided many numbers, they have failed to provide those necessary to explain why the proposed volumetric property tax rate is good for Alaskans (40:08).
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 And Where To Listen
The Top Three Issues Preview
SPEAKER_01This 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 March 30th, 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's show from 6.10 to 7 a.m. for a discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, YouTube, SoundCloud, Spotify, and Substack pages, also on the Alaskans for Sustainable Budgets website, as well as the projects page on national blog site, medium.com. You can find past episodes of the weekly top three also at the same locations. Keep in mind that in addition to these podcasts during the week, you can also follow and participate in the discussion with us of these and other issues affecting Alaska's fiscal and economic condition by following us on the Alaskans for Sustainable Budgets Facebook page and through our posts on Twitter. This week, our top three issues are these. First, we explained why the projected FY27 oil revenue windfall seems to be burning a hole in legislators' pockets. Second, we explained why SB 274, the Senate Finance Committee's proposed reduction of the POMV draw percentage, is addressing the wrong problem with the permanent fund. And third, we explained that while the administration and the AKLNG project have provided many numbers, they have failed to provide those necessary to explain why the proposed volumetric property tax rate is good for Alaskans. And now, let's join Michael.
Oil Windfall And Budget Discipline
SPEAKER_00Well, Brad, uh the more we watch this, the more we wonder are we ever going to learn? Uh it just seems like we keep repeating the same mistakes over and over and over again. And today is no different. Let's dive into the weekly top three uh and get started. Uh, number one of the weekly top three, uh, the Senate Finance Committee gets an F in financial literacy. And I'm not sure what that F stands for, but I'm well, I'm pretty sure I know what the F stands for, but I can't say it on the air. They get an F in financial literacy. Hit me with it, Brad. What's going on?
SPEAKER_01You know, Michael, last week there was an article in the New York Times about Alaska. It didn't get widely reported in Alaska, which I found a little surprising. But the title of it was A Critical Political Season Could Decide If Alaska is a failed petrostate. And the bulk of the article was really diving into the governor's race and what various candidates for governor are saying and what the odds are for governor. But the but the premise of the article was that Alaska has not gotten its fiscal act together. Um and in this next run, uh this next governor's run this year, uh, the question is whether it will ever get its fiscal act together. And as if on cue to prove that we can't get our act together, uh, there were a couple of things that happened during the week that uh just demonstrated that we just will never learn. And and and while financial literacy courses are not required in Alaska high schools, maybe they should be uh to become a legislator. Um the first thing that's that that struck my eye as I was pondering the New York Times article was a memo circulated by Senator Hoffman, who's the co-chair of Senate Finance in charge of the operating budget this year. And Senator Hoffman sent out instructions to the uh finance subcommittee, and you can and those interested can find the memo on uh the Alaska Landmine Twitter page of all places, but uh sent out a memo instructing the subcommittee co-chairs to use$73 a barrel instead of the$75 forecast by the Department of Revenue for FY27 and reserving at least$50 million for a supplemental budget. So the the Department of Revenue came out with the spring forecast that forecasts$75 a barrel as the likely price uh of oil, the likely average price of oil over FY27. Um, and that uh in turn generates a certain amount of revenues for the state. And and we just talked about this last week or the week before. If it were me and if it were anybody who had taken the financial literacy course, they would say, okay, we're not gonna use that. That's nice, but we're gonna use the average price over the last five years as we do for the POMB or as we do for the calculation of the PFD, or at least you, or at least the statute would tell us that's what we do for the calculation of the PFD. We're gonna use the average over the last five years, or the average over the last 10 years, which is a little bit, which is a little bit smoother uh way of approaching oil prices. Um, and any overage that we actually experience, because this is a projected price, right? Any any overage that we actually experience, we'll put into some sort of stabilization account. That's what anybody who took a high school financial literacy course would think about this. But that's not what the Senate is thinking about. Evidently, the Senate was thinking, oh,$75, oh, we'll spend it all. And and Lyman's, you know, Lyman's going to claim to be the great fiscal conservative by saying we're only going to use$73 a barrel and reserve, you know,$50 million plus or minus uh for the supplemental budget. If that wasn't enough, then during the course of the week, uh House Finance, the House Finance Committee shares published their new um uh draft budget that's being considered by House Finance. And you can find that for those interested, you can find that at the legislative finance page uh on the web, legfin.com or dot something, uh state dot a k. There you go. Uh, but legislative finance on the web. And that projects, get this. This is the operating budget before the PFD, before the capital budget. Right. The operating budget, the new house finance uh uh proposed budget is five point, let's see, five point one billion dollars. No, a total of five point six billion dollars for the operating budget, the agency budget, and statewide items alone. This is before the PFD, before the capital budget, five point six million dollars, billion dollars alone. That is just to give you some sense, that is 400, roughly 450 million dollars more, a half a billion dollars more than is in the FY26 management plan. And it's nearly$400 billion or$400 million,$396 million more than what the governor proposed in his budget, which was already up from what was in the FY26 uh management plan. So I think I think the the answer to the New York Times question is um uh can Alaska just is Alaska a failed Petro state? I think the answer is yes. I think I I think I think the answer, even before we get to the governor's race, I th I think the answer that both Senate finance in saying let's predicate the budget on$73, ooh, we saved two dollars,$73 uh uh dollars a barrel, and house finance now raising last year's budget by$500 million. What is that? Well, more than 11%, uh raising last year's budget by$500 million is the answer. I mean, we've already gotten the answer to the to the new time score.
