Most Alaskans eager to hear amount of this year's oil dividend payout amid budget shortfall

Energy Associated Press

Oil prices are so low, they're hovering at benchmarks not seen in years, plunging oil-dependent Alaska into a crippling budget deficit. But the industry's woes won't affect the payout from the state's oil investment account to Alaskans even though state government has been scrambling to pay the bills.

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In fact, most predictions put the yearly oil check at near record levels, about $2,000 for nearly every man, woman and child who lives in the 49th state. Last year's check was $1,884.

Gov. Bill Walker will announce the amount of this year's checks during a much-ballyhooed news conference Monday. Here are questions and answers to the unique Alaska program that pays dividends to residents from the state's resources.

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Q. What is this check?

A. After the discovery of oil on Alaska's North Slope, the permanent fund was established in 1976 so residents could share in the riches of the state's natural resources. The state began distributing dividends to residents in 1982. If Alaskans have qualified for all of the payouts, they would have collected more than $37,000 by now. But a good chunk of that so-called free money would have gone to the Internal Revenue Service in the form of federal taxes. Alaska has no state income tax. Altogether, more than $21.1 billion has been distributed to Alaskans.

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Q: How does Alaska's current budget crunch affect the fund payout?

A: The state is running on a $3.5 billion deficit, according to Walker's office. It's a situation exacerbated by low oil prices, and the state is using money from savings to help balance the budget. But the money in the permanent fund is in a separate account. It would take a simple majority of state lawmakers to tap into the fund earnings, but that could be the political kiss of death for a lawmaker to push the idea of raiding the fund.

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Q: What do Alaskans have to do to qualify for a piece of the windfall?

A: Not much, but they do have to endure the long winter. To get a check, residents must live in the state for a calendar year before they can sign up. Also eligible are young residents who were born in Alaska by the Dec. 31 deadline of the previous year. Last year, nearly 599,000 Alaskans were eligible.

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Q: How does the payout formula work?

A: The dividend amount is based on a five-year average of investment earnings from the fund. During the past recession, Alaska wasn't hit as hard as the Lower 48, but the Permanent Fund Corp. suffered when the diversified portfolio was hammered when markets plunged worldwide. The fund recovered and has a current value of $51.5 billion, compared with a balance of $29.9 billion in 2009.

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Q: How do Alaskans typically spend the dough?

A: Some people treat themselves to recreational purchases like big-screen TVs, down payments on cars and vacations. For this fun-money category, businesses often take advantage of the desires of Alaskans and offer highly advertised dividend deals. You could even use the promise of handing over your check now as a down payment on a car. Other residents treat it as serious money, socking it away in savings, catching up on bills or investing in college savings. Some residents give part of their dividend to charitable causes through the program "Pick. Click. Give."

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Q: How unique is Alaska?

A: Many nations have so-called sovereign wealth funds, with Norway's oil fund among the wealthiest. Several U.S. states also have similar funds, including North Dakota, which launched its Legacy Fund earlier this decade following an oil boom. But unlike Alaska, which distributes proceeds from the fund to residents, North Dakota lawmakers can't touch the fund until 2017 — and only if two-thirds of legislators vote to withdraw cash.

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Associated Press writer Mark Thiessen contributed to this report from Anchorage.

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