The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (4.6.2026)
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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 April 6, 2026.
This week, our top 3 issues are these: 1) we discuss the absolute hypocrisy being exhibited on all sides during the recent debates on the PFD issue in the House Finance Committee (2:14), 2) we discuss the issues we see with SJR 29, the proposed Constitutional amendment to establish a constitutionally dedicated education fund (20:25), and 3) we examine an extremely interesting and, we think, important presentation made last week in the House Resources Committee by Gaffney Cline, the legislature’s consultant on the AKLNG project (39:48).
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
SPEAKER_01This is Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. Welcome to the Weekly Top Three, the Top Three Things on Our Mind here at Alaskans for Sustainable Budgets for the week of April 6th, 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 the absolute hypocrisy being exhibited on all sides during the recent debates on the PFD issue in the House Finance Committee. Second, we discuss the issues we see with SJR 29, the proposed constitutional amendment to establish a constitutionally dedicated education fund. And third, we examine an extremely interesting and we think important presentation made last week in the House Resources Committee by Gaffney Klein, the legislature's consultant on the AKLNG project. And now let's join Michael.
PFD Hypocrisy In House Finance
SPEAKER_00Brad, let's um let's let's get into it. I think we've got a I think we got a lot of a lot of good stuff to discuss this morning, uh things that we've been kind of chatting about uh over the last few days here on the program. Let's start off with number one, our favorite topic, the PFD this morning, PFD hypocrisy. Give me the rundown here.
The Math Behind “Better” Taxes
SPEAKER_01Well, Michael, the the events of last week, which I know you've talked to a lot about on the show, the uh the debate at the early part of last week for on Neil Foster's amendment to uh uh pay a full uh PFD out of the permanent fund earnings and uh sort of let the chips fall where they may on on the general fund budget. Uh and the defeat of that, and then the and and the votes on the votes on the defeat of that, and then later in the week, uh the vote to uh uh include a full PFD in the in the budget, but statutory PFD in the budget, but contingent on drawing from CBR. There was just um just hypocrisy all over the place um uh during those during those debates. The ones the the one that really, I mean, all at some point all of the members of House Finance uh irritated me as we went through this debate. Uh, but the ones that really got me going uh, I think early on were Elise Galvin and Nellie Jimmy, uh, who both said, yes, the PFD is or using PFD cuts to fund government is horribly regressive and takes money from middle and lower income Alaska families and and and is the work is is a bad thing to do. Um but there are but but there are and that there are solutions to that. Um if only other people would agree to it, including uh both of them said the high income, high earner income tax and uh and oil taxes. If only people would would agree to that, uh we could solve this. But because they're not, and because we have to keep spending for government, uh we're gonna vote against this, we're gonna vote against uh Neal's amendment. And ultimately they also voted against the the amendment offered by Jeremy Bynum uh to uh pay the P full PFD contingent on the CBR draw. The the hypocrisy in that is is there's two things that just irritate the heck out of me. One is Elise Galvin's high and high earner income tax doesn't offset the PFD. Uh what that in what that income tax does is create a fairly thin veneer of revenue. Route the projection is or the fiscal note is about$300 million in revenue against a$1.5 billion,$1.6 billion, depending upon what oil prices are on the day, deficit creates this thin veneer of$300 million of revenue uh that would you know theoretically offset$300 million of PFD cuts. But once you get past that veneer, you still got this$1.2 billion,$1.4 billion uh deficit that you have to fill somehow. And they by by failing to propose anything else, they propose to cut to fill it through PFD cuts. So when you do the math on that, that's thin veneer of$300 million, and then the remainder coming from PFD cuts, um, sales taxes. The governor's proposed sales tax, the governor's proposed$700 million that he would have raised through his broad-based sales tax, uh, is better. Yes, it is, yes, sales taxes are slightly regressive. The governor's proposal was slightly regressive, but they're a heck of a lot less, it's a heck of a lot less regressive than the combination of this thin veneer of income tax followed by this have the still heavy dose of PFD cuts. Sales taxes are less regressive than that. So for them to go around saying, oh no, we can't, we don't have any proposals out there. We have we have we don't have anything we move forward on. We would love to have a higher income tax, is just is is hugely hypocritical because they've been offered something. They were offered something by the administration that is better for low-income Alaska families, low and middle-income Alaska families, than uh than continuing to uh use PFD cuts. And the oil tax, I mean, that irritates me also. The the majority, if you look at the at the statement by the majority at the time it was formed, the House majority, they oppose oil taxes as a majority. The reason they do that is to get Chuck Cop, they got to get Chuck Cop on board as part of the majority. They gave him that they they gave him the majority leader position, and they also gave him no oil taxes. That's what they paid in order to get Chuck Cop on board. So when they now talk about when those two, and with Neil talks about, oh, oil, we can solve this through oil taxes, uh, they've already agreed, they've already given it away uh for this session. Right. So, so they've got no, I mean, the alternatives they talk about don't solve the problem in the case of the high income earner, or the high income earner tax, the high earner income tax, don't solve the problem, or they've already given it away in in in order to get to get cop on board. Dunley gave them an answer. Dunleavy gave them the sales tax proposal, but oh no, they couldn't do that because you know it came from Dunley. And so the hypocrisy of saying, yes, PFD cuts are bad, but we don't have any better alternatives. The hypocrisy of that is just huge because they do have a better alternative. They have a better alternative that was offered by the administration.
