Estimated at $1,930, Alaska PFD big but no record

Alex DeMarban,Sean Doogan
Acting Revenue Commissioner Angela Rodell announces the 2013 Permanent Fund dividend amount. This year's payment is expected to be more than double last year's. Loren Holmes photo

The annual Permanent Fund dividend that will be distributed to qualifying Alaskans in a little more than a month is projected to be worth $1,930.49, give or take $100, according to an analysis by Alaska Dispatch News.

At that amount, the check would more than double last year’s $900, a boost that comes because the distribution is based on fund revenues over five years. The dismal year of 2009, when the fund’s overall value declined as the nation was mired in recession, drops out of the equation.  

But the check won’t be the biggest ever paid. It will fall short of the record distribution of $2,069 in 2008. And it may come in below the runner-up of $1,963.86 in 2000.  

Alaskans might think the dividend should be higher this year than it was in 2008, and certainly more than it was 14 years ago.

After all, the state’s qualifying population has only grown 8 percent since 2000, while the fund’s value is up sharply. On June 30, the fund ended the fiscal year in record territory, topping $50 billion for the first time ever, according to the fund’s unaudited numbers.  

The fund, driven by the state’s royalty oil and the value of investments such as stocks, bonds and real estate, was worth:

• $28.1 billion at the end of 2000
• $36.5 billion at the end of 2008 
• $51.2 billion at the end of 2014

The reason Alaskans won’t see a record distribution involves federal monetary policy for the last six years. About one-fourth of the fund (roughly $12 billion) is invested in bonds. But interest income from the fund’s bond investments has dropped sharply in recent years as the feds have held down interest rates to stimulate the economy, said Mike Burns, the fund’s executive director.

“The difference can absolutely almost all be allocated to the bond portfolio,” he said.

Income from bonds was:

• $672 million in 2000
• $549 million in 2008
• $278 million in 2014

Fortunately, other investments have picked up the slack in recent years to offset the dip in interest income, including greater stock dividends and rental income.

Also in 2007, the fund began investing in global infrastructure, such as the Gatwick and City airports in London, a wind farm in Southern California, and ports in Brazil and Australia. The state owns a portion of those projects and about 25 other facilities that provide a reliable stream of income.

“These are steady earning assets with high barriers to entry. No one is building another port to compete with you,” said Burns.

Add it up, and the fund is transferring $1.23 billion to the state division that sends out the checks, slightly less than was transferred in 2000 and 2008.   

The fund experienced a great year, with positive returns in all asset classes and its value growing 15 percent. 

“You have different (kinds of investments) because every dog has its day,” Burns said. “This year, all the dogs had a good day.”   

The revenues could have been better, but the fund has reduced its stake in stocks from prior years -- the stock portfolio is $22 billion -- to reduce risk.

Around 2000, the fund was about 60 percent invested in stocks. Now it’s less than 50 percent, Burns said.

“We’re more risk-averse than we used to be,” Burns said. “We’re always looking for the best balance. We want the portfolio to have that all-weather concept.”

The Alaska Dispatch News analysis of this year’s check was done with the formula used by the state to determine dividend amounts. That includes data including the fund’s overall payout to the dividend division, estimated administrative costs necessary to distribute the dividends, and an estimated 625,000 recipients.

Dividend payments will be distributed electronically and in the mail on Oct. 2. 

Contact Alex DeMarban at alex@alaskadispatch.com.