The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (5.25.2026)
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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 May 25, 2026.
This week, our top 3 issues are these: 1) we explain why the more we learn about how Phase 1 of the AKLNG project is intended to work, the more concerned we become about its potential impact on Alaskans (2:16); 2) we explain how some attempt to use the “federal income tax” argument to deflect attention from the economic impact on Alaska families of PFD cuts (18:20), and 3) we discuss how, just as the effort to inject more fiscal responsibility into the K-12 process at the local level is making some headway, the legislature steps in to undercut it (40:04).
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.
Weekly Top Three Setup
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 May 25th, 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 explain why the more we learn about how phase one of the AKLNG project is intended to work, the more we are concerned about its potential impact on Alaskans. Second, we explain how some attempt to use the federal income tax argument to deflect attention from the true economic impact on Alaska families of PFD cuts. And third, we discuss how, just as the effort to inject more fiscal responsibility into the K-12 spending process at the local level makes some headway, the legislature steps in to undercut it. And now, let's join Michael.
SPEAKER_00We're ready to crack into it here and get started. You got a lot of stuff uh to talk with us about today. So let's uh let's just get to
AKLNG Phasing Gets Real
SPEAKER_00it. First of all, uh the AKLNG is obviously sucking up all the oxygen on the planet, or at least in the state of Alaska, and we're beginning to think about LNG. How are we thinking about it? You said you've got some thoughts on it. Let's get started there.
SPEAKER_01Michael, I'm I'm changing, uh evolving, maybe is the better word, in how I think about AKLNG. A long time ago, back when AGDC still had control of the project before Glenn Farn came on the stream, uh came on the scene, uh, AGDC uh started talking about phase one and phase two. Phase one being the in-state portion, building the line down to NSTAR, and then phase two being the the export portion. And I always thought of that, frankly, as a marketing scheme. I always thought about that as, well, AGDC is trying to emphasize that this line isn't just for export, it's also for in-state use. Um, and so we're gonna we're gonna break out uh how we talk about it into phase one for the export for the for the state use and phase two for the export use. And I always thought that was that was sort of a uh a good way to emphasize the in-state portion, but I never took it seriously that you were actually gonna phase the line, break the line into these two phases and and and think about building one before you built the other. Because uh I've been involved in the economics on this line a long time, and the economics have always said you can't, you can't get a rate that's competitive with any source of supply, imported LNG, any other source of supply. You can't get a rate on the pipeline from the North Slope down to South Central without having, for the in-state use, you without having the export lines. And so I thought, well, this is, I mean, I always thought of as marketing and not a and not a serious phasing. I'm realizing, particularly with the with the things that Brendan Duvall said, the head of Glenfarn said at the governor's Alaska Sustainability Conference last week. I'm realizing that they're actually thinking about building, financing, committing to this line in two pieces. Fairbanks News Miner has an article on it that I think captures this well. It says Duvall stressed, this is they're talking about Duval's presentation at the sustainability conference. Duval stressed two things will determine when the project breaks ground. The first is the yet-to-be-announced agreement, a yet-to-be announced agreement with NSTAR, Alaska's largest natural gas utility, and the Alaska legislature adopting tax incentives. We've had to come up with an arrangement with NSTAR that can deliver gas from the North Slope that is more reliable and cost-effective than importing LNG, Duvall said. We're about to put the finishing touches on that so it can go through the Regulatory Commission of Alaska so we can get to a financial close. The RCA has final say on any utility-based agreements, tariffs, or rate adjustments. I've received enough proposals on private financing terms and conditions that once we convert into long-form documentation, we can build the domestic pipeline. And then elsewhere, uh the ADN or Alaska Beacon, one of the two has an article that sort of talks about other pieces of Duval's presentation and talks about the fact that they're not going to go to financial close, that they're going to defer, essentially defer, because they don't have the commitments yet, the purchase commitments, defer on what's now phase two until uh phase one is is underway.
When Phase One Costs More
SPEAKER_01Now, here's the problem with that. And and again, the the the uh Alaska Beacon has an article on this. It's quoting Dan Stickle, who's the chief economist for the Department of Revenue, in a presentation last week to legislators at the at the first hearing that that House Finance uh uh held on the in during the special session, House Finance held one last week. At the hearing that House Finance held. And here's the Beacons take on it. Dan Stickle, chief economist for the Department of Revenue, told legislators that the department's estimate estimate for the cost of imported gas in 2033, AKLNG's planned completion date, came to about $17 per thousand cubic feet range. He said the department based that figure on an estimate compiled by NSTAR in 2023, extrapolated to 2033. Even if the pipeline is significantly more expensive than planned, in-state gas prices would be cheaper than AKLNG, cheaper with AKLNG than without it, those estimates show. But that's only if the pipeline project is built to completion, allowing uh effectively allowing exports to subsidize the cost of in-state gas. The risk is if only phase one is built. The department in that scenario, the Department of Revenue estimates estimates South Central Alaskans would end up paying more than $27 per MCF under current law and almost $23 per MCF under the governor's proposal compared to the $17 per MCF of imported LNG. In other words, the the cost of the phase one gas would be more than $6, uh almost a quarter higher than the uh than the cost of imported um LNG. So that really, I mean, you if they're serious, if what Duvall said at the sustainability conference is picked up by the Fairbanks News Miner and by the ADN, if Duvall's serious about going forward with phase one without having phase two in place, without having the volumes from phase two, the the export volumes committed, then we're staring at a situation in which phase one could be built at at a cost significantly greater than imported LNG. What this does is this is gonna shift a huge portion of the burden. I mean, you notice Duvall said that they're waiting on two things, the contract with NSTAR, then the AK or then the RCA approval, then uh the tax approval, the modified tax. This is gonna put a huge, if this is what they're doing, this is gonna put a huge burden, a huge target on the RCA in its consideration of the of the NSTAR contract. And that won't, that won't be quick. It'll be a lot longer uh than a special session because there's gonna be a lot of people that'll want to be heard about that and the RCA will want to be dig into it if they're effectively putting Alaskans at risk of paying substantially more for gas uh under the AKLNG project than they would under under an import project. So it's it's changing the way I'm thinking about this whole situation.
