The Weekly Top 3
The Weekly Top 3 (7.22.2024)
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 22, 2024.
This week, our top 3 issues are these: 1) we explain how the term “surplus” has become another step in the Orwellianization of Alaska budget terms (2:05); 2) we discuss what is driving what some are now saying is the long-term outmigration of working Alaska families and why the Alaska “anomaly” isn’t really an anomaly after all (20:09); and 3) we ask (and answer) whether the reappointment of Ethan Schutt to the Permanent Fund Board is a positive, negative, or a status quo development (38:04).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
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 22, 2024.
This week, our top 3 issues are these: 1) we explain how the term “surplus” has become another step in the Orwellianization of Alaska budget terms (2:05); 2) we discuss what is driving what some are now saying is the long-term outmigration of working Alaska families and why the Alaska “anomaly” isn’t really an anomaly after all (20:09); and 3) we ask (and answer) whether the reappointment of Ethan Schutt to the Permanent Fund Board is a positive, negative, or a status quo development (38:04).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
Hi, this 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 22nd 2024. The Weekly Top Three is a regular segment on the Michael Dukes 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 am.
Speaker 1:I join Michael weekly in the first hour of Tuesday's show from 6 10 to 7 am for a discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, youtube, soundcloud, spotify and Substack pages, also on the Alaskans for Sustainable Budgets website, as well as the projects page on the national blog site mediumcom. 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.
Speaker 1:This week, our top three issues are these First, we explain why the term surplus has become another step in the Orwellianization of Alaska budget terms. Second, we discuss what is driving the net out-migration of working Alaska families and why the Alaska anomaly isn't really an anomaly. And third, we ask and answer whether the reappointment of Ethan Schutt to the Permanent Fund Board is a positive, negative or just another status quo development. And now let's join.
Speaker 2:Michael Truth. Tuesdays is what we got here going on and we're ready to go. So, Brad, I mean not to beat a dead horse, but some of these things keep coming back to us again and again and again. We'll start off here in hour one with kind of the Orwellian. Take on language from AK Fiskell and give us this the Orwellianization is what you said in your email and I was like, wow, that's a word. I love it, Orwellianization. What do you mean? Hit me with this. What are we talking about here?
Speaker 1:Well, it's a word that's easier to type than it is to pronounce as I was typing it out. It made sense. So, alaska the Alaska fiscal situation has been characterized in a number of situations by changes in language. It's if you can't change the law, change the language, and there's been two big changes that have occurred that demonstrate that. We're going through the second right now. The first was in 2017, when they realized they weren't going to be and by they I mean Natasha and Bert and others realized they weren't going to be, and by they I mean Natasha and Bert and others realized they weren't going to be able to change the statute around the PFD. What they did was a sleight of hand. They previously had characterized the PFD as designated general funds DGF and that was the way in which it had shown up in the fiscal summaries for decades. But in 2017, realizing they weren't going to be able to change the statute that set aside the PFD, all what they did was change the language and they recharacterized the PFD from designated general funds, which meant those funds were designated for a specific purpose, set aside for that purpose. The legislature could go grab them. They can go grab any designated general funds, but they were on the books as set aside for a specific purpose. They recharacterized those as unrestricted general funds, ugf, and all of a sudden it was oh well, we can use those anytime we want, for anything we want, they're unrestricted. Those PFD revenues are unrestricted general funds and we'll just start applying them across the board.
Speaker 1:Didn't change the statute but changed the language around the statute. And what's really interesting is the language that's in the fiscal summaries about defining what designated general funds are is still there. Restricted revenue equals spending for each category Designated. This is from the most recent legislative finance fiscal summary. Designated general funds include one program receipts that are restricted to the program that generates the receipts, and the best example of that is university tuition Tuition paid for by university students. It's actually state money, it's paid to the state but the state restricts it over to the use by the universities. And two revenue this is designated general funds revenue that is statutorily designated for a specific purpose. That's the definition of designated general funds and PFDs. They haven't changed the statute. Pfds still fit that category, still fit that definition of designated general funds revenue that is statutorily designated for a specific purpose.
Speaker 1:But they changed because they couldn't change the statute, because they couldn't undesignate those funds. They couldn't get enough votes to undesignate those funds. They just started calling them something else. They just changed the language unrestricted general funds. And that is the genesis for a lot of the issues that we've had since. Because they're unrestricted general funds, we can apply them anywhere, and we're just going to do that and ignore the statutory designation or, as Tim Bradner sometimes says, just declare that obsolete and just ignore it, because it's still in the books, like any other statute that we're enforcing today, but it's obsolete because you know there's no longer fits, the definition or something like that.
Speaker 1:We're going through the second phase of that, the second step of that, right now. So we've got all these funds, we've moved them from designated funds, we've redefined them as no longer meeting designated general funds for some reason, and we call them unrestricted general funds, and so now we can spend them on anything. Now what they're doing is they're beginning to realize that, oh, we've got money left over at the end of appropriations. People are stopping short of appropriating all of the revenue they possibly could, they're holding back on revenue. But now they've got in the budget, they've got some leftover money that statutorily, since it's coming from the PFD, statutorily should be paid to the PFD. It's not appropriated for anything else. Statutorily designated for the PFD should be paid to the PFD. Even after all the cuts, there's some left over. So now they've got some left over and, in order to avoid addressing the fact that it should be under the statutes and could be under the budget appropriated to the PFD, they're starting to call it surplus. And we've got this new category of surplus funds, which are funds that they've taken from the permanent fund dividend. They've moved over from the permanent fund dividend to the general budget, but they haven't yet appropriated, and so they're starting to categorize them as surplus funds. And you see, this Legislative Finance sent out a note, sent out a newsletter last week that said, all of a sudden, pfds were no longer designated general funds.
