The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (6.22.2026)
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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 June 22, 2026.
This week, our top 3 issues are these: 1) we explain why, by following a one-way fiscal policy that favors spending over revenues, Governor Dunleavy is making the state's already bad fiscal situation even worse (2:26), 2) we explain why we believe the Senate is right in proposing to fix Alaska's Subchapter S oil & gas loophole and what we will be looking for the Conference Committee to consider as it attempts to resolve the differences between the House and Senate on the issue (17:36), and 3) explain why we believe former Governor Walker's proposal to terminate the PFD is equivalent to Texas or Louisiana confiscating the royalties owed to private mineral interest owners in those states (40:05).
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 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 June 22nd, 2026. The weekly top three is a regular segment on the Michael Duke Show. The show broadcasts on both Facebook Live and YouTube Live, as well as via streaming audio from the show's website weekdays from 6 to 8 a.m. I join Michael weekly in the first hour of Tuesday's show from 6.10 to 7 a.m. for a discussion between the two of us about our three issues. We post the podcasts 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 by following a one-way fiscal policy that favors spending over revenues, Governor Dunleevy is making the state's already bad fiscal situation even worse. Second, we explain why we believe the Senate was right in proposing to fix Alaska's subchapter S oil and gas loophole and what we will be looking for the Conference Committee to consider as it attempts to resolve the differences between the House and Senate. And third, we explain why we believe former Governor Walker's proposal to terminate the PFD is equivalent to Texas or Louisiana confiscating the royalties owed to private mineral interest owners in those states. And now, let's join Michael.
Deficit Framing And Veto Logic
SPEAKER_00I want to get started here, and you we're going to get started with number one, which is uh Dunleavy's, what you're calling Dunlevy's one-sided fiscal policy. So uh walk me through where you're at on this and uh what your what your thoughts are here this morning.
SPEAKER_01Michael, I think uh I think every segment I do from now on, I need to start with this statement. This the state of Alaska is facing $1.9 billion in annual deficits over the next 10 years and maybe growing growing beyond that. $1.9 billion in annual deficits. That's sort of the that's sort of the ground floor to to everything that that at least I uh am thinking and everything I I'm talking about. It's that's that's the starting point. $1.9 billion. So with that starting point, I look at what the governor did uh in the in his veto messages and in and in what he allowed to go into effect um uh after the end of the regular session. And in the in the stuff that that occurred on, I guess what was it? It was Thursday afternoon uh before the Friday session. Um, in the stuff that that went on uh then, he vetoed some things and allowed some things to go into effect. One of the things he allowed to go into effect was the education minibus bill that had been put together in both the House and the Senate. It was sort of they they took a bunch of things that had passed the House and they brought them all together in the Senate. Uh, the education minibus bill. And that bill increases education spending. Doesn't increase it as much as the BSA increased last year, but it increases ongoing education spending, at least in a couple of areas. One is with respect to transportation funding. They they allowed a provision that uh uh increases the amount for transportation funding within the K-12, K-12 transportation funding, increases state contributions toward transportation funding as uh as gasoline and other energy costs uh uh increase. The state's taking on that burden. It's no longer going to be a responsibility of the localities, the states taking on that burden. Um and another thing that got rolled into that bill was a cap on property taxes, a cap on the increase in property taxes among the boroughs. Um and that's you know, that's fine, but what that translates into is increased state funding because the way the formula the formula works, you set the you set the BSA or you set whatever the education funding level is, you deduct from that various things, including the property tax contribution made by the localities, and then the state picks up the rest. So if you cap what the localities are contributing, if you cap the property tax calculation that the localities are contributing, the state, the state share increase increases. So he allowed that bill to go into he didn't sign it, but he allowed that bill to go into effect uh that increases state spending. Then he turns around and he vetoes two bills that would have increased revenues. One is one was the corporate income tax law update, which is sort of bizarre because that passed the legislature last year. Um, and then he vetoed it. The legislature tried to override it, got close, didn't. But part of the reason they didn't veto it is the governor said, Well, I'll come back with a fix in the in in this session. He came back with the fix as part of the fiscal plan, uh, the the corporate tax law update as part of the fiscal plan. And then and it passes, not the whole fiscal plan passes because it was part of the part of the fiscal plan that includes sales taxes, but but but it was in his fiscal plan that passes, and then he vetoes it again. Um, so that was one thing. And the other thing was this e-cigarette tax that you and I have gone round and round on before, but that gets vetoed also. Both of the explanations for those is that uh Alaska needs, quote, a comprehensive fiscal plan, not one-off tax measures. Well, yeah, but a fiscal plan includes both spending and and and revenues. And again, let's start with a statement: $1.9 billion in annual deficits. That's what the state's facing. In that context, he allows increased spending to go into effect, but not increased revenues. And so we've got we've we've added, he adds to the problem by allowing the the minibus, the education minibus bill to go into effect, increasing long-term spending, increasing that $1.9 billion deficit by some amount, probably not a huge amount, but by some amount. I mean, relatively $1.9 billion is big enough on its own, but increases that and at the same time vetoes the revenue measures. I I get I get that we need a comprehensive fiscal plan. Believe me, I think we I've talked about it as much as anybody, right, about the need for a comprehensive fiscal plan. But a comprehensive fiscal plan includes both the spending side and the revenue side. And I just don't get allowing spending increases to go into effect uh at the same time as your vetoing vetoing revenue measures. If you need a comp if you want to, if you want to shut things down until you get a comprehensive fiscal plan, shut down both the spending side and the revenue side until you get a comprehensive fiscal plan. Don't let, particularly given that we have, what's the what's the magic number? $1.9 billion in deficits that we're annual deficits that we're facing, particularly, particularly given that we're facing that amount of deficits. Don't let the spending side go into effect and not let and not let at least some offsetting offsetting revenues uh go into effect. It's just I don't I don't understand what he's doing. I mean, now some are going to say, probably quickly say, probably some are already typing it, oh, but the legislature would have would have overridden the veto. Fine, let the legislature make that mistake. Right. Don't, but don't get out in front of it and make the mistake yourself of allowing that to go into effect uh before before you have a comprehensive fiscal plan. And don't make the mistake of letting that go into effect without allowing the offsetting revenues to go into effect.