SPEAKER_00Well, and and you knew this was uh coming, right? Because they they again, this is all more kabuki theater. They wanted to be able to say the right things uh about uh what they need, and they want to be able to, oh, we could show. Although Nellie Jimmy, I don't understand her vote in the communities because her communities definitely would like to see a full PFD, and they're the ones that are paying through the nose on the PFD cut. So I don't know exactly what her position was. I can understand Elise Galvin's, where she can then point back to her bill as as pitiful as it is, and say, Well, I offered this, yada yada yada, but Nelly, I don't understand. I just don't understand it. Uh, and of course, now it's gonna go up, and they've given Neil Foster more ammunition for him to be able to say, Well, I voted for the full PFD and now it's all gonna go down in flames, but at least I voted for it, kind of thing, right?
Spending Avoidance And Political Incentives
SPEAKER_01Yeah, and and Neil at least is, I mean, Neil Neil was right on all the arguments he made. The only the the argument he the argument where he goes hypocritical is to say, oh, you know, yes, we're gonna create this deficit if we if we pay the full PFD, create this deficit in the general fund. He was right about that. That's where the deficit is, it's in the general fund. The PFD's paid for from permanent fund earnings. That's what the statute says, already paid for. The deficits over in the general fund. He's he was right to say that we're gonna create this deficit over the general fund. But his but his res but his argument about how they were gonna deal with that through oil taxes. I mean, Neil specifically mentioned oil taxes. Once again, they already agreed, the majority already agreed that oil taxes are off the table. So he's talking about something that he knows is unrealistic. He was he was another one of those that piled on the governor's proposed sales tax, not as much as Jimmy did, um, and not as much as some others did, but he was one of those that piled on the governor's proposed sales tax. When the smoke clears and you look at the proposals that have been put on the table, the sales tax is by far the most realistic because you had a Republican governor proposing it, and the most the most equitable in terms of in terms of its least regressive compared to Galvin's thin veneer of uh of a high earner uh income tax. But you know, the hypocrisy wasn't limited just to just to uh uh uh the Democrat side. I mean, Stapp and Bynum hugely irritated me both uh at the beginning when they said, oh no, you know, we we can't we can't vote for a full PFD because that would that would mean we would have to draw money from the ERA, we'd have to draw money from savings in order to pay for the PFD. No, that's not correct. Neil was correct on that point. The PFD's already paid for, that's what the statute says. You don't have to draw money for the P for the PFD. That's not what you're doing. You have to draw money if you're gonna do it, you have to draw money for the uh for the general fund. So they were they were hypocritical when they made when they made that argument at the beginning. And now they're and and they were hypocritical at the end when they voted for the amendment that that made a portion of the PFD contingent on uh contingent on uh a savings draw, because basically all they're doing is they're trading taxation through the through reducing the CBR. They're trading taxation to future generations by taking away savings that future generations will need to get themselves through their own fiscal crises. They're taxing future generations in order to pay current costs. Um, and so you know if if they if they if they think it's hypocritical to draw savings uh uh to pay for the PFD, it's hypocritical to tax future generations through the CBR draw uh to pay uh uh to pay the the PFD. I what was lacking from the from the conversation across the board, and there was no representative who who voiced this, but what was lacking was a recognition that, hey, we had we have a solution to this. The governor proposed it at the beginning of the session. Let's go back and look at that, because that's a fair, fair err. I mean, it's still regress slightly regressive, but it's a fair err way of resolving the the uh resolving the deficit that we have. Um and it uh uh is is it it it recognizes that the deficits in the general fund and that we are that we are addressing that through a revenue measure that will that will close the gap uh in the general in the general fund in a fairer way, uh a less regressive way than than PFD cuts. No, I mean that is the solution. But of all the solutions that have been put on the table, that's the solution that works best. And none of the supposed experts on the House Finance Committee uh uh uh raise that at all during this entire debate.
SPEAKER_00But Brad, that's assuming that they want to actually solve the problem. Right? I mean, I mean, I'm not trying to be, I'm not trying to be, I'm just that's assuming that they would actually like to solve the problem. We know what the problem is. The problem is solvable. The people there just don't want to change the way that they do things. If they actually wanted to solve the problem, you're right. There's a simple solution. Uh, you know, but and again, the first thing that needs to happen out of all of those things is a spending gap so that we can hold back the size of spending, and then any excess would have to go back to the PFD. But until we get that, I mean, nobody's nobody's serious about actually fixing the problem at this point.