Speaker 1:Based on the spring 2020 forecast, both the FY24 and FY25 budgets are projected to have surpluses $128.8 million and $146.5 million respectively. The FY24 surplus will lapse into the CBR, while any FY25 surplus will be available for appropriation next session. So, basically, what we're doing is we're overtaxing, overcutting the PFD now in order to create this slush fund that we call surplus that will carry from one legislative session to the next and, if it's not appropriate, the next legislative session we'll go into the CBR. We're using excess PFD cuts now to start rebuilding the CBR. We've been doing that all along. When you see the CBR uptick, it's really just excess PFD cuts that are showing up in there. But now they're trying to formalize that by creating this category called surplus.
Speaker 1:And it's also it's showing up in other strange ways. I mean it's showing up as a rationalization for why the governor shouldn't be cutting things. For example, in an ADN editorial this weekend, the ADN says this is about the blood bank and Dunleavy's cuts to the blood bank said she had not heard a specific rationale at all about the cuts to the blood bank and pointed out the fact that, insofar as savings and fiscal stability are concerned, the operating capital budgets included a surplus before the governor got out his red pen. So there's a surplus. Why should the governor be cutting it? It's the same thing that we saw last year in an editorial by Elise Galvin talking about the governor's partial veto of the line item veto of K-12 spending, and in her editorial she said and there's a budget surplus, so what's the hangup? And there's a budget surplus, so what's the hangup?
Speaker 1:So what we've got going on, michael, is they can't change the statute, they can't get the votes to change the statute about the PFD. So what they and by they I mean legislative leadership, because Delaina Johnson has been right in there with everybody else calling it a surplus what they, the legislative leadership, are doing is changing the language. First, it's no longer designated general funds, it's unrestricted general funds, so hey, we can spend it on anything. And now it's no longer excess PFD cuts or cuts or revenues that should have gone toward the pay to pay the PFD. All of a sudden it's surplus and now we can now we're just now. We can attack the governor for cutting spending by saying, hey, there's a surplus. So what's the problem? It's Orwellian. I won't try Orwellianization because I'll blow that. It's Orwellian in the sense that they can't change truth, they can't change the facts, they can't change the statute. They can't change the statute, they can't get the votes to change the statute. So they're just changing the language.
Speaker 2:Well, it's Kabuki theater, right? I mean, this is fiscal Kabuki theater. Basically, they're doing what they're doing and they're looking for a way to explain it to the average person, who may understand the basics of a surplus versus a deficit, versus you know, things like that and so they frame it in such a way that it looks like oh, it makes their position look very reasonable. We already had a surplus, why would the governor cut more since we had a surplus? Do we need a surplus? I mean, we're just spending reasonably. We had a surplus, and they keep saying that, but of course, nobody ever talks about, you know, the first thing that they pick up at the beginning of the next year is the overspend from the previous year. Right, I mean, there's always a fiscal I've forgotten the word right off the top of my head here, but you know the, by the way, we overspent from last year, so we need to true up last year.
Speaker 2:Supplemental, yeah, supplemental budget. There you go, sorry, supplemental budget. So I mean, you know, it's just another way for them to, like you said, capture the language or explain away and justify what they're doing and making it sound so, so reasonable. Right, they've used this kind of language in the past for different things, not just this time, but this is just another one where it's just so. So it's like the idea of using designated funds versus dedicated funds, because the dedicated funds are prohibited by the constitution, but we can designate funds all we want. It's the same kind of thing, right? I mean, it's like wait a second, what is that?
Speaker 1:and then, and then, even though they meet the definition of designated funds, we'll treat them as something else. I mean, it's being used for other things. So you have candidates out there that are campaigning on the fact that there's a surplus. I not only balance the budget, but there's a surplus. So you got candidates out there claiming to be fiscal conservatives, claiming to be fiscal hawks, to be fiscal conservatives, claiming to be fiscal hawks when they cut the PFD hugely and cut it even another $150 million, in this case, another $150 million to create this surplus. So they can go around campaigning on the fact and we have a budget surplus, and then, as you say, when they get into the next session, they go oh heck, we had a surplus leftover from last session and so, oh, we can spend that surplus because we got these extra funds that came in from the last budget and we can cut the PFD again so we can have more money in this session. But now we can use excess PFD cuts we made in the last session.
Speaker 1:For a while, is you know, for a while I thought ledge finance was going to sort of straighten out and and play the game straight, but now they're in on it. I mean this, this, this legislative, this, this recent fiscal note, this recent fiscal newsletter is coming from legislative finance, and they're the ones that are explaining oh, there's this surplus. Certainly they're doing it at a Burt's direction, but but they're the ones that are explaining oh, there's this surplus certainly they're doing it in a burke's direction, but but they're right, it's uh, curiouser and curiouser for sure.