SPEAKER_00Right. Does it uh do you see, do you foresee any contingency language or anything that can be wrapped up? I mean, again, splitting the project out has some attractiveness from certain aspects, but this obviously shows the the uh the dark underbelly of that, because again, getting the phase one project only means we're left on the hook, paying six dollars more per MCF than we would have if we just imported the gas. Uh, and as I've said many times, I really would like to be able to burn Alaska gas, but not if it costs me 35% more, right? I mean, I don't I don't want to be eating that cost. Uh, is there any contingency that you could foresee that would uh allow those two things to be connected?
SPEAKER_01Or I mean what what what how do we if this if this plays out in this way where they go to the RCA with only a phase one con with only phase one commitment, uh and the RCA is faced with an N-star contract, I see the RCA conditioning, uh clearly see the RCA conditioning the its approval of of the phase one contract on uh a demonstration that uh uh that Glenn Farn has gotten commitments to phase two. Effectively, going back to the way that I originally thought about it, phase one sort of being the marketing ploy to get, you know, get people to focus on the in-state aspect, and but phase two being absolutely necessary to be able to economically justify the line.
RCA Scrutiny And NSTAR Deal
SPEAKER_01I see the RCA. If the if if the N-Star contract doesn't do it itself, I see the RCA uh clearly conditioning uh uh phase one on phase two. And I don't, and I don't know what that does to the project at that point. But this is really, I mean, uh Duvall's statements last week uh and his focus on proceeding forward uh with phase one without phase two being in the bag, uh, I think is uh is is changing the dynamics of this in a way that uh that will put a lot of emphasis on the RCA. And I and and frankly, I I would expect the legislature, as they as they sort of you know change their focus to understand this, I would expect the legislature to have the same reaction, saying, look, you know, all this stuff that that that we're giving, all this stuff you're asking for that we're gonna give you some uh in terms of uh tax re uh abatement, uh that's gonna be contingent on getting both phase one and phase two uh in place because we don't, we the legislature don't want to encourage a phase one that's gonna end up with South Central paying $23, uh a third, as you say, a third more uh than uh than what even imported LNG is gonna is priced at.
SPEAKER_00It's uh it's interesting to watch again. I was uh along with you, I was seeing this whole discussion on the phase one, phase two, and and uh I mean, hey, look, uh I want to get Alaska gas, but the only way this ever remains economical is if we have the export possibility. And of course, with the legislature dragging their feet and everything else, we just you know, we have no idea where this thing is gonna go. Um, any you care to uh speculate at all looking at this uh with a special session in mind and everything else?
SPEAKER_01Yeah, I it's I mean, the focus, my focus is gonna be uh on the NSTAR contract. And boy, I hope that sucker doesn't come with a confidentiality agreement because it's it that's that's gonna be a big deal. I mean, NSTAR, the the reason utilities are regulated is because they're monopolists, right? And n star has some incentive to to get the lowest cost, but n star, as long as it can recover its full cost, is sort of indifferent to how much how much any of its supplies cost. Um, and so the RCA is sort of the second eye or the second viewer uh of what NSTAR is doing to make sure that NSTAR is in fact uh pursuing the lowest cost of uh supplies. So it's gonna shift, it's gonna shift the dynamic. If this is what they're if this is the road they're going down, we're gonna build phase one. We're gonna we're gonna finance, we're gonna build phase one, even before we before we have phase two locked in, creating the potential that phase one could be as far as it gets, and creating the potential that that's all we that's all that's all this line does. Um uh if if that's the way they're going, I expect the RCA proceeding to be to be pretty intense, uh, and frankly, uh potentially to overwhelm in terms of intensity the the legislative process.
SPEAKER_00Brad, what does this mean if we get phase one built? Let's just hypothetically let's what if out there, okay? So if they focus on this phase one and they get phase one built out, what does that mean for the um for the would then would then phase two be more ameleable to the DPA or to some of this other federal um uh some of this other federal insight,
If Phase One Is All
SPEAKER_00do you think? I mean, where do you think that that how would that fold out?
