In the 1970s, Alaska experienced an economic boom. The Trans-Alaska Pipeline was being built, bringing jobs to the state and a large influx of cash. The governor at the time, Jay Hammond, had the foresight to recognize that the wealth generated for the state by the sale of oil would not last. So in 1976 a constitutional amendment creating the Permanent Fund was passed. It reads as follows:

“At least twenty-five per cent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.” (Alaska Constitution, Article IX, Section 15)

The Permanent Fund, then, was originally envisioned as a kind of state budget reserve – an income producing fund that will allow the state to support some of its programs. At the present, appropriations from the Permanent Fund revenue go not only to the administration costs of the Permanent Fund itself, but also to the Department of Public Safety and the Office of Victims Rights.

In 1980, the first Permanent Fund dividend legislation was enacted. This piece of legislation established a program to pay every adult Alaska resident $50 for every year of residency since statehood (1959). It also established a dividend fund. Opponents challenged the constitutionality of this law, a challenge that was eventually upheld in the U.S. Supreme Court. The Legislature then passed a new law which authorized equal dividend payments to all individuals who had been residents in Alaska for six months. The first dividend amount was $1000 and was distributed in 1982.

Since then, the PFD fund has grown. In 2007 there was nearly one billion dollars available in this fund to pay out to Alaska residents. Over the years, the residency requirements have changed: one must now be a resident for the entire calendar year prior to filing an application (the filing period runs from January to March) and have the intent to remain in Alaska indefinitely. Dividends are paid out to infants born in the qualifying year, provided the parents file an application – the dividend payment is no longer limited to adults. Some absences from the state are allowable – a college aged student, for example, can attend a school out of state and still be considered eligible for a PFD.

The yearly dividend payout amount is calculated by averaging the fund amount over the previous five years. As the fund revenue is generated by investment, then, the amount available fluctuates from year to year. The annual dividend amount ranges from a low of $331 (1984) to a record $3,269 in 2008, when an additional $1200 was added on to the dividend amount. This additional amount came from an unexpected surplus in the state funds due to high oil prices and a change in tax structure on the oil companies. With the high cost heating fuel, particularly in rural areas, the legislature acted to provide some relief with this one time energy relief rebate.

The PFD is an important part of the Alaskan economy. Every October, when dividend payouts begin (the majority of Alaskans now utilize direct deposit), retailers across the state offer PFD specials. Four-wheelers, snow machines, boats, trucks, televisions, airline tickets, chainsaws. . . this is a time of year when many people are able to buy that big ticket item they’ve wanted. Others may use the PFD to pay off bills or put an advance on the upcoming winter’s heating fuel or electric bill. In 1991 the PFD Division added the Advance College Tuition program which allows an individual to put up to 55% of the dividend amount directly towards tuition at any Alaska University. Of course, there are those who have their PFD garnished for a variety of reasons or who utilize their PFD to import illegal liquor into their village or blow it on gambling. But no matter what use the PFD is put to, the majority of the dollars go right into the Alaska economy.

While there are many who decry the PFD as unnecessarily creating or enabling a welfare mentality, most Alaskans look forward to the annual pay off. It’s a unique program that returns some of the wealth generated by the state’s natural resources to the people who live here.