SPEAKER_00Again, you mentioned that doesn't even include the capital budget, which has been underfunded per constitutional mandate for several years, or the PFD. Again, you know, anybody in their right mind would say, we've got a windfall. Do we cash it away or do we spend right up to the line when we're already struggling with what we've been making for the last few years? This is the thing that could bail us out for a short term. But I mean, again, the the number would have been what 67, 68 would have been the number.
SPEAKER_0167 on the 10-year average.
SPEAKER_00Yeah, on the 10-year average. So, I mean,$67. So we're eight dollars over that, could have banked all that money, could have put a little bit away for a rainy day. These guys just cannot help themselves. They just want to spend every available dollar that's there.
SPEAKER_01Could have paid back some of the CBR draw that that that we've made over the last last decade. Yeah, it's um and and I guess to put this in context, the Senate, the reason Lyman's talking about$73 is the Senate, which has control of the capital budget, is thinking about a big capital budget. If you read the the bottom part of his memo, um the bulk of the$510 million windfall, you know, the bulk of the$510 million projected FY27 windfall should be be reserved for one-time critical school construction, major maintenance, and other deferred maintenance needs, as well as as well as build building reserves. That's sort of the tail end of the of the sentence. But the five the bulk of the$520 million,$510 million windfall. So what we got is the House Finance Committee spending it all by by upping the operating budget, and the Senate saying, oh, we want to spend it all by upping the capital budget. And what happens when you combine the two of those? They don't they don't reconcile them and say, oh, we're gonna keep it at a flat number and each of you have to take a haircut. They just both add on add it on in. So we're just, I mean, we're heading toward again, the failure of high school financial literacy courses. High school financial literacy courses tell you that that when your income has a windfall, you put it away because there will be years when your income doesn't have a windfall, when your income has a shortfall. And if and even if you don't, even if you have a steady income, you'll still be able to, you'll have that as a as a nest egg toward toward retirement. That's what financial, that's what high school financial literacy courses tell you. We can't, neither house, neither house of our legislature is applying that lesson uh to uh to the FY27 budget.
SPEAKER_00Brad, um you and I have talked a lot about how there's still money on the table for the oil companies, uh, you know, and we could have gotten, we should have gotten a better deal for our oil, SB21, et cetera, et cetera. And I look back at that and thought, if we did, and I'm I'm wishing we had, but uh, and if we did, and if we got this extra$400 million or$500 million, it's still on the table. This just proves one thing. It would have all been spent anyway. There wouldn't have been a full PFD because they would have found another excuse to spend it as well. We have got to enshrine the PFD, and we have got to get some kind of spending cap on this legislature because otherwise, they are just out of control. It wouldn't have mattered if we had another billion dollars in revenue from the oil companies, they would have spent every single farthing of it.
SPEAKER_01Yeah, it's uh it's it's it's certainly disappointing. I mean, I mean, all of the discussion about revenue issues, which I talk about a lot on the show, all all all of the discussion about revenue issues is predicated on having a financially literate legislature or a financially literate governor who is willing to send the budget back, which which we talked about back in what what night or 20, when was he elected? 2018, which we talked about in 2019. Just send the budget back because it's too high and make the legislature deal with it again. I mean, all of the all of the revenue discussions are predicated on having a financially literate legislature. If we don't have a financially literate legislature, then I then um then the New York Times is right to question whether we are a failed petrostate. We're just gonna spend ourselves into oblivion um uh as we go. And I and you know it's it's tough. We we the state is entitled to those additional revenues. The state should have those additional revenues. They should be, and those additional revenues, I mean, should be on the state's side of the line as opposed to the private company's side of the line. Um, but you know, if you're gonna just blow it, if you're not gonna use it toward the CBR, if you're not gonna use it to comply with the statutory mandate on the on the PFD, if you're just gonna blow it on additional, you know, spending that you know every uh all the legislatures would say, oh, it's necessary spending, or at least Lyman would say it's necessary, necessary spending. Uh, if they're just gonna blow it on that additional spending, then then then you've got to you're legitimate, it's a legitimate question how hard we should be pressing on the revenue items, because you know, you just don't have faith that the legislature is going to be financially literate in in how they how they deal with uh those additional revenues. I it it shouldn't it shouldn't be that way. I mean, the state's state's entitled to the maximum maximum benefit uh that it can receive out of its resources. And that's that's a fairly careful calculation that you can go through. And the state should be entitled, and the state should have that. But if they're just gonna blow it in a way that doesn't, you know, accrue that benefit to a la individual Alaska families or doesn't accrue that benefit to future generations if they're just gonna continually spend the windfall when it comes, yeah. Yeah.
