The Opportunity Costs of the Alaska Permanent Fund Dividend

The Alaska Permanent Fund was established by the State of Alaska in 1976 to save a portion of windfall revenues resulting from the discovery of the large Prudhoe Bay oil field. The Permanent Fund Dividend program, established in 1982, pays out about half the earnings of the Fund to each resident. The dividend was intended to both create a constituency for sound management of the Fund, and directly distribute the State’s resource wealth to its citizens. The dividend has achieved great popularity, and has succeeded in allocating resource rents to boost jobs and personal income, and reduce poverty, while the Fund itself has grown. It has also protected the Fund from frivolous practices. But other sovereign wealth funds without dividends have also prospered. There have been trade-offs associated with the dividend, some of which have become more obvious with the Alaska economy grappling with the impact of chronic low oil prices. These include foregone earnings, political complexity, income inequality, and the question of public vs. private spending.