Alaska became suddenly and surprisingly rich in the early 1980s, with oil revenues from Prudhoe Bay paying for almost all state operations, picking up some of the costs of local government, creating a huge state savings account, paying all Alaskans annual cash dividends, and eliminating the need for state personal income taxes. The smaller projected petroleum revenues of the 1990s will mean cutting the state's budget. To make budget decisions, Alaskans need to know how the state actually spent its money in the 1980s, and they need to keep in mind that before the oil riches, Alaska's state government spending was two to three times the national average. Other factors to consider are the doubling of population between 1967 and 1987 and inflation that nearly tripled prices. The gap between Alaska's state spending and the average for other states widened in the 1980s because, with its increased revenues, Alaska (1) expanded existing programs; (2) delivered services in more expensive ways; (3) added many new kinds of spending; and (4) increased wages of public employees. These steps created economic and political forces that will complicate balancing the state's budget. This paper reveals the facts and discloses the fables about how the state spent $34 billion in the 1980s, and it assesses how those facts will make budget cutting tough. The analysis is in three parts: (1) The Prudhoe Bay Ride; (2) Myths and Realities; and (3) Between a Rock and a Hard Place. One table and 10 figures outline the fiscal history of Alaska's oil-rich years and project its future. (ALL)