Gov. Sarah Palin is calling for more state spending on children's health insurance, preschool and other programs, even as Alaska oil prices and state revenues plunge.

Cash flow into the state is shrinking as oil prices drop below $40 a barrel, the lowest level in nearly four years. Most state general fund money comes from taxes and royalties the state makes from oil. But Palin said the state can afford more than $5 million in new spending on areas like Head Start, obesity prevention, a test program of half-day preschool, and expanded Denali KidCare insurance.

"That means more working families will have health coverage. This isn't done lightly, a decision like this, and we know there will probably be some healthy debate stemming from some opposition in the Legislature over this," Palin said.

Palin will release the rest of her proposed state budget next week and said not to expect any significant cuts. She downplayed the danger falling oil prices pose to the state budget, saying Alaska is in a far better position than other states.

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