SPEAKER_01I think that's right. And and and and I think my point is, you know, people want to pile on, and you, you know, you read uh uh uh the Alaska story, Suzanne's piece, you know, they want to pile on the Democrats. Um nobody, yeah, everybody wants to pile on the the the Democrats for this, and some want to pile on the Republicans for this, but nobody, none of them, none of the members of the House Finance Committee is being honest about what's really going on. They're all playing, I mean, you're right, they're all playing this kabuki theater. None of them are really trying to solve the problem. Neil, I gotta give Neil credit. Neil at least outlined what the problem is, which is that look, the PFD is fully paid for out of the earnings reserve. Uh, that's what the law provides. We've got that's what the POMB uh draw is for, a portion of it under the statutes designated for the for the PFD. We've got that problem solved. What the where the problem is, Neil was correct in this, where the problem is, is over in the general fund, and we need to find a solution to the general fund. He he he he was he was correct all the way up to that point. Then he started talking about oil taxes, but but he was correct all the way up to that point, and and so he had the problem correctly correctly defined. It was, you know, as you say, nobody wants to solve the problem. Nobody is on house finance is serious about solving the problem that confronts the state. And it's just I that's you know, it's hugely disappointing.
SPEAKER_00These are the people that we look to to be serious about solving the problem that confronts the state, which is why I've come to the conclusion that the problem's never gonna be solved. The bottom has to fall out before anybody actually gets uncomfortable enough to actually do anything. I I I fully am committed to that belief now. I've been toying with it for months, but I've come to the conclusion that the whole thing's gotta crash and burn before anybody's gonna take an effort to actually fix it. That's the bottom line, Brad. They just it's it's it's all pretend. It's all pretend, it's all fake and gay. It's all just uh, you know, we're gonna, we're gonna we're gonna uh uh you know say the right things and do the right things. We're gonna attempt to show our our voters that we tried, even though we set ourselves up to fail, but we tried to get this stuff passed, and now uh we could say the whole thing, and now we could just keep doing what we've been doing. And we'll just have to shrug our shoulders and say, well, what you gonna do? We tried, and now here's where we're at. I mean, that's really in the long run. That I'm I'm 100% right on that. I I would stake money, I'm 100% right on that.
SPEAKER_01Yeah, you know, but it's I can be disappointed with that, right?
SPEAKER_00I mean, I can no, you can't be. You you must we must agree with them and say and just feel for them and say, oh, it's so bad that they can't get this done. It's just too bad.
SPEAKER_01No, but I I mean I can be I can be disappointed that that's the direction the state's heading, that the the the direction that you outlined where we have to crash and burn. I mean, it's there are members on house finance, one in particular, that I had high hopes for that would stand up and and who has said that they would talk the you know, speak truth, uh, who would stand up and be a leader on these issues uh and articulate, you know, not only the problem, but be supportive of the solution. But that member was critical on the Republican side, that member was critical of uh of uh of the governor's proposed sales tax as well. Right. Um it's just you're talking you're talking about Will Stapp, right?
SPEAKER_00I mean, this is it. No, actually, I'm talking about Alexi Moore. Oh, you're talking about, oh, Alexi Moore. I apologize. You're right. Okay, all right.
SPEAKER_01I mean, Will Stapp is I mean, Will Stapp has has his own. I mean, Will Stapp just wants to ignore the law. I mean, we've got we've got a Republican who, you know, who's a law and order, gotta follow the law, gotta, you know, gotta enforce these statutes, gotta do what, you know, we pass these laws and they have meaning, except when it comes to a statute that's still on the books, it's never been, as Neil pointed out uh during the debate, that's never been changed, um, because they can't get the the votes to change it. Uh, but yet they just ignore it and they sort of go off on their own merry way. And then Will Stapp, who says, Oh, we can't, you know, we can't tax current Alaskans um uh to pay for in his view to pay for the PFD, because his view is the PFD isn't already paid for, notwithstanding the statute. We can't tax current Alaskans to pay for the P PfD, but then votes to tax future Alaskans to pay the PFD. No, Will Stap, Will Stap has long since left the left left the station in terms of being you know dishonest and and and and hip hypocritical on this issue. But Alexi, Alexi was someone who you know ran that she was going to tell the truth and she was gonna you know be straightforward on this stuff, and you know, she was gonna come up with solutions and took took heat. Uh uh last session, her first session took heat for voting for uh Rob Young's um uh uh digital tax uh proposal, took heat for that, supporting it, uh, and said, no, no, it's the right thing to do. We need to, we need to look it up. And so we get we get to the point where, all right, we've got a solution in front of us, we have the sales tax in front of us. Um uh it's a it's a you know not the world's perfect solution because it's still slightly regressive, but it's a better solution than anything else that's on the table. Um and so when we get into a debate where that issue, the issue of alternative revenues becomes important, you know, disappears from the discussion. So yeah, I it's not there, there's just not there's just not anybody on house finance. I mean, maybe it's the the there's not anybody in the legislature, but there's not anybody on house finance who's really seriously trying to solve issues here.
