The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (7.13.2026)
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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 July 13, 2026.
This week, our top 3 issues are these: 1) we update our look at the Permanent Fund Corporation from the information contained in its most recent performance report (2:10), 2) we discuss how the state is making the economic situation faced by middle-income Alaska families even worse than that caused by the other disruptions in the economy (20:28), and 3) we explain why the response of some to the proposed S-corp fix — “we will get to that later” — is so disingenuous (38:19).
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 The Top Three
SPEAKER_00This 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 July 13th, 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 project page on national blog site at 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 update our look at the performance of the Permanent Fund Corporation for the information contained in its most recent performance report. Second, we explain how the state is making the economic situation faced by middle-income Alaska families even worse than that caused by the other disruptions in the economy. And third, we explain why the response of some to the proposed escort fix, we will get to that, is so disingenuous. And now, let's join Michael.
Permanent Fund Returns Versus Benchmarks
SPEAKER_01Brad, we got a whole metric poop ton of stuff to cover today. Um, and uh and I know that uh that you've got uh you're hot and heavy on a few of these things. So I want to get started. Um, first and foremost, I want to talk a little bit about um uh, well, the weekly top three. We're gonna start off with the permanent fund and returns for the permanent fund. And before we jump into it, I just want to say congratulations, because your and my discussion on this topic seems to have moved the needle on at least a couple of the candidates for governor, that they're at least picking up a couple of your talking points and at least looking at it. Um, Brad's gonna cover the update on the permanent fund returns here for number one. But at least I know that that Bronson and Wilson have both talked about it now as a potential thing that they need to be dealing with when they become governor. So congratulations on that, at least, I guess.
SPEAKER_00Well, well, thank you. Um, so I've got I I I you've never seen my studio, the listeners have never seen my studio, but I always have in front of me prompt notes. Uh, and usually it's a it's a whole set of prompt notes that go on about the three subjects and all that sort of stuff. I've got one prompt note today. It's $1.9 billion deficits. That's that's the that's the one prompt note for for everything that's uh that's coming up today.
SPEAKER_01You're a one-trick pony, Brad.
SPEAKER_00That's what for today, and maybe maybe most days, but for today I am. And it and it is all three subjects today. Um, when we had the discussion yesterday about you know potentially substituting one end, all three subjects today are all focused on the $1.9 billion deficit. And we're gonna start with uh with with permanent fund returns, which is one place that we can generate uh that we should be generating uh additional revenues. I want to show you something. I do a chart um every month when the permanent fund corporation comes out with their returns. And I want to show you uh uh something on this chart. This chart compares the permanent funds returns, what they say they are earning, to the S P 500. I'm not gonna focus as much on that today, but to two other uh performance, three other performance benchmarks. One is the total fund return objective, which is CPI plus five, which they say is what their what their objective is. But they have two other benchmarks, a performance benchmark, which measures whether they are living up to uh the the performance standards that whether the the the investments they have are living up to the performance standards that they've set. The third, the the third is the one I'm gonna focus on, the passive index benchmark. And as I understand that benchmark, it is a benchmark that says, what if we didn't have people in this building? What if we just set our return our investments uh into ETS exchange traded funds, um, and and let them work. I mean, we would set what the parameters are. We would say it's either going to be 60% equities or 70% equities or 50% equities. Um, and then we're gonna have other indices for the other for the other percentage, uh, a bond for for a portion of it, uh, private private equity. Uh, there are uh traded funds that that sort of match private equity for another portion of it. Whatever. Uh we're gonna set the we'll set the percentages and then we'll just walk away um and let the exchange traded funds uh operate. Now, instead of the exchange trade, instead of the passive index, what they're what passive passive investments, what they're doing is they're actively manage the fund, actively managing the fund. We talk about this from time to time, uh, about how much it's costing. It's now running about a billion dollars a year to actively manage the fund. So in order to generate whatever returns they're generating, they're spending about a billion dollars, a billion dollars in investment a year, as opposed to what would happen under the passive index benchmark, which would be sort of set it and forget it and come back and check it every once in a while, make sure it's operating the way it's supposed to be operating, but but not uh spend a billion dollars a year in picking out individual investments that that they're gonna they're they're gonna follow. Let's look, let's look at the results. And I want to focus on the permanent funds returns versus the passive index benchmark. And we've got, I want to focus on the the bottom four uh rows. Uh the first row, uh the one in yellow, is the uh FY26 uh year-to-date average. Uh, we won't get the final that's an 11 month over the 11 months of the of FY26 that they reported on. We won't get the final one for another month or so, but that is that is the uh the year-to-date average. And then below that, below the gray area, the the gray bar that says PFC rolling average periods, they've got a rolling five-year average, a rolling three-year average, and a rolling one-year average, which are you know the 12 months, 36 months, and 60 months uh uh results. I want to compare the permanent fund returns against the passive index benchmark, the the set it and forget it uh benchmark as opposed to the spend a billion dollars a year. Look at the one-year average. Let's just start by looking at the one-year average, the bottom row. On a rolling 12-month average, the permanent funds are in 14%. So everybody goes, yay, 14% after spending a billion dollars to get to that 14%. Look at what the passive index benchmark is, and I'm not doing these numbers, these are the permanent fund corporations' own numbers, right? Look at what the passive index benchmark is for the past 12-month average, 20.51, 6% above above where the the