Spending Vs Revenue And Draining Savings
SPEAKER_00No, it's uh it's frustrating to look to see that if we had had that money, the growth of government would have been even more explosive. And that is the danger. Ben Carpenter and I talked about that a lot, where we're just allowing the government to grow unchecked at this point. Ben says, blow it on operating budget, not on capital budget, that arguably uh benefits the private economy, right? I mean, I mean, if you're gonna argue about it and get down to semantics and and brass tax, he is right. I mean, at least the capital budget does, in effect, benefit part of the private economy. Now, the private part of the private economy that's you know, that's the corporate cronyism. But again, at least, I mean, again, we haven't even got into that. Now, wait, before you get in, before you answer that one, uh, Harold says, let's talk spending and draining our SBR and CBR. Well, SB21 drained the state over the last 12 years, it continues to drain our oil at giveaway rates. Here's the thing this is my comment on this, Brad, and I want your thought on this. You and I just agreed, there's money on the table, it should be picked up, it should be taken. But the spending and the draining of the SBR and the CBR is strictly a legislative problem. They're the ones that decided that instead of balancing a budget, they'd rather draw out of our savings accounts. And and again, overspend. They have overspent. And if they'd had another$500 million a year, we've already seen they would have overspent it. So we would still be drained. And the I agree we need the we need to get maximum benefit for our oil and that there's money on the table. But this is not simply a lack of revenue problem. This is a spending problem.
SPEAKER_01Well, it's a combination of both. I mean, we've we've built up we've built up our spending and we build up the state's services to a point where we except in years where we have these oil windfalls, we really can't finance it. And so we we've got a level of government and a level of government spending that we can't pay for, except in windfall years, that we can't pay for pay for. And as as Dunlevy, as as the experience of 2019 shows, we're not going backwards on those spending levels. Dunlevy couldn't even get 16 in the in the legislature, 16 out of 60 in the legislature to back him up on the level of of um of vetoes that that would have brought him back to his initially proposed level. Um, so we're not we're not going backwards on spending. So when you set aside the windfall years, there is a revenue issue. And the revenue issue has manifested itself in terms of draining the draining the reserves and draining the um and draining the PFD. The problem is you would think out of those years, we would learn the lesson that when you have a windfall year, as it appears that we're coming up on now, when you have a windfall year, you refill the coffers so that you have less of a revenue problem, somewhat less, less of a revenue problem in the years the in the normal years when you get back to normal oil prices. You would think that's what the that's the lesson we would take away. But neither uh Lyman, neither the Senate Finance Committee, nor uh the House Finance Committee are taking that lesson. They're taking the lesson that, oh, there's more money on the table, so let's so let's spend it because people come down to Juneau, you know, they send lobbyists down to Juneau, or they come down and droves themselves to Juneau and they say, oh, we need this, we need that, we need the other thing. It's for the kids, it's for you know, this, that, and the other thing. And and they spend it. And so, yeah, I mean, there's a real tension here when you when you talk about when you talk about, you know, we should get our the maximum benefit, we should get additional oil revenues, uh, and that should help lessen the the revenues, the revenue problem that we have. But when the legislature does things like this, when the legislature does things like this, what they're doing this year, or appear to be on track to do this year, in terms of um, in terms of significantly higher spending levels, just because we have windfall revenues. Yeah. When the legislature is on track to do things this year, it's just it really just makes you shake your head and wonder what the hell.
SB 274 And The POMV Draw
SPEAKER_00Well, and Kevin says, buckle up, Brad, it's only going to get worse. Amendments for the next three days or so. Typically, the vast number of amendments come from the minority on the finance committee, but take heart, this majority never disappoints. And and Rob says, in my humble opinion, failed Petrostate is redundant. This is the reason that Milton Friedman said we should hand out the money, oil money to individuals instead of using it for government spending. Um, and he's and again, he's not wrong. He's he's not wrong on this. All right. Um Brad Keithley, Alaskan for Sustainable Budgets, the weekly top three. Number two, uh, the weekly top three. Uh SB 274. Uh, it's a bill that many of us probably have not been paying attention to or maybe not have heard of. Uh, Brad says it's important though, and it ignores the fundamental problem. Brad, walk us through what you got here.
SPEAKER_01So SB 274, we've actually talked about it on previous segments, uh, and we'll probably be talking about it for more segments as this legislature goes along. But SB 274 is a proposal originated in Senate finance to reduce the POMV draw, the amount of the POMV draw from 5% over a roughly six-year period down to 4.5%, uh uh waiting a year and then starting a reduction of a percent a year, so 4.9 and 4.87, and then down to 4.6, and then down to 4.5 uh in the uh in the last year of the reduction. And and there's two motivations going on here. Um one is that the motivation you see a lot in the in in uh op-ed columns is that the permanent fund corporation is not earning enough to fund 5%, a 5% POMB draw, that it's under-earning. Um, and as a consequence of that, um uh continuing the POMV draw at 5% is ultimately going to force you into a situation where you either have have nothing left in the earnings reserve or those who propose the constitutional amendment that would merge the two permanent fund accounts where they start drawing from the from the permanent fund from the permanent fund corpus. That's one motivation. The permanent fund corporation is not achieving uh the objective. The second motivation sort of came up in the in a uh Senate finance committee hearing this week, um uh where Senate finance had Callan, the Permanent Fund Corporation's advisor, paid advisor, uh come in and talk about uh the 4.5% uh rate and and and how Callan viewed the 4.5% rate. And basically Basically, Callan's perspective was starting again from the premise that the permanent fund corporation is not earning 5%. Callan's analysis was look, lowering it down to 4.5% from 5% will keep more money. Let's say, let's say the permanent fund corporation earns 4.8 or 4.9% or whatever, earns something between 4.5 and 5%. That lowering the POMB draw down to 4.5% will keep more money in the permanent fund itself and invested, that will help the permanent fund to grow. Ultimately, I think 20 years down the road is what Callan's estimate was. And those were fairly optimistic assumptions. But 20 years down the road, ultimately, because you build up the permanent fund to higher levels by reducing the current draw, ultimately generating additional money in the draw, even at 4.5%, than you would if you continued it to make it at uh at 5%. If you continue to make the draw at 5%. I think both of those rationales are wrong. I think the set the Senate Finance Committee is focusing on the wrong thing. The problem with the permanent fund is not that it's earning less than the 5%. And so we ought to question the 5%. The problem with the permanent fund corporation is it's not maximizing its earnings. It's not earning what it should be. It's not performing at the levels in terms of the returns it's generating that that it could be.