SJR 29 Education Fund Proposal
SPEAKER_00Brian says the solution is simple, the political will is not. Right. Rick says, say the things, keep their paychecks coming in, go home, do it all over again next year. Pretty much. Chris says, all I hear from Juno is the Charlie Brown grown-up saying, That's pretty much it, man. I mean, it's it's I mean, Brad, I'm not trying to be Debbie Downer here, but I'm trying to be realistic and say, hey, only if the wheels come off will we actually change. And I think that's part of the problem. We are continuing now with Brad Keithly from Alaskans for Sustainable Budgets. The weekly top three, the three big issues that Brad sees on any given week. And we're moving on to number two. Number two is a constitutionally dedicated education fund. Oh, that's a great idea. Let's uh let's put it out of sight, out of mind. Let's just dedicate those monies and we never have to debate it again, right? I mean, we could have done that with a PFD, but let's just let's just do it again. Let's just put it away. Brad, what do you say?
Why Dedicated Funds Can Grow Government
SPEAKER_01You know, this is a proposal that uh passed the Senate last week. I don't, I've we've not discussed it on the show before. I've not seen a lot of discussion about it uh in the op-ed pages or in the chat rooms or any place. Uh sort of come out, it's sort of come out of the blue, uh proposed by Senate finance, only heard in the Senate finance, um, and uh and sort of, you know, just sort of there all of a sudden as an issue, headed over to the to the House. It requires two-thirds from each body in order to uh be confirmed as a constitutional amendment or be uh proposed as a constitutional amendment in the next general election. Um it got the two-thirds in the Senate. It passed 17 to 3. Uh uh Rob, Shelley, and uh not Shelley. Rob and and uh uh Kathy. Kathy and and Rousher, I guess, were the were the three voting against it. Uh but it passed 17, 17 to 3. It's on its way over to the uh over to the over to the house. The rationale, as I've as I've come to understand it, the rationale is to make taxes easier. The rationale is you can sell people on education taxes, a tax for education easier than you can sell people on a general tax, the tax for for general government. And so, you know, there's been proposals, Elise Galvin's proposal was originally uh headlined as an education tax. There have been proposals that have said they're an education tax, but and and so they've tried to sell those proposals as an education tax a way of raising money for education. But you can't do that constitutionally you can only designate the funds. You can't dedicate the funds. And so subsequent legislature legislatures could redirect the funds as they've done the FD, redirect the funds to other uses. So the the theory is that if you have a constitutional provision, this this provision doesn't put any money necessarily put any money, it just says we will create this vessel in the constitution called an education fund into which money can be poured. And so the theory is that we'll create this we'll create this constitutional provision and then we'll we'll behind it we'll start selling these taxes we'll start pushing these taxes that are in order to put money into the education fund. Now here's the the thought process I guess I've gone through so far on this the thought process is well we need new revenues uh we need we need alternative revenues to PFD cuts uh we need more equitable more fair ways of raising revenue than PFD cuts um and so and so yeah creating something that would make that easier uh might be a good thing um but the problem with it is that that if you is that the the funds you would raise through the tax would not be the only funds that would be spent on education you would still you would still have you could still spend general funds on education. So what this what this tax what this provision likely would be used for is to say oh we need additional funds uh for education we've got this constitutional provision now let's pass this tax and and these uh these the revenues we raise through this tax will be additional funds on top of what we're already spending from the general fund right additional funds that we can spend on education there's no cap there's no way of saying well you've got to offset the funds you raise through the tax against the funds that you're spending on education from the general fund there's no cap um in any of that and so the the sense I'm getting or the sense I'm I'm gaining as I think about it is all this would be all this would be for is to raise funds on top of the funds that they're already spending through the through the uh through the general fund on education and other things. So it really wouldn't help it really wouldn't help the PFD it wouldn't really help restrain spending uh overall because they would still have the ability to to to divert the PFD funds to education uh and other things you know ultimately that leads me to believe that this thing is a is a is a bad idea uh that maybe as part of overall fiscal reform uh it would have a place uh but as a standalone uh provision it really uh it it's it it's it's setting up a situation in which we tax to spend more uh but we still continue to spend all this money from the general fund and we still continue to spend the PFD from the general fund you don't have the the the tax the revenues raised through the tax wouldn't act as an alternative wouldn't act as an offset to the PFD and wouldn't wouldn't enable you know us to back off on the enable the legislature to back off or require the legislature to back off on uh on PFD cuts. It's interesting that it it really I mean it got 17 votes in the in the Senate without without really you know trying hard without without right without breathing hard or without a lot of debate.
SPEAKER_00Over in the house I was just gonna say apparently the the enshrining of the education money in the BSA wasn't enough right we already know we've got an automatic increase we've got this now it's a in perpetuity that wasn't enough now they need to have even more so it can't be touched again. I'm sorry go ahead.
