Alaska: State with a long history of take and give

Alaska is awash in billions of surplus dollars from the current high oil prices and a tax hike on the oil industry, but it remains at the forefront of states feeding at the federal trough.

With Big Oil and U.S. spending now the main drivers in Alaska's boom and bust economy, Gov. Sarah Palin has been blessed to arrive at a high point in the state's 50-year history of statehood.

Residents here pay no state income taxes or state sales taxes. And this year they are the beneficiaries of the greatest period of government-to-citizen largesse in state history, where getting a yearly check from the government is a decades-old tradition.

Under Palin's watch, the state added $1,200 to the annual checks sent to Alaskans as part of what's called the Permanent Fund Dividend, a stipend from the proceeds of the state's more than $30 billion oil-rich investment account. That translated to a record $3,269 this fall for every eligible man, woman and child in Alaska - almost $23,000 for a family of seven like Palin's.

Though rocked by the market turmoil - the fund has lost more than $6 billion of its value in the past year - it is among the largest investment funds in the world, larger than any endowment fund, private foundation or union pension trust.

"The question most Americans are asking is, 'If you have that much money (in the permanent fund), shouldn't you be spending it on the state's priorities?'" said Leslie Paige, a spokeswoman for Citizens Against Government Waste, a Washington watchdog group on government spending. "It's time we all get back to paying for things with our own money."

The group has been scathing in its criticism of Alaska's congressional delegation, especially Sen. Ted Stevens and Rep. Don Young, for their ability to secure earmarks, like $223 million for the so-called Bridge to Nowhere. In a yearly "Congressional Pig Book," the group has consistently ranked Alaska as No. 1 in pork per capita.

Alaska bristles at such criticism. Residents say the state has huge infrastructure needs that are challenging given Alaska's large size and small population. It's one-fifth the size of the lower 48 states combined and its population of 680,000 is smaller than that of Delaware.

Though four-fifths of its residents live in urban areas, poverty is endemic across hundreds of small, far-flung rural villages where basic necessities like sewer systems are often lacking.

Former state House Republican Gail Phillips said Alaska, a young state at 50, arrived too late to share in the nation's enormous buildout of roads and energy infrastructure that keeps the rest of the country humming.

"For us it's a matter of bringing awareness to the Lower 48 and we're doing a poor job right now," Phillips said. "We are being looked at as money-grubbing, selfish people who want it all when we just want basically what was already provided for the rest of the country."

Phillips said Alaska would fare better in the eyes of the country, however, if its citizens were more inclined to contribute to their own state government.

Residents don't pay a state income tax or a sales tax. All efforts to use either the permanent fund or its earnings for state government have been summarily shot down by residents fearful that such ideas would affect their yearly payment.

Built on oil royalties and fattened over time by shrewd investments, the permanent fund is often referred to as the state's rainy day account. But even during years of deficit spending when oil prices were low, that rainy day has yet to come. Instead more than 85 percent of tax and royalty revenues to run state government come from the production of crude oil on Alaska's North Slope.

Federal spending in Alaska isn't surprising, given the number of military installations in Alaska and the federal obligations to Alaska Natives. The federal government also must take care of its own lands, which make up 60 percent of Alaska's land base.

Federal spending in Alaska was more than $9 billion in 2006, and earmarks added as much as $3.4 billion between 1995 and 2008, according the Citizens Against Government Waste. The state is among the most heavily subsidized by the federal government, bumped from the top spot in 2006 only after Hurricane Katrina devastated Louisiana and Mississippi.

The spotlight has been harsh because most Americans don't understand Alaska's unique needs, said state Rep. Beth Kerttula, D-Juneau.

"We are not really a welfare state, we're a resource state that is just beginning," Kerttula said.

Palin herself has no control over the yearly amount of the dividend check sent to residents. But this year, she pushed for the $1,200 energy rebate - made possible by a bloated state treasury that boasts a multibillion-dollar surplus - after she raised taxes on oil companies and oil prices shot up.

Not everyone used the bonus to offset high energy costs, with more affluent urban Alaskans trading up for new toys like big-screen televisions.

But that money is likely to make a difference this winter in Alaska's remote villages, where residents pay up to three times the national average for heating fuel. Food costs - a gallon of milk costs $10 in some villages - are astronomical.

"We had this paradox where the state treasury was rolling in dough from the high price of oil but at the same time high energy costs were just killing people," said Palin's spokesman, Bill McAllister. "It seemed only fair to transfer some of that state government wealth to the citizenry, which collectively owns the resource."