SPEAKER_00I was wondering when I saw this, uh, you know, as I watched this happen, I thought, you know, first of all, I was a little shocked that he let the um the school funding, especially because it was going after the the the heating and the you know the energy and the electric usage, where you know we're gonna all of a sudden we're gonna be the state's gonna be on the hook for all these uh energy costs for all these uh school districts. And I thought I was really shocked that he just let it through without a veto, uh and and then like you said, pass it over to the legislature to override if they want to. But at the same time, I was thinking, hmm, I wonder if he's trying to buy goodwill on the gas line. Uh, you know, but again, buying goodwill from the legislature at this point is just a not, it's it's a no-win. There's there's you why, Mike? Why would you want to do that? Because they're there, they have no goodwill towards the governor, they want they have their own agenda here. I don't understand why he allowed that to go through any because we we did the math on that. That's a significant amount of money. Um, we're talking about increases of three, four hundred million dollars a year potentially, uh, when you start calculating all the energy and things that they would have to pay for for all the districts around the state. That's a significant amount of money that
Education Cost Shifts And Incentives
SPEAKER_00you're adding to that bottom line. Like you said, starting out $1.5, $1.6, $1.9 billion, and now you're going to add to it. It just doesn't look good.
SPEAKER_01Yeah, it's it's and and the incentives get screwed up, Michael. I mean, so the local districts, this is this is the problem I have with our low local contribution level in any event. The local districts make the decisions about about you know how many buses they have, about you know how they what energy source uh uh and how much they pay for the energy source. Now, yeah, yes, there is this market energy sources, but how many, how much invest they invest in conservation? They have the the local districts have that decision-making authority. And now all of a sudden we've said you don't have to worry about the costs of uh of you know making the decision that you're gonna continue to to use the energy sources that the state's gonna pay for, uh, the higher cost energy sources the state's gonna pay for, because the state's gonna pick that up. It it's the same thing we do on maintenance, major uh routine maintenance that the districts um is handled is is comes out of their uh comes out of their budget. Major maintenance comes out of the state's budget. Um and so what does what the districts do is they let things deteriorate. I mean, it's it's the financial incentives are there to do it this way. They let things deteriorate to the point where it becomes major maintenance and all of a sudden it's the state's hook. Now, state doesn't always step up and you got you got big problems, uh, but they don't have an incentive to to to really worry a lot about about routine maintenance. I mean, they do some of it, but they don't they don't have the incentive to worry a lot about routine maintenance if if by letting it go, it can go into major maintenance and let the state pick it up. We we we we we we we say we have local authority, we say we have, you know, local, we give local authority over the school districts, but they don't have local fiscal responsibility. A lot of that gets shifts gets gets shifted to the state. And so they make decisions that that are incentivized to to push the push the cost uh to this to the state level. I it uh I there's a huge package around, or there's a huge things, things that need to be addressed in terms of a comprehensive fiscal plan. But but but this this one-sided approach of letting the some of the spending things go into effect with higher spending levels while you're while you keep saying, well, you we can't have any revenues because we don't have a comprehensive fiscal plan yet, is just is just not we're not gonna get to a solution that way.
SPEAKER_00Barber says no, routine major maintenance comes out of the borough's budget. It's only on the state if you are outside a borough. Um, but he's talking about uh the all the asks that they come back to to the state for the major deferred maintenance. I mean, that's the problem, is that they defer it long enough that all of a sudden it becomes a crisis and then they have to have the state try and bail them out, which is you mean what you know you know that happens. Uh the they that that happens quite frequently where they want the state to come in and and uh and and be part of it. That's uh and and that's a quite honestly, that's something that's happening uh around the state in many areas. It's not just the school districts, but they always leave it until it becomes a major maintenance project so then they could take it out of a different bucket of money.