the permanent fund itself has gotten by spending a billion dollars a year. Look at the three-year average, 15 10.52 percent for the permanent fund after spending a billion dollars a year. Look at the passive index benchmark, 15.33 uh uh percent, five percent higher uh than uh than the than what the permanent fund has returned has has earned after spending a billion dollars a year uh to get to 10.52 percent. Five year average, six point seven uh percent for the permanent fund, six point six eight, slightly, very slightly lower uh for the uh uh for the for the five-year average. But look at the role, look at what's going on with FY26, 11.94% for the permanent fund year to date FY26, 11.94% permanent fund, 16.69% for the passive index benchmark. The the set it and forget it uh uh passive index benchmark. So it's not gonna take maybe next month, maybe the month after that, but but at that rate, at that difference, the five-year average uh is quickly gonna roll over and be higher for the passive index benchmark than it has for than it is for uh for the permanent fund. We're spending a billion dollars a year to get to get lower, significantly lower returns uh out of the out of the permanent fund than what the passive index benchmark would be. Now, I mean we can compare it to the S ⁇ P 500, which I do often and which we should, to to to you know, sort of sort of figure out what's going on in terms of the returns and and look at look at the SP 500 over the last year, three years, five years, uh, year to date. Over the last one year, the SP 500 has been after the on the rolling one year average, it's 29.91 to 14, double, more than double than what the permanent fund is returning. On the three-year average, it's 21.6 for the SP 500 versus 10.52, more than double what the what the permanent fund's producing. On the five-year average, it's 14.10 versus 6.7, more than double what the what the permanent fund uh is is generating after spending a billion dollars. Look at the f look at FY26 to date. S P 500, 23.53, FY uh permanent fund 11.94. More than double what the what the permanent fund's generating. It is ridiculous what is going on uh over at the permanent fund. You want to talk about a bureaucracy. We've got a billion-dollar bureaucracy over there that can't even hit its own passive index benchmark. And so when we talk about the $1.9 billion annual deficit, where are we? How are we ever
The Price Of Active Management
SPEAKER_00going to close that? Oh my gosh, we got to cut spending by 25%. No, you don't. And you can't. I mean, Dunley couldn't do it in 2019, couldn't even get close. Uh, and he wasn't even trying to hit 25% spending cuts. You need to look at the revenue side, folks, and you need to understand what's going on on the revenue side. We are leaving our permanent fund corporation with with its stellar outstanding board members, all of whom are upstanding citizens in the community, none of whom know anything about investments, but all of whom are upstanding under as unstanding stellar board members, they are producing less than double, um, uh less than half, excuse me, of what the of what the Vanguard 500 is doing. They are they can't even keep up with their own passive in uh index benchmark. So one of the places when we talk about the $1.9 billion deficit that we need to go, right? One of the places is we need to go to the to the to the permanent fund corporation. Flip that other chart up just for a second, because I want to show how this translates into uh and we've we've talked about this chart before. This chart uh compares the the level of the permanent fund uh in red uh over time uh compared to what it would be if we'd invested in the SP 500 over the same period. We're taking the permanent fund is reduced by dividends, obviously, and reduced uh by expenses. The SP 500 is reduced by the dividends that would be generated at those levels, at those at those permanent fund corporation uh uh earning levels by investing in the SP 500. So it's apples, it's apples to apples is not reduced significantly by expenses because we wouldn't have any expenses if we if we use the exchange traded fund, the electronic traded fund. Look at what the gap is, and this is just since 2019. Look at what the gap is that's developed in what the level of the permanent fund would be between but it what it is now investing in how it's investing at a billion dollars a year versus what it would be if we would have invested in the billion in the in the SP 500. $60 billion, $70 billion difference uh between the two. That's that is you can see in the red and blue bars that are at the bottom, you can see the difference in the earnings that's generating over time. The blue, the the and having invested in the SP 500, uh would have would be generating significantly higher earnings than uh than what the permanent fund is doing. Okay, people don't like the SP 500. Fine, let's use their own passive index benchmark. That would still be that would be somewhere in between those two, in between those two bars, and it would still be significantly higher than where the permanent fund corporations getting after spending a billion dollars a year in expenses to produce deficient returns. So when you want to when you want to talk about closing the $1.9 billion gap, this is one place we need to be looking.
SPEAKER_01Right. And for those of you who are on the radio who can't see the chart, of course, you can always view the charts here on the uh Facebook page or wherever. But Brad showing at the end here, fiscal year 26, the difference if we had left it on the S P 500, the balance of the permanent fund would be about $158 billion versus the projected $91 billion that we're getting right now. So almost a almost a $70 billion difference by the time it's all said and done. And that's just from 2019. If we started off even Stevens at 2019, uh yeah, there are more volatile things. I mean, it is more a little more volatile, but it always trends upwards in the long run. Why are we spending a billion dollars a year to make less money? That's the question, right, Brad?
SPEAKER_00Absolutely, Michael. That is that is absolutely the question. I mean, uh people complain about government bureaucracies. The permanent fund corporation is one big, huge government bureaucracy. Not only the employees, uh, the number of employees they have, but the but the expenditures they're making uh outside the management fees and other things that they're spending outside uh to maintain the the investments they have, the investment program they have. I mean, I'm sure I'm gonna hear about this, and I'm sure there's gonna be all sorts of excuses, and I'm sure I'm gonna hear about how safe they are and how how uh how how how you know reasonable they are uh and how these investments are all good. But look at your own passive index benchmark. Look at the thing you publish that says if we went on autopilot, this is what we would return would return. Um six point uh six point percentage points higher uh on a one-year, uh, five point percentage higher is on a on a three-year average, uh, and it will soon be higher uh on a five-year average.