SPEAKER_00And that's what Callan, I mean, Callan says that in their I pulled the chart up. Callan said that in their own chart. They show it in the one, three, five, and 10-year averages, they show they're not even earning 4.5%.
Permanent Fund Underperformance And Fees
SPEAKER_01Yeah, and that's and that's the point. This is from a previous Callan presentation, but it's right. And that's the point Callan makes in saying, you know, you lower it down to 4.5% and and you generate more money. I mean, you you get away from the problem that they're not that they're not generating 5% now. Uh, but the but the but the real test here, I think, is when you look at the permanent fund corporations' returns compared to the SP 500, and I'm not automatically saying you go to the SP 500, I'm just using it as a baseline to compare to. Um uh the Buffett rule of 9010, 90% uh uh SP 500, 10% uh uh a debt uh ETF. When you look at the permanent fund against against those other baselines, even its own, the permanent fund corporation's own passive investment baseline. Um and the passive investment baseline is let's put this on automatic pilot, let's let's invest in ETFs, generally you know, recognized and reputable ETFs, and sort of put this thing on passive investment, where we're not the benefit of that is we're not spending a billion dollars a year in management fees to have, you know, to spend on advisors that are micromanaging the the investment of the fund, not to produce five percent at the end. Uh, even when you even when you compare the permanent fund corporation's uh uh return against its own passive investment benchmark, it's still not still not generating the returns that its own, I mean, they get to decide what it is. It's not the SP 500, it's not the Buffett rule. They decide what the passive investment benchmark is, and they're not even achieving that through their through their actively managed account. So the problem here, the problem is not, I don't think, the problem isn't that the permanent fund corporation is earning less than 5%, and so we ought to drop the POMB draw down to you know 4.5%, or the problem isn't that isn't that you know we can build up the permanent fund corpus value over the next 20 years in a way that ultimately can produce more money for Alaskans than where we're going with the 5% draw. The problem is the permanent fund corporation is underperforming. And and the Senate SB, uh, the the bill that the Senate's currently considering um doesn't address that at all. It just sort of gives up. It says, oh, the permanent fund corporation is not achieving 5%. So we ought to reduce the draw to recognize that the permanent fund corporation is not achieving 5%, instead of saying, let's have some hearings on why the permanent fund corporation isn't matching even its own passive investment benchmark. And let's let's figure out what the heck's going on with the permanent fund corporation. And I think the answer to that would be, oh my gosh, the permanent fund board doesn't know what they're doing because none of them are investment specialists. We've got a bunch of really great people, nice people, terrific Alaskans on there, but they don't know what they're doing on investments. And I think, and I think if you had the hearings that said, why isn't the permanent fund corporation achieving these alternate benchmarks, looking at the SP 500, looking at the Buffett rule, looking at its own passive investment, why isn't the permanent fund corporation achieving those? I think those would be a lot more productive hearings than than you know, trying to sort of give up and say, well, we admit defeat. Right. Uh we're the permanent fund corporation is not going to get to 5%. So let's take it down to something that the permanent fund corporation is going to uh achieve over time. It's just it's it's throwing in the towel as opposed to as opposed to concentrating on things that would make Alaska better. I mean, Harold goes off on not getting the maximum benefit out of our oil resource. Okay. We're not getting the maximum benefit out of our permanent fund because of because of the investment policies the permanent fund corporation is following. We ought to be focusing on that. We ought to be focusing on increasing the the take from oil. We ought to be focusing on increasing the take from the permanent fund. And the and this bill, as I said, sort of throws in the towel. It doesn't focus on that issue. It just says, yep, we're not going to get there, so let's take down the, let's, let's reduce the POMB draw down to something that maybe hopefully the permanent fund corporation can achieve. Right.
SPEAKER_00Well, and but there is also an alternative to that, too, because SB 274 is kind of the precursor and one of in some of the groundwork for combining the ERA and the corpus, right?
SPEAKER_01Well, it it it it may be that. I mean, it's not it doesn't have that in there right now. I suppose they could consolidate it with the constitutional amendment, pass them in parallel or something, but but uh yeah, that would that would be that would be even worse. I mean, that would be going in even the even the worse. I mean, that that throws in the towel also. It says, well, permanent fund corporation can't generate enough to keep the to keep the POMV draw going. So let's just throw in the towel and consolidate the two accounts so that when it doesn't, we can start drawing from the per from the corpus. Yeah, right.