SPEAKER_01Yep. And and and we had, I mean, I uh I'm not quite sure what Barbara's talking about because we had a lot of maintenance uh requests, maintenance spending requests come from the school districts to the legislature this session. We have a we have a list of maintenance that the that the state uh maintains for uh uh uh to to do for the localities. So I there there is there is some maintenance. I'm not sure if the dep if we're having a definitional debate here or but there is a lot of school maintenance that goes uh that goes to the state. Yeah.
SPEAKER_00And uh like I said, I was a little shocked uh that he uh that he allowed this to go through, especially um especially after the last go-around with the uh with the BSA and everything else. Um I I I I don't know. I mean, again, I'm trying to figure out why. Why would you do this? I mean, it it can't be for to try and garner goodwill. They already hate you. I mean it's not like it's not like it's not like you're gonna get some friendly uh accolades for passing their bill. It uh it doesn't make any sense as far as that goes.
SPEAKER_01I mean, I it I the a governor's a governor would say, look, you want to spend, we need revenue to to cover the spending. We need a comprehensive fiscal plan. I'm not gonna approve revenue, which it he certainly said he wasn't gonna do, and I'm not gonna approve increased spending until we have a comprehensive fiscal plan. They're both part of the problem. We need to address both of those as part of the problem. That would make sense as a as a veto message, and it would, I think it would, it would collect a significant amount of support uh as a uh as a veto message. But saying, oh, we need a we need a comprehensive fiscal plan, but hey, this spending can go ahead and add to the problem. Um, and but we can't have any incremental revenue. I mean, we have incremental spending increases, but we can't have any incremental revenue, particularly you know, something like the corporate tax that he already agreed should be part of a pla a plan. Right. Um, it it it just makes no sense. I mean, it just keeps keeps digging the hole deeper uh without uh
Why Cuts Only Keeps Failing
SPEAKER_01without sort of any hope of of you know backfilling at least some of the revenue into the hole.
SPEAKER_00We we only have a minute and a half left. I don't know if you have enough time for this one. How about a fiscal plan that uses cuts to balance the budget? I mean 2019.
SPEAKER_012019. We we live through that. I don't know if I don't know if TR was around then, but we lived through that.
SPEAKER_00Yeah, Terry was here. I mean, that's the thing. We've tried the cuts-only approach. There's just no will to do it. I mean, nobody wants to cut the government that much, not even the Republicans in the in the in the in the House. You know, they they wouldn't even back the governor up on those cuts. And that wasn't even an it was only an 8% cut. 8% across the board. Draconian, dogs and cats raining from the sky. I mean, yeah.
SPEAKER_01And and and and yes, and so we we talk about that every year. Oh my god, we gotta do it through cuts only. Well, what happens is spending keeps going up, and we don't have any offsetting revenue, so the deficit keeps getting bigger. I mean, it's it that that argument of cuts only has become has become a a a way in which the hole has become deeper and deeper and deeper because we don't we don't apply it to spending increases. We allow the spending increases to go forward. Right.
SPEAKER_00No, it's uh it's crazy stuff.
Subchapter S Fix On Gas Line Bill
SPEAKER_00Number two of the weekly top three. Oh, they just get better from here. They just get better from here. Why Brad supports the subchapter S amendment? This is from the Friday edition of the uh uh Senate uh uh uh the Senate uh meeting uh as they were getting things in. They they threw the subchapter S amendment in. Now, Brad and I are gonna disagree on this because while I support the idea of creating a subchapter S change, the idea of throwing it in as a poison pill on the uh gas line bill. Uh, I mean, I think it needs I think it needs uh much further discussion. And I like, I mean, again, I like the idea, but throwing it on this is gonna create some problems. But we'll let Brad, Brad knows how I feel about that. We'll let Brad sort that out on the other side. Go ahead, sir.