SPEAKER_01Well, the DPA would be would it would would require less money because the the two pieces that are remaining uh if you build uh if you build phase one, and and I want to say quickly that that's a big contingency, because I just I I don't see how phase one works if if that if the economics are as Dan Stickle described them. Uh but uh if you built phase one, then the DPA would only apply to or the the remaining facilities would be the the gas treatment facility, the big gas treatment facility up at the north slope uh to handle the Prudhoe gas, and the uh uh the the line across the Cook Inlet uh and then the LNG gasification plant uh down in Kenai. So that would be that's the that's phase two. That's the additional facilities to be added by phase two. And maybe I I don't know if they put the I don't know if you need compression. I think you need compression on the line to go to to go to the export volume. So you have to install some compressor stations down the uh down the pipeline as well. It'd be a low it'd be a lower price tag uh to if you're all you're trying to do is finance phase two. Um and so that would be easier for the DPA um uh to uh uh to cover. But that assumes that assumes that you've now got Alaska consumers hooked uh to pay the costs of uh phase one. So I it's um I don't it it it it changes it changes how you think about this process if you delink uh those two and think about financing and building phase one first.
SPEAKER_00Yeah. No, absolutely. Uh Rick asked the question. Good morning, Brad. Can you please go to Juno and give a class on this? Some need educated. Uh, because again, this is really the first time that we're hearing in detail about this whole phase one, phase two thing where they're trying to split it out. Um, I mean, I knew I'd heard some rumblings about it, like you said, to begin with, but I assumed it was just it wasn't an actual phasing. It was just trying to describe how it was going to work in two different phases instead of, oh no, we're actually going to break it out. Um, and going back to that uh Beacon article, um, 17 uh $17 per MCF um is you know the price range that they came in. What are we what are we paying right now? Do you know right off the top of your head what we're paying right now per?
SPEAKER_01It's it's about ten dollars, a little bit uh under ten dollars on the which is the weighted average of all the old contracts and the new contracts. Yeah. New contracts, the the the hex contracts, uh the John Hendricks contracts are like $14, $15, somewhere in that range. That's what we're paying. So we're paying for new supply.
SPEAKER_00$10 to $14, and it could go up to twelve. I mean, nothing like doubling the cost of energy. I mean, it's you know, I don't know about you, but I don't know if I could afford another $100,000 a year in operating costs around here if they doubled the cost of my energy. Um, I mean, that's a pretty significant jump when it's all said and done.
SPEAKER_01Yeah, and and as people have pointed out, I don't think that, to be honest, I don't think that $17 for imported LNG is right. If you look at the futures market for for LNG into the Asian market, it's going down over time. Ormuz, the Iran War has has sort of has sort of masked that and maybe changed the dynamic permanently of that. But if you look, the futures market is still saying that Asian LNG prices are going down. So if you look at that, I don't think the $17 is right. I don't think that's where we're going with with imported LNG. But even if you assume that's right, even if you take that as the number, uh uh delinking phase one from phase two and putting Alaskans at risk for just you know just having phase one at the end of the day is uh is a big issue. And and you know, some people say, well, there's no risk. There's no risk. You know, the the the the international volumes, the export volumes will show up. Uh and and so it's just a it's just a span of time. Don't worry about that. Well, if the international volumes, if the export volumes are gonna show up, they would have shown up by now.
SPEAKER_00The weekly top three
The PFD Federal Tax Claim
SPEAKER_00continues. I mean, we could probably go for another couple segments on this whole discussion about AKLNG and the ramifications and everything else, but we're gonna move a little bit over and start thinking about the PFD. And Brad has got some thoughts on what upper income Alaskans overlook when they talk about the PFD. And part of that is this opinion piece that was in the ADN that was I mean, it was a great history lesson, but boy, there was some hoity-toidiness that was built into this thing. Brad, uh, give me your thoughts on it.
SPEAKER_01Well, Don Mitchell wrote uh Don Mitchell, who's a longtime lawyer, Alaska lawyer, wrote uh this ADN piece, and uh in the and the title of it is Jay Hammond's very bad idea. And it goes into uh goes into the history of the PFD and how it got put together and uh uh mentions all of the key players along the way, including including the Zobels. Um uh but then sort of winds up in this in this conclusion that says that the PFD was a very bad idea because the PFD is taxed at the federal level, and because a portion of the PFD being distributed to Alaskans ends up in the federal government's pocket uh through tax, which is sort of correct. Uh there are ways the ways to deal with that, but but sort of correct. But here is and that's the way the top 20% look at the PFD. They look, oh my gosh, you know, I'm paying a tax on this PFD. That's number that's dollars that could go to the state if they never paid me a PFD. And so we're having this leakage of federal of federal tax dollars uh uh out the door. And that is what uh uh Giesel cited, Giesel and others cited in 2017 uh when they decided when they led the legislature to continue PFD cuts that have been started by uh Governor Walker. They put a lot of emphasis on on this federal leakage that uh that Mitchell talks about, and Mitchell's going back to it. But here's the thing there's a whole other flip side of this that that that that sort of makes this issue irrelevant. And the flip side is there are other ways to raise the same amount of revenue that bring in a lot more outside money uh uh into the state than going out the door to the federal government through PFD cuts. If you look at the ICER, uh the most recent ICER study, the 2026 ICER study released at the at the beginning of this session, if you look at it, it shows that sales taxes, um, even before you get to seasonal sales taxes, but sales taxes and an income tax even, uh, brings in more money from, brings more money into the state from non-residents, uh, from outside sources than is going back out the door uh through uh uh taxation of the PFD. So replacing uh replacing PFD cuts as a revenue source with sales taxes and income taxes is a net plus for the state. We get more money into the state using the the 2026 ICER report. We get more money flowing into the state, substantially more money flowing into the state uh by using one of those alternative revenue measures uh as opposed to using PFD cuts to uh to raise uh to raise the money. Uh Matt Berman from ICER has has even mitigated the issue even more in uh his op ed and the ADN a couple of years ago. Ago, Matt Matt described a way that you
