Is Palin a fiscal conservative? In Alaska, it's hard to say

Anchorage Daily NewsSeptember 19, 2008 

The following article appeared on the editorial page of the Anchorage Daily News

Sarah Palin presents herself to the nation as a fiscal conservative. How does her record stack up?

Alaska's unique financial circumstances make it hard to give a traditional assessment.

As governor, Palin presided over the largest tax increase in Alaska history -- but it was a tax increase paid by a handful of multinational oil companies. She took on the state's most powerful industry and ensured Alaskans get their fair share of income from oil development, most of which occurs on publicly-owned land.

Gov. Palin asked the Legislature to reform the state oil tax that was passed during Alaska's bribery scandal. The Legislature took her proposed $600 million oil tax increase and boosted it to capture even more of the windfall from high oil prices. The new tax netted Alaska an extra $2 billion last year compared with the old tax, even allowing for increased oil prices.

Gov. Palin presided over the largest state budget in Alaska history -- $9.8 billion for the current year -- but it was a budget fueled by those billions of dollars in oil money, plus more billions in federal funding. And that budget included setting aside $2 billion as savings.

The state budget would have been even bigger if she hadn't cut a half billion dollars worth of pork from the first two capital budgets the Legislature sent to her. Though she left the operating budget unscathed both years, she cut $230 million (about 12.5 percent) from the capital budget the first year and $268 million (less than 10 percent) her second year. The cuts were deeply unpopular with legislators of both parties.

To their credit, the Legislature and governor agreed to save, rather than spend, a total of about $7 billion of the oil windfall.

While Alaska's state budget is big -- about $9,900 per resident -- Palin can boast that Alaskans enjoy the lowest personal tax burden of any state. Since 1980, Alaska has had no state sales tax and no personal income tax.

This year, Gov. Palin persuaded the Legislature to suspend one of the few taxes that ordinary citizens do have to pay, the state's 8 cents a gallon gas tax.

With oil prices soaring past $100 a barrel, Alaska's treasury had plenty of money beyond what was needed to support government services. She persuaded the Legislature to pay each and every Alaskan an extra $1,200 from the windfall state revenues. At first, she wanted to issue the $1,200 as debit cards strictly for paying energy bills. But the mechanics of that approach were too complicated and so she switched to a straight cash payment as a "rebate" from Alaska's oil wealth.

That $1,200 comes on top of the $2,069 each Alaskan gets this year as a dividend from the state's $35 billion oil savings account. Total payout for each Alaskan: $3,269.

During Gov. Palin's tenure, high oil prices have made her job relatively easier. Her deeply unpopular predecessor, fellow Republican Frank Murkowski, had to deal with much more austere times, which added to his unpopularity. When he became governor, oil was selling for less than $30 a barrel, not $100.

While Alaska is swimming in oil money, a fiscal conservative does not need to slash government services. There's so much oil money, a governor can limit government by trimming the worst spending excesses and handing some oil money back to the people.

It's good for a chief executive's popularity, but it's not great training for running a government that has to tax voters for essential services.

Sarah Palin's fiscal record as mayor of Wasilla has some of the same unusual Alaska twists.

As mayor, she helped persuade Wasilla voters to approve the single largest government facility it has ever had: a $15 million indoor recreational sports arena. In 2002, voters narrowly agreed to raise the city sales tax a half percent to pay for it. They knew a good chunk of the bill would be paid by people who live in the rapidly growing areas outside the city limits. Wasilla was then and still is the commercial center for the most rapidly growing area of the state.

Wasilla's sports arena was supposed to pay for itself, but last year, it still required an annual taxpayer subsidy of about $150,000.

When Palin was mayor, Wasilla's population was steadily growing, and she presided over steadily growing city budgets. At the same time, though, she was able to cut property taxes. That's because the city's sales tax collections grew as the area's record-breaking growth continued.

Wasilla's operating budget was $6 million the year Sarah Palin was elected (1996); the year she left (2002), it had grown by 50 percent to $9 million. The city's sales tax, thanks to purchases by residents outside the city limits, have allowed Wasilla to enjoy government amenities without big property tax bills.

It has been a happy arrangement for Wasilla residents. And it's another example of the special Alaska conditions that allow a fiscal conservative like Sarah Palin to deliver voters a relatively high level of government services with relatively low taxes.

BOTTOM LINE: Alaska's unique financial conditions complicate the assessment of Palin's record as a fiscal conservative.

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