Abstract
<p><em>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.</em><strong></strong></p>
Highlights
The Origin of the Alaska Permanent Fund Dividend The discovery of the huge Prudhoe Bay oil field on the North Slope in 1967 led to profound changes in the Alaska economy
The spending reflected a combination of legitimate needs, anticipation of future oil revenues, future infrastructure requirements associated with the anticipated oil development, and in the minds of some, squandering
The oil revenues that would accrue to the state would be very large
Summary
The Origin of the Alaska Permanent Fund Dividend The discovery of the huge Prudhoe Bay oil field on the North Slope in 1967 led to profound changes in the Alaska economy. Between 1970 and 1980: - Population increased from 300,000 to 402,000 (Note 1) - Employment increased from 133,000 to 211,000 (Note 2) - Total personal income increased from $4.9 to $8.7 billion (Note 3) - The state budget increased from $262 million to $2.2 billion (Note 4) (Note 5) Subsequent to the discovery, a North Slope lease sale in 1969 yielded the state $900 million, triple the annual budget, all of which was spent fairly soon. The spending reflected a combination of legitimate needs, anticipation of future oil revenues, future infrastructure requirements associated with the anticipated oil development, and in the minds of some, squandering
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