Monday, September 21, 2015

Alaska State Lottery - Governor [Shania Sommers] Announces Everyone Wins $2072

Screen shot of Shania Sommer announcing PFD amount 2015
Technically, it's not called a lottery.  It's called the Alaska State Permanent Fund Dividend.  PFD for short.  Individuals don't have to put any money down for a ticket.  No numbers are drawn from a hat.  But you can't be a winner unless you fill out an application to demonstrate that you've lived in Alaska the whole previous year, that you aren't a resident of any other state, and that you plan to stay.

The total amount each resident wins (the governor announced that total today)  is calculated by formula (from the PF website):

  1. Add Fund Statutory Net Income from the current plus the previous four fiscal years.
  2. Multiply by 21%
  3. Divide by 2
  4. Subtract prior year obligations, expenses and PFD program operations
  5. Divide by the number of eligible applicants

The fund comes from monies the state collects from mineral related income.  The state constitution says: 
"At least 25 percent of all mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses received by the state be placed in a permanent fund, the principal of which may only be used for income-producing investments."
Originally, it was thought that since oil and other minerals extracted from the state were not renewable resources, the wealth generated should not be used up by just one or two generations.  Instead, it should be conserved for the benefit of all future Alaskans.  It was envisioned to eventually serve as a trust fund for Alaska when the oil revenues ran out.  A small percent would be used each year to help fund the state.

But over the years, Alaska residents have come to view it as an entitlement.  Just this weekend one of the speakers at the Fiscal Future Forum talked about using the earnings of the Permanent Fund as the "third rail of Alaska politics." 

The payoff to Alaskans was originally determined by a formula that gave those who'd been in the state the longest, the most money - the payout was to be $50 per year of residency since statehood. But that was found by the US Supreme Court  to violate the guarantees of the Equal Protection Clause of the Fourteenth Amendment.  The law was changed to allow all Alaskans to receive the same amount.  

I did use the word 'win' in the title and many Alaskans view this as a 'win' though, as I said above, one they are entitled to.  

But I would argue that value of the PFD paid out to individuals may well be less than what we could do with all or even just some of the money were it used for needed services like schools or maintenance of state infrastructure.  

Undoubtedly, the PFD helps many Alaskans pay basic expenses.  And there are a number of Alaskans who economically do not need the dividend.  And there are others who spend their checks  on short term pleasures - drinking, an expensive vacation, etc.   Mine will go directly to the new water heater we had to install last week.  

Others have argued - though the exact proof is elusive - that the dividend attracts lower income migrants with large families from other states.  The $1884 per family member we got last year, sounds pretty good to a family of ten living on welfare.  And even with Alaska's higher cost of living it seems to be good enough to keep folks here.  

The lack of a state sales and income tax, plus the PFD means that most families come out ahead.  

It also makes people who demand that the legislature "spend my tax money wisely" sound pretty silly, because the only tax money they might possibly pay would go to local government for their sales or property taxes.

But then there are many ironies in "the last frontier" where people believe themselves to be ruggedly independent, yet we get the PFD and the state gets much more federal tax money than we contribute. It's easy to be indignant when you're ignorant.  

As I'm thinking about this, I bet Alaskans would be willing to add a lottery twist to the PFD.  I bet we'd be willing to lower the average payout if there was a chance to win some really big prize money for a few who are randomly selected.  I bet most Alaskans would give up 10% of their check for the chance to win $100,000.  

[Note:  I had this ready to post when the governor made the announcement, but was busy at the exact moment.  When I checked the video on the governor's  mulitmedia page, I was pleasantly surprised to see a girl talking about her college plans and how the dividend will help with that.  Announcing the PFD is one of the things that Alaska governors love to do because it's lots of free publicity on something everyone is happy to hear about.  Especially this year when the dividend is the highest on record (by $3). 

But this governor gave that moment of glory to  Shania Sommers.  Another sign that Walker is not only an adult, but also someone who is comfortable with who he is and happy to give away his  limelight to someone else.  Great move on his part. 



  1. Good job, Steve. I always enjoy reading your blog posts. BB

  2. "It's easy to be indignant when you're ignorant." Excellent.
    Thank you.

  3. Thanks BB and Ziba. I try to avoid words as judgmental as ignorant, but the alliteration was too strong to resist.

  4. Being a regular US lotto player, I first though I missed something as I have never heard of Alaska lottery before. Now it's clear - the different still good idea for the lottery. Thumbs up!


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