SPEAKER_00Well, and so Brad, uh, I mean, uh, I do note that there are have been a couple politicians that have at least acknowledged what you're saying. I mean, we are making a difference in the people are finally, I mean, I think we're the only people that are talking about the permanent fund and the way that it's investing and the SP 500 benchmark and the billion dollars. I heard a politician the other day say uh something about a billion dollars, nearly a billion dollars in fees for the permanent. Somebody's finally, we're they're listening to us and they're talking about it, but not nearly fast enough. I mean, this should be, in my opinion, a cornerstone issue for gubernatorial candidates. They should be looking at that and say, we could save nearly a billion dollars a year right there just by not paying these management fees. And in the long run, we'd be money ahead. I mean, you you pointed out the chart. Sure, there's ups and downs, and sometimes the SP benchmark is lower than what the permanent fund has made. But overall, if we tied it to the SP in the last 10 or 15 years, we'd be at 120 billion instead of 80. Well, I guess we're down to 76 billion or whatever it is now because we took a hit, but we'd be up to 120 billion compared to the 80 billion. And so somebody at least is finally talking about it, but not many. This should be a cornerstone issue.
SPEAKER_01Yeah, I'm and I'm not sure why. I mean, maybe, maybe it's because we've had this discussion about oil taxes for a long time. People think they're comfortable talking about it. And so, you know, the the claim that we're not getting enough of our oil is is a fairly fairly standard one out there, and we've had hearings on it now, all that sort of stuff. But it's the same thing. We're not getting enough out of our permanent fund resource, we're not getting enough out of our financial resources. I guess if the theme of to I guess the theme of today's program is nobody took financial literacy 101 uh uh or took financial literacy in in in high school because you you we've got this huge financial resource. Good for us. We build it up over time, good for us. It's been invested in a way that at least it didn't lose money over time, but but you've got this huge financial resource, and just like you look at your oil resource and maximizing the benefit out of the oil resource, you ought to be looking at maximizing the benefit out of the financial resource. And I don't get a sense, I don't get a sense that the legislature is doing that. Anybody in the legislature is doing that. And SB 274, to me, is a confirmation they're not doing that because it's saying, look, we're not going to get to 5%. So we ought to just sort of take it back. We ought to recognize that and just sort of take it back to uh to uh to some level that that we can achieve. Problem is when you you had that chart up there, the chart shows in in a number of years, a number of five-year periods, they didn't even get to 4.5%. They didn't even get to 4% in a number of those periods, they didn't get to 3% in a number of those periods. So if you're gonna start giving up um and saying we're not gonna achieve these numbers, and so we and so we ought to reduce it to something, something that we may that we may be able to achieve, it's not clear that 4.5%, given the current investment strategy that our permanent fund is following, it's not clear that 4.5% is gonna be right to know the right number.
SPEAKER_00Right. Well, as you pointed out with that previous Callan chart, and Ben Carpenter in the chat room says the same thing. Callan says 50% of the time the corporation's not going to make the 5%. It's slightly better with 4.5, but not much. So, I mean, they're not even gonna make that 4.5% if they keep doing things the way that they're going to do them. Final thoughts on number two, uh, Brad.
SPEAKER_01Number two is the Senate Finance Committee and the legislature as a whole is going in the wrong direction on looking at the permit fund rather than giving up uh and saying uh, well, we ought to reduce the POMB draw because we're not getting it to we're not getting to the level we need to support 5%, rather than giving up, they ought to be turning it around and looking at the permit fund corporation and saying, look, we need a uh a healthier return. And we don't need you spending a billion dollars a year. We need a healthier return out of the permanent fund. What would it take? What what is it that we're not doing that we should be doing to achieve that healthier return, to achieve a return that looks like your passive investment benchmark or looks like the SP. What do we need to be doing? And then focus on that. Um, you don't want to you don't want to legislate your micromanaging the permanent fund. You want the experts over there, but we don't have experts over there. I love Ralph Samuels. Ralph Samuels is a great guy. Ralph Samuels would be a wonderful board member on on ADA on on the board that's that's focused on investing in Alaska. Ralph Samuels is not an investment expert. Ralph Samuels, frankly, doesn't know a whole lot about investments. And having him on the permanent fund board is a wasted seat, a wasted voice, an empty chair with respect to guiding the permanent fund to achieving returns. So I think that's where the legislature ought to be focused, instead of instead of throwing in the towel and saying, you know, what what lower number do we need to get to so that the permanent fund looks good in terms of in terms of the returns that they're producing?
SPEAKER_00Donna Arduin says, I talked about it in 2019. Legislative leadership, she again, the permanent fund and the earnings. Uh, she said, I talked about it in 2019. Legislative leadership does not want a solution that would stop their agenda of getting rid of the PFD or raising oil taxes. Or both. I mean, and really, I think that's part of it. Again, Brad, we've got a crew of folks in there who are the old guard, again, business as usual, and they see the PFD as a theft of their money and their ability to spend it. Right? I mean, they don't, they don't that's that's what they see it as. They see it as their purview as the legislature, and it just in it just infuriates them that it ends up going to Alaskans. They want to have control of that.
SPEAKER_01I've never heard of it as a as the theft of the legislators, legislature money, but but yeah, they sort of they sort of treat it that way.