SPEAKER_01All right, we're gonna start this segment the same way we started the last segment. We are facing a $1.9 billion deficit. Actually, it's two now. When you when you when you take the the the FY27 spending that the legislature approved, governor hasn't approved it yet, but you take the FY27-7, uh FY27 spending the legislature approved, and you just increase it across the board for inflation, uh across the 10-year uh horizon for inflation, and then you look at the revenues that are in the revenue forecast, the deficit's now over $2 billion. The average deficit over the 10-year period is over $2 billion. We're facing huge annual deficits in this state. Um, and so that's that's the that's the as I say, that's the starting point, should be the starting point of every segment I do. Certainly is the starting point of how I look uh at any issue. The the the what Glen Farn came to the state and said was look, we need we need help with respect to the property tax issue. And the property tax and and they claim and they said they needed help on the property tax issue for a couple of reasons. One was it is the way the Alaska property tax works, it's an upfront cost. And that upfront cost makes this project uh uh uneconomic. We it's uh it's a it's a huge hill to get over at the at the front. We need it, we need it you know spaced out over time and we need it tied. The proposal was to tie it volumetrically, to tie it to uh to actual uh actual throughput. Uh the other uh uh problem was uh with respect to the property tax, was uh the level, that the level needed to be, needed to be changed. And so that and so that got changed as part of the as part of the part of addressing the upfront cost. Oh, the other there was a third issue. And the third issue was property tax in Alaska, especially pipeline property tax, is always subject to litigation. And so we need a mechanism, unlike what goes on in TAPS, we need a mechanism that isn't subject to litigation. And so the volumetric, the volume, the fixed volumetric uh uh addresses that. So the the the pro the the the res the resolution on the in the tax uh uh bill that came that was before the Senate was fixed the fixed the uh the property tax issue as it came out of the house. The Senate made some further adjustments to it, as is the Senate's right to do, uh, but fix the property tax issue. But the Senate said, wait, we gotta we got another issue that we need to we need to get resolved at the same time, and that is the subchapter S issue. It's not I don't think that's illegitimate. We're we're we're in the midst of giving property, we're in the midst of giving tax relief on this project to address issues that the that the project had raised. We're in the midst of giving tax relief. The Senate says in that context, we want to address another tax issue that helps offset the relief that we're giving you uh on the property tax uh that you asked for. And and we want to address the subchapter S issue. And so I and so it's it it I think that's a legitimate issue to raise in that context, in a tax context where revenues, where we're reducing revenues on the left hand, the question is whether you know there's some way that we can adjust revenues on the right hand to make the ultimate result more palatable. I think it's a legitimate issue to raise. Um, and frankly, it's not clear what Glenn Farn's problem with the subchapter S uh uh tax fix. Is none of the LNG projects in Texas and Oklahoma use subchapter S. None of them have use the use the subchapter S exemption because the subchapter S exemption is very it is relatively tight. You can't have corporate partners in the in the subchapter S. You can't have even have LLC uh partners in the subchapter s. You have to limit the number of uh of of participants of owners of the subchapter s project. You can't have any foreign ownership of the subchapter of the subchapter s. Um, and so it's not none of the none of the ones in Texas and Louisiana, none of the LNG projects in Texas and Louisiana use it. I'm not entirely clear what Glenn Parn's problem with with uh with subchapter S is. Even if you assume for the moment that that that they do have that they would be subject to the subchapter S uh uh uh uh fix that the Senate's got. It's both the tech both in Texas and Louisiana, even if you're subchapter S, you still pay state corporate income taxes. You do it, you do it different ways. In Texas, you pay the the business franchise tax. It does not, the Texas business franchise tax, which is their version of a corporate income tax, does not exclude subchapter S uh corporations. They pay the business franchise tax the same way that subchapter C corporations pay. In Louisiana, they do they do have the subchapter S exclusion at the uh at the corporate level. But what happens at both the federal level and the state level, the subchapter S is you don't get taxed at the corporate level. The the income falls to the to the individual owners of the subchapter S corporation, and then they pay at the federal level, they pay federal income tax. That's what per personal at the personal level. That's what happens there. Louisiana has a state income tax, a personal state income tax. So in Louisiana, the same thing happens. When when they have the subchapter S exclusion at the corporate level, but the income falls to the personal level, and then they then they capture the income at the at the at the personal level. We're more like Texas, Texas doesn't have Alaska is more like Texas, Texas doesn't have a personal income tax, and so they tax it at the at the corporate level through the business franchise tax. I'm not so when you know a lot of people walk around, have walked around during this entire process and said, Oh, we need to be we need to be competitive with Louisiana and Texas. We need to do like they do on the property tax, and they both have both those states have property tax abatements. Um, but but okay, so if we need to be like Louisiana and Texas, let's be like Louisiana and Texas. Let's let's let's have the let's let's do the the tax of the of the corporate income uh at the um at the either uh like Texas at the corporate income level or like Louisiana at the uh at the personal income level. All of this what we need to what we need to be focused on in this state is tax fairness. We have a $1.9 billion deficit, annual deficits that we're facing. If the corporations don't pay it, if the corporations don't contribute to it, it's just gonna be more out of the pocket of middle and lower income Alaska families through PFD cuts. Somebody's gonna pay that. It's not gonna be absorbed by something else. Production tax revenues, oh, we're gonna increase production, production tax revenues are going down. We've talked about that on previous programs. Somebody's paying this somebody's paying this deficit. And and for and for the Senate and for people to look at a potential sub subchapter S fix to have contributions come from corporations also, like they do in Louisiana, like they do in Texas. If that's where we want to, if we that's where we want to draw the line, like they do in like they do in Louisiana and Texas, if if if if somebody wants to look at doing a subchapter S fix, I think it's I think it's a valid thing to do.
SPEAKER_00Do you think that uh and I guess for me it was more I don't have a problem going after, you know, looking at it, talking about it, finding a way. I agree with the tax fairness issue, but do you think that this was the place to do it? I guess is my is my major question. Because again, there could be a question on subject rule. I mean, I'm just asking here because this is uh, you know, of all the places the it's been discussed, but it hasn't ever been sussed out. They haven't done fiscal plan, they haven't had public input.