Speaker 2:Uh, it's, uh, it's that capturing of the language and again trying to explain away what they're doing and justify it I just love the, the, the mental gymnastics you've got to go through to follow this stuff can't have dedicated funds, but we've got designated funds through to follow this stuff can't have dedicated funds, but we've got designated funds. And then when the designated fund part doesn't work out, we just redefine that as something else and then we throw in new phrases that will confuse you, which we've never used before this idea of a surplus and that will justify everything we're doing by saying he's not being reasonable because he's cutting and we already had a surplus. You know, it's just again. It's, it is, it's kabuki. They're shuffling stuff around and trying to justify to you how they're spending billions of dollars and it's just oh so reasonable and we should just all get with the program.
Speaker 1:Essentially, Well, it's 1984. It's George Orwell. It is changing the language to justify acts. That it's the use of the language that isn't normal use of the language to cover what they're doing and it's wrong. I mean, I know there's only so many times I can say that, but they are conveying a meaning to Alaskans that is not what they're actually doing. They're conveying the meaning that we're creating surpluses, that we have a surplus.
Speaker 1:It's not like oil prices went up to the point we have in the old use of the term, where we have a budget surplus, where we have more revenues from traditional sources than we can spend, and they ought to go to the SBR, they ought to go to the CBR. It's not like that. They're creating these additional revenues through deep PFD cuts, through deep cuts in something that's designated by the statute, and then they're just calling it. They're calling that surplus. They're calling if you think of PFD cuts I know Randy doesn't, but if you think of PFD cuts in the way that Matt Berman thinks of them, as taxes or as takes of income reductions in income from Alaska families, it's excess taxes. What they're doing is making excess taxes to create this surplus for them to go campaign on and for them to use in attacking the governor and for them to use in a subsequent budget cycle.
Speaker 2:Yeah, no, it's frustrating. Ben Carpenter said I thought the argument was that PFDs aren't affordable any longer, or was it? The dividend should only be paid from surpluses, right, I mean, this is the. It gets so confusing in there. I mean nobody can kind of keep track what's going on. But the bottom line is is that they're taking more money and that surplus should have gone to the people to begin with, and instead they're just overtaxing you and then justifying that money to then be used later on or to go back and pay the CPR. It basically prevents them from having to be fiscally responsible in the moment, because they could pass everything on down the road, right?
Speaker 1:Yeah, and when you think about it in the context of the CBR that the surplus then spills over to the CBR what's really going on is we overspent we way overspent in the early 20-teens.
Speaker 1:We spent on roads, bridges, we spent on all sorts of different things in the early 2020 teens and drained the CBR. Now they're trying to pay the CBR back, but they don't want to pay it back from all of the Alaskans who benefited from that overspending probably 50% of whom have moved out of state by now. They don't want to pay it back from all of those Alaskans who benefited from the overspending. They want to pay it back from middle and lower income Alaska families through PFD cuts. So the top 20% oil and non-residents dodge again. So it's sort of this concept of surplus sort of cascades into oh, and we get to keep taking more from middle and lower income Alaska families and we get to keep taking more from middle and we get to overtax them more. It's just, it's capturing, it's using the language in a way that is not the common, ordinary, understood meaning of the terms.
Speaker 2:Well, again, you know, the thing is, this is all a justification, Like you said. You keep seeing it now in this idea, both Elise Galvin last year and Kathy Giesel this year, saying we've got a surplus, why are they cutting? We've got a surplus, why are they cutting? We've got a surplus, why are they cutting? But it's a fictitious surplus that's basically been ginned up on the backs of Alaskan people and that's why they're cutting and that's why some of these cuts are occurring. But again, it makes them sound oh so reasonable. And that's where the danger is, I think, because the average person is not deep enough in the budget to understand these things and he hears the word surplus and they're like oh OK, well, that makes sense. Yeah, we shouldn't cut, we've got a surplus. Why would we do that? You know, again, it's capturing that low information voter to basically make them understand it.
Speaker 2:Let's continue on here. Brad Keithley, alaskans for Sustainable Budgets, is our guest. The weekly top three continues. We're jumping into it now, revisiting something we talked a little bit about last week, and that is the Alaska anomaly. Brad, remind us of what that was before we jump back into this here, so that people can understand where we're at here.
Speaker 1:So the Alaska anomaly is that many consider us most consider us a low tax or a no tax state, but we're losing population. When tax people do an analysis, or when fiscal people in DC do an analysis, they explain the population shift that's going on in the country the exit from New York, the exit from California, the growth in Florida, the growth in Texas. They explain that in terms of low taxes. They said well, you have a low tax jurisdiction and so that's attracting people from high tax jurisdictions. Well, on the standard they use which is looking at the standard definitions of tax income tax, sales tax, property tax. On the standard definitions they use, which is looking at the standard definitions of tax income tax, sales tax, property tax. On the standard definitions they use, alaska is virtually a no-tax state. We have no statewide sales tax, we have no statewide income tax, we have no statewide property tax and, as a consequence, we're basically a no-tax state. Yet, as we discussed last week, alaska finishes in the bottom five in terms of migration patterns. Not only are people not coming to Alaska, they're leaving Alaska, and so we're seeing this out migration and to some degree people have said, oh, this out migration is a temporary thing. It has to do with oil, has to do with a bunch of other stuff, and we will turn around at some point and we'll start having in-migration again. Alaska will start growing the population. Well, as James Brooks reports in Alaska Beacon article this week, last week, that's not happening. The demographers how's that? For a word, the demographers at the Alaska Department of Labor have issued a new update that predicts a population drop. The headline on James's article is Alaska demographers predict population drop a switch from prior forecasts. So now we're no longer trying to excuse this population shift as this out-migration that we've been having. We're no longer trying to excuse it as a temporary thing. Now we're admitting it's a long-term thing. How does that happen? When you look at the stuff that comes from DC, how does that happen in a no-tax state? That comes from DC, how does that happen in a no-tax state?