SPEAKER_00Right? I mean, but I mean, I know that sounds funny, but that's kind of how what she's saying there plays right into that. That's exactly what they're saying. They're saying, I mean, this was Kathy Geisel at the Commonwealth North. That's$685 million. Look at all the things we could spend it on. It was Natasha, look at the downtown and the housing and the homelessness and the mental health and the tourism. Look at what we could spend it on. That's what they look at it as. They look at it as a pot of money that they could have spent and they're infuriated they have to give it to Alaskans.
SPEAKER_01Yeah, it's it's it's one more step than that. Look at all the money, look at all the things we could spend it on that we, the top 20%, or in Nathasha's case, the top 1%, that we wouldn't have to pay for because we've taken the money out of the out of the out of the uh out of middle and lower income Alaska, largely out of middle and lower income Alaska families by doing it, by paying for it through PFD cuts. So it's not just think of all that money that that we could spend, it's all that money we could spend with our friends in the construction industry or with our friends in the in the government services industry. Think of all that money we can spend that we, Natasha, Kathy, Bert, others wouldn't have to wouldn't have to pay for. So it's it's a step. But but Michael, this is, I mean, I I understand that, and I understand you want to focus on, you know, want to focus on taking the PFD first. But this is money. I mean, this is just like the oil industry when people say we ought to be looking at the oil industry for more money. We ought to be looking at the permanent fund corporation for more money. Basically, what we what the legislature is doing is is they they're just taking whatever the permanent fund corporation does and saying, well, you know, you're not doing well enough for five percent, we'll just go down to 4.5%. They're just taking it as opposed to being affirmative and saying, but you know, look at the SP or look at your own passive index. You could be doing better. Why aren't you doing better? Right. Those questions I've I've not sensed those questions being asked, except in this sense. Mike Kronk and and James Kaufman in Senate re in Senate Finance did ask the Permanent Fund Corporation, Devin, they asked Devin, why aren't you using the SP? But it was a setup question. I mean, it was a set up, oh, yeah, you know, some people talk about using the SP, why don't you do that? And then Devin went through this, you know, we're not chasing headlines, we're chasing performance, and and that, and that, and this whole performative art question and answer. They're not legitimately pursuing the issue of why the permanent fund corporation isn't doing better.
SPEAKER_00Right. And Ben asks a question, which I again I think goes back to the whole onion aspect of this, is that there's many layers to it. He says, Brad's not wrong, but do we really want the PFC to earn more if it means government grows? And I mean, you're right. The government, we just talked about that. They'll spend every available dollar, which is why it's imperative that we get some kind of spending cap mechanism in there to slow it down, because then if we earned more money, we could put more money away to earn more money. I mean, he's not wrong about that, that they would just spend it. If we had been earning extra money through oil revenues or through a PFD or through the permanent fund corporation, they would have just spent it. So again, it's a manifold problem. We have more layers to it.
SPEAKER_01Yeah, I'm just gonna go back to the New York Times article. We are a failed petrostate. If that's how we think about this issue, we are a failed petrostate.
SPEAKER_00I mean, well, but we have to think about this issue that way, right, Brad? Because again, you just saw$73 a barrel on a one-time windfall, right?
SPEAKER_01But Michael, here's what we're doing in that sense, in that case. And we're doing the same thing on the oil side. What we're doing is we're saying Alaska can't get its house in order. And so we're gonna leave more money, leave more money that's rightfully due to Alaskans. We're gonna leave more money for the for the the billion-dollar advisors and the and the and the Wall Street uh uh uh uh the Wall Street community to get more of Alaska's money because we can't handle it if we get more. So you just keep it over there. You just keep you just keep that money in your pocket as opposed to it coming to our pocket. Same thing on the oil side. We can't handle more money. We don't know how to, we can't be responsible adults. So you you just keep the money.
AKLNG Tax Plan Missing Key Math
SPEAKER_00Well, but I don't think it's mutually exclusive, Brad. I don't think it's one or the other. I think again, I think we're right in that the PFC has to earn more. I think we brenn Ben's also right in that they would spend it all. So we have to have a combination of marketing it and and tying it to an SP 500 and having a spending mechanism, and it would solve both those problems. Uh Brad Keithly, Alaskans for sustainable budgets, the weekly top three. Uh, we got one more. And uh I mean, I hate to be that guy, but I've said it time and time again. I'm hopeful but not optimistic on AKLNG. And it looks like the AKLNG advocates have failed the assignment. Brad, what do you mean by that?