SPEAKER_01What do you think about what do you've had conversations about subchapter s for for the last what five sessions? Um around, well, maybe even longer than that because of the Hill Corp situation. I mean the Hill Corp exclusion is is a subchapter S exclusion. I I I don't, I mean, I don't I don't think it's invalid to to add it uh uh to this bill. I think it I think it's something that uh deserves a look, you know, and the and the conference committee can certainly give a look at it. I think I think the Senate was looking at a situation, I looking at a situation where we have a $1.9 billion deficit and and they're trying and a request to reduce the level of uh property tax that the project would otherwise pay. And I think it's a valid, a valid thing to raise as a subchapter S. This may be this may be more uh well anyway. I think it's a valid, I think it's a valid issue to raise.
SPEAKER_00Charlie asks a question Do you see a problem of unintended consequences on small businesses uh going after the mean old oil corporations organized as S-corps?
SPEAKER_01No, because we have in this state, uh we have a uh a separate petroleum corporate income tax. Um and this fix, if if I understand it correctly, this fix is to the petroleum corporate income tax. I mean, we don't we don't have the same the the the mom and pop corporations in the state, even the C corps, don't pay the set on the same basis as the as the oil companies do, the petroleum through the petroleum corporate income tax. So I don't see this as just like the existing petroleum corporate income tax, doesn't affect the mom and pop C corporations. I don't see this fix affecting the mom and pop uh subchapter S uh corporations.
SPEAKER_00Brad Keithley, Alaskans for sustainable budgets, the weekly top three. Um Brad's thoughts on the uh on the S-corp, he's okay with the with it being included in this bill. Um and uh, you know, again, I I see the argument, but I'm wondering if it and and I too wonder why Glenfarn, if it's not going to affect it, uh, as you point out. Um I don't know uh necessarily as why, other than obviously it's going to affect some of the players involved in this in the long run. Um but do you think it will, I guess one final question. Do you think because because one of the arguments was, well, this will infect
Tax Fairness And Investment Questions
SPEAKER_00this will infect, this will affect um potential investment because some of these people might organize as a C Corp or an LLC who are investors. Do you see that as being a truism that it might affect the investment in that regard?
SPEAKER_01I think, I think the Senate, I thought, well, I think the the the now the conference committee needs to sort out what effect the subchapter S Corporation, layering on the subchapter S corporation, has on this project, has on the viability of this project. I, like virtually every other person in the state, want to see this project go. And we want to see the benefits of of the project, particularly on the upstream of being able to monetize, monetize the gas, the particular the the the effect on revenues in terms of monetizing the gas. But we need to see the project go at a at a at a tax structure that fairly treats in the face of a $1.9 billion deficit that fairly treats uh uh fairly treats Alaska. So I think I think it's up to the to the conference committee to sort through and figure out what the subchapter S, how the subchapter s affects the economics. If legitimately, not just you know arm waving, oh my God, we can't do this, but legitimately there is an effect on the on the on the project, not just they earn less profit, but that but it makes it to the point where uh uh the project doesn't go. If it legitimately does that, then there needs to be some modifications to the subchapter s or there needs to be some additional modifications to make the project go. But just throwing out the subchapter S by saying, by not doing the subchapter s because we say, oh my gosh, we can't do that. Um it's just uh that doesn't sit with me, particularly when you look at Louisiana and Texas. I mean, people want us to look at Louisiana and Texas. That was part of the that was part of the part of the rationalization for the property tax reform. Well, I look at Louisiana, Texas, they do tax abatements. Well, okay, when you particularly when you look at Louisiana, Texas, and you say all those projects down there, none of them are used in subchapters, none of the major ones are used in subchapter s. I haven't studied the minor ones, which is why I said major. None of the major ones use subchapter S. And they have even even for those subchapter S corporations, they have ways of still capturing revenue to the state. Particularly when you look at Louisiana and Texas, I'm not sure that just arm waving and saying subchapter s shouldn't shouldn't be applied here is the right way to go.
SPEAKER_00Okay, we're in the break. Brad Keithly, Alaskans for Sustainable Budgets.
SPEAKER_01Michael, I want to add one one other thing that sort of that sort of ties the first segment and the second segment together. Okay. When you when you got a governor who says, you know, I know, I know we're I know we're deep in debt, and we're we're making it worse by increasing spending, and I'm gonna I'm gonna let that go into effect. When you've got when you've got an administration that's doing that, and and so you know if you try to do the subchapter S fix separately, you're just gonna get it bounced back in your face with the same under the same theory that he bounced back the corporate income tax and the e-tax, uh uh that you know we're not gonna do revenue until we have a comprehensive fiscal plan. We're gonna keep letting spending going, but we're not gonna do revenue until we have a comprehensive fiscal plan. When you got a governor that's doing that, I mean, as a at a practical level, uh I think there's a I think there's another reason that creates another reason why it's legitimate for the Senate to put the subchapter S fix uh on this bill, because you've finally found a bill the governor's gonna have to deal with.
