Palin gives and saves amid big Alaska surplus

Times Staff Writer

Daniel Congiolosi is sure it won’t be long before energy is so expensive he won’t be able to pay the bills. When that happens, he will be ready. This spring, he tripled the size of his garden. He’s rushing to install a hand pump on the well, build a concrete-lined root cellar and get an ice house ready before next summer.

Thanks to soaring oil prices, he’ll be able to pay for it all. Americans have been hit hard by months of $120- and $130-a-barrel oil, but in Alaska, they’ve hit the jackpot.

Congiolosi this month expects a check from the government for as much as $29,000 before taxes -- a combination of the annual dividend he and his large family have earned from the state’s oil wealth and a special $1,200-per-person energy rebate signed into law last month by Gov. Sarah Palin.


The fuel givebacks will cost the state $750 million. With a temporary freeze on gasoline taxes and a long-standing program to help poor rural Alaskans pay their fuel bills, the state this summer is handing out $1 billion in energy relief. Though the amount of the dividend won’t be announced until this morning, analysts say that even a family of four will probably get a check for up to $13,000.

Few states could afford such a bonanza, likened by Republican state Rep. Mike Kelly of Fairbanks to “morphine and welfare payments.” But Alaska is on pace to earn more than $10 billion from oil and gas operations this year, double last year’s revenue.

Palin’s stern veto pen at a time when the state is swimming in cash has helped establish her credentials as a fiscal conservative, economic analysts here say -- although critics complain that she has failed to use the state’s unprecedented oil bounty to help tackle perennial issues of domestic violence, alcoholism and inadequate child healthcare.

“The surplus just seems to get bigger and bigger,” said Oliver Scott Goldsmith, head of the Institute for Social and Economic Research at the University of Alaska. “The state is awash in oil dollars, and the projection is that for the next few years we will have significant surpluses over and above current levels -- in the billions of dollars.”

Estimates of the budget surplus by early next year range from $5 billion to $9 billion, a huge amount in a state of 670,000 people. Spending it -- or saving it for a day when oil is not so plentiful or expensive -- is one of the central policy issues confronting the administration of Palin, the running mate of Republican presidential nominee John McCain.

The governor is facing a dizzying array of requests from legislators to find a comfortable home for the money, including technology upgrades in the schools, new surgical wings in regional hospitals, fire stations and roads.

The speaker of the state House of Representatives has even talked of reviving plans for a massive hydropower dam on the Susitna River, under discussion since the 1970s but put aside because it was so stunningly expensive. The estimate 10 years ago was $5 billion.

Except for the $1,200-per-person fuel rebate, Palin has taken a firm stand against blowing through the surplus, socking away billions for education and underfunded state employee pensions.

In 2007, she used the governor’s line-item veto powers to cut $231 million in capital projects from the Legislature’s spending bills, and in May she rejected proposals totaling $250 million.

But Republicans in the Legislature have clashed with her because while she was cutting one-time expenditures for capital projects, she allowed a substantial increase in the state’s operating budget -- up 33% since the 2004 fiscal year, legislative officials said.

“What the Legislature would say is that if you’re going to claim that you’re cutting the growth of government and you haven’t reduced the operating budget, it’s an insupportable claim,” said one legislative staff member, who was not allowed to speak for attribution.

“Some of the things she knocked out were legitimate. A lot of times you put things in the capital budget you don’t necessarily like that much either, but you’ve got to have them there to get it passed,” said state Rep. Kevin Meyer, co-chairman of the House Finance Committee.

“But we did want to see more money being spent on infrastructure, museums, schools, bridges and things like that,” Meyer said. “We’re a fairly new state and our infrastructure is way behind the times. You can’t even go from Anchorage to Bethel because there’s no road.”

Women’s organizations complained that Palin rejected requests to increase funding for healthcare for low-income children and for combating domestic violence. They said she cut funding for programs for disabled veterans, victims’ assistance and the Literacy Council of Alaska.

But the governor approved an increase in the per-pupil expenditure rate for schools and money to help people weatherize their homes.

Palin’s vetoes marked the largest capital budget cuts in the last 10 to 15 years, said Gerald McBeath, a political science professor at the University of Alaska at Fairbanks.

“She has the potential for exercising budget discipline with legislators who see money on the table and want to spend to the last dime,” he said.

The budget surplus also comes from a new windfall profits tax on oil companies that has tripled the state’s take on production taxes.

Separate from that, Alaska is sitting on a $35.8-billion savings account known as the Permanent Fund, an accumulation of a 25% share of the state’s oil royalties since 1976. It is out of that fund that Alaskans receive a guaranteed annual dividend; the amount this year is expected to reach a record $2,000 or $2,100 for every man, woman and child who has lived in Alaska for the previous year.

The combined checks of about $3,300 will be distributed by the end of the month. State officials for years have debated whether to use the dividends for infrastructure projects -- since Alaska has no state sales tax or income tax to pay for such investments.

“People have talked about, why don’t we tap into the Permanent Fund?” Meyer said. “They usually don’t get reelected.”

The fuel rebate was designed to compensate Alaskans for a very real increase in their energy costs. Because the state has only two small refineries and pays so much to ship supplies from the Lower 48, Alaskans have faced the highest gasoline prices in the nation, and costs for fuel oil and groceries in remote bush towns have been staggering.

Gasoline was $4.60 a gallon for regular unleaded in Anchorage on Sept. 1. It was $5.36 in Nome. Milk in Nome last month was $7.50 a gallon. Electricity costs in some places were up to 10 times the national average.

“Every fuel drop last year was a newer, scarier number. Basically, a lot of people are doing wood stoves,” said Mary Leith-Dowling, Delta Junction’s mayor.

Congiolosi, who moved to his remote cabin outside of Delta Junction many years ago from New York, said he would use his dividend check to make his family energy independent -- he’s not counting on the government to bail him out in the long run.

“We’re not going to be dependent on any boom,” he said one recent afternoon outside his cabin, which has a large wooden cross nailed on one door, a “guns and ammo” sign on the other.

“But some of us will be more willing to work than others, and that’s what it’s going to take.”