SPEAKER_01So we talked about AKLNG last week. We're gonna probably gonna talk about it in a number of more weeks as we as we as we go forward uh as this as this issue continues to mature. Um, and the the the comment last week, the comment I made last week, or the gist of the comment I made last week was look, AKLNG is not coming forth with information that that can satisfy the the needs of the legislature and the analysts to understand exactly what AKLNG is doing and what the costs are and what the what the financial aspects are. They're not they're not being forthcoming with respect to those numbers so that you know legislators like Kathy Geisel are overreacting and saying, we need to take control of this through, you know, through a 15-page statute. We need to take control of this and and force you to produce the additional information because we're just going to insert ourselves right in the middle of it so that the information has to has to flow through us. And and we have this gap between the information the legislature legitimately legitimately needs to make some decisions and what the project is producing. This past week uh they had a hearing, Senate res House Resources and then Senate Resources had hearings in which the legislature, in which the Department of Revenue, as well as consultant Mark Beggage, as well as Glenn Farton, uh were given the opportunity to come forward and explain the need for and the justification behind the administration's proposal to go from a fixed uh property tax uh rate uh based upon value, property value, uh, and moving that to a volumetric rate uh depending upon the volume that's going through the uh going through the line. The administration had the opportunity to come forward and explain that. And they had an extensive presentation. They had a huge number of numbers in there that were basically runs assuming different levels of uh cost, uh investment cost, uh, in the um in the project, and saying, you know, if it costs$45 billion, this would be the economics, and this is what the state and the various localities, the various boroughs would get. If it's for$50 billion, this is the economics$55 billion and so and so on and so forth. Huge number of numbers. But it didn't, it doesn't those numbers don't answer the fundamental question that that I think the legislators have and I have, which is how does this proposal, proposal to go from the the fixed property tax rate, that by the way, has worked for TAPS uh uh since the early 1970s, how how does going from this fixed property tax proposal over to the over to the volumetric rate, how does that make the project more competitive? And is that the right number to make the project more competitive? Could we still have, if we reduce the fixed tax rate from 20 mils down to 10 mils, or if we front ended it at five mils and then had a volumetric piece on the back end of that, would that work in a way that would still produce more revenue for the state? Is the state getting the maximum benefit accident? Out of the property tax. And none of the numbers, none of this broad array of numbers that Department of Revenue produced or Glenn Farn talked about, none of those numbers answered that question. There was no analysis of the competitive position of the pipeline relative to the markets that the pipeline's trying to serve. There was no analysis of whether of financing differentials. I mean, they just assumed a 10% pre-tax rate of return, overall rate of return. And there was no analysis of whether that's the right pre-tax overall rate of return, uh, or whether, whether you know, there's going to be some additional financing mechanisms that will that will lower that cost of financing or maybe raise that cost of financing. None of that. It was just a bunch of assumptions put into a model that then could spit out what everybody, what, what every taxing authority got out of out of the project at various at various investment rates. So after those presentations, I'm not any better off. And I doubt the legislature's any better off in understanding what why the move to a six percent volumetric rate, why the abandonment of the fixed rate that works for taps, why the move to the to the six six cent volumetric rate is necessary, why it can't be a different number. I mean, why it has to be six cents, why it has to be totally volumetric. None of the information that the that the God provided answers that question. Here's, I think, the fundamental problem. The fundamental problem is we're not having a give and take, an honest give and take. Maybe that needs to happen in a conference room, maybe it needs to happen under some form of confidentiality, but we're not having that sort of give and take. We're having, you know, Giesel firing off her legislation because she's not getting the information she thinks she needs, some of which she does need, Giesel firing off her legislation, them coming back and firing off, you know, a 35-page slide deck that has a bunch of numbers, none of which answer the fundamental question. I mean, British Columbia got to their project by going in a conference room and working out a deal. We had, Alaska had pretty close to, you know, people talk about we're the closest we ever were. Actually, we were the closest we ever were back in the 19 or back in the 20s, 2000s in the Murkowski negotiations with the companies. Uh those negotiations were in a conference room under confidentiality and produced a deal, like the British Columbia deal, produced a deal that took into account a lot of factors because everybody was working off a common set of information, full information. We're not going to get there the way we're going. I mean, the only way we get there the way we're going is the legislature says, oh yeah, we we don't care what the numbers are. We want this project so bad that we'll agree to anything. You just throw a number out there, we'll agree to it. I mean, that's that's that's what Glenn Farn and the administration is trying to push the legislature toward. Just agree, just give them a blank slate, whatever the hell they say, right. We're not getting, we're not gonna get to a deal, though, the a normal concept of a deal, the way we're going with with Giesel throwing out a bunch of legislation that's that's gonna have the state in the middle of a bunch of stuff that it really doesn't need to be in the middle of. If it had confidence, that stuff was being handled correctly, and Glenfarn and the state responding with just a bunch of information that really isn't useful toward getting to an ultimate solution.
SPEAKER_00All right, Brad. Uh a minute left. What's the what's the over and under on this whole thing with Glen Farn, this gas line getting passed at this point, based on what you're seeing right now?
Trust Gap NDAs And Deal Making
SPEAKER_01We're way we're way on the under. I mean, we're we're we're we're we're way on the ain't gonna get done. Because we aren't going about the product, we aren't gonna go, we aren't going about setting the terms right. Um and not to mention the disarray that the international market's in right now. Right. Um uh but but we're just we're not coming to we're not coming to grips as a state with this project in the right way, in a way that gives everybody confidence to go forward in unison. That this is we we've we've looked at it all, we understand, and uh, and this is the way we ought to go forward.
SPEAKER_00Rob just said we had some legislators and resources yesterday saying they don't want executive session or NDAs for the information they're asking for. Well, then you're not serious about it. Right? I mean, Brad, at some point, you're just not serious about it. If you don't want an executive session or NDAs, then you're not serious about working with these folks because I understand that there may need to be some confidential information if you're out there working on it. But if you just don't want it, then you're not serious about it.
