One of the largest Alaska Permanent Fund dividend checks ever started landing in bank accounts on Tuesday.
The $3,284 payment, which includes a one-time energy relief payment of $662, comes as Alaskans face higher prices for everything from rent to fuel, and as many in Western Alaska begin to recover from the major storm over the weekend.
The annual payment, created from earnings of the $73 billion Alaska Permanent Fund, has been subject to a grueling annual debate in the Legislature on how much of it should be given directly to Alaskans and how much could be better spent on government services like education.
Experts say there haven’t been many studies on how the money is spent. But they said the impacts of this year’s overall $2.1 billion injection into the economy will be felt widely.
The heft of this year’s check could feel like a “windfall” for many households, contributing to a different spending pattern than in recent years, when the dividend was around $1,000, said Neal Fried, an economist with the Alaska Department of Labor and Workforce Development.
“I wouldn’t be surprised if people spend a bigger piece of it right away,” he said.
The size should free up money for spending on recreational items more so than in recent years, such as for dining out or travel, he said. It could also provide the basis for big down payments — a family of five receives more than $16,000 — for items such as a car or a house.
‘A lot of need in a lot of places’
Bill Popp, head of the Anchorage Economic Development Corp., said the big check will definitely boost spending in stores, restaurants and other areas, including construction for items like home remodels and new appliances.
The cash injection into the economy could prolong pressure on inflation, he said. But the dividend should be a big win for consumers and business owners overall, he said.
“A lot of this money will be put to good use,” he said.
The anticipated bump in spending could also bring in money for Alaska communities through sales tax revenue, said Nolan Klouda with the Center for Economic Development at the University of Alaska.
Not Anchorage, which has no sales tax, “but Fairbanks, Juneau, the Mat-Su Borough and other local governments will get a good take of higher retail spending,” Klouda said.
This year’s dividend will provide critical relief for many families, especially low-income households, amid soaring prices for food, energy and rent, economists said.
“This cash is arriving at a time when there’s a lot of need in a lot of places in Alaska,” said Brett Watson with the Institute of Social and Economic Research at the University of Alaska Anchorage.
The largest household expense is often rent, typically more than one-third of many budgets, he said. And it’s been rising in Alaska, especially in Anchorage, where it jumped 14% over the past year.
People are also dealing with gas and fuel prices that are significantly higher than they were last year, after Russia’s invasion of Ukraine disrupted global oil supplies.
In rural Alaska, gas prices are especially high and anticipated winter heating fuel expenses are a major concern, said Nils Andreassen, head of the Alaska Municipal League. “This should be helpful for them,” he said.
[Fuel in the Alaska village of Noatak was $16 a gallon. The costs are more than just money.]
The money could go a long way in many Western Alaska communities that have suffered damage from the recent storm and flooding spawned by Typhoon Merbok. Federal aid may not be enough to help some residents, Andreassen said.
Boost to nonprofits and college savings
The dividend is also helping donations to nonprofits, said Jessie Lavoie with the Alaska Community Foundation and the facilitator of the Pick.Click.Give. program. This year’s contributions to the program were the third highest in its nearly 15-year history, at just over $3 million, she said.
The program allows Alaskans to earmark donations to nonprofit groups. Close to 24,000 individuals gave money to more than 640 groups this year, she said.
Leading recipients this year include Alaska Public Media, Abused Women’s Aid in Crisis, Alaska Dog and Puppy Rescue, and Bean’s Cafe.
The program typically raises about $2.6 million in a year, she said. “To be over $3 million is a success,” she said.
About 13,000 Alaskans earmarked money this year for the Alaska 529 educational savings program, a 2% rate of dividend recipients that’s similar to previous years, said Lael Oldmixon, the director of Alaska 529.
Investments in Alaska 529 feature tax-free withdrawals for post-secondary educational expenses at colleges, apprenticeships and trade schools across the U.S.
High school students on average have about $28,000 saved up in the program by the time they’re ready to graduate, she said. That helps alleviate the need for student loans or jobs while people are in college, she said.
High inflation and a poorly performing stock market could help explain why the contribution rate didn’t grow.
“It’s been an interesting year with increased inflation, and the cost of oil and gas, and I’m thinking that has impacted individuals,” she said. “And then there are those who save, and they are still going to save no matter what.”