What were things like in Alaska before oil?
They were pretty tough.
Taxes were high; jobs were scarce; the economy was dicey, and the young state of Alaska was basically broke.
Still, there was an air of optimism. Alaska was finally a state and Alaskans were in charge, not federal bureaucrats.
Conditions were precarious, though.
“Alaska was a wonderful place to live, and you could leave your doors unlocked, but we needed everything, schools, hospitals, roads, sewer, water, power, docks. Mostly we did without, unless the federal government had already built it,” recalls Judy Brady, who arrived in Fairbanks in 1963 from Idaho.
She went on: “We had the highest infant death rate in the nation, and the highest incidence of TB. We had at least 2,000 high school-age rural students with no school to go to, so they just didn’t.”
Almost immediately, an infant state government faced a fiscal crisis: Federal transition payments to the state were running out and the state was $15 million short of meeting the 1962 state budget of $57 million.
Responding, the Legislature increased the personal income tax, the most significant revenue source, along with taxes on motor licenses, fuel, cigarettes and alcohol. The gap was still $3 million.
“With a small population of under 200,000, there were just too few people to raise the amount of money needed,” Brady remembers.
But the unexpected happened: The bids for the state’s first oil and gas lease sale, in Cook Inlet, were opened. One million dollars was expected. Governor Egan was hoping for $7 million. The bid totaled $14.6 million.
It was a lucky break, but the money was used up meeting the immediate budget shortfalls.
That same year, however, Alaskans demonstrated their faith, and their unity. Voters approved a statewide general obligation bond issue, Alaska’s first borrowing on credit markets, to build a state ferry system to connect coastal communities in Southeast Alaska.
There was opposition to it but it still passed, with Alaskans in all parts of the state supporting a basic infrastructure for coastal communities,” recalls Eric Wohlforth, who was in Alaska working as a financial consultant (he was to become Commissioner of Revenue in 1971).
Alaska’s first governor, Bill Egan, was very worried about the budget, however. “People were beginning to wonder if statehood was such a good idea,” Wohlforth said.
The 1964 earthquake, although a disaster for Alaska, brought in a lot of federal reconstruction money and disaster aid, however. There was money for rebuilding, and it provided a lot of jobs, he said.
Education, particularly for rural areas, was a pressing issue at the time, along with jobs and how to create them, Judy Brady remembered. In 1966 Alaska voters approved a state general obligation bond issue to build regional high schools in rural communities. “Urban Alaskans supported the rural needs for high schools,” and it was sign of unity, Brady said.
As it happened, only one school, the Beltz school in Nome, was actually built. Meanwhile, urban Alaskans responded to the rural education need with volunteerism. Families in larger cities took rural high school youths into their homes so they could attend school.
The state’s economy was thin but people had faith. “There was an optimism in the air,” said Victor Fischer, a member of the 1956 constitutional convention and later a state senator. “Alaskans felt something was going to happen, although they didn’t know what.”
Alaskans assumed natural resources would provide an economic foundation, but they were thinking mostly about fishing, mining, timber or agriculture, Brady said. “Those were things Alaskans knew about. Nobody knew anything about oil.” Many pinned their hopes on a big copper discovery at Bornite, in northwest Alaska. The copper is still there.
But something big did happen, as Vic Fischer envisioned. Oil was discovered at Prudhoe Bay, in 1969. A state lease sale later that year that brought $900 million into the state treasury – a fortune at the time, and unexpected. Finally, the promise of statehood for Alaska seemed secure.
Tim Bradner is an Anchorage-based business writer.