SPEAKER_00Right, to tie it to something that he's gonna have to sign uh versus something that he would potentially as a standalone. And I could see that argument for sure, uh, because he has bounced back a lot of things. And and and I always uh I I've I've shook I've kind of shaken my head at some point because you're they're letting the they're letting you know uh uh good be the enemy of great. You know, we've got a good bill, but not a great bill. It's not perfect, right? We don't have the perfect comprehensive plan. And if that's the argument, then we'll never have the perfect comprehensive plan because they'll just keep throwing bits and pieces at it. And if the spending keeps going up, then everybody's happy, right? Except for the, of course, the Alaskan taxpayer or the the the Alaskan resident who's losing their PFD through their taxes. I mean, that's you know, but you're right. That is one thing that every time you turn around and says, I'm gonna cut this because it's not a comprehensive fiscal plan. But if it's a step in the right direction, why aren't we at least taking baby steps in the right direction?
SPEAKER_01Particularly at the same time as you're approving spending increases. Yeah. I mean, if he were saying no more spending, no more spending increases, period, and I'm gonna I'm gonna slash the budget down. Um, and and and it's all gonna be part of a comprehensive fiscal plan. We're gonna have a big come to Jesus meeting about a comprehensive fiscal plan, no more spending, no more, no more, no revenues until we until we have the whole plan. If you were saying that, okay, but particularly at the time when he's saying, okay, spending, yeah, go ahead.
SPEAKER_00Right. Well, think about it if it had been, I mean, less COVID. Think about it if in 2018, 2019, after he got spanked on the thing, if he had come back every year after that and basically just vetoed any additional spending and said, I'm not gonna have anything until you have a comprehensive plan. And anytime you put a spending bill on my desk that increases spending, I'm gonna veto it. And you could override it, but I'm just gonna veto it, and we're gonna be in this veto override cycle until you guys put forward a comprehensive spending plan. And it just it just never happened. I mean, that's that's the problem. It just never happened.
LNG Import Costs And Price Bubbles
SPEAKER_00Um, hot springs, hot spring shot arc flash. Wow, that's a name. Uh, looking at your pricing charts on LinkedIn for LNG import cost, does your import price include building the import facility? During testimony, I think it was agreed import gas would be in the mid-20s. Um, and I haven't seen the chart, Brad, so I can't comment on it. But uh we talked about them last week.
SPEAKER_01We talked about this week on the show. And the answer is yes. Uh if you look at the Monday there, every time I publish the chart, I put a link to a column where I explained all of the ingredients that go into the chart. If you look at that column, uh you'll see that I added five dollars uh an MCF, which is the mid-range uh uh NSTAR said, yeah. Is that it? Yeah, yeah, pretty good, Michael. Hey, you can pull things up from back. NSTAR said you uh that uh you can uh uh uh that that the import costs would be between four and six dollars. Um and so I added five dollars on top of the LNG uh uh import price uh to um to account for those facilities. The mid-20s I hate I sometimes I really dislike people. The mid-20s that they talk about for the import price comes out of the LNG price during the Iran War high. So you so you pick you pick, you know, you say we got sixteen dollars or something uh for uh uh for LNG prices, and you had five dollars onto that, or yeah, you say the LNG price or the LNG price is $17 or $18, which is what it got to for winter months during the during the Iran War, and you had five dollars on that, you're in the mid-20s. But as oil's coming down, so is LNG coming down. And uh and the charts I'm doing are reflecting the futures price, futures price out both for oil and LNG, less the Iranian problem, the Iranian bubble at that point.
SPEAKER_00Right. Yeah, yeah. So that uh that uh that makes sense. Final final thoughts on this, Brad, because this, you know, you're right. And we talked about this, and we're in this bubble because of the Iranian situation, and yet when it all comes down to it, that the whole thing's gonna go away and we'll be right back where we started, only worse because this is how it happens every time there's some kind of big plus up or uh a bubble of some kind that comes up and oh, happy days are here again, and then we're worse off when the bubble cry you know pops than we were to begin with. Where do we go from here?
SPEAKER_01Uh yeah. I where do we go? Uh we go we go bad places. I mean, because the 1.9 billion grows bigger. If 1.9 billion is predicated on oil prices stabilizing somewhere in the 70s. Um, and if the oil prices continue to decline. I did the oil prices, I do a chart every day that I publish on Twitter and Facebook and all sorts of places um uh every day of oil and gas prices. And I was shocked at the level that that oil prices have have fallen just from yesterday. I mean, it during the height of the of the Iran war, uh using the futures prices, uh futures prices were saying that state revenues were going to be in excess of a billion dollars over the FY27 uh the fall uh FY27 uh revenue forecast, over a billion dollars higher. When I did it this morning, we're down to in the 300s someplace, and and the trend line's going like this.