SPEAKER_01I just want to point this out. I just want to point this out on this chart. Uh whoops, wrong one. Let me uh let me go. Nope, this one right here. Um they may say, well, it's more volatile. The Vanguard, it's more volatile. And sure, if you look up here in fiscal year uh uh 22, you could see um in fiscal year 22 the permanent fund, the drop on what they're doing was only one percent. Um, and it went down a whole 10% with the Vanguard. So there's a nine-point difference. But look around it the year before, again, 30, what 12 points difference the year after, uh, a 14-point difference. The year after that, a what 18-point difference? I mean, sure, it's more volatile in the downtimes, but it always recovers faster. It always ends up being better uh in the long run when it's all said and done, Brad.
SPEAKER_00Well, no, I that's exactly right, Michael. I mean, they go back to the the meltdown, the the market meltdown in the 2000 period, the late 1990s and the and the early 2000s, and then the market meltdown in 2008, and say, oh my gosh, look at look at how you know, look at how poorly the S ⁇ P 500 did. Well, it did. You're right. But we are now what? We're now 25 years from the market meltdown in the late 1900s, 1990s, and we're now what 2017 years away from the market meltdown in 2008. If you look, if you look at this chart, if you look at the van, compare the Vanguard to uh the uh uh the the permanent fund, I think this is right. Let me let me go through it real quick. I think in every year except one since 20 since 2012, since we got through the market meltdown of uh of 2018, everyone since 2012. Yep, the uh the Vanguard 500 has exceeded the uh the exceeded the permanent fund. The one year it didn't is the one you pointed out, uh 2022, uh when we had a brief market meltdown, but then it popped right back up. And if you look at the average over time, if you look at the 10-year average, and and I could even do it looking at the 20-year average, the SP 500 is exceeding the permanent fund. Now, people will say, Oh no, we can't use the S P 500, that's too dangerous, it's too risky. Fine. Look at uh look at the the passive index benchmark instead, then. I mean, they are admitting their own benchmark is admitting that that they aren't keeping up with the times uh by spending a billion dollars a year. Um, so I you know, I I'm I'm this is I mean, these are fine people on the board, but none of them know what they're doing. I mean, there they're none of them are are any great shakes as investors. Uh, they're not known for being investors, they're not known for, you know, having the green eye shades and understanding understanding numbers day in and day out. They're nice people. I love nice people. They ought to be on the ADA board. They ought to understand. I mean, they ought to be focused on what you know how how we spend state money through ADA to to develop the the state. They would understand that. They should not be on the permanent fund board, and the permanent fund board should not be doing the type of investments they are.
SPEAKER_01Yeah, yeah. No, it's it's it's astonishing to me that here we sit, even again, their passive benchmark supposed to be 16.9 percent, 16.69 percent, and we're at 11.9. You know, the 10-year average is uh we're barely making the 10-year average, but almost every other year you look at it, and but they're not even hitting what their passive benchmark should be, let alone the SP 500. S P 500 is worlds ahead uh uh on that, the Vanguard and SP. Um, so anyway, like I said, we're making we're making some noise here and somebody's figuring it out, but it's uh it's hard to get them to move the needle on this.
SPEAKER_0050 seconds. Well, you know, if you if we if we didn't have a $1.9 billion dollar deficit, this might be a nice esoteric discussion. But we've got a $1.9 billion deficit, and we ought to be look under looking under every rock to find the to find the ways to uh to close that.
SPEAKER_01Yeah, no, absolutely. Uh anything we can do to do it. Charlie said, are Brad's numbers net of fees for both examples? I don't know. Are they net of fees for both examples? He says they pays.
SPEAKER_00There aren't fees with uh uh with uh uh with the SP 500. There aren't fees with uh passive index. You're using like exchange traded funds, right?
SPEAKER_01Okay, Brad Keithley, Alaskans for sustainable budgets. We continue
How PFD Cuts Hit Families
SPEAKER_01on now with the weekly top three, where Brad says middle income Alaska families are struggling, and the state government is just making it worse. Talk to me here, Brad. What's going on?
