Palin = big spender = no fiscal conservative

She may have fired the governor's chef and sold the state jet, but Governor Sarah Palin of Alaska has also presided over a dramatic increase in state spending in the last two years.

Still, she can accurately claim that her state is in good fiscal health, thanks to an explosion of revenues from state taxes on oil industry profits.

Indeed, in her 20 months in office, Palin's toughest financial decisions involved dickering with the Legislature on creative ways to spend and salt away the billions of dollars in oil revenues pouring into the state treasury.

At times, Palin has been more economic populist than small-government conservative, partly because of Alaska's unique government financing system.

With no statewide income or sales tax, Alaska funds about 90 percent of the state budget from royalties and taxes on oil produc-

Sarah Palin's 2007 Iraq visit was a brief stop at a border crossing, aides said. A10.

ers. Soaring oil prices and a higher windfall oil profits tax - an increase pushed through by Palin, now the Republican vice presidential nominee - have state coffers overflowing with petrodollars. The Alaska oil industry calculates that its annual payments to the state doubled in a single year to $10.2 billion.

Until a few years ago, the state government struggled financially for years because of low oil prices. But that's all changed. In the first two budget years under Palin, the state government has stashed almost $6 billion of surplus revenues in various reserve and savings accounts in anticipation of future drops in the price of oil. And the state has allocated another $4 billion over two years for a laundry list of new capital projects, mostly small grants initiated in budget requests by legislators for their districts.

And Alaska residents are getting their cut. Starting this week, every Alaskan who has lived in the state more than a year will receive $1,200 from the state, a total of about $756 million in rebates to offset high energy costs in the 49th state. That's on top of the perennial check each will receive from the state's oil revenue-endowed Permanent Fund, this year a record $2,069 per resident. The large Palin family is eligible to receive more than $19,000 from the combined payments.

Whether Palin is acting as a true fiscal conservative is moot in the state's current environment, said Gerald McBeath, a political science professor at the University of Alaska Fairbanks who monitors state finances and politics. "It's an irrelevant question," he said, because in Alaska's oil-driven boom-and-bust economic cycles, Palin's challenge is to manage the surpluses for long-term benefit. McBeath gives the popular governor high marks.

"She's used her popularity to get what she wants out of the Legislature," McBeath said. Along with the Legislature, she has used surplus funds to reduce the state's unfunded pension liability, increase education funding, establish a revenue-sharing fund for local governments, and help residents with home weatherization and energy costs. Alaska has also suspended for a year its 8-cent-a-gallon tax on gasoline.

Palin "took a great deal of flak" for vetoing almost $500 million over two fiscal years in capital requests, McBeath said. That was roughly 10 percent of the amount sought by the Legislature, mostly for small projects and grants, and lawmakers complained that Palin gave them no guidance in advance and then blindsided them with her vetoes. Three legislative leaders did not return calls from the Globe seeking comment on the governor's performance.

Palin now trumpets those vetoes on the national campaign trail. Her running mate, Republican presidential nominee John McCain, has equated the capital budget items to the federal budget earmarks he has long opposed. What Palin does not mention is that she later approved more than $60 million of those once-vetoed projects when they were resubmitted by the Legislature and she let stand hundreds of others.

By contrast, in two budget cycles, Palin has vetoed a total of only $2.6 million in spending requests for the state's now $8.1 billion annual operating budget, which, according to an analysis by the legislative finance office, has increased about 30 percent in two years. The increase figure includes the one-time energy rebate checks but no increases in reserve accounts or any capital expenditures. It also doesn't include a supplemental appropriation for additional expenditures, which is routine. Last year, the supplemental budget was more than $4 billion, mostly deposits in reserve accounts when revenues continued to pour in at high levels.

"There's huge pressure to do all these things because we have this revenue," said Karen J. Rehfeld, director of the governor's Office of Management and Budget. "But the governor is still trying to stick to her goals; she still wants to slow the growth of government and be efficient. . . . She's been very consistent about that."

A challenge, Rehfeld said, is to balance spending controls against "providing some of the significant infrastructure needed for this state. We're still a young state and a lot of work needs to be done."

In her vice presidential stump speech, Palin declares that she assumed the governor's office "promising to control spending. Today our state budget is under control and we have a surplus."

When she took office in mid-fiscal year, she actually inherited a surplus from her unpopular predecessor, Frank Murkowski, whom she easily ousted in a three-way 2006 Republican primary. For much of Murkowski's term, low oil prices stretched the state budget and resulted in budget cuts that angered constituents.

The revenue and spending boom is likely to continue this fiscal year. The state budget is built on revenue estimates of oil priced at $83 a barrel. While prices have dipped to around the $100-a-barrel mark, the state appears headed for another significant surplus, followed in all likelihood by another large supplemental budget.

The long-term effects of sharply increased taxes on oil remain unclear, and the major oil companies in Alaska have warned that increasing taxes on their product will lead to reduced investment and production.

Alaskan oil production has been dropping steadily as older fields are depleted - down from about two billion barrels per day 20 years ago to well under 800,000 barrels per day now. Earlier this year, BP Alaska, ConocoPhillips, and ExxonMobil disclosed they were reducing 2008 spending by $400 million and postponing a $1 billion expansion project.

The oil companies pay a royalty of 12.5 percent on oil as it is extracted, plus property and corporate income taxes, but the biggest bite is a tax on net profits of between 25 and 50 percent, escalating with the market price of oil. The Alaska Oil and Gas Association, a trade group, projected that the production tax increase resulted in a one-year spike in the taxes on profits from $2.2 billion to $6.1 billion. The association's executive director, Marilyn Crockett, did not return repeated calls from the Globe, and a spokesman for one of the oil companies, in declining to be interviewed, said: "We try to stay out of political campaign stories."

http://www.boston.com/news/nation/a...alaska_spending_soared_under_palin/?page=full

 

If Palin is supposed to be a fiscal conservative, and therefore deserving to be supported by small government conservatives, why wasn't the surplus returned to the taxpayers and not spent?

 

And Alaska residents are getting their cut. Starting this week, every Alaskan who has lived in the state more than a year will receive $1,200 from the state, a total of about $756 million in rebates to offset high energy costs in the 49th state. That's on top of the perennial check each will receive from the state's oil revenue-endowed Permanent Fund, this year a record $2,069 per resident.

 

In addition to the subsidy that Alaskan taxpayers receive from the rest of the states.

 

I really don't understand why since Alaska is a part of the UNITED States and receives funds+earmarks from the Federal government(ie the rest of the states) each resident of Alaska receives a royalty check from the Oil companies? In other states that produce oil from both oil shale or drilling the residents don't receive direct payments.

 

But Palin's government is still spending the rest, as the Boston Globe article.

Why can't Palin do a Jesse Ventura and give the money back? Isn't that what a true fiscal conservative would do?

Would a fiscal conservative keep getting handouts from the Fed? Alaska takes out more what it puts in to the federal kitty. Wouldn't a real fiscal conservative stick to fiscally conservative principles?