Better Revenue Options Than Cuts
SPEAKER_01could use uh uh you could you could take the PFD as an offset to uh tax responsibility, and you could use and you could find and you could develop a way that reduced the the federal take through uh through federal income taxes uh even more. There is no mention of any of that. No mention of any of that in Don Mitchell's uh uh uh op-ed piece. And and and it's and it's reflective of the way that the that the top 20% continually think about the PFD. They think about it as, oh, it's free money, uh, I got to pay taxes on it. Uh if I didn't, if I I don't really need that money, if I don't take the money uh and it goes back into the state, then then I get more free government uh out of the state by uh by that state using that money as opposed to me using the money. What they don't focus on, what they don't look at, and so that's that's where the analysis starts, their analysis starts, and their analysis ends. They don't look at the alternative revenue op alternative revenue measures that could bring in the same amount of money and fund that, fund government with a lot more of outside money than uh than we're losing uh, according to Don Mitchell, than we're losing uh through PFD cuts. So it's it's I mean, all Mitchell's thing does is sort of typifies what I've called in past uh landmine columns the myth uh of uh of of the federal tax problem. It just typifies the way the top 20 thing, top top 20% think about this issue. They only think about it one-dimensionally. I don't know why. Well, I do know why. I mean, it's it's in their interest to think about it one-dimensionally. But if you if you think about it multidimensionally, if you think about other alternatives and the impact on Alaska from those other alternatives, uh, then uh then the the the federal tax issue is a is a relatively minor issue in the uh in the scheme of things. It's an offset to a far bigger number of outside money that's coming into the state through the through the other other revenue approaches.
SPEAKER_00That's what you know what really kills me here, too, is that aside from everything you just laid out, which is 100% correct, the one thing that he doesn't mention, he he mentions in the article here um that uh you know uh if they if they paid only 10% on the money that's been given in PFDs over the years, it would be $3.12 billion that would have been able to finance education and rebuild the port. And he goes through this. But I'm like, do you know how much money comes into the state every year from the feds? We are nowhere near. I mean, it's what six billion dollars this year alone. You're talking about since the dividend program started, they've made maybe three or four billion dollars in taxation off of it. It's almost nothing. And he just skips right over the fact that we put $31.29 billion into the state economy since 1982. $31 billion in the hands of private citizens, bolstering. But again, it just shows them, shows us again, they don't really care what's going on in the private economy. They don't really care what's going on in the private economy, right? It's it's it's it's the it's the public economy or bust, it's the government economy or bust. Doesn't matter that that $31 billion went in there and bought heating oil, propped up businesses, started new ventures, put kids' clothing on, did all those things. You know, I mean it's it reminds me of the old stamp that one of my bosses used to have that he would put on past due bills that said, please it was a big red stamp, and it said, please pay us so we can pay them so they can pay you, right? I mean, it's a big circular thing where that money was in the economy, and they just he's that's one sentence and he skips right over that effect at all. It's always about the government. It is.
SPEAKER_01And that's I mean, and that's what what we heard from Giesel and the others in 2017, and we continue to hear uh from from those. It's more important to have that that money in the hands of the of the government. It's more important that 21 plus 11 plus one make the decision. What was uh 30, 32, 33 people in the state of Alaska make the decision about how to spend that $32 billion, as opposed to the 625,000 people who would otherwise uh receive the PFD check and would make individual decisions about about the needs of their life and the wants of their life, as opposed to government, you know, uh uh making the making the overarching decision. It's just I this myth about you know that we've got to do this, we've got to do this because of the because of the the federal tax impact is just you know drives me a little crazy because it's just it's a one-sided analysis of the of the of the issue. It is a factor, it's a factor to be taken into account, or in the case of what Matt Berman has proposed, a way to be a beta, a way to be reduced, it is a factor, but it's not the only factor by any stretch of the imagination of how you ought to analyze uh the issue of whether you make PFD cuts or use alternative revenue approaches to uh to raise the revenue. Alaskans would be paying, Alaskans would be paying in terms of the total, total revenue, Alaskans would be paying something like 30% less, 25% less, uh, 25% less for the costs of government if we used a seasonal sales tax, as opposed to using PFD cuts. We would keep Alaskans would keep 25% more in their pockets. Um uh 25% of the cost of the of the of the amount of the PFD cut, or the amount of the revenue being raised. We keep 25% more in their pockets if we use a seal sales tax to raise the revenue as opposed to PFD cuts. But yet we get we get something we get something like this says, oh no, we've got to continue to use PFD cuts because we pay pay the feds a little bit of it as opposed to as opposed to getting outside
Tax Aversion And Who Gets Hit
SPEAKER_01money.