Speaker 1:The response has been the response is interesting to this to the Alaska Labor Department publication. You know you've seen people say well, we need more education spending. How are we going to stop this population, this out-migration? We need more education spending, say some Democrats. We need more energy subsidies, say some Republicans. We need more infrastructure, say both Democrats and Democrats. We need more energy subsidies, say some Republicans. We need more infrastructure, say both Democrats and Republicans. We need defined benefits government-defined benefits to keep people in the state, says Kathy Giesel. But I don't think they're looking at this the right way.
Speaker 1:Let's go back to last week's analysis. When you look at low-tax states, what's really going on is the low-tax states have low government spend and they spread the burden not the best way in the world. They spread it largely through sales and property tax, but they spread the burden broadly so that at least it picks up some contribution from non-residents and at least it picks up some contribution from non-residents and at least it picks up some contribution from the top 20 percent. Um, and and so you have a much, a much lower per per capita or much lower per person charge to pay for government, and government is lower spending in the first place. So you have a. You have a low tax state because the government's not spending a whole lot and it is spreading the burden broadly so that no one given segment is bearing a big share of it. That's the exact reverse from what's going on in Alaska.
Speaker 1:Alaska is actually, when you look at it on a per capita basis or any sort of basis. It's a high spend state and we have high spending on a per capita basis. Now people will rationalize that that we're largely rural. We're a big state. We've got to. You know things cost more, we got to spend more. But I don't care how you rationalize it. The fact is we're a high cost state and, unlike Florida and Texas, we're concentrating that burden. We're not spreading it across all the population and including non-residents by having a broad based revenue source to cover that spending. We're concentrating it on middle and lower income Alaska families through PFD cuts. We're concentrating the burden on middle and lower income Alaska, on the middle, those in the middle and lower income brackets, unlike the low tax states.
Speaker 1:So Alaska is doing the reverse and guess what's happening as a result? We're losing people. We're losing people. And where are we losing people? We're losing people in the working age population, those that are 60 and older. That segment of Alaska is actually increasing. Population's actually increasing. When you measure it by the number of income tax returns filed, that population is actually increasing. The decrease is going on in the middle and lower income brackets. $200,000 and below is where we're losing people that are age 60 and below.
Speaker 1:So the Alaska anomaly is. We have what people think is a low tax state, but we're still losing people. But if you think through it, we're losing people because we're actually a high-cost, high-tax state. We are, from the perspective of middle and lower-income Alaska families, we are the equivalent of California or New York because we're putting the entire fiscal burden on them. It shouldn't be any surprise that we're losing people. It shouldn't be any surprise that we're going to continue to lose people, that we're going to continue on this downward spiral. As long as we have high government costs and we continue to put them entirely on middle and lower income Alaska families, those people are going to continue to leave and that's what explains the Alaska anomaly. It's not oh, we need more education spending or we need more energy subsidies, say George Rauscher and other Republicans, or we need more infrastructure or we need more defined benefits. It's not any of the mores, it's the less and it's the spread the burden broadly as opposed to concentrating it on middle and lower income Alaska families.
Speaker 2:And this is again part of the problem of why it's driving it out, donna said earlier. Donna Ardwin said her firm shows the absolute correlation between taxes and out migration. Alaska is recognized as a high tax state. Wait until you add an income tax or something else, and then that exodus will actually speed up. We talked about that previously. It's like the doom loop, right, I mean, once you reach that point of and that's what? Like California and New York, that's what they're experiencing at this point, and Alaska if the spending continues without any you know, capping or anything else.
Speaker 1:This is what we're going to see here is a continual out migration that will actually increase. Generally speaking, when you go to the Tax Foundation and the other national institutes that look at ITEP and other national institutes that look at Alaska, they call it a low tax state. And you talk to legislators and they'll say, oh, it's a low tax state. We have no tax, we have no statewide taxes. We need to keep it. That way, says Zach Fields or Andy Josephson. That's what we, that's what we need. We need to spend more, but we need to keep it a low-tax state. How do we do that? We use it by calling things surpluses and unrestricted general funds and we take money out of the pockets of middle and lower-income Alaska families and they're showing us how they react to that. They're leaving.
Speaker 1:That's what the numbers show. So you know you cannot. It is the Alaska anomaly is explained by the fact it's not an anomaly. The Alaska anomaly that some people say is the Alaska anomaly is a low tax state but we're still losing population. Well, it's not an anomaly because we're not a low tax state. We are, when you take into account the PFD and the burden that puts on middle and lower-income Alaska families. We're actually a very high-tax state in league with California and New York and the other states that are losing population.
