Sutton Community Council (final2.26.2025).pdf

At the request of the Sutton, Alaska, Community Council, our 2.26.2025 presentation on the Top 3 issues the #akleg is facing this session.

1. A Look at
Current Legislative Issues
Presentation for Sutton Community Council
February 26, 2025

Brad Keithley
Managing Director
Alaskans for Sustainable Budgets

2. Our Top 3 Issues

* Budget
* Southcentral energy
* Permanent Fund
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3. Budget: Where we are now (the “baseline”)
3
* Huge and growing current law deficits

4. Budget: A big part of the problem
4
* Oil volumes are
growing, but state
revenues from oil
are falling:
-No royalty from
federal lands
-Sequential
SB21
“incentives”
that push back
production tax
revenues from
new
developments

5. Budget: It can get a lot worse (HB69 or other)
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* While HB 69
starts at
$330mil in
FY26, it grows
to $1.04bn/yr
by FY35

6. Budget: It can get a lot worse (HB69 or other)
6
* Deficit equals
(as % of POMV):
-FY26: 90%
-FY28: 101%
-FY30: 107%
-FY35: 107%

7. Budget: It can get a lot worse (HB69 or other)
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* By FY30,
deficit equals:
-46% of
spending
-7.1% of AGI
(income tax)
-4.4% of
Private
Sector GDP
(sales tax)

8. Southcentral Energy: The situation
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* Declining
Cook Inlet
supplies

9. Southcentral Energy: The options
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* 2023 Study looked
at a wide range of
options

* Cook Inlet
exploration
increasingly costly

* Pipeline viable only
if heavily subsidized

* LNG options most
economic

10. Southcentral energy: Since then
Cook Inlet Production Costly
(Recent Enstar Furie Contract)

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Kenal LNG Available and Economic
(Recent CEA Filing with RCA)

11. Southcentral Energy: Why we support Kenai LNG**
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* Economics

* Already built and mostly
permitted

* Not tied to potential #AKLNG
complications

** But significant market power
concerns with Hilcorp

12. The Permanent Fund: The issues that concern us
* The Fund isn’t generating enough annual earnings to cover the POMV draw
-Some propose to merge the corpus and earnings reserve to help cover the problem
-But that opens the door to bleeding the corpus
-Another option is to reduce the POMV rate (to less than 5%), but that means even
bigger budget problems
* Separately, there are some significant issues with fund management
-Recent returns are below “passive” benchmarks
-Management fees are excessive (currently running at $880 million/yr)
-Double Norway’s as a percent of funds managed (1.0% v 0.4%)
-Boosting returns and reducing costs would increase earnings, helping the first issue
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13. Questions
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