SPEAKER_00So there's all sorts of headlines that that I can pick from uh from this week's uh uh news to talk about the impact of the current economy on middle-income families. Uh one in the Alaska Beacon, urban Alaska's high cost of living, driven by health care and groceries, uh, Fairbanks News Minor, um uh energy apparel costs spike, uh Alaska Beacon, uh outmigration, inflation school choice, Alaska school closures continue to uh continue, like Alaska school closures likely to continue without changes, blaming it in part on outmigration, which is being inflation, which is being driven by by the economy. I did some charts, and and and so, and so the question is what are we doing? What is the state doing to help middle uh income Alaska families? Let's forget lower income, let's forget upper income. What is the state doing to deal with this to deal with the situation with middle income Alaska families? And that's 60, that's the 60 percent in the middle, if you do it by quintiles. It's the upper middle, the middle middle, and the lower middle. Let's focus on let's focus on the on the 60 percent. What is the what's the state doing to help them? And the answer is I mean, if you had Apollo. On here, they say, oh, we spent on child care, we spent on schools, we spent on this, we spent on that. We direct, we took, we took money and we directed it to try to help middle income Alaska families. Well, let's let's talk about where you got that money and let's talk about how that's affecting middle income Alaska families. Two charts I did on the Friday, on last Friday's column that uh that that really were eye-openers to me. Frankly, I hadn't put the numbers in this way before, and uh and and I and I and I decided to do it for the Friday column. So you can go back and see it in the Friday column. Here's the first one. The first one is the five largest sources of state tax revenue. And the and I just did the the top five. The first is the PFD tax or the PFD cuts, uh, largest uh source of state revenue of tax revenue, second is the production tax, the third is the non-petroleum corporate income tax, the fourth is the petroleum corporate income tax, and the fifth is the petroleum property tax. Those are the five largest sources of revenue, uh tax revenue, uh uh into the state. So let's compare them. And and what I did was go by year from 2017, the first year of PFD cuts, the first year we instituted the PFD tax, to uh 2026, estimated on 2026. And I looked at the level of tax uh that was collected uh uh through these various sources across this time. The average uh for the for the for the 10-year period from 2017 to 2026, the average was every uh over annual average over that over that period, we collected more than a billion dollars a year. Uh uh $1.066 billion a year. Rounded that's $1.1 billion a year through PFD cuts. Through uh production taxes, $754, and then through the other three of the of the largest uh sources of tax revenue in the state, the largest sources of tax of tax contribution toward closing the deficit in the state, they're all less than $300 million, $300 million. In fact, they're significantly less than $300 million when you look at them. They're sort of minor buzz. When you add them and the and the and and the production tax, the average production tax, you barely get to the same level uh uh that uh that what we're raising through through PFD taxes. Um and so the biggest source of revenue that the state is using to close the $1.9 billion is to take money out of middle-income Alaska families. Is to take more money out of middle-income Alaska families than any other way of raising revenue uh would uh would affect them.
SPEAKER_01And then give it back and tell you what a great job they're doing trying to take care of you after they've taken all the money and then they're giving it back.
SPEAKER_00Give it back to some of you. Right. Give it back to some of them. What they're doing is they're is they're discriminating. I mean, we see it in the economy all the time. Price discrimination. I'm gonna charge you more for this car than I'm gonna charge that guy for this car. I'm gonna charge you more in Alaska than I'm gonna charge you uh in Washington State. They're price discriminating or or or or revenue or spending discriminating by giving it to select groups. And then when you campaign, you try to stack up the groups that you favored uh to get enough votes to beat to beat the other guy. That's what that's what's going on in this state. It's we're spending for dollars, we're spending for votes, and we're spending for special interest groups that will stack up behind me uh and re uh and re-elect me. And where are we getting the money? We're pulling it out of the very people that we are just saying, oh no, they're in such poor shape, middle income Alaska families, such poor shape. The next chart, the next chart really stunned me. Um, this is if you if you look at PFD cuts as a percent of adjusted gross income in the state, the the what what it would be viewed as as an average tax uh on adjusted gross income. And so average, we're in the we're in the middle income, middle, middle income bracket somewhere. It's not the median, which is different from the app from the from the mean, from the average average, but we're somewhere, we're somewhere in the range. This is the tax rate that uh that's falling on the income of the of the middle income Alaska families uh as as we go along through by using PFD cuts. So it's 2.76 percent uh in the in the far left uh on the far left side in 2017. Then it goes down a little bit as as the PFD, as the level of PFD cuts go down as adjusted gross income is climbing somewhat. And then the level of PFD cuts start climbing, and so do the uh and so do the level of uh of the tax rates over the period. The last low tax rate was 2.61 percent in 2023. Since then, 2024, 2025, 2026, 2027, the tax rates have exceeded three, um, uh, well, nearly exceeded uh uh 4%. There's one year in which it's 393%. But look at what's been going on from tax rates that were on on middle income Alaska families, these are the average tax rates, so they're the they're somewhere in the in the range of what's hitting middle income Alaska families, from tax rates that were 2.76 percent on middle income Alaska families up to 3.96 percent over the last five years. We've hit we've had tax rates of 5.26 percent, 3.93%, because the level of the PFD cut down went down a little bit, 4.72% in 2026. And then the all-time high, both in terms of the of the level of the PFD cut and in terms of the tax rate, uh, is this last legislature, the one that the one that isn't gone yet because they're still in conference committee. But but this this last legislature, when they when they finally figured when they finally did the FY27 budget, or when they did the FY27 budget, this last legislature, the tax cut is 1.957 billion uh dollars, nearly $2 billion. Uh the tax rate falling on middle-income Alaska families is 5.4 percent. From 2023, just from 2023 to 2027, the tax rate has gone from 2.61 percent to 5.4 percent, more than doubled. Maybe that's the theme of this session of this segment. Doubling. More than doubled from 2023 uh to 2027. The average tax rate over the period is 3.63 percent. That is the average tax rate that we have hit middle-income Alaska families with by using PFD
Why PFD Cuts Are A Tax
SPEAKER_00cuts as the primary revenue source, primary revenue source, tax revenue source. Not only the primary tax revenue source, nearly half of total tax revenues from the top five tax sources uh have come from uh from PFD cuts. Targeted taxes that hit middle income families uh worse, uh hardest uh of uh of all the options that you could do, all the alternatives out there. Right. Uh that hit middle income Alaska families hardest. One other thing about this chart, I included on the chart just to pick up what we were talking about at the beginning of the session when Governor Dunlevy proposed the sales tax. I've picked up uh what the impact would be if uh if instead of using PFD cuts, we'd used a broad base tax. Um and and by and through the use of a broad base tax, picked up a portion of the revenue from non-residents, like happens in the other 49 states plus the District of Columbia. The Alaska is the only one that's not picking up rev uh revenue from non-residents. If we'd done that, using the ICER numbers from the beginning of the session, if we'd done that, the the 3.93 average tax rate, 3.63 average tax rate would be about uh 3.1, I think is the right number. Uh yeah, there it is. Uh yeah, well, it's 3.1, I think. So about a half point, a half percentage point different uh between uh between the two uh approaches. Using PFD cuts only affect Alaska families. Using a broad-based tax that included non-residents would reduce the uh impact on Alaska families by about a by about a half a percent. So this is, I mean, when we talk about middle income Alaska families, we we've got to we're this is how we're closing the $1.9 billion deficit. We're taking it out of the pockets through through exceedingly high tax rates. We're taking it out of the pockets of middle income Alaska families. And then we complain about oh my gosh, middle income Alaska families are not doing very well, are they? The economy isn't doing very well for them. Well, yeah. And the state's making it worse, right?
