Anchorage Daily News

Newly elected Alaska legislators may be saying to themselves today, "What did I get myself into?"

Oil prices have plunged by $80 a barrel, while the Permanent Fund has taken a $10 billion hammering, losing about a quarter of its value.

At no time in Alaska's history have lawmakers seen such a drastic weakening in both pillars of the state's economy at the same time. Oil prices are hovering around the level that will balance the current year's budget. Throw in uncertainty about whether Alaska can continue mainlining billions of dollars in discretionary spending from Congress, and you have major economic uncertainty.

No need to panic, but it is time to think ahead.

The good news is that legislators and Gov. Palin socked away $5 billion of the state surplus that rolled in while oil prices spiked to $140 a barrel. That's a good short-term insurance policy for the state budget.

The hammering taken by the Permanent Fund won't inflict a lot of immediate damage on the budget or state economy, either. Right now, the big losses are mainly on paper. If the fund rides out the storm without selling off holdings, the value of its portfolio has a chance to rebound as markets recover.

Alaskans' annual Permanent Fund divided is based on a five-year average of the fund's actual earnings. If the dividend payout drops, it will fall slowly.

The tighter financial climate in Juneau come January will be healthy in one respect: It will discourage the mega-million dollar pork-outs Alaskans saw the past two years.

But Alaskans need lawmakers to do more than just show capital spending restraint, along with the usual platitudes about cutting other spending. Alaska is a growing state that already has serious, unmet needs.

Lawmakers have to craft a sustainable way to meet them. Vacuuming up billions during oil price spikes and running multi-billion dollar deficits when prices fall is not sustainable.

Oil income drives the state budget, but oil production is steadily declining. Incentives in the state's revised oil tax system may help -- the state is a major co-investor now in every drilling prospect -- but any new production payoff is years away. A natural gas pipeline to the Lower 48 could bring long-term prosperity, but it is years off as well.

Politicians are notorious for short-term thinking. If a problem isn't going to hit until after the next election, it's easy to say, "hey -- we'll deal with it then."

Alaskans need their newly elected state legislators to be leaders instead of politicians -- and plot a course that will stabilize the state's roller-coaster finances.

Bottom line: As oil prices return to normal, life as an Alaska legislator gets harder.

Enough!

Governor should fire Bailey

The known misdeeds of the state director of boards and commissions, Frank Bailey, are piling up. More surfaced this week in reports from the state Personnel Board's independent investigator Tim Petumenos.

Bailey's record is bad enough that Gov. Sarah Palin should fire him as one of her first orders of business after the national campaign.

In two reports Petumenos made to the state Personnel Board, we have confirmation that Bailey set up a private e-mail network outside the state e-mail system for use by five administration insiders, including himself and Todd Palin. If this is not illegal, it should be. It is clearly an attempt to bypass the state open records law.

And we learned that Bailey, operating completely outside his job duties, intervened on behalf of a Palin campaign supporter who was at first judged not qualified for the state transportation job he sought.

It would be illegal for Bailey to help a campaign worker get a classified state job.

Even the pro-Palin investigator Petumenos, who lets everyone else mentioned in his two investigations off the hook, says Bailey needs some ethics training. But Petumenos couldn't quite bring himself to say Bailey's intervention in the hiring, documented in e-mails, violated the state ethics law. It was "a close case," said Petumenos.

On top of all these wrongdoings, there's the infamous phone call Bailey made to an Alaska State Trooper lieutenant, passing on the governor's concerns that Mike Wooten hadn't been fired from his state trooper job.

Bailey implied in the phone call, which was recorded by the troopers, that he was speaking for the governor and her husband Todd -- which Palin has said isn't true. If that's the case, he's a loose cannon who has no business staying in state government.

Bailey has shown time and again that he lacks the ethics required for a top state job. As long as he's on the state payroll, Palin's claim to be an ethical reformer is a hollow boast.

BOTTOM LINE: Frank Bailey is unethical. Why is he still on the governor's staff?

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