SPEAKER_01Well over in the house I think the calculus I think the calculus will be different. I think there will be concern about the fact that all this is really setting up is additional incremental taxes on top of or additional incremental revenues on top of existing revenues. It won't really help solve the overall fiscal problem it won't really act as an offset to uh uh as an offset to uh PFD cuts it won't really act as a as as a as a way of depressing spending getting everybody involved in depressing spending because they have to pay all income brackets have to pay for it it'll just be it'll just be this sort of this isolated pot of money that gets added to uh gets added to education spending and so I think those issues I mean now that now that you can see it coming and now that you can start having discussion or now that you realize you should be having discussions about it I think those discussions will be had over in the house. But still it's going to take 14 uh in the house to stop this train. I mean it's two thirds from each like each legislative body um uh 27 well what is it 27 would be two thirds 26 27 so so it takes 14 on the House side to stop this train and you know you start looking around the House Republicans you look at Jeremy Bynum you look at uh Julie Colomb you look at at other sort of squishy Republicans and um and you know it's it's a hard count to get to 14 that vote against it. So I think it's something that that it may be a hard count to get to 14.
SPEAKER_00So I think it's something that deserves a lot of discussion a lot of writing I'm going to write about it this Friday I think in the in the landmine uh to really sort of understand what we're doing here and that it's not it's not the the simple alternative oh we need taxes so we'll just set this up set up this fund so it's so it's easier to sell taxes it's not really that simple approach it's much more once you grind through it it's once more once it's much more a way of getting incremental money additional money uh uh for the legislature to spend for uh for education on top of the spending that it's already doing for education out of the general fund it's I mean I I guess the question how how much is enough how much is enough for educational spending right I mean we've got problems uh I know in the maintenance and everything else of these schools but that's not just simply solved by pouring more money into the situation you've got a you've got a a substantive mismanagement of funds uh for everything that's happened here and and just pouring more money into the equation is just going to embolden them to do more of what they've been doing which is ignoring the maintenance propping up the programs and the funding and everything else I mean we're you know it's not going to solve anything in the long run.
SPEAKER_01Yeah they would have to go out I mean it does set up this situation where they have to go out and explain you know they would pass taxes that would that would that would fund this this fund and they would have to explain those taxes. They would have to you know articulate a reason for the need for the taxes um and I guess survive re-election after they did that or survive a veto and survive re-election after they did that but it would it and so they'd have they'd have that barrier to to have to cross but you know you can easily see you can see how we how we sell these things at the local level oh Johnny needs a new school um uh or you know you know we need to we need to do this program or that program pass an increase in the property tax to do that pass a bond to do that funded by an increase in the property tax um and so you can see how they would how they would try to do that it'd be incremental this tax is for this program this tax is for that program and this tax is for another program um and and you can see how they would try to build that up incrementally it's not I mean initially back in the you know back a few weeks ago when I first started hearing about this thing I thought well that could be that could be a solution a part of the solution to the fiscal problem because it's a way of raising revenues which we need alternative revenues to PFD cuts which we need but the longer you know the more I think about this the more that it's not that's not really the way in which it would work. That's not really the way in which it would work out and so it's something to something to be concerned about.
SPEAKER_00Well and it's an easier sell to the public because if you if you compartmentalize all these different things you'll find the constituencies that are behind those oh education who who who can say no to you know better educating the kids and then down the road oh it's the trails and we'll get the trail crowd involved and they can motivate their base to get certain things and you know it's just you when you compartmentalize it instead of putting it in the general fund and then having to have kind of a general melee in the legislature over what the spending does for each thing if you can compartmentalize it and keep it in its own little lane then that special interest group can vote for it and get it going. It makes it easier to increase the overall size and scope.
SPEAKER_01Yeah it does it does and and there's no constraints I mean there's no constraints in the bill uh there's no constraints in um uh in um there's no offsetting constraints that are created in the general fund that the that the that the proposal creates in the general fund to prevent this sort of you know we'll just keep spending what we're spending over there this is all incremental uh on top of that there's no there's no constraints built into this so um I as I say it it could be uh a part of an overall fiscal solution I mean I could sort of see it you know fitting in as a piece of that um the with the spending cap and and other other pieces of protection of the PFD use of funds as offsets to the PFD and that sort of stuff but it's just not it's not it's not being set up that way. So I mean I'm just I'm I'm I the more I've thought about it and the more I've thought about these issues, the more I'm surprised that you have people like you know James Kaufman and Rob Yunt and and Mike Kronk voting for this thing you know people who claim to be fiscal conservatives claim to be concerned about the size and scope of government uh that you have that you have those type of individuals uh uh voting for this thing uh over in the uh uh over in the uh over in the Senate so I think it's something we ought to be talking about so that the House members really sort of have the opportunity to think through this fully before they before they vote on it.