SPEAKER_01Well, and as you said, if the middle income Alaska, the average is 3.6%, and if we were doing a broad-based sales tax, it would be 3.1%. That doesn't sound like a lot to people. Uh, it is a half percentage point drop in the middle incomes, but what you don't see is it also is a tremendous decrease for the lower incomes because some of them are a 20 and maybe 30%. So they go from that to 3%. And it's also an increase on the upper incomes because they go from 0.8% or 0.5% to 3.1%. So again, it's a it equals everything out in the end. But this is where it is. The problem is that people, including Randy, are not seeing this as a tax. They don't see you're already being taxed 5.4% next year in the middle income brackets. You're already being taxed. Uh there, you know, average family of four is losing 10,000, 11,000 bucks a year on this already. They're just not seeing it. Yeah.
SPEAKER_00Well, it it is, I mean, I don't know how it could be any clearer. It is revenue that otherwise would end up in the pockets of Alaska families that is being diverted withheld by the government and diverted to government spending. That is the very definition of a tax. It is it the only reason you don't think it's a tax is because it doesn't come into your pocket. Actually, withholding taxes don't come into your pocket either. They they're withheld by your employer and diverted to the government. This is simply another form of withholding tax. We're not the only reason we don't call it a the only reason that people don't think it's a tax is because we call it PFD cuts instead of a tax, just like we call tariffs, tariffs instead of a tax. Oh, it's not a tax because we don't call it a tax. We call it a tariff. So it's something different. Well, PFD cuts are our taxes, right? We we call them something different, but they're taxes. It's the withholding and diversion to government of revenue.
SPEAKER_01I'm gonna disagree with something that Chris just said. He said liberal minds are the only ones seeing it as a tax. And you're I'm sorry, Chris, you're wrong. There's tons of Republicans out there who are like, well, I don't care, take my PFD. It doesn't, I mean, it doesn't hurt me. It's a tax. Are you kidding me? Again, even Icer said that if you replace the income, the uh PFD take with a broad-based sales tax, seasonal sales tax, the average Alaskan would have 30% more money in their pocket at the end of the year. I mean, come on, man. It's a and it's not just the liberals who are missing it. There's tons of Republicans died-in-the-wool conservatives out there who I know who are friends of mine who disagree with me on this, who say, oh, well, we just we don't need that PFD. They're taking it's a tax, dude. It has the effect of a tax. If it smells like a tax and it walks like a tax and it quacks like a tax, it's a duck tax. That's what it is.
SPEAKER_00You know, Michael, and and and maybe it helps some uh uh to explain it this way PFDs are the Alaska equivalent of oil royalties. When when when my property in Oklahoma or my or my property in Texas uh uh generated revenues, oil revenues, um, or generated oil, I got a share of that as an oil royalty, as an owner of the resource, as an owner of the mineral estate and an owner of the resource. I got a share of that. All we are, and nobody thinks about that is free money. It is, I mean, I didn't, I didn't, I had clients when I was back in Oklahoma who didn't know they had oil on the land. All of a sudden they discovered oil. They hadn't paid for the oil, they hadn't paid for oil. They they bought the land as farmland, but all of a sudden it had oil under it. And so, you know, it's nobody said, Oh, it's free money to use, so we're gonna the government's gonna take it. And it's not really a tax when the government takes free money. It is taxing PFDs is the same as targeting a tax on oil royalties in the lower 48. Alaskans are common owners of the resource. We have one big family trust. I used to deal with family trusts in the lower 48. They would own, they would own the oil as uh as a family, they would own it as a as a common resource. Everybody get a share of it. Well, Alaska is one big family trust that uh that owns a commonly owned resource. And what's happening is is the oil royalties are going into an investment trust, just like happens with a family trust in the lower 48. And the revenues from that are being in the lower 48 are being distributed to the family. That's what's happening in Alaska. And when you and when you and when you start to think about what that revenue really is, it's not free money, it's not government, government largess. It is the the the the benefits of common ownership, the benefits of ownership of the resource. When you think about that money that way, the government withholding and diverting it is in fact a tax. And that's exactly that's exactly what's going on.
