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The Honolulu Advertiser

Posted on: Sunday, October 12, 2003

Payout helps oil Alaska economy

By Mary Pemberton
Associated Press

Sheryl John checks out a used vehicle offered for sale at Anchorage Chrysler-Dodge to tempt Alaskans who will receive this year's Permanent Fund dividend of $1,107.56.

Associated Press

ANCHORAGE, Alaska — Robert Lague fingered the price tags on the guitars in the pawnshop as he fantasized about what he would do with his check for $1,107.56 in free money.

Lague, a 34-year-old laborer from Chugiak, said that even though he was not working, he was going to "spend it on junk, on fun stuff, kind of using it as mad money."

In what may seem inconceivable to people in the Lower 48, practically every man, woman and child in Alaska receives a check every year just for living here. The money is from Alaska Permanent Fund dividends, or PFDs, paid out of an oil-royalty investment account created in 1976 after crude was discovered on Alaska's North Slope.

Beginning last Wednesday, a total of $663.2 million was to be handed out to nearly 600,000 Alaskans.

In the days before the checks go out, Alaskans are inundated with offers from businesses. Pawnshops offer to cash checks. Huge blinking signs advertise PFD specials at Anchorage car dealerships. Travel companies offer special tours to Mexico and Europe. A clothing store is running a newspaper ad of a buxom blonde in black lingerie, encouraging readers to have "some PFD fun."

The first dividend check was issued in 1982. This year's check is far less than the $1,540.76 paid last year and well below the record-high of $1,963.86 in 2000.

The amount is calculated according to the fund's five-year average return on its stock, bond and real estate investments. Several times this year, the fund was battered so badly by the stock market slump that Alaskans were told there might be no dividend.

That would put a damper on Alaska's economy, particularly at this time of year, when businesses have come to expect the influx of money from PFDs.

"The distribution has been built into the Alaska economy for quite some time. After 20 years, I'd call it an integral part of the Alaska economy," said Robert Storer,

executive director of the Alaska Permanent Fund Corp., which manages the more than $25 billion account.

Every year, lawmakers debate whether the fund should be used to help run state government. Alaska, which has no income tax or state sales tax, faces chronic deficits

because it relies on oil for about 80 percent of its revenue. At the end of the last fiscal year, the state had a deficit of nearly $400 million.

But the Legislature is restricted by law from touching the fund's principal. And the dividends are all but untouchable politically.

While many urban Alaskans are fantasizing about buying expensive toys, many rural residents spend it on essentials, such as home heating fuel and other household bills, hunting gear and gas to operate snowmobiles to go hunting.

"It is really important for people out here, especially those that are subsistence hunters and gatherers. They rely on that money," said Stella Havatone, secretary for the school in Shishmaref, an Inupiat village on an island in the Chukchi Sea. "I can't imagine our people without a PFD."

Anchorage Chrysler Dodge was offering used cars for one to five PFD checks. Matthew Tennant, a 28-year-old single father of twin 2›-year-old girls, bought a 1988 Chevrolet truck for $1,000. Tennant said he had been taking the bus, but needed the truck to move to a new apartment.

"I'm moving out of the ghetto into a better neighborhood. My kids come first," he said.

Christine Manning, manager of The Look, which placed the sexy PFD ad, said she expected business would be hopping as customers picked up feather boas, platform shoes and leather corsets.

Although the checks are smaller this year, "it is still free money for extra fun stuff," Manning said.