palin's managerial skills

Houston Chronicle | Alaska Gov. Sarah Palin's first two years in office have been called a time of milk and honey, when the resource-rich state was flush with wealth from record oil prices.

The second half of her term isn't looking so rosy as Palin faces her first major financial challenge as governor.

The rapid decline of oil prices has left the state in a looming budget crisis and a late-entrant in the national recession. And that could have political repercussions for the former Republican vice presidential hopeful, who has signaled an interest in a 2012 presidential run but must stay visible in the Lower 48 to be successful.

"Given these bad times, she's going to have a much more difficult time traveling outside Alaska," said Larry Sabato, director of the University of Virginia's Center for Politics. "When times are good, people will let their governor roam. In bad times, citizens expect their governor to stay home and work on solving the problems."

Oil accounts for as much as 90 percent of state revenues. So the plunge of North Slope crude from an all-time high of $144.59 per barrel last July threatens to give the state an estimated budget shortfall of up to $1.5 billion in the fiscal year that ends June 30.

Palin bills herself as a fiscal conservative, and has called for reducing state spending by $268 million in this budget year, but lawmakers and others say these aren't reductions at all and do nothing to curtail spending. For example, the bulk of that sum — $200 million — is unspent tax credits for companies investing in oil and gas development that are being returned to the treasury.

Palin also is seeking approval from lawmakers to tap budget reserves to fill the deficit. She also has implemented a state hiring freeze that exempts public safety employees, but other departments are lining up to ask for waivers.

It's a long way from Palin's early tenure — particularly last year when the state's treasury was bloated with surplus money from the skyrocketing oil prices.