ANCHORAGE - For the first time since stocks began to slide 16 months ago, Alaskans will feel the battered market in dividend checks.
This year's Alaska Permanent Fund dividend should total roughly $1,820, off 7 percent from last year's all-time high of $1,963.86 due to the slump in stocks, according to preliminary numbers from the Alaska Permanent Fund Corp.
Almost $2 billion of stock value evaporated from the fund this year, and dividend checks could continue to shrink for the next several years. However, the fund still earned a profit last year, thanks to its other investments.
An $1,820 dividend would be the second largest ever and is expected to again fire a consumer spending spree when the payout arrives in October.
"It's down a little bit, but, hey, that's still free money," said Patrick Haylock, manager of Peter Glenn Sports, a ski and sports shop in Anchorage.
Permanent fund spokesman Jim Kelly told the Anchorage Daily News that in the fiscal year ending June 30 the fund fell in value by 3.4 percent to $26 billion.
The fund's bonds, stock dividends and real estate feathered the fall and allowed an overall profit of $1.2 billion.
The profit masked a slide in stocks, where about half of the fund is invested. Overall, the fund's U.S. stocks fell 13.5 percent and international stocks fell 22.9 percent.
The $1.2 billion profit was a sharp fall from $2.2 billion earned during the previous year. In fact, the fund had earned more than $2 billion for four straight years.
Despite the common perception, permanent fund dividends largely are unhinged from oil. Since voters created the fund in 1976 to save some of the looming oil bonanza from Prudhoe Bay, managers have invested the money holdings broadly. Today, Alaska's savings account holds everything from Microsoft stock to New York office buildings.
This year, North Slope oil revenue will add only $300 million to the fund.
About half of the investment profits are distributed to Alaskans as dividends. This payout has become a cornerstone of the Alaska economy, said Scott Goldsmith, an economist at the University of Alaska Anchorage. At $1 billion expected this year, the dividend payout is worth more than the entire payroll of the oil industry.
Dividend money is particularly crucial in rural Alaska, where jobs are scarce, he said. Cash arrives in time to prepare for winter.
Although the dividend will be paid to about 600,000 men, women and children in every corner of Alaska, the spending - and the benefit to businesses - falls to retail centers such as Anchorage and Fairbanks.
About 20 percent of snowmachine sales happen in the month after dividends are distributed in late October, said Andy Corbin, sales manager at Alaska Mining & Diving Supply, an Anchorage snowmachine dealer.
Barring a spectacular rebound in the stock markets, dividends will continue to fall in coming years. Dividends are calculated on an average of the past five years of profits.
As the profits of those years drop out of the five-year formula, dividends will shrink. If the next two years' profits match the year just ended, the dividend in 2003 would be less than $1,500.