SPEAKER_00It just shows again the whole tax avoidance, right? I mean, that's the whole problem. It's the tax aversion that all those people on the right have. They become so tax adverse that they're cutting off their nose despite their face, not realizing you have to pay for government in some way, shape, or form. And there are better ways. If you had a seasonal sales tax, you could again save 25%. If you had the seasonal sales tax with the outside, I mean, the numbers show up to 30%. We could be keeping 30% more in our pockets, but no, we can't because it has the T-word in it. That's the problem. Uh, just because they're not calling the PFD theft a tax, people just say, okay, it's not a tax then. I mean, it's it's Randy all over again, right? I mean, that's that's where we're at right now. Uh, if they called it a tax, maybe we'd be having another argument here.
SPEAKER_01Yep. And and and you're right. I mean, it's cutting off our nose to spider face. We're we're bleeding more money. Uh, well, we're not taking in as much outside money as we could. We're bleeding the Alaska economy more. We're bleeding Alaskans more uh by using PFD cuts uh to fund government than we would if we used a sales tax. We're bleeding Alaskans substantially more uh by using PFD cuts than if we than if we used a sales tax. And we talk about, oh no, you know, we're concerned about the Alaska economy, we're concerned about outmigration. Who are we bleeding by using PFD cuts as opposed to a sales tax? We're bleeding middle and lower income Alaska families, the very ones that are middle income Alaska families, the very ones who are leaving the state in the in the great outmigration.
SPEAKER_00That's the thing. If you had 25 to 30 percent more money in your pocket every year, would you be thinking about leaving Alaska if you had 25 to 30 percent more of that money in your pocket? Would it be such a discussion? Would it would it even be on your mind if you had that kind of money floating around in there? But no, again, it's so tax averse that we we can't even conceptualize, we can't think about it from a standpoint of we are required to have some form of government and that government must be paid for, but we are so tax averse that we can't even consider the fact that there may be an alternative because it's got again, because it's got the T-word in it. Um, and uh, I mean, that's just short-sightedness on our part. If you really cared about people leaving the state, how about putting 25% more money in their pocket? I mean, what?
SPEAKER_01Yep. And but but Don, Don Mitchell's, I mean, that's not the way the top 20%. It's not the way that the the the the donor class thinks about it. They think about it as, oh, I don't need that money. Um, and and yes, a portion of it's going to the federal government. And so I don't need the money anyway. So hey, government, you keep it, you spend it, uh, and and we'll save the tax on it, as opposed to thinking about alternatives or oppos as opposed to thinking about middle and lower income Alaska, Alaska families. I'm I had a I've had conversations with legislators about this very issue and about you know the focus on impact on the middle and lower income Alaska families. And it's just like a it's a blank look on their face. It's like it's like you know, like deer in the headlights are just staring, staring into the abyss. They just don't think about it that way because it doesn't affect them personally that way. With the with the with the uh salary change, with the salary increase they got a couple of legislatures ago, they are in the top 20%. Every last one of them is in the top 20%. And so they think about it the same way that Don Mitchell does, notwithstanding the fact that it's affecting the other 80% of Alaska families adversely. It just, it just, you know, they can't compete, they can't see the issue broadly. They can't see the issue from the standpoint of how it's affecting all Alaskans. They just personalize it and think about it from the from the stand from their stand, their particular standpoint.
SPEAKER_00It's amazing to think about. And this is a conversation that you and I have been having for 10 years on this program. We've taken a lot of slings and arrows over it because how dare you talk about a tax. But the more you look at it and the more you realize it, we've been saying basically that we have to have the discussion about tax, otherwise, they're going to put the most onerous, most critical uh crippling, you know, the worst form of tax will be placed on us if we don't have the conversation about it. Because it's not a question of do you want a PFD or a tax? It's do you want to have a PFD and a tax or no PFD and a tax? And it's essentially going to be no PFD and a tax, and it will be the worst form of taxation that you could possibly have.
SPEAKER_01Yeah, it's it's revenue, right? I mean, some people say, oh, PFDs, uh, I think that of the PFD is a tax. Matt Berman. Other economists think of the PFD as a tax. But Randy and others say, oh, no, it's not a tax. So if you don't want to talk about it as a tax, talk about revenue measures. Say, say, okay, there's there the PFD cuts are revenue measures. Hard to argue with that. PFD cuts are revenue measures. They put more revenue in the in the government's hands. They divert, they withhold and divert revenue that's otherwise going to Alaskans into the
A Blind Test Of “Revenue”
SPEAKER_01government's hands, revenue measure. Compare it to other revenue measures. Compare, just, you know, sort of have a blind taste test. Don't call call it option A, option B, option C. Option A is the most regressive revenue measure you can have. It takes the most out of middle and lower income Alaska families. Option B, and and in a portion of it uh is saving money that otherwise would go to the feds, but only a portion of it. Option B reduces the impact on middle and lower income Alaska families, 80% of Alaska families substantially. It spreads the burden, includes uh non-residents, uh, and has a much lower impact on 80% of Alaska families. Option C does the same in a different way. Um, so option blind taste test. Option A, big impact on middle and lower 80% of Alaska families. Option B, much lower impact on middle and Alaska families. Option C, much lower impact on middle and Alaska families. Which would you pick? Option A, option B, option C. If you did it on a blind taste best test, you'd have differences between B and C, but I doubt A would get very many, uh, very many votes. Uh, but but but because we put labels on them, because we call option A PFD cuts, option B tax, option C tax, because we put those labels on them, then we have different results just because of the labels, not because of the economic impact, right? Just because of the labels. And that's and and and Don Mitchell is perpetuating that sort of that sort of analysis, if you can call it that. That sort of analysis of the situation.