Speaker 2:Brad Keithley Alaskans for Sustainable Budgets. So, brad, how do we overcome this? I mean because, again, now this James Brooks article talks about, now they're no longer looking at these rosy forecasts. They're saying that by 2050, we'll have, you know, another 30,000 or so fewer residents than we did, you know, than we do today, and it's just going to continue. That out-migration is going to continue. So what's it take to tip the tip the balance back the other?
Speaker 1:way we have. We have politicians and policymakers like Ben Carpenter who call, who call the truth the truth and say look, we do have taxes, we do have burdens, we do. We are taking revenue from from segments of the Alaska population. We need to spread that out more broadly to lower the impact on the people who are leaving, to lower the impact on middle and lower income Alaska families, and in doing that, we're also going to generate pushback on additional government spending, because government spending will no longer be free to those in the top 20% and non-residents and the oil companies. That's the way you do it.
Speaker 1:You admit what PFD cuts are. You admit they are burdens, taxes on middle and lower income Alaska families. You say we can't concentrate that burden because they're leaving. We don't need to spend more. Take more from them in order to create more toys out there in terms of higher K-12 and other things. We don't need to increase the burden on them. We need to lower the burden on them in two ways One, by spreading that burden to include people who are currently getting off in Governor Hammond's term scot-free, and second, we need to then start reducing the burden on everybody, as happens in actual low-tax states.
Speaker 2:Brad Keithley Alaskans for Sustainable Budgets. Brad, that's number two. Give us a tease for number three.
Speaker 1:Number three is what is number? Three no number three is does Ethan Schutt's reappointment to the Permanent Fund Board put the Permanent Fund Board back on the right track?
Speaker 2:All right, we continue here in just a moment. Brad Keithley continues with us again for the weekly top three and two Tuesdays. We'll be back with more in just a moment. Don't go anywhere. The Michael Duke Show common sense liberty-based free thinking radio Liberty-based free-thinking radio.
Speaker 3:If you missed the show, you can listen to it on your time with Dukes On Demand. Oh, and it's free, like America used to be. Streaming live every weekday morning on Facebook Live and MichaelDukesShowcom ben carpenter says um, so we're both.
Speaker 2:We're now. We're both a low tax state and a high spend state. But are we a prosperous state? And I mean that's the, that's the million dollar question, and I think the answer to that is pretty much at this point, no, because we know where this is going to all end up in the long run.
Speaker 1:I mean right and and the answer is we aren't a low-tax state. The low-tax state should have had quotes around it. We aren't a low-tax state, we are a high-tax. When you take into account PFD cuts, we are a high-tax state and those high taxes are high takes of revenue. If I'm dealing with Randy, those high takes of revenue are coming from a targeted segment of the population middle and lower income Alaska families. And when you look at where the out migration is occurring, it's middle and lower income Alaska families, working age, middle and lower income Alaska families. So low tax date should be in quotes.
Speaker 2:Yeah, no, it should be. He also said so. Rather than a permanent fund, earnings flowing into the private economy, it's flowing this is on your previous comment it's flowing into the CBR. So it's like the private economy doesn't matter to some, which again I mean. This is the whole point. Right, the private economy. As long as the public economy is protected and they have those monies from the fund, they can get the fund up to $100 billion, so they can just draw. You know, nothing else matters at that point. As long as they can get their kick and their chunk of money, it's all good.
Speaker 1:And that's I mean it's coming back into the Alaska anomaly, Michael. I mean we got declining population. Ooh, we need to spend more. We need to spend more on K 12. We need to drive this state deeper into the ground. Where's that money going to come from? It's going to come from middle and lower income Alaska families and who's leaving Middle and lower income?
Speaker 2:We need to drive that stake until they're gone, until we've turned this state into a high income haven, for you know Well, it's a high income haven of government only employees, because they're the only ones that can remain, and whatever service industry can service them, and the rest of it's just like there you go. I mean, you know where do you go from there, right? I mean, once you've got nothing but government employees, because they're the only ones that can afford to stay, and the service industries that keep them. It's almost like because, again, the fewer people that are here, the less services the state has to provide, and they could just keep going. You know it. It's frustrating.
Speaker 1:Kyle. The more services, the more services they can provide, the more employees they need to provide to less people, right, we'd have more. Well, you know, 50 percent. Need to provide to less people, right, we can have more K-12, for you know 50% less people For less people.
Speaker 2:And then Kyle says CBR payback is a constitutional requirement is a constitutional requirement. Nobody's saying not to pay back the CBR, kyle, but that again that's a whole other kettle of fish. Where is the rest of that money going to come from? I mean we owe it what I think $7 billion or $8 billion. At this point it's supposed to have a $10 billion balance and I mean nobody said not to pay it, but I mean this is not a dig at not putting money in the CBR. This is kind of this fictitious shell game that they're playing with the finances to show oh well, if we don't use it, it'll go into the CBR.
Speaker 1:I've been one of the biggest advocates and Kyle knows this I've been one of the biggest advocates of paying back the CBR.
