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Palin legacy lies at heart of Alaska oil tax fight

Kirk Johnson
Stephen Nowers

For many Alaskans, Sarah Palin is a figure in the rear-view mirror, the memories of her time as governor obscured and distorted by the national spotlight she stepped into as Republican vice-presidential candidate, pundit and tea party darling. And often as not, the memories come with a grumble anyway, since her shooting-star career mostly took off after she left the state.

But now the Palin legacy is being burnished, if not a little airbrushed, by a seemingly unlikely source: Democrats. The reason is oil.

Palin was elected governor in 2006 on a pledge to clean house after revelations of oil-industry corruption in the state Legislature, and in 2007 oversaw a sweeping overhaul of policy that included big new taxes on oil profits. But this year Gov. Sean Parnell -- Palin's lieutenant governor, and successor after her resignation in 2009 -- led a drive in the Republican-controlled Legislature to repeal the Palin tax package, arguing that it discouraged new exploration. That is a big issue in Alaska, where oil taxes pay for 90 percent of the state's general fund budget.

But that was not the end of it. Opponents of the new law gathered enough signatures this spring and summer to put the issue on the statewide ballot next year. They want voters to repeal Parnell's new tax plan and replace it with Palin's old one.

And that has stirred up a very strange political cocktail: Democrats leading the repeal effort have every incentive to make the Palin years under her oil taxes look good, while Republicans and many business leaders, in supporting the new system, are pulling in the opposite direction. The Palin era, they say, was a glass half empty at best.

"She was a transformational figure in Alaska politics," said state Sen. Bill Wielechowski, a Democrat from Anchorage and leader of the repeal effort. Oil remade the state's economy, he said, but tax policy on that bounty has not kept up. "People realized that for decades, Alaska had not gotten a fair share."

Supporters of the Parnell plan scoff that nostalgia for the Palin years is misguided hindsight. The old law, they said, created big disincentives for oil companies to explore and drill.

"People were angry at the oil industry, angry at the Republican Party, angry at the lawmakers who got caught in the scandal, and she channeled that," said Andrew Halcro, the president of the Anchorage Chamber of Commerce, referring to Palin. "And so when she raised taxes, people were like, 'All right, you go get 'em.' But then the reality sunk in."

Buffing or besmirching the Palin aura is a risky business, people in both parties said.

Many Alaskans affiliated with the tea party still revere her, which makes it tricky for Republican supporters of the Parnell plan to speak too harshly. But she also evokes strong negative feelings across party lines in Alaska, Democrats say, partly because of her attack dog role during the 2008 presidential campaign and partly because of her decision to resign as governor, which many residents took as a slap. That makes the repeal forces hesitant to ask her to help or endorse their efforts -- even if she had an inclination to do so.

"She did the right thing. She put in a tax that was tough on the big guys," said Jack Roderick, 87, a major public figure since Alaska's early statehood as a lawyer, author, former Democratic mayor of the Anchorage Borough -- and now leader of the repeal drive. But her image now is so divisive, he said, that active campaigning on her part would "probably not be helpful."

Another former Anchorage mayor, Rick Mystrom, a Republican who is a co-chairman of a group called Vote No on 1, which is fighting the referendum, said a discussion of the Palin legacy would probably not factor in at all.

"I don't think we're even going to touch on Sarah Palin, we believe that our arguments are so logical and rational," he said.

Palin, who has been on a book tour and making political endorsements, did not respond to requests for comment.

Both parties are divided over how to tax the oil that shapes Alaska's economic life. Parnell's plan gained final approval in the state Senate by an 11-to-9 vote in April, with 11 Republicans voting yes, and two Republicans joining with the seven minority Democrats in voting no. Some prominent Democrats, meanwhile, including two former governors, Tony Knowles and Bill Sheffield, are supporting Parnell.

What complicates the picture for Parnell is that his new system will hurt state tax collections. Even he and his supporters say billions of dollars of tax revenue will be forgone in the early going, though they say that new drilling and production incentives will eventually build state revenues. The old law, called ACES, for Alaska's Clear and Equitable Share, included an escalator clause that raised oil tax rates as profits went up; the new law scraps that for a flat rate.

Leaders of the repeal effort, who accuse Parnell of a giveaway to the oil companies, have already begun reminding voters of the billions of dollars that flooded the treasury under ACES.

So Parnell, whose proposed 2014 budget comes out in the next few weeks, said his plan was to "fight back with the truth."

"In just the last five or six months, Alaskans are starting to see the benefit of a competitive tax regime," he said in a telephone interview, pointing to new investment in oil drilling areas. He said that he gradually saw harmful effects in the ACES law he helped Palin pass and that Democrats, in "all of a sudden now raising her legacy," were overlooking or ignoring the explosive rise of challengers in energy production since Palin's time, notably North Dakota.

Timing is an issue too. The referendum on oil taxes will be in August. Parnell is aiming to seek a second full term in the general election two months later. The two races are now intertwined, Democrats said.

"Repeal bodes ill for the governor," said state Sen. Hollis French, a Democrat from Anchorage and a would-be candidate for lieutenant governor.

Halcro at the Chamber of Commerce also worries that Parnell and Republican legislators will try to solve their budget trouble with spending cuts, which could be directly felt by voters and attributed to the new tax law.

"Fuel to the fire," he said. "The governor has got to keep investing in education and keep investing in infrastructure." State savings funds are ample, he said, and should be tapped in the short term.

For voters like Phil Shanahan, a lawyer in Anchorage, who described himself as a Democrat and an opponent of the oil tax rollback, there is a definite awkwardness to the debate. He likes almost nothing about Palin's views now but says that as governors go, Alaska has had worse.

"Palin had the right concept," he said as he stopped for coffee at Side Street Espresso downtown on a recent chilly morning. Then he paused and lowered his voice: "I have a hard time saying that out loud."

 


By KIRK JOHNSON
The New York Times