Alaskans reap boom – and bust – from oil
High prices led to a $3,269 state payout for each resident. But rural areas slumped on $9.20-a-gallon gas.
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At least state coffers are flourishing. Oil royalties, taxes, and fees currently provide about 90 percent of the state's general revenues. Thanks to the recent spike in prices and a recent rewrite of the state's oil-tax system that reaps the benefits of high prices, the state treasury is overflowing. That has allowed Palin and the legislature to authorize bigger budgets, including a nearly $1 billion "energy assistance" package that allowed the special $1,200 payments and targets aid for rural utilities and bulk-fuel purchases.Skip to next paragraph
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Alaska's current riches are a dramatic turnaround from the 1990s, when oil prices fell as low as $9 a barrel and the state was weighing whether to reinstate a personal-income tax, impose a statewide sales tax, or tap into its Permanent Fund to pay for services.
"We were the only state in the nation at that time that was actually cutting its budget, and every one of the eight years I was in office, we cut our budget," says former Gov. Tony Knowles, a Democrat who served from 1994 to 2002.
Skyrocketing oil prices have erased that dilemma for now. Even as state operating budgets rose from $2.46 billion in fiscal 2005 to $5.26 billion for the current fiscal year, the legislature was able to sock away $5 billion into various savings accounts and craft the energy package that includes the $1,200 payment.
Under Palin's watch, the legislature reinstated a popular municipal revenue-sharing program and revived the Alaska Film Office. Education spending is up, and capital budgets have been among the biggest in state history.
Oil prices have already dropped, a trend that is likely to continue, and North Slope oil production is on the decline, he says. It will be at least a decade, under the best-case scenario, before any of the long-languishing North Slope natural gas – touted as the base for Alaska's economic future – is sent to any markets. So that means budget deficits will probably return, he says.
At least Alaska leaders know enough to create a cushion for the coming hard times, Mr. Goldsmith said. "Since we've been through so many fiscal ups and downs, there's more of an awareness today of the need to conserve and the need to save."
Some skeptics consider the $1,200 payout part of a shortsighted plan that lacked investment in the future and, at worst, could morph into a long-term entitlement.
"It sounds good that you give everybody 1,200 bucks," said state Rep. Les Gara, an Anchorage Democrat. "But as a government leader, you're supposed to figure out what the problem is and find out a solution.... Everybody decided it was just easier to dole out the cash than to come up with a plan to reduce the cost of energy."