AMHS budget on tap for special legislative session

Funds to keep ferry system going came up against deadline to keep government running

Budget matters related to the continuous operation of the Alaska Marine Highway System are on tap for the upcoming special session of the Alaska Legislature, set to begin on Oct. 23.

Word that a budget oversight would leave the marine highway without sufficient funds to operate was indeed a surprise, but it will be corrected, said Sen. Gary Stevens, R-Kodiak. The ferry service is crucial for Stevens’ legislative district, which includes Cordova, Homer and Kodiak, and legislators will do the best they can to get the money back in there, Stevens said Sept. 25.

“It will be a point of discussion,” he said. “I can’t believe it was anybody’s goal to destroy the marine highway system.”

The matter came to light earlier this month, when Pat Pitney, director of the Alaska Office of Management and Budget, advised legislative leaders that AMHS would run out of money in early April of next year.

“It was a real bad timing situation,” said Brian Fechter, an analyst with the Alaska Office of Management and Budget. Every year legislators pass a budget bill that approves spending for the upcoming fiscal year, but because we know other things will come up, they put in an allotment to cover emergencies and other foreseen events, he said.

Last year legislators approved an allotment of $100 million from the state’s savings account, the Constitutional Budget Reserve, which was much lower than in previous years.

Since the allotment had shrunk so much, legislators were bumping up against the $100 million cap, because they had to approve a blank check appropriation to cover the state’s commitment to Medicaid costs. There was also no way of knowing what would be appropriated for the ferry system in the capital budget, so legislators had to approve AMHS funding, which was to be $30 million, down to $7 million.

“I think everything was moving so fast,” Fechter said. “By the time the bill was sent to the governor we were days before a government shutdown, and there was no time to review the situation.”

A good analogy, Fechter said, would be a person spending more money than the individual has in their checking account, so they take money out of savings. At the end of fiscal 2017, the state did a $30 million transfer and in fiscal 2018, spending more than was coming in as revenue to AMHS, but since the transfer was actually only $7 million, that’s where the situation ran into trouble,” he said.

Those traveling on the ferry system, where ferries travel for hundreds of miles along their routes, currently pay about 30-40 percent of the actual cost of each trip, he said.

A 2016 report by Juneau’s McDowell Group on the economic impact of AMHS notes that the ferry system is a vital transportation lifeline, supporting jobs and businesses and providing economically valuable access to non-port communities.

The largest generating port for tourism is Bellingham, Wash., and most of those tourism passengers travel in the spring and summer, said Aurah Landau, public information officer for the Alaska Department of Transportation,

The McDowell report notes that AMHS carries over 100,000 non-resident passengers annually, bringing significant outside dollars to Alaska.

Average spending per person entering and existing Alaska via AMHS was $1,700, compared to $941 for average summer visitors, helping to sustain businesses offering lodging, food, tours and other visitor services.

AMHS also accounts for some 1,700 Alaska jobs and $104 million in Alaska wages in recent years, with AMHS employees residing in 44 communities within Alaska, including Anchorage and the Interior.

A number of seafood companies rely on AMHS to ship fresh seafood. The ferry offers an essential alternative to airfreight, which can be prohibitively expensive, have insufficient capacity, and lack proper refrigeration, the McDowell report said. Having the ferry option lowers transportation costs, allowing seafood processors to pay local fishermen more for their catch, the report said.