ANCHORAGE, Alaska -- Republican vice-presidential nominee Sarah Palin promotes herself as a small-government conservative. But when Alaska government officials wanted to shut down a money-losing creamery, the governor overturned the decision after dairy farmers near her hometown complained the loss of subsidies would cripple them.

On June 8, 2007, a board overseeing the 71-year-old state-run Matanuska Maid creamery announced the business would close after amassing $1.5 million in red ink since 2005, the result of a run-up...