Gov. Sarah Palin rolled out her proposed budget for next fiscal year in Juneau on Dec. 15.

Palin said the budget includes small decreases from the current year, but she is being cautious in proposing spending less than the current revenue estimates for next year.

"Conditions are changing even as we speak," Palin said.

The budget proposal is based on an oil-price forecast of $74.41 per barrel for the 2010 fiscal year. In December, the price of Alaska North Slope crude oil hovered around $40 per barrel, according to the Department of Revenue.

Sen. Kim Elton, D-Juneau, said Palin's cautious approach was smart.

"It's a rational approach to take to assume the long-term forecast is grim," he said.

Palin's budget calls for spending $4.9 billion in general funds next year, and $11.2 billion in total funds, both amounts that were 7 percent lower than the current year's budget not including the one-time resource rebate.

Palin's budget director Karen Rehfeld cautioned that there were a number of reasons why the two numbers could not be compared directly.

Despite being smaller than the current year's budget, Palin's budget includes some new programs. New pre-school and Head Start spending won praise from members of the Juneau delegation.

"I like that she's moving ahead with the pre-K and the health care efforts," Rep. Beth Kerttula, D-Juneau, said.

In addition to $1.05 billion in education funding, including $100 more per student as part of a budget agreement negotiated in the Legislature last year, the proposal included $118 million for intensive needs students and changes to the District Cost Factor system.

Also, there will be $2 million for a pre-school pilot program, $40.5 million for 20 major maintenance projects, $7.7 million for Head Start and $34.9 million for Denali KidCare.

While oil prices are down dramatically from their summertime highs of more than $140 a barrel, Palin said the state's new oil tax structure, passed in late 2007 as Alaska's Clear and Equitable Share Act, is working. Despite objections from the state's oil producers to the increased tax rates, the measure's incentives for new investment are working as intended, she said.

"ACES is doing what it was created to do: encourage exploration and development with investment tax credits," she said.

Department of Revenue Commissioner Pat Galvin said oil companies, including independents that previously hadn't been active in Alaska, are investing in new operations on the North Slope, while incumbent companies are spending more.

"In the end, we're having a net positive effect," he said.

Elton said that might not be true, and that high oil prices rather than tax credits may have been the incentive.

"It's probably too early to tell," he said.

intended, she said.

"ACES is doing what it was created to do: encourage exploration and development with investment tax credits," she said.

Department of Revenue Commissioner Pat Galvin said oil companies, including independents that previously hadn't been active in Alaska, are investing in new operations on the North Slope, while incumbent companies are spending more.

"In the end, we're having a net positive effect," he said.

Elton said that might not be true, and that high oil prices rather than tax credits may have been the incentive.

"It's probably too early to tell," he said.