Alaska was a territory of the United States before it became a state. In the early days of the country, before the U.S. constitution was written Congress had worked out a territorial system for the areas such as the Louisiana Purchase, the Oregon Country or Alaska that wanted to be part of the United States. They had to first prove that the area had a large enough resident population and a way to sustain itself economically. Until then, Congress would hold those areas in a sort of second class status, as a territory.

In territories, the governor was not elected; he was appointed by the U.S. President. At first, territories had no legislatures. Then, when Congress authorized it, the resident citizens could elect a two-house legislature, a Senate and a House, that could make laws for the territory; but Congress could also not allow such laws (veto them) if it chose. When Congress authorized it, a territory could elect a delegate to serve in the U.S. House of Representatives in Washington D.C. but the delegate would have no vote.

Congress established this system because in the beginning of a territory's life, there was no way to tell who planned to live out their lives there, who hoped to see their grandchildren settle there, and who planned to make as much money as they could in the territory, and then go back to where they came from. Congress wanted any new states in the country to be governed by people who would make laws to protect the future society living there, not laws that would make it easy for temporary residents to make money and then leave.

By the end of WW II residents of Alaska had come to resent their second class status. They saw no reason why they should not have the same rights and powers to govern themselves that the citizens of any state of the U.S. had. They also resented bureaucrats in Washington, D.C. who applied rules and regulations to Alaska that did not fit Alaska's unsettled and undeveloped conditions., It was a territory with very few roads, and a very small population spread out over a huge area. The point of statehood was to gain greater control of Alaskan affairs, so that Alaskans would govern themselves rather than be governed from afar. Alaskans were convinced that by running their own affairs, they would make the state grow and become prosperous.

To become a state, the residents of a territory had to persuade Congress that they were law-abiding, that they could run a state responsibly, and that they could plan and build for the future of the new state. Alaskans had already proved that it could in the statehood campaign from 1946 to 1958.

The was small in 1959 when it became a state - barely over 225,000 (c. 45,000 Native). Congress did not think that such a small population could generate enough tax dollars to pay for state government. Therefore Congress included two measures in the statehood act to help pay for the new state. The first involved federal land in Alaska. Sixty percent of the land in Alaska - 225 million acres - was set aside as federal land. By the first measure, the federal government gave to Alaska 90% of the profits from mineral lease sales on the federal land in Alaska. Oil is one of the most important minerals in Alaska, and to this day wherever oil or gas leases are sold for exploration or development on federal land, 90% of the revenue is given to Alaska.

The second measure also involved land. In the statehood act Congress said that Alaska could select 104 million acres (28% of the total land in Alaska) from the unreserved and unoccupied land in the state for its own; the federal government would transfer the title of this land to the state. . Congress assumed that as the state's land became economically valuable, through development or settlement, the state could earn enough revenue from it to fund state government. This has almost come true because of the discovery of North America's largest oil deposit at Prudhoe Bay in 1967, and because of the way the state taxes the production of that oil.

As part of any statehood campaign, residents of a territory had to write a state constitution. Alaskans gathered in Fairbanks in the winter of 1955-56 where they wrote one of the best state constitutions of any of the fifty states. Fifty-five delegates there were highly dedicated to planning for Alaska's future. They were careful to protect citizens' rights, and to build in safeguards against inefficient government.

A statehood proclamation was signed on January 3, 1959 and state leaders began to build a new state government. It is something most people would get to do only once in their lifetime, if they ever got the chance at all. William Egan of Valdez, a Democrat who had been elected chair of the state constitutional convention, was elected governor. John Rader in the Senate and Thomas Stewart in the House among others provided leadership in crafting legislation and organizing state administration. Buell Nesbett designed the state court system and then Egan appointed Nesbett as the first chief justice of the state supreme court.

Everything seemed in place for the efficient functioning of the new state government. Alaska seemed to be off on the right foot. But a huge challenge to state leadership was already brewing, one that threatened economic development in the state and delayed the selection of the state's land for many years. For while Congress had made Alaska a state, it also created great confusion by ignoring the claims of Alaska Natives to their Alaska land.