Oil Prices And A Zero PFD Fear
SPEAKER_00Rob uh Rob Myers in the chat room says there's a good reason our founders prohibited dedicated funds. Every fund has a good rationale but it's the aggregate that slowly strangles you and that's kind of what I was trying to get at he articulated it much better than I could. Kim says education needs to crash and burn and maybe everything else will fall in line Mark says it's already burning we just keep throwing cash into the blaze and he's not wrong. Rob also mentioned earlier watch for SB227 finance stripped it down to just the educational head tax now. So they're going to try and marry this to the new uh to the new dedicated fund uh for sure um as well and then Ken said something about stop teaching the earth stop teaching that the earth is a magical spinning ball chasing a giant gas ball through the vast what are we on a flat planet Ken is that what you're trying to say are we flat I'm just I'm asking are you a flat or is that what you're saying we're not a we're not a spinning ball chasing a giant gas ball through the vastness of space because I mean that's uh there you go um all right um the cold medicine you need an ID to purchase that was funny says Frank uh because we were talking about yesterday we're talking about needing IDs to purchase everything including the cold medicine so it's at this point um uh Kim says at this point I'd take a one-time payout I see a zero dollar PFD for next year uh I I think this year we're gonna see it for sure because it's an election year but yeah it very well could be nothing in that I mean Brad what do you think I mean could it could could it be uh um I mean could could could it could it not just be all consumed next year because it's not an election year the election's over we're we'll be another two years away and and we've got short memories maybe they take it all next year oh probably depends on oil prices doesn't it I mean if oil prices if if oil prices stayed at$90 or$80 or$70 there's still I mean I don't I don't think they've yet I identified ways to entirely consume that in other spending uh but if oil prices crash to$50,$60,$50, there's no projection that they're going to do that.
SPEAKER_01I mean what what the Iran war has done is sort of soaked up all of the surplus that was sitting out there in tankers and in storage bins, storage facilities that were that was depressing the current oil price the Iran war has soaked all that up um uh so I don't think we're gonna see a crash and burn an immediate crash and burn but you know at some point these high oil prices are going to depress are going to have the effect of demand destruction people are going to stop you know they're gonna curb their use of oil uh because they can't the economics don't work at these high prices and so what that sets up what that usually sets up over time if you look at the oil curve is it usually sets up a period where when oil prices start coming back down demand doesn't pick back up immediately because it's because it's forced people to go to alternatives or they've closed plants down or this that or the other thing and as oil starts coming down it slides it slides way down.
SPEAKER_00So you know that probably the the the point at which we hit a zero PFD uh is going to be driven by uh when the oil curve you know hits goes back into its its uh deep decline again well I mean they've already you say that they haven't found a way to spend it all Kathy Geisel had it all lined out man she told you just think of what they could use that$685 million on that's what she said at that Commonwealth North meeting that$685 million we spent on the PFD just look at all the things that we could we could spend it on uh you know Medicaid expansion and and all these other things I mean uh the and and uh von Imhoff was the same way she wanted to spend it on tourist hubs and uh and homelessness coordination centers and everything else I mean it's all they could spend it tomorrow they could spend that$685 million tomorrow so they could they could but what but but what's going on now is you're you're having oil revenues excess oil additional oil re revenues come in on top of that and so they'd have to sp they'd have to they'd have to identify a way of spending not only the six six hundred eighty five million dollars but also the additional you know 500 million 700 750 million billion dollars that are gonna that's gonna come in through through oil revenues i you know they could probably come up with plans to do that but it may take them a while yeah yeah well we'll have to uh we'll have to see uh what else is uh you know what else happens but I'm with you I think this change to trying to create a new dedicated fund is just a workaround um to uh you know to find a way to pour more money into that on top of what because they're not going to stop putting it through the regular process they'll just have money in that account uh that they can give it's all gimme money at that point if they create a head tax or whatever else with another two or three hundred million dollars a year in there it'll just be it'll just be give me money and they'll still be fighting over the BSA and telling us that we're still need to spend more on top of everything and it doesn't even address again it's none of this addresses the school maintenance problems or anything else.
