Funding reallocation spares summer ferry service

  • Sunday, May 17, 2015 10:48pm
  • News

The state ferries will run mostly as scheduled this summer despite significant budget cuts looming, the Alaska Marine Highway System announced May 12.

The announcement is a departure from predictions made less than a week earlier that nearly 20 percent of advertised summer service would be impacted by a $12.5 million cut to the system’s budget.

Gov. Bill Walker reallocated $5.5 million of unspent “fuel trigger” money from fiscal year 2015 to fiscal 2016 AMHS operations to keep summer service intact, according to an AMHS release.

Transportation Department agencies can tap fuel trigger funds when oil exceeds $70 per barrel. When the price of oil fell below that threshold last fall, the money the AMHS budgeted for fuel in fiscal year 2015 could not be used. The $5.5 million offsets $5.3 million in fuel trigger funding the department had budgeted for fiscal year 2016 when it made the summer schedule last July, but now likely won’t be available.

“While summer service for this year has been essentially restored, travelers and Alaskans must remember that the state is still facing a $4 billion budget deficit,” said DOT Deputy commissioner Mike Neussl, who oversees the ferry system. “The AMHS schedule for the upcoming winter season and summer 2016 will likely be different than years past.”

Service in subsequent seasons will likely hit the chopping block because the fuel trigger shift doesn’t fill the yearlong funding gap.

A draft winter schedule will be available for public review this summer after the operating budget is finalized, the release states. Winter service is already drastically reduced from summer ferry operations in normal years.

“We’re going to have to really call on communities for their input on what service is essential for them,” DOT spokesman Jeremy Woodrow said.

The only service casualty this year is Prince Rupert, British Columbia, which will not be served by the M/V Taku in July and August. Woodrow said the “domino effect” of other vessels not getting out of shipyards for winter overhauls on time left the Taku in service longer than expected. Thus, its scheduled overhaul will begin and end later, so canceling its sailings to Prince Rupert was not just a cost measure, according to Woodrow.

The attitudes some Railbelt legislators have towards the Alaska Marine Highway System came through unvarnished in a May 6 House Finance Committee hearing.

Committee members from the Matanuska-Susitna Borough and the Fairbanks area interrogated Transportation Commissioner Marc Luiken and Office of Management and Budget Director Pat Pitney as to why DOT had not made changes to its schedule that would close the $12.5 million difference.

In total, the cuts could’ve amounted to nearly $25 million in lost revenue to make up for the subsidy cut, according to Neussl. Part of the larger loss is due to the fact that ships still incur significant costs, such as crew requirements, when docked, he said.

The overall amount of funding for the AMHS changed through the legislative session and stands at $153.8 million in the latest version of House Bill 72, the state’s operating budget.

Walker requested $165 million for the ferry system in his original budget and is requesting $7 million be put back in the budget now, which amounts to about 4 percent of the total budget.

As of May 1 there were 11,172 tickets sold on ferry routes that could have been impacted by the proposed budget cuts, according to Woodrow, before the funding shift. The retail value of the 3,216 itineraries containing those tickets is about $1.25 million. Those numbers have grown from 9,261 tickets totaling about $1 million with vehicle fares on March 1.

About 70 percent of the itineraries were booked by Outside tourists, who spend on average $930 when they get to Alaska, according to state reports. Luiken said the administration was asking for additional funding so the state could honor the schedule it published.

“That’s why we have come back and asked for the budget that we have asked for (the $7 million add-in), so that we can honor the commitments that we’ve made through the schedule,” Luiken said.

Among other route changes, he said the projected reductions would have eliminated summer mainliner service in Lynn Canal — Juneau to Haines-Skagway by the Malaspina — and eliminated Prince William Sound service for about a month beginning in mid-September. That would have cut off Cordova, which is not on the road system.

Rep. Tammie Wilson, R-North Pole, said the sound and canal service could be saved if other choices were made. She also likened driving 352 miles between Haines and Skagway, a trip that requires two border crossings, to driving from Fairbanks to Anchorage.

By ferry, the trip between northern Lynn Canal communities takes approximately one hour.

Luiken said the service decisions in Prince William Sound and Lynn Canal were made base on “least impact” to the overall summer schedule with what vessels are expected to be available.

A contentious exchange began between Mat-Su Republicans Rep. Lynn Gattis and Finance chair Rep. Mark Neuman and Luiken when Gattis asked why the ferry system had not begun notifying passengers that could have had their travel plans changed by the service reductions. A former aviation professional, Gattis likened the state ferry schedule to that of an airline’s.

“It’s truly not that complicated,” Gattis told Luiken. “If we don’t have the money we call these people up and say, ‘I guess you’re not coming or you’re coming on this other schedule.’”

Luiken responded to Gattis with, “We’d be happy to start that today but we haven’t had a budget and so until we have a budget we’re not going to start making phone calls to let people know whether or not they’re going to be rescheduled or not.”

Neuman interjected: “Commissioner (Luiken), I would suggest you start talking to people about availability, OK. This is not a surprise. This is not a surprise and quite frankly I’m rather insulted that that was your response to that.”

DOT officials have said they are hesitant to cancel any sailings that might ultimately be funded because of the negative impact it could have on future business, particularly with travel agencies that book ferry trips for their customers.

Calling each itinerary holder and attempting to re-book them would likely take weeks, according to system officials, during which the AMHS reservation system would be locked. The sooner the budget stalemate over education funding can be resolved the sooner the state ferry system can implement its plan of action.

Anchorage Democrat Rep. Les Gara asked Luiken if DOT has looked at cutting road maintenance to save money and spread the burden of budget cuts further across the state. Luiken said the department is taking every measure it can to mitigate the impact of the cuts.

Sen. Dennis Egan, D-Juneau, said in a May 12 release he was disappointed to learn summer sailings between Juneau and Prince Rupert, British Columbia have been canceled.

“While statewide budget cuts are necessary, I don’t like the way the AMHS has been treated in the process,” Egan said. “The ferry system is the highway for Southeast and coastal Alaska and passenger and vehicle fees are its lifeblood. Because we lack a completed budget, this decision will cost the State of Alaska more than $400,000 of revenue.”

All on-board bars and gift shops have been closed over the past year to save money as well.

The state subsidy has accounted for about 70 percent of the system’s budget in recent years. Luiken said he wants to get that figure down to about 50 percent. A 4.5 percent rate increase went into effect May 1.

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