SPEAKER_01Yeah, legislators are just scared of being second guessed, I suppose. Um you know, they they saw what happened to the Pardell, what's what's happening to the Pardell, the leftovers of the Pardell administration out of SB21, and they don't want to be they don't want to be second guess. So the way of not being second guess is not having the information and and being put in that box in the first place. The problem, there's also a problem that what if you did an NDA and a confidentiality and an executive session, and Glenn Farn still doesn't give you the numbers. So now you've so now you've boxed yourself in by by agreeing not to be open about the information that you're getting, but the information you're getting still doesn't solve your problem, still doesn't, still doesn't provide the solution. So it takes good faith on both parties' part, right? It takes good faith on legislators' part to want to be part of that process. But also you have to have confidence that the result of that's gonna be you're gonna get the numbers you want.
SPEAKER_00I would think you'd still be able to articulate, even if you did go, if you get an NDA or whatever, and you go in there and they don't give you the information, you could still say we saw a lot of stuff, but none of it still answers the question. They're not giving us all the information. I mean, that doesn't violate an NDA. You didn't tell them what you saw. You just said they didn't give us what we need. You know, and that's the problem. We need somebody with some hootzpa and some and some courage to go in there and do it. And that's just that's just not working right now.
SPEAKER_01Yeah, it's not it's not working. And and and legislators would also say, look, it ought to be the administration that's doing this, right? I mean, it was the administration during the Murkowski, during the Murkowski administration, it was the administration, Jim Clark and Murkowski himself, that negotiated with the with the producers on the on the on the deal. Uh it was the British Columbia government, uh, the the the prime minister and the and the or the premier and the and the and the various cabinet officials that negotiated those terms on the on the BC uh LNG project. It ought to be the administration that's doing this and then bringing it to the legislature and and the legislature, you know, getting the numbers to be comfortable enough to confirm. But here you've got the administration who just came out sort of out of the blue with a volumetric property tax, and and you have no confidence in that number because they've not come with the numbers that that help support why they why they picked that particular number from the dart board. So it's it's just it's a failure of trust all around the way in the entire circle. And if we continue down this road where we have the failure of trust, I don't see the legislature approving anything. I I see Glenn Farn, you know, sort of throwing in the throwing in the towel, because they really haven't put that much money into this. Glenn Farn throwing in the towel and saying, well, we tried, but we couldn't, we couldn't deal with Alaska and the whole thing sort of imploding.
SPEAKER_00Yeah, we got our fit, we get the$50 million guarantee and we spent it all and kept our people employed for another year. We we used the$50 million and now we're gonna walk away. That was always my fear. I talked about that at the very beginning. They were getting that$50 million guarantee and they were gonna spend another$50 million trying to get this pipeline in. And when it was all said and done, they'd wash their hands of it and walk away. Um, because it was just another jobs program for another consultancy or another group. As long as it was state money, they're okay. They weren't in it with for their own money.
SPEAKER_01So But but to go back to Rob's point for a second, it shouldn't be the legislature that has to negotiate this, it should be the administration that negotiates it and then is open. Maybe, maybe the conference room, the the NDA needs to be with the administration on seeing the numbers the administration saw, but it shouldn't be legislators. I don't want, you know, I love Rob, and I think Rob's, you know, maybe one of the great senators we've had in Alaska, but I don't think he's up to negotiating these things with with Glenn Farn. I mean, it shouldn't be the, and I certainly don't want Giesel negotiating anything, so it shouldn't be the legislators the negotiating it should be the experts the administration has negotiating it, and with the legislature acting as a board of directors looking over the information, ratifying it. That's what should be going on. I it and Dunley would likely say, well, that's what we did, that's how we got to the sixth cents. But Mike, I I've been to a lot of board meetings, and I've never seen a board really react very well to the way in which you're presenting the sixth cents. So it's just not working. The process isn't working.
SPEAKER_00Well, like I said, Brad, I'm coming to the conclusion that maybe the wheels have to come off the bus and these people all have to be cleared out before we can get started. I I just don't know. I don't I don't know. Uh short version says Rob is that the legislature doesn't trust the administration. Uh, there's just no trust back and forth. And not that they should. The administration doesn't trust the legislature for the same reason.
SPEAKER_01It the whole thing is and I've not and I've not seen the let I've not seen the administration frankly earn the trust on this issue. True. Six percent keep in mind TAPS lives with the property tax that that that is on the books now. Yeah, and so taps lives with it, but all of a sudden the LNG project can't different economics, all right. Different economics, but where the hell does six cents volume metric?
SPEAKER_00How do you back that out? Yeah, how do you back that out of the equation? How did you come to that number? If you can't answer that simple question, we got problems. I mean, I think that's I think that's it. All right, Brad Keithly, Alaskans for sustainable budgets. Thanks, Brad. You've given us a lot to think about today. Appreciate it. Now you can go on now that you've dropped your hand grenade of hatred, discontent, and confusion, we can we can scramble around and figure out where we're bleeding. Thank you so much, Brad. It's always pleasure. Michael's always thanks for thanks for having me.
Final Takeaways And Sign Off
SPEAKER_01All right, thanks so much. Well, that's a wrap for another week's edition of the weekly top three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, SoundCloud, Spotify, and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week on the next edition of the Weekly Top Three.