AKLNG Oversight And Constitutional Duty
SPEAKER_01Yep and there's no limit I mean as I say the problem with it is there's no limitation. You raise$500 million in a tax it goes into this account is that is dedicated now not designated for education but there's no limitation on still spending you know a billion five billion seven whatever uh from the general fund on education. Brad Keithley Alaskans for sustainable budgets the weekly top three uh we're continuing on now on to number three which is uh an interesting presentation on AKLNG Brad what are you talking about here so last week there was um a presentation over on the house side in house resources that's not where a lot of the action has been on on AKL and G, but there was a presentation over on the House side uh dealing with uh the governor's proposed change of the property tax to volumetric tax HB you know we're used to talking about this in the context of the Senate bill number but uh this was in the context of the House bill number uh House Bill 381 and I've and I have not seen that this presentation's been repeated on the Senate side usually you'll see especially when you bring in the the consultants that you have the consultant present on the on the House side and then present on the Senate side or vice versa this one appears at least so far only to have been on the House side but it's it's a really it's a good presentation it's by um uh Nick Fulford who's the uh uh Gaffney Klein consultant uh that's heading the Gaffney Klein consulting team for the legislature on AKLNG there's two slides in particular and and you can find it I mean for those interested uh you can find it Michael may throw up a link in the chat room or you can find it uh by going to uh the House uh uh resources committee their hearings this past week and look for the presentation by Gaffney Klein but there's two slides in particular that I think are are important to pay attention to one is um the the first one is the title of it is why does a host yeah why does a host government need disclosure and it's a it's an excellent way of looking at why Alaska is different in the way in which it needs to dig into uh the discussion about AKLNG it it breaks it breaks the the the the host government role if you will the government hosting the LNG facility hosting the the the the geography in which the LNG facility is going to be placed it breaks uh the role of the host government down into into three categories one is first one is in dark green on the slide host government private capital and that is like like you see in Louisiana or Texas or other states that have LNG export facilities the host government is doesn't really have a role other than being the jurisdiction in which the the LNG facility is is being placed. And and it talks about the slide talks at this and subsequent slides talks about what the host government looks for in in when it's playing that role. Basically it's after the fact uh it's after the fact yeah you've got an LNG plant running and it's generating revenue and the revenue is going to be taxed and it's talking about you know audit procedures for how you deal with that. Then it's got then the second category is the category that Alaska falls in and Alaska is unique among the states uh in falling in this category it's the host government that has a constitutional duty uh uh with respect to the project uh but it's private capital that's building the project and and this category I really hadn't thought of it this way before but this category is is applicable to Alaska because we have a constitutional provision that says we will get the maximum benefit out of our resources for the benefit of the people of the state you don't find that in the Louisiana Constitution you don't find that in the Texas Constitution or elsewhere uh but you do find it in the Alaska Constitution and we have state resources we have resources subject to the constitutional provision That are involved in this project, the natural gas resource that's being developed and marketed. And what the what what the what the slide suggests, and what the subsequent slide suggests, is there's a higher duty, a higher level of involvement by the host government, a deservedly higher level of involvement by the host government in those sorts of projects that essentially require the host government to go in before the project and ensure that the economics and that what the host government is deriving what the host government is deriving from the project achieve uh satisfies the maximum benefit standard. Um and it's really an it's an interesting way of looking at it that that I really haven't thought about before. And then the third category is host government uh equity, where the host government is is funding the project or it has a role in the project in terms of an equity holder, is contributing to the cost of the project, and talks about uh talks about uh what happens in that situation. The the the the the thing that's important about the way this way of thinking about it is in the first situation, host government private capital, it's just another it's just another industrial project going on in the state in Louisiana or Texas, another industrial project. And so you don't really, there's nothing for the host government really to worry about in advance of the project that it meets the regulatory requirements, that it's not polluting and all that sort of stuff. But but you there's no really reason for the host government to worry about the economics of the project in advance because it's private private capital produced private capital involved. In the third category, host government equity uh uh taking an equity role, because it's taking an equity role, the host government's gonna get a lot of information in its capacity as an equity owner. And in its capacity as an equity owner, it's gonna be in a much better position to figure out what the economics are and to figure out that what the host government's getting satisfies the constitutional duty. It's this middle category that Alaska falls in, host government with a constitutional duty, but private capital building the project that is that is the most difficult because you're not seeing, you're not naturally, the host government is not naturally seeing all the economics involved in the project because it's not a can it's not an equity holder. It's not naturally seeing all the economics involved in the project, but it has a duty, a constitutional duty, to ensure that the government is getting the maximum benefit in its tax structure and its revenue structure uh in connection with the project. And so you're you're sort of in this in this middle situation where you're not seeing a lot of information, just like a host government and private capital, you're not seeing a lot of information, but you have a constitutional duty to maximize benefit, but you're not an equity holder, so you're not seeing the information, all the information you need naturally. And I think that does a really good job. I think this construct does a really good job of explaining why Alaska's in the situation it's in, why you see things like the Giesel bill that that that essentially asserts the state's the state into the process in a way to see all these economics that that you wouldn't see in Texas or Louisiana because the state doesn't have a constitutional obligation, um, it inserts is is trying to insert the the the state into this process in a way to see a bunch of information to to determine whether the state's getting uh getting the maximum benefit. And I and I really hadn't thought about it this way before, and I think it's a great, I think it's a very good tool to sort of realize, to sort of help realize why the uh why the state is as involved as it is. There's one other slide uh that I think is important to uh uh that's useful in this useful in this presentation, uh, and I'll leave it to people to read, but it talks about the economics of the project and the break-even points in the project, and and and whether you're leaving whether the state's leaving money on the table uh by not uh by going to the volumetric proposal that uh that the governor's proposed and other proposals. And I and this tool, this economic tool, uh frankly, is a is is one I've not seen before and one that I think is going to be extremely important going forward in figuring out whether there's money being whether there's money on the table that the state ought to be uh going after in some way uh from the project.
SPEAKER_00Brad, do you want to explain what this chart means here for the folks in the chat room and for the podcast later on?