SPEAKER_00That sort of fantasy, I think is what I call it. Fantasy. Barbara says, Who is Don Mitchell and why should I care about his op-head? Don Mitchell's just a guy in Anchorage. Uh, but uh again, I think it's indicative of kind of that upper, you know, 20 percentile, the the donor class. It just gives you a snapshot into the ideology of the donor class, right, Brad? That's essentially what this does.
SPEAKER_01Don is uh uh a lawyer in Anchorage. He's he's famed for his uh uh knowledge about uh uh native issues, um uh land rights uh and other uh native issues. That's that's the predominance of his practice. But sometimes he bleeds over into other things. Don't a little arrogant, he's a little elitist, um, and uh and and you can sort of you sort of factor that in when you read his stuff about uh about native issues, but it really comes blasting through in uh in this op-ed. But a lot of people in Anchorage uh and around the state, frankly, are going to recognize Don's name because of his uh notoriety on uh on native uh native rights issues. Um and um and and so we'll read it because of that, right, and and we'll take it into account because of that.
SPEAKER_00He wrote a two-volume history on Anilka and and uh another book on tribal sovereignty and some other things. So he's he's he's known. He's a known quantity out there. Um Willie says the piddling amount of PFD taxes headed to the feds is irrelevant compared to the amount of federal money in every state budget. That's what I was just talking about. I mean, the amount of money that they've taxed out of Alaska since 1982 wouldn't even make up one year's worth of federal subsidies into the state. Um, I think it's about half of one year of uh current federal subsidies into the state. So to me, it's a piddling amount uh when it's all said and done. And then uh who else what I think I think Barbara said something else. Oh, yeah. If you don't need the money, because Brad was like the the top 20, you're like, we don't need this money, then don't apply for it. But they're again, they can't help themselves. They're gonna apply for it anyway, right, Brad?
SPEAKER_01Yeah, what they view, what what and and I've got a lot of friends in this, in this, in the income bracket that that I have these long debates with. But what they view is giving up the P PFD, giving up that that amount, is their way of insulating themselves against taxes. It's their way of saying, state, take this money, don't take, don't have taxes, and don't take money through sales taxes or income taxes. And they're saving huge amount. I mean, that that trade-off saves them a huge amount of money. They're the income bracket that would pay more, a little bit more, not a huge amount more, but would pay more with sales taxes or income taxes than they do through PFD cuts. Everybody else, the other 80% would pay less uh with using sales taxes or income taxes uh instead of PFD cuts. But the top 20% um save themselves money by by using PFD cuts. So it's their way of saying uh we don't need it. We we take it, uh uh take it from us and and save the federal tax piece of it. Uh uh and that way, and that way you don't have to tax us.
SPEAKER_00Well, it's their way of shifting the burden. It's their way of shifting the burden away from themselves and onto the lower 80%. Uh, I mean, that's kind of an ugly way to say it, but that's uh that's that's where it is.
SPEAKER_01No, it's that's clearly right. Yeah. And and and they don't they don't think about the second half of that. What they think about, they don't think about where the burden goes. They just think about they don't have to uh bear the burden uh if the if they will take the PFD instead of taxes. And so that's the end of the thought process. I mean, that's that's when I have discussions with the legislators, that's the end of the thought process with them as well. I don't have to bear the burden.
SPEAKER_00Yeah. Uh Willie points out some of the irony here. He says he's a native rights activist and he's paid big time from BIA grants to the tribes, yet the PFD theft hurts villages more than anything else. I mean, it, you know, there's some irony there. And Harold and I actually agree. He said without a constitutional amendment to direct the financial returns directly to the people, 50% into the permanent fund, 50% into the PFD program, and require the state to tax Alaskans for services, the current Venezuela economy in Alaska will prevail. And he's not wrong. It's a command economy. I mean, that's where we are right now. They are deciding it. They get to, they, they get to direct it. And without some kind of protections or constitutional amendment to require them to pay it, this is where we're at. We're always going to be at the mercy of the legislation of the whims of the political whims of the legislature.
SPEAKER_01Yeah. It may be time for me to haul out my taxation without representation claim as well. I mean, they're deciding the fate of 80% of Alaskans, at least on this issue. They're decided that deciding the fate of 80% of Alaskans. And there's no eighty that none the none of the legislators are from that 80% because of because the legislative raise are all they're all in the 20%.
Local Pushback On K-12 Spending
SPEAKER_00The final of the weekly top three, number three, uh, because I can count that high because I am a Lathrop graduate, pushing back on K-12 spending. Everyone's pushing back on it except the Alaska legislature, it seems. They want to take more and more under themselves. Um and uh it's, you know, I mean, all I see is a runaway train right now on this spending for uh for K-12 spending. Brad, what what's your take on this?
