Why might Alaskans favor Arctic drilling? A $2,000 check

JUNEAU — This year's Permanent Fund dividend check — what Alaskans receive each year from the state's oil-revenue investment fund — is likely to be more than $2,000, the first time since the state began making the payments in 1982 that the dividend has topped two grand.

The biggest previous dividend was $1963.86 in 2000. Last year's was $1,654.

The dividend spins off the Alaska Permanent Fund, the state's $37 billion oil wealth savings account.

Although oil prices have hit record highs recently, it's not the price of oil that determines the size of the dividend. Rather, it's the profits Permanent Fund managers generate by investing in stocks, bonds, real estate and other things.

The dividend is based on an average of the fund's profits over the past five years.

Using the latest figures from the Permanent Fund, and factoring in some assumptions such as how many residents will qualify for a check, the Anchorage Daily News estimates this fall's dividend will be $2,080 to $2,100.

If that proves accurate, a family of four would receive dividends totaling at least $8,320.

Dividends are scheduled to start going out in early October as either direct bank deposits or as paper checks, with more than 600,000 residents — men, women and children who lived in the state for all of 2007 — expected to receive a payment.

Mike Burns, the Permanent Fund's executive director, said the dividend is a byproduct of the fund's success, which is novel among the states.

"This is an extraordinary socioeconomic experiment that has grown and paid off beyond anybody's expectations," he said.

The dividend annually provides a powerful punch to the local economy, with dividends totaling more than $1.2 billion expected to gush out this fall. Merchants ranging from airlines to car dealerships often mount special sales to try to capture some of these dollars.

The McDowell Group, a Juneau-based economic research firm, in March presented survey results on what people do with their household's dividends. Statewide, 37 percent said they spend the greatest portion on living expenses such as rent, utility bills or groceries, with another 32 percent saying they save or invest the money. After that, the priorities are debt repayment, vacations, major purchases such as TVs or snowmobiles, and charitable donations.


Dave Cavitt, owner of Furniture Enterprises of Alaska -- with Sadler's, Williams & Kay and other furniture stores under its banner -- said a $2,000 dividend is sure to lift sales for many merchants.

"A rising tide raises all boats. That's definitely a rising tide," he said, talking by phone from Juneau where he and his family are touring Southeast aboard his 34-foot sailboat, the Balance.

Cavitt figures his stores in Anchorage and on the Kenai Peninsula will see a good boost in business, with lots of parents looking to buy children's furniture.

But he expects little added sales punch in Fairbanks, or from Bush orders. Why? Because folks in the Interior and in villages will be forced to burn their dividends on heating oil and other fuels that have spiked hugely in cost, Cavitt said.

Wayne Stevens, president of the Juneau-based Alaska State Chamber of Commerce, said a record $2,000 dividend will be both a blessing and a curse.

"Katy bar the door!" he said.

Why does he say that?

Because after the dividend amount becomes known each year, the news travels across the country and chamber phones start ringing, Stevens said. The callers are Outsiders, often with kids, asking how to move to Alaska, where to live, how to get a job and, of course, how to get the free money.

"It's going to do harm to Alaska, in my opinion. People are moving not because they can contribute or because they have an idea. It's just where do I get in line?" Stevens said. "Karl Marx must be lying in his box somewhere with a big grin on his face."

On the positive side, he said, the dividend is almost a second Christmas for many of the state's retailers. And for people in rural Alaska, where jobs and opportunity are scarce, the dividend is important for sustaining families.

OK, here's one final, tantalizing note for you financial planners out there.

It's possible your $2,000 dividend could be a $3,200 dividend. That's because state legislators are considering Gov. Sarah Palin's idea of giving each Alaskan a $1,200 "resource rebate," or share of the state's multibillion-dollar oil tax surplus. Some lawmakers want to simply tack that onto Permanent Fund dividend checks, although the Palin administration prefers a separate payment that could go out earlier, in August or September.