Speaker 1:I've written article after article, commentary after commentary, about the need to pay back the CBR. But we need to pay back the CBR from the people who benefited, from the top 20%, from the non-residents, from all those people who got the benefits of taking down the CBR in the early 2020 teens, and what we're doing with this surplus is we're paying sneakily. We're paying back the CBR from middle and lower income Alaska families through deeper PFD cuts, excess PFD cuts, and I yeah, I, absolutely we need to pay back the CBR. But we need to pay back, pay it back from the people who benefited, or at least the. Since 50% of those people are gone from the early 20 teens because the out migration, we need to pay it back at least from at least from the same income brackets that got the benefits of that massive spending that occurred in the early 20-teens. Kyle and I have these half arguments it's yes, absolutely, we need to pay back the CBR, but it's who we need to pay back the CBR from. Who needs to contribute to that process is the issue.
Speaker 2:Right, it's a broad thing. You can't just continue to hang the burden on the lower income, the lower 80%, middle, middle and lower income. Right, it's a broad thing.
Speaker 1:You can't just continue to hang the burden on the lower income, you know, the lower 80%, middle, middle and lower income.
Speaker 2:Yeah, I mean, well, you just, you just can't keep hanging the bill on them and then expect it's all going to be. Uh, you know, gravy, everybody's got to pay to pay that back. We all quote unquote benefited from it. Uh, so we should all have to pay it back together, I guess, which is the more frustrating thing. All right, let's see.
Speaker 2:Gary says this is beating a dead horse by saying taking the PFD is a tax on middle and lower income families. Everybody here already agrees. Saying this here week after week goes nowhere. But the thing is, we may agree with it, but not everybody else is understanding that. That's the problem here on the program. We may agree with it, but you know, not everybody else is understanding that. That's the problem here on the program. We may understand that, you know deeply and agree with it, but the problem is, not everybody is in agreement with that. A lot of mainstream people, you know, just regular folks who are not paying attention to this. They don't know that. Gary, that's the problem and that's why I think Brad keeps repeating it over and over and over again. All right, brad Keithley Alaskans for Sustainable Budgets is our guest.
Speaker 2:We continue with a weekly top three on this Truth Tuesday. The final one is the discussion on the Permanent Fund Board. This has been a topic on and off for weeks here on the program, with all the different furor that's going on over the, the permanent fund and and uh, you know, unethical behavior and ignoring the, the legislature and all the other things that are going on. But don't worry, the governor is now reappointed. Uh, uh, shoot back to the thing. Is this a? Is this a good thing or a bad thing? Brad, where are we at?
Speaker 1:So one of the things that in the leaked emails from the permanent fund staff was an email that said that Ellie Rubenstein, who's vice chair of the board currently the vice chair of the board Ellie Rubenstein had said that the staff should know that the governor won't be reappointing Ethan Schutt, who was the chairman of the board. And since Ellie's the vice chairman of the board, one would think that she said that in order to give them some indication that she was likely to ascend to chair, that Ethan wasn't going to be reappointed and that she was going to have more complete control of the board than she had even at that point. So go talk to the people I want you to talk to was sort of the rollout of that string of emails. Ethan's term Ethan has been chair of the Permanent Fund Board. Ethan's term expired on June 30th and, unlike other state agencies or state positions, you don't carry over. A board member on the Permanent Fund Board doesn't carry over past the end of the term until his successor is appointed. The end of his term means the end of the person's term means the end of the person's term.
Speaker 1:When we got to June 30th, the governor hadn't appointed anybody. He hadn't reappointed Ethan. He hadn't appointed anybody else to take that seat, and so Ellie, his vice chair, all of a sudden became acting chair. Because she was the vice chair and there was a lot of speculation about what the heck the administration was doing now. Were they going to try to leave that seat vacant in order so Ellie could just automatically roll up to chair? That didn't seem like a good idea after all the chaos that she caused earlier in the year. But what were they going to do? The governor finally acted and reappointed without any discussion, without any explanation, posted on the state website that Ethan had been reappointed as a director of the permanent fund board and that doesn't mean he's chairman. The governor doesn't name the chairman. The permanent fund board members elect the chairman. But at least that part of Ellie's predictions didn't come to pass and the governor reappointed.
Speaker 1:Now the question is okay, does that mean the permanent fund board is now back on an even keel? We can stop worrying about it, all's right with the world and everything is going to be hunky-dory from here on in? No, it doesn't mean that at all. First, it's not automatic that Ethan continues as chairman. Plus, ethan has been outvoted. He and Craig Richards have been outvoted four to two on a number of recent initiatives, with Ellie leading the four against Ethan's two. So just because he's back on the board, a doesn't mean he's chairman and with whatever power that has. And B it doesn't mean that the votes are gonna go any different because the four Ellie and the three commissioners well, two commissioners appointed by Dunleavy plus Jason Brinney it doesn't mean that they're gonna change their voting pattern.
Speaker 1:So it doesn't mean that. What it means is it didn't get worse. He didn't appoint another sycophant on the board to go along with Ellie that Ethan has stood up to Ellie in the past and presumably may continue to do so. And the governor didn't appoint another sycophant on the board that would just vote with Ellie and make these into 5-1 votes as opposed to 4-2 votes. So in some sense it sort of stops the bleeding where it was. We're still bleeding, but we're not bleeding further. But I would argue it also passes up an opportunity actually to make the board better.
Speaker 1:As we've talked about on the show before in other jurisdictions the requirement for a board member like Texas, texas has two permanent funds.
