WASILLA, Alaska — Gov. Sarah Palin lives by the maxim that all politics is local, not to mention personal. So when there was a vacancy at the top of the State Division of Agriculture, she appointed a high school classmate, Franci Havemeister, to the $95,000-a-year directorship. A former real estate agent, Ms. Havemeister cited her childhood love of cows as a qualification for running the roughly $2 million agency. Ms. Havemeister was one of at least five schoolmates Ms. Palin hired, often at salaries far exceeding their private sector wages. When Ms. Palin had to cut her first state budget,...