OCTOBER IS EVENTFUL in Alaska. Its vast landscapes erupt in a riot of colour, daylight becomes precious and beefy bears rush to fatten themselves before winter. It is also the month Alaskans get a payday. Each October the state government disburses dividends from the investment earnings of its oil revenues. The amount varies, but this October each resident who has lived in the state at least one full calendar year will receive $1,200.

For half a century Alaska has run an experiment in how to use revenues from its abundant oil resources for the public good. Now, as American lawmakers grapple with whether and how to share the wealth that artificial intelligence might create, the state’s experience has new relevance. Proposals to put stakes in AI companies into a public fund, and use the proceeds to pay dividends or finance public services, echo Alaska’s approach. But Alaska’s Permanent Fund and its dividend offer both a model and a cautionary tale.

The state’s good fortune dates back to 1968, when roughnecks drilling at Prudhoe Bay, on Alaska’s North Slope, struck oil. Less than a decade later Alaskans voted to create the Permanent Fund, an investment vehicle for a portion of annual mineral royalties. The idea, says Mike Dunleavy, the Republican governor, “was to ensure that finite resources such as oil mining could be converted into infinite revenue for the people of Alaska”. In 1980 the legislature created an independent state-run corporation to manage the Permanent Fund’s investments. Two years later Alaska began paying the dividend. Today the fund is worth $90bn, or roughly $122,000 per Alaskan.

The remaining mineral royalties, along with oil production taxes, are used to finance public services. For a long time the riches seemed inexhaustible. A single lease sale in 1969 raised more than five times the state’s annual budget. In 1980 Alaskan lawmakers repealed the state’s personal income tax. They have since shunned other broad-based levies on residents. This makes Alaska unique among American petro-states. Others, such as Texas and New Mexico, continue to collect sales or income taxes to finance their spending.

Alaska’s utter dependence on the black stuff has left it hostage to fluctuations in the oil price. In 2018, after several lean years, lawmakers decided to use Permanent Fund earnings to help bankroll the state government for the first time. Now annual draws from the fund account for roughly two-thirds of the state’s budget. Lawmakers must haggle over how to divide the oil money between dividends and public services. Brett Watson, an economist at the University of Alaska Anchorage, says Alaska’s budgeting has become “zero sum”.

Mr Dunleavy was elected in 2018 after promising to restore a long-standing formula linking dividends to the fund’s investment earnings, which would have given Alaskans annual payments of more than $3,000. But lawmakers had stopped following the formula two years earlier, amid a budget crisis. In office, Mr Dunleavy has had to face up to the maths; the average dividend during his tenure has been roughly $1,500. “Every legislator who gets elected saying, ‘I promise you a $3,000 dividend’, once they get down to Juneau, and they look at that budget, they realise you cannot do that,” explains Gary Stevens, the Republican state Senate president.

Under Mr Dunleavy, lawmakers have also cut spending on services, both to balance the books and to preserve money for dividends. Deprived of state dollars, cities and boroughs are operating on shoestring budgets. “Many local governments…just close when they run out of money,” says Nils Andreassen of the Alaska Municipal League, a non-profit. Lawmakers have long hoped the dividend would help keep residents; some now worry that worsening services will drive them away. The state’s net migration has been negative in each year since 2013.

The war with Iran offers a band-aid: higher oil prices are propping up the state budget. Bernadette Wilson, a Republican candidate for governor, is calling for bigger dividend cheques; her opponent, Jonathan Kreiss-Tomkins, a former Democratic state legislator, favours fiscal reform.

When it comes to AI wealth, the debate is only beginning. Bernie Sanders, a senator from Vermont, wants big AI firms to hand over 50% of their shares to a sovereign wealth fund, which would pay Americans at least $1,000 a year and eventually support health care and other services. The bosses of OpenAI and Anthropic favour donating a more modest 5% stake to a public fund. OpenAI also backs higher taxes on capital gains and corporate income.

An AI fund would not initially face the same fiscal pressures as Alaska’s Permanent Fund: America, after all, still collects federal income taxes. But Alaska’s predicament shows the dangers of relying too heavily on a single source of revenue, and how easily dividends can become a political football. Donald Trump is already dangling a “Trump dividend”, unrelated to AI, if Republicans win the midterms. Just vote for the party’s candidates, he implored recently, “and you will each have $5,000”.