Institute of Social and Economic Research, University of Alaska Anchorage
Abstract
The Alaska Permanent Fund is a sovereign wealth fund of the state of Alaska established in 1976
by a vote of the people to preserve part of the revenues from current oil production for future
generations. Twenty percent of direct petroleum revenues have been deposited into the fund
which now has a balance of 32billion.Overitslifeithasgeneratednominalearningsof35 billion.
The successes of the fun in saving a share of the Alaska petroleum windfall and generating income
are due to several factors. The boom-bust economic history of the state has been a reminder of
the need to actively manage public resources. Fund management is independent of general
government finances and extremely transparent. It invests to maximize long run income.
In addition, the modest share of petroleum revenues set aside in the fund has left enough
available for the state to expand public spending, including the establishment of a number of
programs designed to strengthen the economy in recognition of the non sustainability of the
petroleum sector. Since these public programs benefit particular segments of the population, the
Alaska Permanent Fund dividend program was created in 1982 to provide an annual unconditional
direct cash distribution to all Alaska residents. The dividend was felt to be the most equitable way
to distribute a share of the public wealth of the state to the entire population.
Since the inception of the program, the dividend has been paid each year. About half of
Permanent Fund earnings have been allocated to the dividend program and the rest to increasing
the balance in the fund. The size of the dividend has increased as the fund has grown, but it
fluctuates considerably because fund earnings change from year to year. In 2010 the dividend
payment was $1,281 which augmented per capita income by 3 percent.
The dividend program has become extremely popular since most Alaskans feel that individuals
can benefit more from deciding themselves how to spend at least a portion of the public wealth
rather than allowing the government to decide on their behalf. However a minority of the
population feels the dividend fosters an attitude of consumerism and leads to underinvestment.
And although the dividend has created a strong constituency defending the Alaska Permanent
Fund, which many feel is the main reason for the success of the fund, there is concern that the
dividend will prevent the fund from being used for its ultimate purpose which is to help support the
economy after petroleum production ends.
Beyond its obvious positive impact on aggregate income, employment and population, little
analysis has been done of other economic, social, and political effects of the dividend program.
Because the dividend is not viewed as a policy to improve social welfare, but rather as a means to
share public wealth equitably, interest in these other potential effects has been limited.The Revenue Watch Institut