SPEAKER_00Yeah. I mean, what WTI was what, 74 yesterday, 75?
SPEAKER_01Yeah, and and uh when I did the futures, I I spend more time on the futures market than I do on the current market, but the futures market for WTI that I did this morning, uh five years out is below 60. Now, now Brent isn't below 60 yet, but but Brent's certainly in the 60s, right? Uh uh five years out. So, you know, when we talk about, you know, we don't worry about subchapter s. Don't worry about fake that fix. You know, just just keep on going on. When you look at when you look at the oil prices and you look at what that does to the to state revenues, you worry about it a lot. Um, and you worry about that $1.9 billion a lot. So yeah.
SPEAKER_00No, I mean, uh that's the thing that I think that that we're not nobody's talking about. I try to bring it up with every candidate that I can, that billion dollar hole, that one point, whatever billion dollar hole, now 1.9, and they uh they just kind of look at you blankly, you know. It's it's kind of I mean, even Adam Crumb, the commissioner of revenue, when I had Adam on the program, I don't know if you watched that show, but had Adam on the program and just kind of crickets, you know, when I brought it up. I mean, you're the one putting this together for the governor, and you have no comment on this billion-dollar hole that's you know moving forward for years and years and years. Oh, well, we'll just we just need to generate more resource revenue.
SPEAKER_01Well, the only way we're gonna generate more resource revenue is uh given the way that SB21 has turned out 10 years after the fact, the only way we're gonna generate more resource revenue is to fix SB21 because the more production we do, the more investment that goes on out there, the lower the the the production tax revenues are. So yeah, yeah. I we've got a lot of fixes to do. We got a $1.9 billion hole. We got a lot of fixes to do, and people who just want to dismiss fixes, while the governor's approving increased spending, people who just want to dismiss fixes are part of the problem, they're not part of the solution.
SPEAKER_00Yeah, no, as the money goes up, you can't cut your way out if your spending continues to exceed what you're even not that we're doing any cutting, but you know, it would be difficult
Walker Plan To End The PFD
SPEAKER_00for sure. We got one final talking point, and this is the one I made some people mad because I said, I'd take it, I'd take it, and that's Walker's payout plan of the PFD. The ten thousand dollar per per. I mean, Brad, I'm just I just want to get mine before they spend it all. They're gonna spend it all anyway. We're gonna lose the whole thing. I might as well get, you know, between my household, I might as well get, you know, $30,040,000 and put it in the bank and do something with it rather than what these jokers are gonna do with it because it's gonna be gone anyway. But we're talking about Walker's PFD proposal. Hit me with it.
SPEAKER_01Yeah, well, maybe so. Uh so I'm gonna st I'm gonna start that, I'm gonna be consistent today. All right, all right. I'm gonna start this segment with every uh the same as the other two segments. We're facing a $1.9 billion annual deficit uh uh in the in the state of Alaska. If we eliminate the PFD, uh where's the the the deficit goes down a lot? In fact, it probably turns into a surplus, but over time, uh but what have we but who whose backs have we put that $1.9 billion on the on the back of? We put it on the back of middle and lower income Alaska family. Who's leaving the state? We talk about out migration a lot. Who's leaving the state? Well, oh it turns out it's middle and lower income uh working Alaska, working age Alaska families. We we are Walker's proposal it is bad at a number of levels. I mean, it's bad in terms of what it does to future generations, it's bad in terms of in bad in terms of what it does to the current generation, in terms of of uh of of taxing, completely taxing, completely shifting the burden to middle and lower income Alaska families. It's just bad, bad across the board. It is the equivalent. I've tried to, since we're on the Texas and Louisiana kick also, um, I've tried to, I've tried to think through how to put this in a way that that really you know sort of gets people to focus on what the PFD is and what Walker's proposal does. Uh the PFD is Alaska's equivalent of royalty payments. It is, we all own the resource in common in Alaska, and so we all share, we all get a piece of the of the of the revenue from the resource in the in terms of the PFD, in the same way that owners of resource in the producing states, Louisiana, Texas, Oklahoma, Louisiana, get a share of the revenue through um uh through royalties. They when they own when they own the resource, when they own the the mineral rights, the oil and gas mineral rights, and those are developed, they get a share of the revenues through uh through royalty payments. Our the way we do it up here is since we have you know full ownership or since we have you know uh common ownership throughout the state, we share it through uh the PFD. What Walker's proposal to terminate the PFD is, is essentially the same thing if in Louisiana, Texas, and Oklahoma, you went to the royalty owners and said, the state's gonna take over the resource. The state's gonna get all of the revenue from the resource. You can talk about it in terms of taxation, you can talk about it in terms of confiscation, you can talk about it in terms of nationalization, you can talk about it different ways. But it's the same thing as if in in those states the the state comes in and says, we're gonna take over the resource. You will get we're and we're gonna pay you for it, but we're gonna pay you pennies on the on the dollar in terms of in terms of the potential revenue source, in terms of the uh the the revenue source going forward that you otherwise would get from royalty. We're gonna take it over and and the state's gonna own it now. And all those revenues are gonna go are gonna go to the state. And so there is no private ownership anymore. In those states, it's the equivalent of saying in those states there is no private ownership anymore of the mineral resource. The state now gets the entire the entire benefit of it. The entire revenue stream that would otherwise go to otherwise go to the landowners or otherwise go to the mineral interest owners or the or the royalty owners. It's the same thing. And what Walker is doing up here is saying we're going to pay you pennies on the dollar of what you're owed. Now Michael raises the question about whether we'd ever ever get what we're owed, but we're going to pay you pennies on the dollar of what you're owed, or in terms of Louisiana, Texas, Oklahoma terms, pennies on the dollars of what it of what your royalty interest is worth, uh, and confiscate it uh to the state. So we're we're we're not only affecting current uh uh royalty owners, Alaska royalty owners, current Alaska owners, we're affecting future generations as well by just confiscating it, uh confiscating confiscating it to the state. I didn't think Walker could get any worse from from 2016 from what he did in 2016. I didn't think he could come up, he and Hofbeck could come up with a worse idea than they had in 2016. But by gosh, he managed to do it. Yeah. Uh and it's just I I'm just you know, it it is let me be very clear, it is state confiscation, state confiscation of of the royalty interest that's created by statute uh that is supposed to go to the to the common owners of the resource in the state of Alaska.