SPEAKER_01Yep. So this is this is um this is a chart that shows it's it's taken from the Department of Revenue's analysis of that that they submitted to to back up the governor's proposed uh volumetric um uh property tax. And it's a chart that shows the break-even price at a 10% rate of return, the break-even price at various uh uh upstream gas prices um and at various levels of capex at various levels of of the investment required uh uh in developing the project. And what this chart does, that the administration's chart, the Department of Revenue chart, didn't do is is calculate, look, look at the prices that exist in the market for LNG, in the Asia-Pacific market for LNG, and sort of say where the where the zone of economics are. That is what price which of these combinations that Department of Revenue came up with with are economic, which which would make the project work. Um and it's when you when you piece through this, you sort of figure out that uh uh uh Gaffney Klein has said ten dollars and fifty cents per MCF is going to be about the break-even price for the project that delivered into delivered into the Asia Pacific market. And so what you see in the dark green with the with the with the uh uh dashed lines and what you see with the red lines is is using that price uh trying to figure out which of these things are economic. And what it tells you is that is that the break-even price for this project is a lot higher, I think, than than what what the normal listener, what I took away from the governor's pre from the Department of Revenue presentation. The governor's presentation sort of left you with the impression that we had to do volumetric and we had to do it at six cents, because that is what was necessary to achieve the break-even price. What this chart tells you as analyzed by Gaffney Klein with the with the dashed lines on it, is no, there's a lot of money on the table, uh, money, money on the table in this project, uh at various levels, even at various levels of and uh even at higher levels of investment, like 20% above the base capex or 40% above the base capex, there's money on the table uh to be to be that's that somebody's gonna get out of this project. This sort of analyzes that some of that money could go to the upstream, go to the producers, uh, and the state will get a share of that through royalty and through production tax, but only get a share of that. Uh, but it also tells you that that maybe the six cents isn't the minimum or the maximum we can get out of this through the property tax, that there's there's higher levels that we can get out of the property tax, and the project will still be economic. So it's a hugely important chart in terms of finally being able to analyze the economics of the project, what's in the project in terms of potential profitability to still achieve the 10% rate of return, what's in the project in terms of profitability, and what the state, in its role as achieving the maximum benefit, what the state might be able to track out of it. I I think, I think this chart will be a key chart, should be, excuse me, should be a key chart going forward in analyzing not only the proposed six cents, but also the governor's proposed six percent property tax rate, but also uh uh the the upstream uh uh production tax and other revenue measures that the state is looking at in its role as achieving the maximum benefit for the state out of the project.
SPEAKER_00What does this tell you, uh Brad? What does this say to you as far as the viability of the project? What does this overall chart show you?
SPEAKER_01It's actually telling you, is that these numbers are actually telling you the overall project's viable, economically viable, at certain levels, uh at certain uh capex and upstream price levels. It's actually telling you the project's economic. Um I'm a little surprised by that, but it that's what the experts are saying. So it's it's a it's a fascinating chart from that perspective as well, telling you that the project may, in fact, there may be an economic project here.
Final Push For A Fair Fix
SPEAKER_00Well, we'll have to see what this means. And of course, uh Brian said that we're gonna have to that the chart's gonna take some ciphering for sure. Uh, we're gonna have to go through it and take a look at it and understand it a little better. Maybe we could have you come back and uh and break it down a little bit more for us uh as we go through. All right, final thoughts here, Brad. We're down to the last uh minute and a half here. Final thoughts uh for anything that you have left over this morning.
SPEAKER_01Well, I want to go back to the first thing about the PFD because that's gonna be on the House floor this week. Somebody, Neil's come the closest so far, but somebody needs to be correctly articulating what the issue is here. And somebody needs to be standing up and talking about that. There's a solution, that the governor proposed a solution early on that actually works, that actually serves as a solution that actually would provide alternative revenues to the uh uh to the uh PFD cuts in a way that um in a way that would not adversely impact middle and lower income, as much adversely impact lower and middle income Alaska families. I'm gonna be looking to the House debate to see if anybody will actually do that, stand up on the House floor and and and correctly articulate the issue.
SPEAKER_00Well, we're gonna have to see. Uh, I mean, this whole thing with the PFD, again, I'm not trying to be negative Nelly, but I'm I'm just coming to the conclusion that there is no political will to actually fix the problem. It seems like a continuation of the problem is um is what's right. I mean, like we said earlier on, avoidance is a strategy, right? I mean, that's kind of uh not only am I avoiding the cold, it's they're avoiding the reality of uh of the of the particulars for the rest of the uh state. That's where we're at right now.
SPEAKER_01Yeah, everybody, everybody sees political advantage to talking about it and posturing about it, not based on fact, but talking about it and posturing about it, and nobody sees an advantage to actually solving it, uh, or nobody's understanding that the solution is out there and is and is gutsy enough to actually articulate it uh in the legislative body.
SPEAKER_00Brad Keithly, Alaska's for sustainable budgets, the weekly top three. That does it for us today with Brad. Uh Brad, thanks so much. We appreciate it. Uh, look forward to coming back next week.
Closing And Where To Follow
SPEAKER_01Michael, as always, thanks for having me. 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.