SPEAKER_01So this is an interesting dynamic. Um we we did a segment several months ago now on why uh Alaska is or that the fact that Alaska has the lowest local contribution to K-12 spending. Um that that Alaska is uh maybe the bottom three in terms of local contribution to uh to K-12 spending. Um and and my uh take on that, that that encourages localities not to really be very, I mean, they don't have much skin in the game in terms of in terms of K-12 spending, most of it comes from the state. And so they don't really push back on K-12 spending. In fact, they sort of encourage additional K through 12 spending because that means more state money coming in to their communities that they don't that that they don't have to raise among the state.
SPEAKER_00And if I recall, down in the states, the average is about 40% comes from the state, 40% comes from the local community contribution, and about 20% comes from the Fed. And up here, it's like 20% comes from the local contribution, right? The state's picking up most of the kick right now.
SPEAKER_01Yeah, that that's that those are I I think that in some districts the state kind of the local contribution is even less than that. So one of the things that one of the recent developments that was a little bit encouraging was the defeat of the bond issues in Anchorage, uh, because that meant that even at these low levels, uh, we were getting local pushback, we're beginning to get local pushback on uh on K through 12 spending, that there was some pressure on the on the boards to become cost effective because the localities, their their own constituents, were starting to push back on uh uh on uh on spending. It it looks like, I mean, there's there's not a there's not a there's not a statement or there's not a uh uh an article uh that directly ties these two, but it looks like what the response really is uh to um uh to the Anchorage Bond issue, to things like the Anchorage Bond issue, where the localities are beginning to, the constituents are beginning to try to make the boards more responsible uh with respect to dollars. It looks like what's happening is that's just increasing the pressure from the localities on the state to get even more and and reduce the uh reduce the the pressure on their from their constituents to to manage the dollars better at the local level, uh, reduce the pressure on on at the local level by having the state flood even more money into the local districts and reduce and and reduce the the dependence on on local uh on local sources. And and sort of it's the reverse impact of what you would have hoped from the Anchorage Bond issue, which is more economic uh uh realization, more economic thinking at the local board level. It's it's it's simply said, oh, well, we just need to go to the state for more money. Um, some of this shows up. There was an op-ed before the end of the session uh from uh Suzanne LaFrance, the mayor of Anchorage, and and Grier Hopkins, the mayor of Fairbanks. Uh there was an op ed in the ADN that said, Alaska needs to recalibrate its school funding before communities break. Uh and that was a big push by the two mayors to say, look, the state. Needs to bear more of the share of the cost of schools than than than the huge share they're bearing even now. The state even needs to bear even more of that before the communities break. What they really meant in terms of before the communities break was before the communities had to deal with the fact that their constituents said no more, were saying no more. That you need to you need to manage these monies more wisely. Or in the case of Anchorage, before Anchorage had to go out with a sales tax and say, look, you know, we can't raise any more from the property tax. We need to raise from the sales tax and have and have constituent pushback from that. And so what they were, what the what this what this op-ed really says is, look, we need the state to give us more money. We need to give it you need to give us relief from dealing with our own constituents because our own constituents are saying even even the small share that their own constituents were paying, the small share of the overall, you need to give us a break by giving
State Takes Costs From Districts
SPEAKER_01us more money so we don't have to deal with our own constituents uh in pushing back on the costs. And the legislature, uh again, you can you can sort of trace this line uh by following following the moving ball. Uh the legislature has responded to that. Uh at the at the end of the legislature, uh the legislature put together this education package, this K through 12 package, that gave more one-time funding to uh the to the K through 12 schools and did a couple of other things. One was the legislature, and this was a big vote. I mean, this was a vote that conservatives voted for as well. The legislature agreed that it would that the state would fund the energy costs of the local districts from now on, uh maybe beginning in 2028, but would they would fund the energy costs of the local districts? The energy the local districts no longer had to be concerned about energy costs. Now, the legislation says that the local districts have to report on their energy costs and they can't increase energy in a variety of maybe effective, maybe partially effective constraints on what that on what the local districts have to do with that excess funding. But but the state said, look, you don't have to pay for energy costs anymore. We'll take that on as a as a state funding obligation. So that'll we'll take the pressure off your constituents to that res to in that respect. And then the legislature also approved uh a cap, a new cap on the amount of local contribution uh that has to be made uh by uh the localities, uh reduce the cap to to 4% or the increase to 4%. And so and so what the state's doing is saying, yeah, we know you're getting pushback by your local community. So so we'll help out by by increasing the state who doesn't have any money. Right. We'll we'll we'll help out by increasing the amount of state funding so you don't have to face your own constituents uh as much as you've been facing this, facing them, because we see that your constituents are fed up as well.
SPEAKER_00And to put it in perspective, that just the energy component of that is almost a hundred million dollars a year, eighty-nine million dollars a year plus some other stuff, but it's almost a hundred million dollars a year just in energy costs if they pick up and they want to do that by the end of 2027. They want to be picking up 100% of all the energy costs for all the schools around the state.
SPEAKER_01Now, the legislators, I mean, the this whole debate was just fascinating. Um, the legislators were saying, well, we're doing good things for our constituents. We're doing good things in terms of, you know, relieving them of in each of our districts of relieving them of the obligation to pay for it by picking up at the state. Who the hell do they think is picking it up at the state level? It's going to be picked up by increased PFD cuts. The way, the way we've been financing the marginal source of revenue at the state level is increased PFD cuts. So it's another one of these deals where we are unwinding the obligation for certain people by increasing the obligation for everyone to pay more. So those certain people, the ones in the in the districts uh that that get relief out of this, certain certain people don't can can pay less. And the legislators are claiming credit for all the good they're they're doing. It's uh it's it's a wild thing. We had a big internet hiccup there.
