**The 2018 PFD is $1,600. It was officially announced on the PFD division webpage. The checks will be deposited on Thursday, October 4th.
**Update: The PFD division now shows that it received 656,905 applications. When adjusting for this new information, the statutory PFD works out to $2,989.
***Update (2/6/18): The numbers are now official and the 2018 PFD calculation works out to $2,988
For decades, the announcement of the PFD was a big ordeal in Alaska. After the Permanent Fund Corporation Board meeting in September, a government official would tell Alaskans how big their check would be.
There was anticipation leading up to the announcement. Companies would start promoting PFD sales and holding competitions around what the number would be.
For the last couple years, the excitement has waned. The number on our checks has been told to us in advance. That’s because the calculation switched from a one based on unknown investment returns to one that decision makers felt the State could afford.
So, there is little excitement about the upcoming board meeting and the announcement that will follow. We already know that the legislature funded a PFD of $1,600 for each of us.
But, what would that number have been if the amount was still calculated as before? That seems like an interesting question, so I calculated it. Naturally, my numbers aren’t the official numbers from the Corporation. But I can get pretty close.
And the number is…..
I’m sure most readers will stop here, but keep reading if you are interested in how that number is calculated.
The statutory formula for determining the dividend amount is found in AS 43.23.025. It’s a little complicated, but here is the simplified version. Add up the last 5 years of earnings, cut it in half, and multiply that number by 21%.
We already knew the last four years’ returns. And now the 2018 returns (the unaudited version) are out.
Here are the reported “Statutory Net Income” numbers from the Corporation:
|5-Year Total||$ 18,173,000,000|
Statutory Net Income
There are some complicated accounting principles that go into calculating this number. The details are not that important here. But you should be aware that if you try to compute this number from other published components, it might take a while to track down the moving pieces.
Dividend Fund Transfer
The statute says to take one-half of the number above and multiply it by 21%. That is the number to be transferred to the Dividend Fund, from which the PFDs are paid. One half of the number above is $9,086,500,000.
21% of that is $1,908,165,000.
There are some costs associated with running the PFD division, and some deductions that are paid out of the dividend fund each year. These deductions come out before the payments are made, so the actual distribution amount is reduced a little bit.
I compared the transfers into the dividend fund to the disbursements out of the fund to approximate the amount of these deductions. Over the last 8 years, it has averaged about $43 million.
So, the amount of money that would have been distributed is estimated to be $1,865,165,000.
The last step is to divide that amount by the number of eligible people. This is an unknown, so I have to make an educated guess here. In formulating this number, I ran across two things I found interesting.
The PFD division posts the number of applications it receives. By dividing that number by the Department of Labor population numbers, we can see the percentage of the population that applied for their PFD. Here’s a plot of those percentages since 2000:
That sure looks like a downward trend to me. I’m not exactly sure what is causing less of the population to apply for the PFD. Maybe its has to do with a lower payment expectation. Or maybe its because more retirees feel like they don’t want to take the money. Maybe it has to do with migration patterns. Or maybe its something else entirely. I really don’t know, but it is in the data.
Not only are applications being reduced, but more were also declined last year. Here is a plot of the percentage of applications paid versus received.
I don’t know why 2017 had so many more declined applications, but it did.
We know that there were 737,080 people in Alaska in FY17. We don’t have FY18 numbers yet. The last estimate from the Department of Labor implied an expected growth of 0.4%. That yields an estimated population of 740,028.
Estimated PFD Applications Paid
Assuming that the 2017 application percentage is a good approximation for 2018, I infer that the PFD Division received about 673,389 applications in 2018. Of those, I suspect that 95% will be paid (unless that lower acceptance rate in 2017 is indicative of a real change and not of a statistical anomaly).
That results in an estimate of 636,424 paid applications.
The 2018 PFD Amount
Now we have all the information we need:
$1,865,165,000 divided by 636,424 payments = $2,931 per person
The real number would have been a little different, but in this ballpark. But don’t go spending it yet. The actual amount will be announced next month. I’ll go ahead and guess that announcement to be $1,600.