Alaskans Reluctantly Face Drop in Oil Boom

By Yereth Rosen, | The Christian Science Monitor, April 22, 1992 | Go to article overview

Alaskans Reluctantly Face Drop in Oil Boom


Yereth Rosen,, The Christian Science Monitor


WITH the super-giant Prudhoe Bay oil field past its production peak, no huge new oil developments on the horizon, and oil prices slumping, Alaska's long, free oil ride is nearing an end.

Daily oil production that fuels the state treasury peaked at 2.1 million barrels in 1988. It is expected to drop to half that by the year 2000, forcing reevaluations by the state government.

"At one time we were filthy rich. Now we're just rich," said House Speaker Ben Grussendorf, a Sitka Democrat, just after the Alaska House of Representatives passed, last week, a $2.37 billion operating budget for fiscal year 1993.

The budget includes boosted user fees and a gasoline tax hiked from the nation's lowest rate to the United States average. It draws on reserve funds, and cuts popular programs and agencies across the board.

Trimming some $138 million from the budget Gov. Walter Hickel introduced and erasing a looming deficit estimated at $300 million to $1 billion was grueling and draining, House members said.

"It was the hardest budget that I've ever worked on. It was the first time that I've ever heard of that a governor's proposed budget has been reduced," said Anchorage Republican Ramona Barnes, a finance committee member. Still, she added, "The cuts were easy this year compared to what you'll get from now on, because from now on you'll have to eliminate whole programs."

Legislators and some business leaders have even begun to mention the once-unmentionable: the return of the state personal income tax that was repealed in 1980, a year when oil wealth appeared endless to many Alaskans.

A bill that would bring back the state income tax - a bill that no one at the state capitol here expects to survive in an election year - has gotten a surprisingly warm reception.

Fairbanks Democrat Niilo Koponen, who has championed the return of the income tax for six years, said intelligent Alaskans know that the 1980 repeal was a mistake.

A proud "Alaskan Before Statehood," Mr. Koponen said he remembers the days when Alaskans paid state income taxes without complaints and budget limits forced certain tasks to be left undone, such as winter snowplowing on the sparse highway network.

But that was before the North Slope oil boom, which sent the first oil down the trans-Alaska pipeline in 1977 and brought to Alaska a population explosion and building binge.

Now, no other US state government is so dependent on oil. Eighty-five percent of Alaska's operating budget comes from royalties, taxes, and fees from oil. A $1-per-barrel change in Alaska North Slope crude prices means about $150 million a year in revenues to the state treasury. Fishing tops oil

While the oil industry is said to lag behind fishing and, some say, tourism in total private employment here, state government spending is critical to the economy and the maintenance of a life style that could not be provided through the private sector in this sparsely populated region.

And no other state is so generous to its residents. The average Alaskan pays a few hundred dollars a year in all local and state fees and taxes, while receiving $6,000 a year in direct state government benefits, according to the Institute of Social and Economic Research at the University of Alaska (Anchorage). …

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