Sunday, September 14, 2008

Alaska's Permanent Fund, Explained for Outsiders

-- by Dennis Harris

Phil says that he's had many queries regarding the Alaska

Permanent Fund Dividend program. Apparently much misinformation regarding the Dividend is circulating Outside. Some folks seem to think that the payments might increase the prices they pay for gasoline or heating fuel.

The Alaska Permanent Fund Corporation was created by an amendment to the Alaska Constitution in 1976, in order to retain and invest a portion of the State's income from non-renewable resources (gas, oil, and minerals) so that when those resources were
exhausted, the income from investing that revenue could be used
to finance government activities and programs.

At least 25% of oil, gas, & mineral production taxes and royalties must be deposited in the Fund, and the Legislature has appropriated additional amounts to the Fund's principal from time to time. The fund's value is currently about $35 billion. For details about the Fund's investments, click here.

The Permanent Fund Dividend program was proposed by the late Governor Jay Hammond and passed by the Alaska Legislature in 1980, in order to ensure that Alaska citizens retained an active interest in the Fund and its growth, and to discourage future Legislatures from spending the principal of the Fund or investing it in risky ventures. Click here for information about the Dividend program.

Alaskans who reside in the state for one year or more, and who spend less than 90 days outside Alaska (with exceptions for students, military services members, employees or members of the Congressional delegation,and a few others) are eligible to apply for the annual dividend, which is paid from part of the Fund's earnings (most earnings are retained and re-invested for fund growth and inflation proofing).

The amount of the annual dividend payment varies from year to year, and is based on the Fund's rate of return on investments over the previous five years. The 2008 payment that many Alaskans received by direct deposit to their bank accounts on Friday, September 12, was $2,069.00, the highest dividend paid to date.

Alaskans pay some of the highest gasoline and fuel oil prices in the nation. In many Alaskan rural villages, this fall's fuel oil prices are around $9.00 per gallon, and gasoline prices are up to $8.00 per gallon. In rural areas, gasoline is critical for hunting and fishing, which rural residents depend on as their main food source. Urban areas, especially outside of Anchorage, also pay high fuel prices.

Many Alaskans felt that if our oil brought such high prices, some of that large state revenue surplus should benefit us directly, by subsidizing our purchase of those high priced products produced from our oil.

Because of the impact of fuel costs on Alaskans' cost of living, Governor Palin proposed, and the Alaska legislature recently passed, a one-time "energy rebate" payment to every Dividend recipient of $1,200 that was added to the 2008 Dividend checks. One reason for this was that the State had a very large surplus because of the current high oil prices, mostly from selling State royalty oil --- the State gets 1/8 of all oil pumped from State land, and takes its royalty in
oil which is sold on the open spot market.

Neither the dividend payments nor the energy rebate increase the price that non-Alaskans pay for fuel, since dividends are paid from the Fund's investment income, and the rebates are paid from income received from the sale of oil in the open market.

image -the late Gov. Jay Hamond


Glitter and Doom said...

Is Alaska a welfare state?

Anonymous said...

Not a welfare state, but a COMMONWEALTH in the fullest sense of the word.

The Constitution of the State of Alaska
Article 8 - Natural Resources
§ 2. General Authority
The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people.