Alaskans digest effects of smaller PFD

  • By STEPHANIE PROKOP
  • Saturday, October 1, 2016 7:23pm
  • News

Local retailers are expected to receive a boost when the dividend is distributed on Oct. 6, but not as big a boost compared to previous years.

While a lawsuit contesting the amount of this year’s dividend continues in the courts, Permanent Fund distributions will be sent out to eligible residents on Oct. 6. What was going to be a $2,052 check is now $1,022, after Gov. Bill Walker partially vetoed this year’s appropriations bill and authorized $695 million to be transferred from the Alaska Permanent Fund Corporation instead of $1.3 billion.

In response, a group on Facebook has formed “Alaskans Against Gov. Walker’s PFD Theft” and has so far attracted close to 12,000 members in less than a dozen days. A protest was planned for Saturday outside the Wendy Williamson Auditorium in Anchorage where Walker was scheduled to speak.

Members represent every area of the state, and have voiced concerns about not being able to meet energy bills, renew car leases, and purchase snow tires due to the dividend which has been cut in half.

According to messages on the group’s public wall, members are hoping to receive publicity from the media at the protest. It is not clear, however, how the event was being publicized, outside of social media sharing.

The Alaska Journal reached out to group moderators. Cameron Cowles of Anchorage told the Journal, via Facebook, that he recently joined to “help get Alaskans’ voices heard on the matter of the PFD.” Cowles serves as co-administrator along with Brandi Wadkins and Cameron Bush of Eagle River, who originated the group.

The budget gap — whether Alaska should rely on a volatile commodity or implement a stable tax system — has been debated since the days of Gov. Jay Hammond, who oversaw the creation of the Permanent Fund in the late 1970s.

Annual dividend payouts have been as high as $2,072 (2015) and as low as $331 (1984).

“This year’s $1,022 dividend is actually pretty close to the historical average of $1,100 since the program’s inception,” wrote Abigail Enghirst via e-mail.

Enghirst is the Special Assistant in the Office of the Commissioner for the Department of Commerce, Community and Economic Development.

The department does not track economic data on the PFD, she noted. So the Journal turned to Gunnar Knapp, who lives in Anchorage and recently retired from the Institute of Social and Economic Research. He is now Professor Emeritus of Economics at the University of Alaska Anchorage.

“The PFD is a significant boost to Alaskans’ income. In turn we all have more money to spend, and we spend a lot at local businesses,” he said, explaining that a smaller portion will purchase items online, take vacations, save for college tuition or pay off that credit card.

What makes the dividend a distinct source of income is that it arrives all at once.

“It’s different than the usual paycheck which quickly gets used to pay rent, buy groceries,” he said.

Generally, one will use income on what is most essential. Millionaires might buy a second luxury car or perhaps a yacht, but for everyone else, even if one is in absolute poverty, the first bit of income goes towards food, diapers, medicine, whatever you most have to have, along with basic rent and so on, he said.

Because the dividend offers a lump sum, for many, this is a way to make big purchases, car down payments, buy snow machines, etc.

“I do not buy more cereal because I received a dividend check, but I might buy a nicer TV set,” he said.

This is why retailers love the dividend: its significant purchasing power. When there is less received, Knapp expects a correlation in less spending at local businesses.

“But it may not be in some obvious way, and it does not apply to everyone,” he said. Someone planning to save, for example, has no bearing on the neighborhood furniture store. However, when the dividends do come out, sectors such as automotive, sales, electronics, furniture, restaurants, etc. are going to see a boost in activity, but not as big as in previous years, he said.

Furthermore, when someone says, that stinks, $1,000 is disappearing from the local economy, Knapp offers this advice: “Keep in mind that the money has been saved by the state and does not mean it will not show up in the economy later.”

“We are taking the hit this year in lieu of a future hit,” he said. “That is not any consolation to businesses this year nor is it any consolation to a family of four that is receiving $4,000 less. That hurts. God, that hurts.”

It’s possible though, he said, that as a result of a lower PFD this year, the family won’t be receiving a $4,000 higher tax bill in the future, or their kids are not going to have more classmates because school budgets are cut, or the neighborhood will not be packed in snow because services were reduced. “I’m not saying you should like this, but we can’t see it as a total loss to the economy, it’s a shift.”

Stephanie Prokop can be reached at stephanie.prokop@alaskajournal.com.

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