SPEAKER_00And my argument is, and I agree with what you're saying, I want to say that up front, but my argument is they're already doing it, they're already confiscating. They already accomplished 83 percent is what they took of the of the of the earnings this last go around. You know, we ended up with what 17, 16, 17. I mean, and next year it'll be 15, and the year after that it'll be 10, and then it'll be five, and then there won't be anything, and they'll have confiscated it all anyway. I'm thinking, boy, I should probably take mine while I can. That's what my point was, because I could see that this is where this is going. They're gonna confiscate it and it'll all be gone.
SPEAKER_01Yeah, I'm one of those people that that that that really don't throw in the towel. I'm I'm one of those people that just keeps on fighting, uh uh maybe to the maybe to the bitter end and maybe till I'm bloodied and and dismissed and all that sort of stuff.
SPEAKER_00I'm with you. I'm with you. I just as a as a but as a thought exercise, I was like, ooh, man, it'd be the only time you're gonna get out of this what you you know, any part of what you were really owed.
SPEAKER_01Yeah, and and you know, and again, Louisiana, Texas, Oklahoma. Again, I can see, you know, my my clients that I had in my the early stages of my career down in Oklahoma, I can see them saying, uh, you we'll give you, you know, and in some instances, the old companies did this. The old companies would say, we'll give you $500,000 for your mineral interest. We'll buy your mineral interest from you. Instead of doing royalty share, we'll do $500,000. And so I recall in my in the early stages of my career running spreadsheets that said, okay, well, if the oil does this and oil prices do that, and the revenue stream is this, your net present value from the future revenue stream from this property, you and future generations is you know multiple millions of dollars. And they want to pay you $500,000 for it. You can do that. I mean, yes, you can sell your mineral rights, absolutely, you can do that. But in terms of the economics, you know, you're you're you're really shortchanging yourself and your heirs and and others that would that would own the land. You can do that. So I so it's the lottery and and some of the clients did that. Some of the clients sold their mineral interests.
SPEAKER_00Yeah, you it's the it's the lottery payout. You could take this smaller lump sum or you could take it out over the course of years, and which one do you want? So it just questions whether or not there's going to be anything left in five years for the PFD to be paid out. That's gonna be the question. All right, we're running
Wrap Up And Where To Follow
SPEAKER_00out of time. Brad Keithley, Alaskans for sustainable budgets. Final thoughts quickly, Brad, here on anything else.
SPEAKER_01Sub chapter S. Give it a fair chance. Let's let's see, let's see what the what the arguments are in front of the conference committee.
SPEAKER_00See, I would have given money that you would have said one point nine billion dollars. I should have, I should have one point nine billion dollars underwater uh at the beginning of every year here. All right, Brad. Well, thank you. Um thank you. Thank you so much.
SPEAKER_01I appreciate the uh appreciate the no, you don't the number the number of likes probably went from six down to zero or no, it's it's good.
SPEAKER_00I mean it's it's a good I mean it's good stuff. It it it we have to fa you know, this is the problem with truth. Truth is painful sometimes, and we have to acknowledge that. And uh, you know, it's not what we want to hear. You're not a politician, you're not telling us what we want to hear. Um, so it's good thought-provoking stuff. So I like it, even if I disagree sometimes. Uh, I disagree under protest more than anything else. I'm just like, that's not the way I want it to be, you know. So that's there, you see. There you go. Feelings, feelings over fact. That's what it was all about. All right, Brad. Well, thank you so much for uh coming on board today. It's good to talk with you. Thank you. Hi Fred, Michael, thanks for having me as always.
SPEAKER_01Well, 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.