NSTAR Gas Storage Decision Explained
SPEAKER_01Uh, Brad, I wanted to touch base on this NSTAR thing. We got less than three minutes. If you could just give me a brief summation, I know we're going to dive into it a little deeper next week, but this RCA decision that's that uh submarines the storage thing for NSTAR, uh, I got wound up about it yesterday. Maybe I'm wrong. What's what's your hot take on this quickly here?
SPEAKER_00What's going on is is both NSTAR and the RCA are struggling to figure out how to deal with the with the situation we're in with uh uh with the the cook inlet declines. NSTAR wants to do more storage because they the and and generally it's a good idea to do more storage because when you have when you're gonna go to LNG or when you're buying cheap gas in the summer from fields that don't you can't count on you know full time, you want to store it someplace and then have it available with with uh when you when you hit winter. And and NSTA wants to do that, and that's a good thing to do. The problem with this latest decision is NSTAR really didn't have a fully formed idea of what they were doing. They had they had an idea of they wanted to store gas in this field, they wanted storage rights in this field, and they knew who they were going to buy them from. But the problem is there's a dispute going on uh about about who really owns that field and who really owns the poor space and the storage rights between Hillcorp and and and the and the owner that NSTAR wanted to buy it from. The DNR is dealing with that, they haven't decided it yet. NSTAR, for its part, really didn't know how much it was going to spend on that. Uh, and and what they were asking the RCA for was advanced approval of a concept of of buying of buying this resource if they could buy it, of buying this, of buying the space and storing in it, putting in the kit necessary to store it. But they wanted RCA advance approval before they really had a fully formed idea. So what the RCA said was, you haven't you you can't tell us enough about this project because you haven't fully formed it yet. Um, and so we're gonna reject your request for advance approval. That is the approval to put the put whatever whatever you spend on it in rates. We're gonna reject your your proposal uh for advance approval because it's really not a fully formed idea.
SPEAKER_01Okay. All right, I mean, I guess that's a little bit better than what I was envisioning because again, I was looking at this and just thinking, man, what what are we gonna what are we gonna do? It's gonna be a gonna be a tough thing for sure. Brad Keithly. Alaska's for sustainable budgets, the weekly top three.
The S Corp Loophole Fight
SPEAKER_01We're on to number three. It's always the fastest hour in radio, and this is what he likes to call the obligatory S-Corp discussion. The obligatory S Corp discussion. All right, Brad. Um, some say that they're gonna get to that in the future sessions, that it doesn't need to be talked about now. You say you don't think that's gonna happen.
SPEAKER_00All right, here we go again. $1.9 billion deficit. Everything we can do to close that deficit and reduce the burden on middle-income Alaska families who we say are in trouble, and they are in fact in economic trouble. Everything we can do to reduce that burden on middle income Alaska families, reduce the 5%, 5 plus percent tax rate we've got on them, we ought to be doing. We ought to be having increased revenues from the permanent fund corporation uh by better by a better investment strategy. We ought to be uh looking at other revenue, alternative revenue sources such as a sales tax, which spreads the burden broadly and reduces the burden on Alaska families by shifting a portion of it to non-residents, as happens in every other one of the 49 states plus the District of Columbia. We ought to be doing that. And we ought to be looking at the escort, the escort fix, because that would help produce uh additional revenues, fair revenues, uh, additional revenues uh to help relieve the burden uh that is currently existing as a result of uh of PFD cuts. One of the earliest lessons I learned in politics, I still remember it. I remember the meeting. I remember how I went into that meeting, and I remember what was said during the meeting. It's just as clear today as it was at the time. And I was in my 20s then, I'm not in my 20s anymore. Uh, one of the earliest lessons I learned in politics uh was as a result of a meeting I went into with a congressman uh in the late 1980s when we were talking about fixes to the Natural Gas Policy Act, uh, which had created distortions between what's called the interstate market and the intrastate market. Went into a meeting with uh with a with a congressman to talk about fixes to the Natural Gas Policy Act. And the congressman said the following He said, We'll get to that. That's important. I understand what you're saying. It's an issue we need to deal with. We'll get to that, but we got this one other issue we need to deal with first. And I've got a bill up that deals with that issue, and I and and to keep it clean and to get it through Congress, I need to keep it focused on. We'll get to your issue. Don't worry about it. You did it's an important issue. I understand what you're saying, I understand all the charts you brought in. I understand all the legal arguments you brought in. We'll get to that issue, don't worry about it. What happened? They passed the bill, they never came back to the issue. They never came back to my issue, the issue, my client and a lot of other clients uh were uh were talking about uh with the congressman. And later asked the congressman what happened. Well, we just didn't get back to that. I'm sorry, you know, yeah, I know it's important, but we just didn't get back to that. I I that lesson still sticks in my mind today. If there is an issue, and if it's timely and right to deal with, deal with it. Don't say I'll get to it tomorrow, or I'll get to the to the next legislature, or that's an important issue. We ought to talk about it more. Um, and and we ought to you know really spend a lot of time on that, and we'll get to it down the road. Don't buy that. That's the S-Corp issue. The S-Corp issue is a fair issue. All we're doing, all we're doing is extending the same petroleum corporate income tax that we've got currently applicable to Coneco, who's investing and growing, to Santos and Repsol, who are investing and growing, to Exxon, who's still investing. All we're doing is extending the same corporate income tax that we've got to them, to Hill Corp. The only reason it's an issue is because Hillcorp is organized for federal income tax purposes, has really nothing to do with the state. For federal income tax purposes, Hillcorps organized differently. But all we're doing with the S-Corp fix, the loophole fix, is extending the same corporate income tax that we've got with Conaco, Repsol, Santos, and the others. All we're doing is extending that to them. And for P and when people say, and and and to Glenn Farn also, so it's relevant to the bill. We're telling Glenn Farn what the rules are going to be once they once they generate income 15 years from now, or generate, yeah, generate income, 15 years, taxable income 15 years from now, we're telling them what the rules are. All we're trying to do is get that fixed done. And people who say in op-eds or in arguments or on Facebook or on Twitter or wherever they say it, people who say, Don't worry, we'll get to that. It's an important issue. We'll understand, we'll we'll we'll talk about it. I just I'm um every time they say that, every time that word comes out, those words come out of their mouth. I'm thinking of that congressman in the late 1980s who did that to me.