SPEAKER_00It was a big internet hiccup. Uh, all right. Final thoughts, Brad. It's funny that what? Finish your thought.
SPEAKER_01Well, it it's it's funny to see legislators who many of whom, the conservatives of whom often rail against increased spending, often you know, oppose increased state spending, affirmatively increasing the state's obligation uh in order to protect the the localities from pushback by their own constituents, from their own constituents who are paying just a fraction of the total cost, pushback from their own constituents saying no more. Rather than accepting that the constituents have a point that maybe the local boards ought to be looking at their spending levels, the state's gonna come ride in and save them.
SPEAKER_00And it wasn't just Anchorage that just defeated that $12 billion education bond. It was two years ago in Fairbanks when they tried to bust the cap for $10 million for education, and Fairbanks overwhelmingly blue Fairbanks said no. And blue Anchorage said no. Uh, even those folks are like, no, we can't do any more than that. We keep, you know, we just can't keep going. And again, where is the pressure? Uh where is the pressure on the uh on the school boards to do the right thing, to budget correctly, to plan for the worst case scenario instead of the continual best case scenario. That's what we're facing right now. We need to have these school boards facing the worst case scenario so that they come up with something that will fix it long term.
SPEAKER_01Yeah. I mean, in Illinois and other states, but the the pressure on the local school board is what has led to consolidation. I mean, school districts, small school districts have realized they can't do this on their own. And so they consolidate to get economies of scale, they consolidate with the larger into into larger districts uh and and reduce costs at that way. What's what's happening in Alaska is we're we're we're taking the pressure off those local districts, increasingly taking the pressure off those local districts and putting it on the state. And the local districts are saying, hey, we don't have to consolidate. We don't have to look for economies of scale. We don't have to look for economies in our energy usage. State's gonna fund it, state's gonna ride over the over the hilltop and save us.
SPEAKER_00Yeah, no, it's uh like David said, the legislature keeps rewarding bad behavior in school districts. The worse the districts fail, the more money they get. Like for energy, now the legislature provides it's more money, schools will be less conservative in saving energy, resulting in more energy costs in the future. I mean, it's the same kind of thing. Uh, and again, where is the pressure on the school districts and the boards to actually live within their means? They if they know that Uncle Sugar is always gonna come in, Uncle Daddy's gonna come in and always give them more money, where's the incentive to do more with less? I mean, that's that's the biggest problem. Um, we ran right over the end of the hour break. We had a big internet hiccup there, and I lost my timer and I looked up and realized that it jumped ahead. Anyway, we uh we ran right over the top of the hour. So we got about two minutes here, Brad, before we run out of time to jump into hour two. So final thoughts for today on the weekly top three.
Final Watch List And Wrap
SPEAKER_01Well, I think the final thoughts go back to the back to the AKLNG project. I think there's a for me, there needs to be an increased focus on this phase one, phase two break, and there needs to be an increased focus on on the cost of phase one, and there needs to be an increased focus on protecting Alaskans in the event uh uh that uh phase one is the only thing that's ever built. Phase two is never built. I know people will say, oh, phase two's got to be built. Don't worry about it. The the the export volumes will come out and it'll save Alaska or save Alaskans a lot of money. But the export volumes haven't shown up, the contracts haven't been finalized. Uh and and I'm not sure I'm I'm willing to buy, I think as Gary Stevens put it, can't believe I'm focused I'm I'm quoting Gary Stevens. But uh, but I'm not willing to buy a pig and a poke. Um I'm not willing to rely on the fact that the the interstate or the international volumes, the export volumes are gonna are gonna ride to the ride to to the to the save to the save here. Uh I think we need to focus on if if that's if if if Glen Farn and if the state's gonna do break this into phase one and phase two, we need to focus then on each individually and on the economics of each individually without assuming that that the that the export volumes show up.
SPEAKER_00No, I mean I I mean I would uh 100% agree with that. We we can't bet on the it's betting on the if come, right? Until we see something solid. I just I can't uh I can't buy into the fact that uh that's actually going to happen. Um and I and I just wonder, give me the over and under real quick here, Brad, on what do you think happens in the legislature and where do we where do we end up at at the end of the summer with this LNG project? Where do you think?
SPEAKER_01Well, if we're breaking fate into phase one and phase two, the legislature actually becomes a lot less important than the than the RCA. And the and the N-Star contracts be the N-Star contract becomes the big issue, and the RCA becomes the big issue. And and if that's if that's what happens, then at the end of the summer, we're still waiting. We're we're waiting because the RCA is not going to move that quickly. The RCA is not gonna rubber stamp a contract that potentially puts Alaska families uh at uh at substantial risk uh like the like the phasing would would seem to do. So it's I I the legislature has become less relatively speaking to the RCA, this phasing is making the RCA much more important than it has been, and the legislature is sort of in the same same area.
SPEAKER_00All right, Brad Keithly, Alaskans for Sustainable Budgets, the weekly top three. Thank you, Brad. Appreciate it.
SPEAKER_01Michael's 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 for the next edition of the weekly top three.