Speaker 1:Requirement for a board member like Texas, texas has two permanent funds.
Speaker 1:In Texas the requirement for a board member is they have a substantial background and expertise in investments, the very business that these permanent fund boards are in.
Speaker 1:We don't have that requirement in Alaska, and Ethan is really just another sort of broad-based community member. He doesn't have any special expertise in investments or in the investment industry or how to make investments, and so the governor had an open seat. He could have appointed somebody who actually had substantial background, expertise and investments, could have progressed the board by doing that, could have progressed the board by doing that, but he chose not to. So we've sort of stopped the bleeding in a way. We still have a four to two majority that goes against Ethan and Craig Richards that follows Ellie. We've sort of stopped the bleeding in that it's not going to get worse, it doesn't go to 5-1, but he passed up an opportunity to make it better, and so I don't think this is an indication that we're going back to the good times or back to where we were, or that we need to stop worrying about the Permanent Fund Board. I think it means that we've still got big worries, just not bigger worries, maybe, than what we had before.
Speaker 2:I mean he had an opportunity here. If he had put because obviously Ellie has, she has some background in investing and things like that he had the opportunity to put somebody on the board who also had investment experience and things like that and could be a counter to her arguments from that perspective. But instead he just put shoot back in there and so it's kind of a status quo. It's not good, it's not bad, I mean, it's not better, it's not worse, it's just kind of continuing on, which seems to be a habit of what we've got going on here.
Speaker 1:That's a great point, michael. I mean people sometimes say, well, the permanent fund board isn't responsible for much, but one of the things they always outline the permanent fund board is responsible for is allocating investments in categories. Annually they step back and they say how much do we want in fixed return, how much do we want in opportunity return, private equity and those sorts of things, how much do we want in the stock market? That's a huge decision and it really takes investment understanding to understand what those allocations ought to be. And that's one thing the board does Right now.
Speaker 1:Ellie I mean, as you point out, ellie's the only one on the board who really has experience background in that. I mean, ryan Anderson, who's the commissioner of transportation, is on the board has no experience in that. Adam Crum would tell you he does, but he doesn't. Jason Bruni I don't know what Jason Bruni would tell you, but he doesn't. Craig Richards doesn't really have that background either and Ethan doesn't. So it really leaves Ellie as the only one who's really had some familiarity with that. So when she speaks she's got the authority of somebody who actually does have some of that background and she's got her father's whispering in her ear also as background to that. We need a counterweight. It would have been great to have a counterweight to that on the board, but the governor passed up the opportunity, leaving Ellie essentially is the only voice that has experience in the area.
Speaker 2:And, as we've talked about in the past and I think as Kyle mentions here in the chat room as well, the entire statute needs to be rewritten, that we must have legislative confirmation. Should we be just basically be writing a requirement for board members that they have some experience, like the Texas statute that you were just quoting?
Speaker 1:Absolutely. I mean, we've talked about it on the show. I've written columns on it that Kyle may or may not have read. I've written columns on that. We need to be restructuring the board to include legislative confirmation, but legislative confirmation itself is not enough. Sovereign wealth funds to match what you see in Texas, to match what you see in New Mexico, to match what you see in Norway, to match what you see in Saudi. We need to rewrite the requirements so that the members have substantial experience and knowledge about investments, about the very thing that is going on. Maybe one or two members from the community to sort of add a community gloss on that, a test, a community test would be useful. But we need people on there who really understand the investment community and are good supervisors of those who are making these decisions. So, yes, we need to rewrite the statute, we need to restructure the board to include legislative confirmation, but that's not enough. We need to rewrite the requirements as well.
Speaker 2:We definitely need to counterweight for what Ellie's doing. I mean, I think that is, I think you know, I think that's important. You know, like hire professionals perish the thought that we should hire professionals in this, in that industry or in that business who understand it. Ben just kind of highlights what I was just saying there at the end. Recent reallocation towards more private equity investment means increased risk that fund income will be inadequate to meet earnings draws in the future, all in an effort to grow the fund to a hundred billion dollars as soon as possible. Slow and steady wins the race was. The was really the theme of the permanent fund for decades, and now it's like, oh, we need to get that $100 billion mark. So how do we do it quickly, even though there's a higher risk factor involved, and everything else? Because, again, that is the ultimate goal, right? $100 billion means they can ignore everything else in the state just to spin off what they need.
Speaker 1:You know, michael, I've started to wonder if that's really the goal. I mean, they're explaining the $100 billion in a way that is part of the piece of the rationalization for unifying the earnings reserve and the permanent fund corpus. It's being used as oh, we need to unify the two together because that's part of what will enable us to grow it to $100 billion and that'll enable the top 20% to live rent free forever and ever in the oil companies and the non-residents to live rent free forever and ever. That's part of the rationalization. But really what? What?
Speaker 1:The whole unification of in in what I'm increasingly understanding is the unification of the earnings reserve and the permanent fund corpus is really just to provide access to the permanent fund corpus so that when we get to the end of the permanent fund dividend cuts, most people say, well, we're going to go to taxes.
