Oil Prices Don’t Yield Big Dividends to Alaska Residents

If one has lived in Alaska for a year and intends to stay indefinitely, the state pays a dividend from the Alaska Permanent Fund, which has about $30 billion in oil royalties in it. This bit of socialism will go without complaint into the pockets of 603,080 Alaskans of all ages this year. With oil touching $70 a barrel, one would think that Alaskans are cashing big checks this year. In fact, Governor Frank Murkowski has just announced the smallest dividend in the history of the fund.

Starting October 12, Alaskans will get $845.76 each from the fund. This is better than the residents of the other 49 states who get nothing at all. But it’s quite a bit off the 2000 record dividend payment of $1,963.86 a piece. How does this happen when oil was much cheaper in 2000 than it is today?

When the Alaskan North Slope started producing oil in serious quantities back in the 1970s, the oil companies paid the state a royalty because the oil was under state land. An amendment to the Alaskan state constitution passed in 1976 sent a portion of these royalties into the fund as a way to keep the state government from wasting it all; instead, individual Alaskans get to waste part of it themselves. The fund invests in equities, real estate and fix-income instruments. And that is the reason for the lower dividend. Alaskans get paid according to the stock market not the oil market.

The calculation of the dividend is not a straight yearly calculation. To smooth out the income stream a bit, the state uses a five-year average of realized earnings. Since the stock market was pretty lame from in the last five years, the pay out isn’t so hot. With a stronger 2005 results coming in and dot-com troubled 200 dropping out, next year’s check may be for more than $845 and change.

All the same, few hundred extra right about now is helpful to a family’s budget. In Alaska, many retailers have dividend sales. As Governor Murkowski said in his news release announcing the pay out, “The dividend is vitally important to the dreams and needs of Alaskans and the economic vitality of the state.” Indeed, it will just about cover the increase in their heating bills this winter.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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