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Bigger dividend checks likely as Permanent Fund swells $4.3 billion in 2013

Alex DeMarban
There's plenty for Alaska residents to smile about. For one thing, the Permanent Fund continues to grow nicely. It now totals $47.4 billion, up $2.5 billion in three months. istockphoto

The good news is the state's largest savings account -- the source of the Permanent Fund Dividend checks that will hit the streets next week -- remained a cash cow during the last fiscal year, adding a whopping $4.3 billion to boost the total to $44.9 billion, according to newly audited numbers.

But even better: The part of that growth most Alaskans likely care about -- the number factored into our dividend checks -- also grew mightily to $2.9 billion, its biggest gain in five years.

That's the income the fund realized, from such things as stock dividends, property rent and bond income. A fraction of that income turns into Alaskans’ dividend checks.

That large boost in realized income in 2013 is partly why the $900 check hitting bank accounts and mail boxes of most Alaskans starting Oct. 3 isn't so bad.

Also, that large boost should help contribute to fatter checks in future years. Potentially much fatter checks.

But first, some slightly bad news. Permanent Fund managers in fiscal year 2013 worried that economic headwinds -- such as monetary woes in Europe -- might rein in what had been a sizzling stock market. So the fund took a conservative approach toward investing.

That cautious stance means the fund trailed its own pre-set benchmark by 0.4 percent, bringing in about $150 million less than the benchmark.

"We were not as heavily invested in stocks as we might have been, and the stock market had a very strong year," said Mike Burns, the corporation's chief executive.

But markets are fickle. And after all, this is the people's money. A little caution seems reasonable.

And there's plenty to smile about. For one thing, the fund continues to grow nicely since the end of the fiscal year on June 30. It now totals $47.4 billion, up $2.5 billion in three months.

And in fiscal year 2012, all of the areas where the fund invests -- including real estate and bonds -- grew.

Stocks were the fund's top investments, growing almost 20 percent. Stocks account for almost half the fund's total value, with $20.6 billion as of June 30.

Best of all for many Alaskans, dividend checks are likely to grow sizably next year. That's largely because the dismal numbers from fiscal year 2009 will no longer be part of the equation for calculating dividends. That year the stock market collapse caused a $2.5 billion drop in the fund's realized income, the only time it's been in the red in at least the last nine years.

That sickening number won't be factored into the five-year-average used to calculate next year's check. So even if the fund's realized income is zero next year -- far below the $1.2 billion to $2.7 billion that is expected -- the dividend payout still rises 46 percent, to more than $1,300, said Burns.

But let's say the numbers posted in fiscal year 2013 are equaled in 2014. The dividend payout will almost double, approaching $1,800 per Alaskan, not a bad chunk of change for living in one of the world's most scenic spots.

Contact Alex DeMarban at alex(at)alaskadispatch.com