Speaker 1:Or when we run out of the permanent fund dividend, most people say we're going to go to taxes. If you unify the earnings reserve and the permanent fund corpus, what you've really set up is you can just kick over and start drawing down the corpus Because you've set up there's not a stop there. You don't run out of the earnings reserve at some point and have to stop drawing. You can just keep drawing and drawing, and drawing and drawing once you make that unification. So I'm curious whether the $100 billion I'm increasingly skeptical whether the $100 billion is an objective in and of itself or it's just an excuse to do the unification of the two funds and set up the ability to draw down the permanent fund corpus as a way of continuing to avoid taxes going on into the future.
Speaker 2:That's an interesting take because and that would actually play into their modus operandi of not having a long-term fiscal plan as long as they get theirs while they're here and it's in their lifetime or in their you know, then they can retire and move away or whatever else they don't care. I mean, if they draw down the permanent fund then and they don't have to pay the consequences down the road and they could still be the heroes for avoiding taxes, right? Because now they could say, well, we don't want taxes, we'll just overdraw the permanent fund until it, you know, until they draw that down to nothing. I mean you could be right. I mean I could be wrong where I said I think there's going to be taxes, you know, discussion and taxes in three years. You're right, maybe they avoid that whole discussion, and with all the Republicans who are like I'd rather have no permanent fund than taxes, the thing is then they don't know that we're eating our seed corn and what it'll do is create an even bigger problem down the road.
Speaker 1:And what we'll do is we'll create a new word. Just like the permanent fund, dividends are no longer designated All of a sudden by magic, they're unrestricted, and just like excess permanent fund dividend cuts, excess PFD cuts are now surplus, they'll create a new word to Orwellianize the drawdown of the permanent fund corpus. I think the real driver, in all honesty, the more I think about this, the more time I spend with these issues, the more I understand the motivations. Think about the motivations of the various actors in this. I think the real driver at the end of the day is for the top 20%, the oil industry and the non-resident industries, tourism, fishing, to avoid taxes at all costs, and that explains why we drained the CBR or the SBR. That explains, then, why we've drained the CBR. That explains why we're draining permanent fund dividends, and I don't think it stops when we get to the end of permanent fund dividends.
Speaker 1:I think the unification, I think the key to understanding Alaska's future is this whole debate about the unification of the earnings reserve and the permanent fund corpus, and I think if they and all of the arguments are really around trying to get those two unified, so once they're unified, then you can draw down the permanent fund corpus. Then you've set up the ability to draw down the permanent fund corpus and I think you know Burt's movement of $8 billion out of the earnings reserve over to the permanent fund corpus so we could claim there's an earnings reserve crisis out there. I think that was part of it. I think the $100 billion, I think that was part of it. I think the $100 billion, frankly, is probably part of it. It's all to set up a situation where the top 20% this generation's top 20% and the next generation's top 20%, the oil companies and the non-resident industries never have to contribute. It's all taken off the backs of middle and lower income Alaska families.
Speaker 2:I mean it's spooky. But again, I have often said and been saying for 25 years on this program that the main goal is to get to the corpus, that the corpus is the piggy bank, that they cannot help but look at adoringly and say this is what we really need. Is we really need to get our hands on that? So you're right. I mean, if they do are, if they are able to combine the funds, that will be the next step. Um is, uh, probably to drain that down because, hey, I don't have to take care of it. If they, if they drain it an extra billion dollars a year, what do they get another 40 years out of it before their earnings start? Really, you know know, are they able to do that? I mean, possibly, if they're eating into it a billion dollars a year, as it goes forward and it remains steady.
Speaker 1:That's a I mean, that's a scary proposition right there, and I think the Permanent Fund Board is playing is part of creating this crisis around the earnings reserve to justify the unification of the two funds. I think the Permanent Fund Board is in on this and that's why you don't want somebody with investment experience in there, because they'll understand it and say wait, wait, wait. That's not what we're supposed to be doing. So the $100 billion I've become skeptical of as a target in and of itself. If it is, it's only to get there, so we can slide backwards.
Speaker 2:Well, thanks for that load of great stuff. All right, brad. Well, we got about just over 90 seconds here, so I'll give you a chance to finalize and sum up your thoughts for all three of the weekly top threes today. Weave them together and give me the answer here.
Speaker 1:What's the theme? The theme is, I think, that we are ignoring reality. We're using words to ignore reality. We're calling things that are excess cuts, surpluses now we called them they used to be designated, now we call them unrestricted. We are changing the. We can't change this. They can't change the statute, so they're changing the language instead. The Alaska anomaly isn't really an anomaly Once you truly understand what's going on, that we're putting that. We are a high tax state. The high taxes is on middle and lower income families, 80% of Alaska families, and they're the ones leaving.
Speaker 2:And of course the fact is, is that the permanent fund as it continues this way is endangering the permanent fund? I mean, that's the thing. In the long run, the permanent fund and the dividend itself very dangerous. And of course does it play into their whole point of wanting to make sure that they get that hundred billion dollars so they don't have to worry about anybody else. You know, the private sector doesn't matter. That's a bigger question, I guess for another day. Brad Keithley Alaskans for Sustainable Budgets, the weekly top three. Thank you, my friend, appreciate you coming on board and joining us.
Speaker 1:Michael, as always, thanks for having me. Well, that's a wrap for another week's edition of the weekly top three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, SoundCloud, Spotify and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keith, a managing director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week on the Weekly Top Three.