Sparks

Sweet home Alaska

 By Nicholas Newman

A few Oil & Gas rich regions are studying the possibility to create a permanent fund with royalties from energy. The model they are considering is the 30-years-old Permanent Fund Dividend (PFD) in Alaska. Nicholas Newman explains how it works and how many organizations across Alaska benefit from PFD

Today some 540 organizations across Alaska including the Anchorage Folk Festival and the Alaska Museum of Science and Nature benefit from the Alaska Permanent Fund (APF), a sovereign wealth fund created in 1977 to receive 25 percent of the State’s oil royalties. Each year, the fund’s investment profits are distributed in the form of a dividend to residents who are able to make donations for good causes via the State’s Pick Click Give system. The APF is perhaps unique in paying a portion of its income directly to each Alaskan resident.

Last year, more than 641,000 Alaskans each received $1,884 through the dividend program compared with the first payment in 1982 of just $1,000. Some residents use the money to buy the latest gadgets including snowmobiles, others for holidays to Hawaii or even saving for a rainy day. However, an increasing number of Alaskans have decided to be a bit more caring towards their fellow Alaskans.

In April, the State government reported that 33,421 individuals made a record 53,851 pledges totalling $3,329,575. These donations enabled the annual winter Anchorage Folk Festival to put on a free 10-day folk arts and music festival of jazz, blues performances and competitions, workshops and music classes. Donations also support the Alaska Museum of Science and Nature‘s exhibits, education programs for local schools and extensive collections about the State’s current and past nature and geology, helping to bridge the gap between scientists and students.

 

This year, the annual dividend payment to residents is expected to reach $2,000

The Alaska Permanent Fund has two parts, the principal which receives at least 25 percent of the State’s oil and gas royalties and cannot be spent without a vote of the Alaskans and the income from the fund’s investments which can be spent after inflation proofing and adding to the earnings reserve. The income remaining is distributed in the form of dividend payments known as the Permanent Fund Dividend (PFD). The PFD is the closest thing to a basic income guarantee that exists in the world today. It is calculated using a five-year rolling total of the net income of the fund. Half of 21 percent of that amount is paid out in dividends thus making good the promise that every resident would benefit from the country’s natural resources now and after the oil runs out.

The Alaska Permanent Fund (APF) was created in 1977 with a first deposit of dedicated oil revenues. Despite Alaska’s oil production peaking in 1988, the fund has grown in value from some $25 billion in 1998, reaching $52,753,700,000 in August 2015. Today it invests outside Alaska in a broad spread of stocks, bonds, real estate, hedge funds, private equity and infrastructure aiming for a competitive rate of return. In the 2014 financial year, the total investment return was some 15.5 percent. The APF earned $3.5 billion in state net income and transferred $1.2 billion to the Permanent Fund Dividend for the annual pay-out to residents. This year, the annual dividend payment to residents is expected to reach $2,000.

about the author
Nicholas Newman
Freelance energy journalist and copywriter who regularly writes for AFRELEC, Economist, Energy World, EER, Petroleum Review, PGJ, E&P, Oil Review Africa, Oil Review Middle East. Shale Gas Guide. https://nicholasnewman.contently.com/