SPEAKER_01Right. And and you made a valid point. I don't remember where you made it, if you made it here on X or wherever you made it, but you said Hill Corp is already dealing with this in Texas, where they're organized as an LLC, right? Uh and uh or S Corp, and they're already dealing with that down there. They have to pay the taxes down there, they're just not. Paying any taxes up here, it's the same thing, right? So they're still paying down there what they would be paying up here if we had a different tax structure. So it's not that far stretch. Is that what you're saying?
SPEAKER_00Yeah, exactly right. I mean, Hill Corps' dealing with it in I I would think every other state they have. Every other state, I mean, I know Louisiana, Oklahoma, Texas, New Mexico. Um, those states, you they get the those states get at it either through in Texas, through the the the business franchise tax, which doesn't have an S-corp loophole. If you're a corporation, whatever kind of corporation you are, you pay the business franchise tax. Or in Louisiana, Oklahoma, and Texas, they mimic the federal system, which is we don't tax you at the corporate level, we let it drop, but we tax you at the personal level. Louisiana has a personal income tax, Texas has a or Oklahoma has a personal income tax, New Mexico has a personal income tax. We tax you at the at the personal level. That those states get those states have taxes on Hill Corp and on the Hill Corp proceeds. Alaska of those states, of those five states, Alaska is the only state that's not taxing it at all. We aren't taxing it at the corporate level, like Texas, but Texas does, we aren't taxing it at the personal level, like Louisiana, Oklahoma, and New Mexico do. It's just dropping tax-free uh through the system. And you know, and if we didn't have a $1.9 billion deficit, tax-free be fine. Heck yeah. Everybody ought to be tax-free. Right. We don't have a deficit, shit. Yeah, let's keep going. But we have a $1.9 billion deficit and we're pushing it off on middle-income Alaska families exclusively by using PFD cuts, taxing them at the rate of 5%. We're pushing it off on middle-income Alaska families because we have a $1.9 billion deficit. We ought to be finding reasonable ways, expanding the base to include non-residents, getting the permanent fund corporation to earn what it should be earnings, and and and including other companies in taxes, like we include in corporate income taxes, like we include Canico, Repsol, Santos, um, and the others. We ought to we ought to be doing that. And and when somebody and and and this bill is the perfect time to do it, and somebody telling me, no, no, we'll get to it. Don't worry about it. We'll get to it. It's important. Yeah, just that just that just does not resonate. In fact, it gets me riled a little bit because I remember remember having gone through that with the congressman.
SPEAKER_01Right, right, right. Well, what do you think happens, Brad? We've got about a minute here. What what do you think happens? Conference committee, they're supposed to vote in two days. They're down there. Latest article up this morning in the ADN said they've gotten nowhere. In fact, they were gone. They didn't come back until yesterday. They've been gone for an entire week and a half, 10 days. What happens here? 45 seconds.
SPEAKER_00I I'm confident what they've been doing that the staff's been doing, is they've been trying to fix all of the the various little nits that uh that people brought out about the escorp tax, about you know, didn't have the we don't have a form and all that sort of stuff. They're they're having staff fix all the nits. And so the nits are no longer an issue. So you can come back clean and say, okay, we fixed all the nits, we fixed all this other stuff you were complaining about. The issue is an escorp tax versus uh versus not having an escort tax, and we're gonna have an X escort tax. We fixed all the nits. Forget about that. Those are done. And I and I think that's I think that's what the what the end time the meantime has been to fix all the nits.
SPEAKER_01I don't know, Brad. I feel your pain. I feel your pain. And I look at this, and I'll I'll just be honest with you. I mean, I just I have no hope that the legislature is gonna do the right thing. Um, so do you think, you know, because they're talking about how, well, the Senate, they won't, you know, you can't amend it on the floor. It's an up or down vote. So they're just gonna. So what do you think? They're gonna squeeze the S Corp thing in there to try and get it through to get the Senate's vote, or are they gonna try and hold it back? What do you think is gonna happen?
SPEAKER_00No, I'm pretty sure the S-corp provision is gonna be in there. Yeah. Um uh and and I mean, if you just look at the conference committee members, I'm pretty sure the S Corp provision is gonna be in there.
