Alaska's Golden Promise May Be Turning to Dust
EAGLE RIVER, ALASKA — THE spectacular mountain scenery of Chugach State Park may soon cease to be free. Here and at other well-visited sites, the Alaska Division of Parks has begun to erect toll gates and charge fees.
At Chugach, the most visited destination in Alaska's vast state park system, only four rangers now patrol the 495,204 acres of peaks, glaciers, lakes, streams, and meadows. In 1983, there were 14 rangers. Funding for all state parks has shrunk by a third since 1985.
From parks to prisons, Alaska government services have been slashed, despite a growing population and increased needs.
The capital budget passed by the legislature this spring was a bare-bones $100 million, less than one-sixth of last year's level and a radical departure from the past few years, when expansion-minded Gov. Walter Hickel (Ind.) touted ambitious megaprojects like an undersea water pipeline to California. Now state officials are talking openly about re-imposing the income tax that was repealed in 1980.
How did such a situation arise in this oil-rich state almost as famous for its lavish government benefits as for its natural beauty?
Some 85 percent of the state's operating revenue comes from royalties, taxes, and fees generated by North Slope oil production, and world oil markets have been unkind to Alaska recently. For a period this spring, North Slope crude prices dipped to a five-year low. Prospects for higher prices are dim, and for each annual $1 drop in oil prices, the state loses an estimated $150 million in anticipated revenues, according to the Alaska Department of Revenue.
One crisis came to a head last spring, when the State Supreme Court ruled that the Republican-led legislature and Governor Hickel illegally appropriated about $1 billion, mostly for capital projects last year, from a special budget-reserve fund. The legislature was forced to repay the money to the reserve fund, erasing nearly a third of the $3.75 billion budget. In a torturous legislative compromise, the funds for this year were freed with proceeds from settlements of back oil taxes.
The legislature has spent approximately $1.5 billion more in the past two years than the state received in oil and other revenues, according to preliminary estimates.
More ominous is the inevitable decline of Alaska's main cash machine, the giant Prudhoe Bay oil field. The 1968 discovery touched off Alaska's legendary oil-pipeline construction boom, but its wealth is waning. Production at the field peaked at 1.5 million barrels a day and began to decline in 1989. The field now yields about 1.1 million barrels a day.
The Prudhoe discovery also fueled unique and generous spending programs that Alaskans are loathe to relinquish. Rather than pay state taxes, they receive money from the state, which has by far the nation's highest per-capita government spending. All residents are entitled to annual dividends from the state's $14 billion oil trust account, the Alaska Permanent Fund, which was set up in 1977 in the hopes that not all of Alaska's oil wealth would be squandered. Last year's annual dividend was $949.46.
There are other generous programs, such as the state's $250-a-month ``longevity bonus'' given every Alaskan 65 and older. The planned curtailment of that program has sparked opposition from aging residents.
``As time goes by and we let things slide, we are compromising our options in the sense that we become more and more dependent on future sources of revenue,'' University of Alaska, Anchorage economist Scott Goldsmith says.
Mr. Goldsmith has advised a sweeping reorganization to cut government spending, reimpose the income tax, and end or cap the Alaska Permanent Fund dividend to gradually remove the state's high-octane diet. The alternative would be a shocking economic crash, he says.
Alaskans may be mentally prepared for some of the changes, he says. ``I think the state has matured in many ways.'' Some politicians, for example, say voters are no longer as opposed as they once were of a reimposed income tax.
``I think [that] in most districts the number of people who are supporting an income tax is coming up. There just aren't many alternatives out there,'' says David Finkelstein, a Democratic state legislator from Anchorage who advocates the measure. ``I'm not sure the majority of the people in my district support an income tax, but I think eventually they will. It's because the other alternatives are so bleak.''
The state may be moving to a new kind of economy, away from big government spending and oil boom toward a more modest economy based on tourism, transporation, and communications.