SPEAKER_01Well, then what's gonna happen? What happens with Dunleavy then? Because he's already said and he was quoted in the so that's gonna be tough. It's gonna be tough.
SPEAKER_00I mean, well, Mike, be tough. I mean sign the bill. Let's get on with the gas line, let's claw, let's, let's fit, let's fix the S-corp loophole, let's stop putting it off, you know, to the next thing, to the next thing, to the next thing. Let's fix the S Corp loophole and let's get on with life. Um, uh, as opposed to, you know, fighting about the S Corp bill until the until the until the cows come home. If Dunlevy, if if the S Corp provision's in there and it's clean, it should be, they've had enough time. If the S Corp provision's in there, um, and but they nevertheless approve the property tax uh adjustments that that the governor has argued for, and they nevertheless clean up the other stuff the governor's been upset about. If the whole issue comes down to the escort and he doesn't sign the bill, then then the fact the gas line, the the the legislation isn't going forward is on him. It's not on the legislature, it's it's on him.
SPEAKER_01Yeah, the hot potato is in his the hand grenade is in his lap. He's either got to get rid of it or hold on to it, and I don't think he's gonna hold on to it. Because as Brian says, what are they gonna do if he doesn't veto? Not re-elect him? I mean, that's the thing, right?
SPEAKER_00I mean, right? I mean, it it yeah, I mean, I the people who are worked up about the S-corp provision are people who either are making up this argument that, oh, it'll apply to all the S-Corps. No, it won't. Just like the C Corp has, just like the C Corp has a division between the way we tax petroleum companies and the way we tax everybody else. It's a C Corp, the S-Corp provision will have a way that we tax petroleum companies and everybody else will still be off. I mean, they'll still be off in whatever they're doing, but whatever they're doing with S-Corps. The Alaska Supreme Court has long since recognized you can tax petroleum companies different than the way you tax everybody else. And so, no, it's not gonna apply to everybody else, and so and so let's forget that. Um, oh, it's gonna it's gonna affect Hill Corp. You know, they're gonna they're not gonna operate in the state anymore. Well, Conaco pays it, and Coneco's expanding, Santos, Repsol, they pay it, they're expanding. Exxon's still here, they pay it. So I I don't get this thing about Hill Corp. You know, is Hill Corp such a snowflake that they can't they can't operate in the same way Canico, Repsol and Santos does? Are they are they so special?
SPEAKER_01Even the way that they're they're already doing that in other states, just not here, right?
SPEAKER_00Right, so right. This is are they so special that they can't that that's not right? I mean, they're they're hard-nosed businessmen. Yes, they don't want to pay, they don't want to pay taxes, but if they pay taxes like Conico, like Repsol, like Santos, like they do in other states, if they pay, if they if they have to pay taxes, they'll pay taxes and they'll keep on going. I mean, so that's that's not an article. It's just all these arguments that people up about, well, we need to we need to study it more, we need to have more hearings on it, we need to do more now. I've had it. I mean, I had it in in the 1980s when the congressman, after I figured out the way the congressman had tricked me, I've had and my clients, I've had it the way that you know everybody is going on about this issue uh in op-eds and everything else about uh about we need to study it more. No, you don't. It's clear. These guys aren't paying taxes that Conico, Repsol, Santos, and they're paying in other states. It's very clear. Let's apply the tax to them and get on with our lives. Let's stop screwing around with uh with the gas line bill, you know, trying to figure out how we can delay the escort provision.
SPEAKER_01All right, Brad. So what are you um what are you watching this week? Two minutes. What are you watching this week here as we wrap
Oil Price Whiplash And Wrap
SPEAKER_01things up?
SPEAKER_00I'm watching the Straight of Hormouth, which is you know, sort of like a this ongoing comedy show or something. I know. And it's flipping. I mean, if you look at the ANS oil price as reported by the by the tax department daily, it's flipping the ANS oil price all over the place. Yeah, all over the place. I mean, the ANS oil price for those who who don't watch this daily like I do or hourly, the ANS oil price this past week has gone below the WTI price, which is just almost unheard of. And what's going on was all these ships, uh, all the all the Gulf Coast, all Persian Gulf Coast, uh ships got bottled up when the Strait of Hormuz got closed. Then when the Strait of Hormuz opened, they all you know ran like ran like the wind. And what's happened on the what's happening to ANS is that all those the the pent-up ships are hitting the West Coast, driving the price of ANS down, driving the price of a uh West Coast oil down and driving the price of ANS down, even so far as as to drive it under WTI. And now that we're gonna close the the whore news again, I'm sure the price is gonna pop back up higher, higher than Brett again. So it's just what I'm watching is just you know these gyrations that we're going through.
SPEAKER_01$129 in April down to $71 this last week, and now it's on its way back up again. I mean, it's just like a yo-yo. I mean, at this point, uh, I don't know what's gonna happen, but I know that they're gonna spend it all, whatever it is, they're gonna spend it all, and then some. It's it's gonna be amazing, amazing to watch. All right, Brad. Well, thank you so much for coming on board and uh and and being with us. I appreciate it. Uh yeah, 1.9 billion. I got the note. I got the note, it's right here in front of me. So all right, Brad. Thanks so much, my friend. Michael, as always, thanks for having me.
SPEAKER_00Well, 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.
